How Europe ditched Russian fossil fuels with spectacular speed

and the global economy. Over the past year, I've been working with Bloomberg Energy reporter Will Mathis to look at one of those disruptions, how the war in Ukraine has transformed Europe's energy landscape. The shift has been remarkable, unprecedented in scale, and has immediate and long term implication for

the use climate goals. On today's episode, we turn the tables and Zero's producer Oscar Boyd asks Will and I the questions instead, Will the attempts to ditch Russian fossil fields speed up the energy transition, or will the high price paid for energy security make it harder for the

EU to live up to its big golds. In the last twelve months, there's been an extraordinary change in where and how Europe sources its energy, something that the two of you will actually have been writing about since the start of Russia's invasion of Ukraine. And in your arsicle that went out a couple of days ago, you summed up what that year of war has done to Europe's energy supplies. What did you find Over the past year. The headlines have been dominated by Europe's many attempts to

try and help Ukraine deal with this war. There's been aid given, lots of military supply, lots of meetings about how to deal with a Russian threat that may come to other countries. What's not being talked about, at least not in that lens, is how quickly Europe has moved away from Russian fossil fuels, strangling one of the biggest sources of funding for Putin's war machine. Put that into

numbers for me when you say it's unprecedented. They're moving quickly away from Russia's fossil fuel supply, They're stopping the funding to Russia's war machine. What does that mean, Well, Russia is a huge source of natural resources right on Europe's border, and before the war, Europe spent about a billion dollars a day to pay for gas, oil, and coal that it imported from Russia, and today that's dropped to a small fraction as Europe put embargoes on supplies

and Russia cut supplies of some other fuels. Oil, crude, oil, coal, and gas have fallen not quite to zero, but pretty close and much lower than anyone really thought as possible a year ago. Even European officials have been supped. European Commission's President Ursula Wonderin said earlier this month. Initially we were discussing whether we are able to do that till twenty twenty seven. Well, you know now that we have gotten rid of our dependency completely of Russian fossil fuels.

It went much faster than we expected. That's good. So take me back to this time last year when you first started reporting on this. Why was this question of Europe's dependency on Russia's energy is so important at that time? So it's not just that Europe is paying Russia a billion dollars a day, which is then eventually getting into the war machine, but Russia controls the supply and there was a risk that Russia would use its energy as

a weapon. Cut off gas supplies, cut off coal supplies, and that would bring Europe's economy and its people to its knees. And there was good reason to think that, because even before the invasion started, Russian supplies of natural gas had already been back and president Europe had been

going up and in late twenty twenty one. In early twenty twenty two, people didn't know exactly why Putin was doing that, but once the invasion happened, it was clear that Russia was willing to use its energy supplies as leverage over Europe right and so at a European level, politicians realized this is a pretty unsustainable relationship that they

need to change quickly. If we go back to the start of February twenty twenty two, before the war is happening, as a percentage, how much of Europe's energy supply came from Russia, I mean, the numbers are spectacular. Europe is an energy dependent continent. About sixty percent of all the

energy it consumed came from importing fossil fuels. Of that, forty five percent of its gas came from Russia, twenty seven percent oil and forty six percent of its coal, and different countries had different exposure to these Russian fuels. Germany in particular, built up a huge depend it's on Russia.

Over half its gas came from Russia. Italy, another one of the biggest European economies, got about forty percent of its gas, and the Baltic region, which is right on Russia's doorstep, got three fourths of their gas from Russia in twenty twenty one. And why is it that it became so dependent on Russian fossil fuels. I mean, you've mentioned one reasons, which is just the actual proximity to Russia.

But how did that relationship really develop? Well, it's hard to underestimate how important being close is, especially when it comes to gas. With oil, you know, you can get oil anywhere in the world, put in a ship and send it where it needs to go. But with gas, that's much more difficult and much more expensive. And if you can get gas from somewhere nearby, it's gonna be

much cheaper. So Europe's economic growth and their ability to fund the transition to cleaner sources has been predicated on the ability to get really cheap energy today from Russia and some of This goes back decades right During the Cold War, there was a push to have a separation

between the Soviet Union and Western allies. But after the Soviet Union fell, Germany especially but Europe in general, thought it would be a good idea to create this economic relationship tied to importing fossil fuels from Russia as a way to keep peace, which of course has been completely proven wrong over the last twelve months. And tell me more about that green transition element. Why did your plans to go green mean that it ended up relying more

on Russian fossil fuels. So coal is the dirtiest fossil fuel, and Europe burned a lot of coal. Of course, going back all the way to the Industrial Revolution, gas provided the same amount of energy for about half the emissions, So gas was seen as a bridging fuel between dirty

