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Europe's Gas Crisis: A Growing Concern As Winter Falls

September 22, 2021

European natural gas prices have soared so high that hundreds of millions of people could be facing cold homes or inflated energy bills over winter. There's also fears of a knock-on impact as carbon dioxide used in food production — a byproduct of fertilizer made with natural gas — also gets more expensive.

Politicians are blaming the surge in prices on an increase in natural gas demand as the world wakes up from the pandemic, supply disruption caused by maintenance, and a less-windy-than-usual summer that saw a drop in wind-generated power.

But really, Europe's crisis is in its renewables sector. The region has invested heavily in renewables, such as wind and solar, but it can't get enough of this green power to the people who need it. After the UN published its state-of-the-science climate report in August, warning the world must make deep and sustained cuts to greenhouse gas emissions this decade, there has been a growing understanding among political leaders that the transition away from fossil fuels needs to happen more quickly than planned.

There are other incentives to moving faster on renewables, however. A fuller transition would free Europe from the disruption of volatile energy markets and reduce its dependence on other oil and gas providers, such as Russia. Europe could avoid its energy security getting tangled up in geopolitical storms.

More than 40 European Union lawmakers, mostly from eastern and Baltic states, have appealed to the European Commission to launch an investigation into Russia's state gas company Gazprom. They suspect it had been restraining its supply to push up prices and pressure Germany to expedite the launch of Nord Stream 2, a gas pipeline that runs from Russia and under the Baltic Sea to Germany.

Gazprom said that it was supplying gas to customers abroad "in full compliance with existing contractual obligations" and that supplies were "at a level close to the historically record high" over the past eight months.

"What China has been doing and will likely continue to do, is to export the equipment that is used to produce renewable energy," said Dominic Chiu, a China analyst with the Albright Stonebridge Group. "China has also been helping countries, such as Pakistan, build solar farms. Energy infrastructure, renewable or otherwise, plays an important role in China's Belt and Road initiative," Chiu added.

That dynamic means that there is still lots of potential for energy security to get tied up in geopolitical tensions, or other thornier topics. An investigation published in May by the UK's Sheffield Hallam's University, for example, found that China was using forced labor from ethnic-minority Uyghurs in the production of solar energy panels. This prompted the United States to impose trade bans on five Chinese entities linked to the abuse.

On a recent trip to Tianjin, US climate chief John Kerry said Chinese officials complained about the sanctions, arguing they limited how cooperative China could be with the world on climate. "That is a potential concern that many countries have with China's polysilicon production," Chiu said, referring to the material used in the panels. But sanctions haven't had a huge impact on the industry, Chiu said.

Beyond the obvious climate benefits, there is an undeniable political advantage of renewables over fossil fuels such as gas. A country like Russia can cut off supplies for Europe with a flick of a switch, but once a solar panel or windmill is installed, that's that — no country can take the sun or wind away from another.