Three myths about the global energy crisis

This article was first published by the Financial Times.

As the global energy crisis continues to hurt households, businesses and entire economies worldwide, it’s important to separate fact from fiction. There are three narratives in particular that I hear about the current situation that I think are wrong — in some cases dangerously so.

The first is that Moscow is winning the energy battle. Russia is undoubtedly a huge energy supplier and the increases in oil and gas prices triggered by its invasion of Ukraine have resulted in an uptick in its energy income for now. But its short-term revenue gain is more than offset by the loss of both trust and markets that it faces for many years to come. Moscow is doing itself long-term harm by alienating the EU, its biggest customer by far and a strategic partner. Russia’s place in the international energy system is changing fundamentally, and not to its advantage.

This narrative also ignores the significant medium-term impacts of the tougher international sanctions on Russia’s oil and gas sector. This particularly concerns its ability to produce oil and transport gas.

A growing share of Russian oil production had been set to come from more complex oilfields, including offshore, Arctic or otherwise hard-to-recover resources. The absence of western companies, technologies and service providers as a result of sanctions presents substantial risks for the country’s capacity to exploit those resources.

Russia was banking on liquefied natural gas as the main way to diversify its exports away from a heavy reliance on Europe. Before its invasion of Ukraine, Russia’s stated aim was to export 120mn-140mn tonnes of LNG a year by 2035, at least quadruple its current level. This appears a distant prospect without international partners and technologies. A homegrown liquefaction technology has been beset by difficulties and delays. Russia’s LNG expansion plans are now back on the drawing board.

The second fallacy is that today’s global energy crisis is a clean energy crisis. This is an absurd claim. I talk to energy policymakers all the time and none of them complains of relying too much on clean energy. On the contrary, they wish they had more. They regret not moving faster to build solar and wind plants, to improve the energy efficiency of buildings and vehicles or to extend the lifetime of nuclear plants. More low-carbon energy would have helped ease the crisis — and a faster transition from fossil fuels towards clean energy represents the best way out of it.

When people misleadingly blame clean energy and climate policies for today’s energy crisis they are, intentionally or not, moving the spotlight away from the real culprits — the gas supply crunch and Russia.

The third mistaken idea is that today’s energy crisis is a huge setback that will hinder us from tackling climate change. I don’t see it that way. This crisis is a stark reminder of the unsustainability of the current energy system, which is dominated by fossil fuels. We have the chance to make this a historic turning point towards a cleaner, more affordable and more secure energy system. And this is already happening.

The EU is raising its renewables and energy efficiency targets and putting significant resources behind achieving them, with its REPowerEU plan. The US government just put into law the Inflation Reduction Act, giving a boost to a huge array of clean energy technologies, from solar, wind and electric vehicles to carbon capture and hydrogen. The act provides for $370bn in energy security and climate change investments, with the potential to mobilise far larger sums from the private sector.

The Japanese government is seeking to restart and build more nuclear plants and expand other vital low emissions technologies with its GX green transformation plan. China continues to break records in the amounts of renewables and electric vehicles it is adding each year. And India just took a key step towards establishing a carbon market and boosting the energy efficiency of buildings and appliances.

The world’s biggest economies are pushing hard on clean energy. And with all the readily available, highly competitive clean energy technologies there are good reasons for optimism that others will follow.

So don’t believe all the negative narratives about the energy crisis. Yes, there are some tough challenges ahead, especially this winter. But that doesn’t mean Russia is winning or that efforts to tackle climate change are doomed.

And after winter comes spring. The oil shocks of the 1970s resulted in major progress in energy efficiency, nuclear power, solar and wind. Today’s crisis can have a similar impact and help speed up the shift to a cleaner and more secure energy future.