coal and clean energy. And because cheap gas, especially in the form of pipes from Russia, was available at the doorsteps, that seemed like the right option if Europe wanted to speed up its emissions reduction and find a way to make the transition as smooth as possible to clean energy. And gas also works really well paired with some renewable resources, particularly wind, which countries like Germany and the UK are

ramping up significantly to cut emissions. So when the wind drops all of a sudden, but you still want to have the same amount of electricity available, you can really quickly burn more gas to match that, even as your emissions fall overall as more wind is producing electricity. Another turning point in the story was the twenty eleven to earthquake and tsunami in northeast Japan and the mountdown that

followed at the Fukushima Day Nuclear power plant. I'm that disaster completely changed how Germany approached its energy mix, particularly in regards to nuclear, and also contributed to its dependence on Russian gas. Right. I mean, France is the largest nuclear power in Europe, and France has not particularly wavered, But Germany waving on nuclear mattered a lot because its replacement meant it would use more coal found in its own backyard, some of the dirtiest form of coal you

could get. And as Germany started to set out more green goals, it needed to cut coal use. And what did it do well, pipes to Russia. So we get to February twenty four, twenty twenty two, Russia launches its full scale invasion. We see all the images of fighting coming out of Ukraine, cities being reduced to rubble. European leaders realized that they need to move away from Russian energy and quickly, I'm assuming that panicking at this point,

what options did European countries have. And they were panicking because not only did they see their source of energy potentially being cut off, but they were also looking at the market, and prices of energy were going to levels that would have been unimaginable before that, you know, double quadruple prices that would be normal, and they're still quite high. And we basically through all of the energy sources that Europe was relying on Russian fur and then we looked

at all the possible alternatives. Where could it turn for something that wasn't Russian oil, gas and coal, and how could it ramp up those alternatives. And one narrative that emerged very quickly and worked well with Europe's green ambitions was to just speed up the green transition and replace all those Russian fossil fuels with wind and solar and batteries.

That is an option, but those things take time, and if you wanted to have energy for the winter, keep people warm, keep the lights on, building wind and solar could only go so far as ambitious as they might want to beat with renewables. They still have a dependency on fossil fuels, so it comes a question of where do we get it from instead exactly, And then you have to look at each of those fossil fuels differently.

A coal is easy to transport, and so if you don't buy it from Russia, well you could go to the US a little bit further away, or even Australia, which plenty of goal but far away oil. On the other hand, global market again can be moved, but politically harder because the largest supplier of oil is opaque plus, which is the Middle Eastern countries, mostly with Russia, and they are in agreement on how much supply they will

put into the market. And so if Western powers suddenly wanted more oil but did not want to take it from Russia, they would have to go begging to their old foes Iran and Venezuela. Not going to look politically right, but there was room to try and increase supply from those countries. Gas is a lot harder, yes, in the last few decades, we've been able to put gas on ships and move it around, but it's not cheap and there's just not enough infrastructure to make that happen at

short notice. So what did you do well? It took a different approach for every different fuel, and even different countries had slightly different plans. But the biggest challenge was gas, and it was also the most urgent because not only did the EU want to cut gas demand, but Russia was actually slashing supplies to Europe. Russia's state owned energy supply, A gas promt says it is indefinitely holding the flow

of gas through a key pipeline through Germany. But European leaders see Russia's move to hold gas supplies to Poland and Bulgaria because they won't pay in rubles as aggressive. So they really gave the Europeans no choice but to move as quickly as possible on gas, and they did everything they could to find alternatives. They tried to import more from North Africa. They got more from Norway, which

is the biggest producer in Europe other than Russia. They got a bit more from the UK, but the by far biggest source of alternative supplies was liquefied natural gas, which is a kind of gas that has brought down to a really low temperature, put on these weird ships and then you can move it all around the world. And most of the supplies of L and G you

come from the US, which has unlimited natural gas. Wise and Qatar and the Europeans went to the US and paid whatever price was necessary to swap as much elergy as was available, and luckily enough for Europe there was more lergy available than normal. Normally, the biggest player buyer for liquefied natural gas is China, but China's economy was shut because of COVID last year, so there was a big amount of supply available for the Europeans to take

in and meet their needs and fill up storage. These weird chips, though, we should explain they look like these bulbous bodies floating in the ocean. There is a good reason for them being bulbous, right. They are essentially spherical tanks, multiple of them, and they're spherical because you've just put all this very high pressured gas, turned it into a liquid, and put it into a sphere. And the sphere is an object that has fewer margins to have errors and

so you can actually store it for longer. So yes, it looks weird, but physics guys Llengy facts. We had to put a picture in the show notes sharing these ships. But it wasn't a unified strategy to start with. When the European Union was trying to fix its gas problem, it affects me that its member states run around and just get their hands on as much gas as they could for as much money as they were willing to pay. Yeah, and they did things that they would have never done before.

