Russia Has Dominated Europe's Gas for Decades—Now It Covets Its Green Energy, Too | Opinion

Russia and the European Union may be facing another energy crisis as the natural gas transit agreement between Moscow and Kyiv is expected to expire by the end of the year, and Russian gas supply via the new Nord Stream Two pipeline is under threat due to Denmark's objections. In the long term, however, Russia and Europe have a complimentary energy relationship which goes beyond gas. The U.S., hoping to increase its liquefied gas sales to Europe, better take notice.

Natural gas is likely to grow in significance for Europe even as renewable energy is expected to reach 32 percent of total consumption by 2030. In practice, it translates into a shutdown of coal-powered plants and increasing wind and solar energy output by 33 percent and 50 percent off the current levels respectively.

Combined with the phase-out of nuclear reactors in Germany and the fate of troubled new nuclear projects in France and Finland, this would have a dramatic impact on the energy landscape, requiring more gas.

The problem facing renewables is intermittency. Solar and wind power generation need a back-up energy source when the sun is not shining and the wind is not blowing. Massive, industrial strength batteries are not viable yet, although some progress is being made.

In the absence of coal, the main and, essentially, the only "transitional" base-load fuel is natural gas. Hence, the greater demand for cheaper pipeline gas. No wonder Gazprom shares grew from the beginning of this year, increasing 17 percent to its highest level in a decade this past spring: the fuel share in the final electricity price for gas-fired plants is close to 70 percent.

Under pressure from U.S. LNG exporters such as Chenier, the natural gas market in Europe has already become a price-war arena, with Russia obviously willing to sacrifice its profit margin in exchange for retaining and even growing its market share despite all attempts to 'diversify' gas imports. Even the LNG infrastructure built in Europe in order to reduce its dependency on Russian gas is being used to receive shipments from the new Siberian LNG facilities.

At the same time, another energy revolution is hitting the world: electric cars. The share of electric vehicles (EVs) is set to grow, consuming 5 percent of Europe's total electricity output by 2030.

It is projected that EVs would account to half of all cars sold in Europe in 2030.

Further decarbonization of the transport sector is likely to require growth in the use of hydrogen – a major alternative fuel. Hydrogen-fueled cars, trucks, and buses will represent another important step in evolving mobility away from hydrocarbons.

Neither Russia, which is heavily dependent on its energy exports revenues, nor Europe, which is dependent on energy imports from Russia, can ignore the emerging hydrogen economy.

If American LNG floods Europe, the Russians would need to replace missing hydrocarbon profits with potentially higher margin products. One of their options is hydrogen—Gazprom is aggressively exploring how to use its natural gas pipelines network to deliver hydrogen produced in Russia to Western Europe.

The electrolysis process used to produce hydrogen is energy-intensive, so it is a boon for the electricity-rich Russians to utilize excess power generation capacities and, at the same time, find a way to use its massive pipelines capacity—even if natural gas supplies are restricted by the EU energy security policy demanding diversification. Moreover, hydrogen is also a good PR stance, positioning Gazprom as a "clean energy" supplier to Europe.

While Russian energy leaders, including Gazprom's Alexei Miller and Rosneft Igor Sechin disparaged the shale gale and EVs, others have moved ahead into the 21st century energy revolution. Russian metals giant, Norilsk Nickel, controlled by Vladimir Potanin, announced last year its joint project with German BASF to tap into the growing demand for EV batteries.

At about the same time, the company, previously known for its controversial environmental profile, set ambitious targets of reducing its sulphur dioxide emissions by 75 percent and is spending almost $3 billion on new emission capture installation in its home production in Norilsk. The company reports avoiding tons of carbon emissions as a result of shifting to gas and hydro to make it among the best performers in the non-ferrous metals sector in terms of the carbon emissions intensity.

Just ten years ago, all these steps towards cleaner energy could have been easily dismissed as 'greenwashing' – polluters' corporate PR. Not today: Nornickel, as well as the other key Russian exporters, are keen to become part of Europe's energy transition and to make themselves indispensable for the green future.

Batteries are just a part of the puzzle and special alloys for wind installations and massive electric power interconnectors (a multi-billion EU infrastructure initiative) is the other part. To wit, that even a notorious environmental sinner may turn into a sustainability champion if it benefits their bottom line.

Today, the Russians recognize the limits of the Chinese market and the need for European customers. No matter what they export –oil, gas, hydrogen, or metals –today, they are trying to make Europe reliant on their natural resources for the 21st century energy revolution.

While Europe needs resources for its ambitious energy transformation, and the Kremlin needs European markets, it takes two to "the renewables energy" tango.

Ariel Cohen, Ph.D., is a non-resident Senior Fellow at the Atlantic Council, and Director, Energy, Growth and Security Program at the International Tax and Investment Center.

The views expressed in this article are the author's own.​​​​​