Germany had been completely relying on gas from Russia and they didn't have any of the facilities to import ellengy, so they bought it indirectly from other countries that did have supplies and facilities to bring it into the gas grid. But they also basically just throughout their environmental regulations to very quickly bring on floating ellen import terminals. You know, German regulations are notoriously cumbersome and projects take a long

time to build there. But in Germany last year they said, forget about all that, we need these supplies right now, and there's gas diplomacy had downstream impacts right There were countries like Pakistan that had built gas power plants dependent on ellen G at a certain price, and they were priced out to the extent where they could not have enough gas and there were blackouts. So Europe in the end does avoid blackouts, but there were blackouts in other

countries Bangladesh with another one. So if gas is the most difficult, most pressing challenge to fix, what did they do with both coal and oil? So oil, because of the political nature of that commodity, they ended up setting out a target that was going out a few months, so by December they would sanction any imports of crude oil from Russia so that refineries and countries could figure out where the remainder of the supply would come from.

As it turned out, some of that supply ended up coming through India, so India started importing a lot more of Russian crude. India has plenty of refineries capacity, so India took cheap Russian crewed, refined it and then exported that to Europe and we don't count that as coming from Russia. That's true. That's how Europe has been able to manage its petrol and diesel prices, and then on

coal because they could import stuff from other countries. Extra supply came from the US, from Colombia and from South Africa. And also let's note that coal was burned more than usual because gas was so expensive that some of the power plants that were supposed to retire were put on hold, and some of the coal power plants that didn't use that much goal in the past were using more coal. And coal burned for the past year jumped about seven percent. Okay,

so the cold amount actually increased, it did. Yeah, so it's not just that imports were replaced from Russia, but there was more coal burned after the break. Enough about fossil fuels, how have renewables helped Europe out of its energy crisis? Where the heat pumps fit into the equation, So we know that Europe has had a green strategy for a couple of decades now that actually helped alleviate some of the pressure on Europe because they had developed

these non fossil fuel sources over multiple years. But at the beginning of the crisis, there is this narrative that emerges, which is, yes, we can accelerate renewables as much as possible to try and fill some of the gap. So how much of a role have renewables ended up playing well This time last year when we were looking at what could Europe possibly do. The one clean energy source that we saw as potentially playing a role in going

faster with solar because solar panels are really simple. You can just basically put them anywhere, They're very easy to set up, and they start producing electricity immediately. And Europe really lived up to that. They installed by far record

amount of new solar capacity all over. You know, countries like the Netherlands, which aren't particularly sunny places, installed record amounts of new solar and a lot of that came from households and businesses that we're seeing their bills rise astronomically and just thought it made economic sense to put in some solar panels and also a lot of them added batteries as well, so those are now permanently there and not just helping people last year to cut fossil fuels,

but for the foreseeable future. Wind was about what we expected. But wind farms are much more complicated than solar. You can't just put a wind turbine anywhere. You need to permit them. And while there were some efforts to cut down on the time it takes to permit. They're just

wasn't that much possibility to go faster with wind. So while it did play a really important role and Europe has been ramping up wind and it was a record level last year, it didn't go that much faster than otherwise would have and Europe needed this transition also because climate change plays havoc. In fact, last year because of climate impacts, hydropower, which is one of the biggest sources

of clean power, took a real hit. Europe experience its worst route in five hundred years, pushing down the level of water in many reservoirs and crimping hydropower supplies. A summer of record breaking heat is drying up rivers across Europe. Shipping companies in Germany preparing for the worst as levels on the River Rhine dropped through critical levels with more than sixty percent if The European Union and the UK now under a drought alert or warning. Reservoirs and rivers

are receding. At the same time, which made matters worse. Nuclear power was becoming a trouble. There were nuclear reactors in France, which is a major source of nuclear power, and exporter off nuclear power to many countries which had any maintenance issues, some expected, others not, and because of the lower production of hydropower and nuclear power, Europe had

to burn even more fossil fuels. In that period, we also heard stories about solo pannel costs going up, wind turbine prices going up, and when we spoke to maud Nipper, the CEO of Allstead for our episode in January, he was talking about how complicated it is to get permits for new wind farms. But he also bought up the issue of supply chains and inflation and how that was forcing him to put more pressure on his supplies. How

did those higher prices affect this renewable transition. That's true, and it certainly ought to have renewable energy prices go up, which have been for years going down. But because the delta, the difference between higher fossil fuel prices and slightly higher renewable prices only grew. The case for renewables has only

gotten stronger. And there are also reliable You know, you're never going to have a country cutting off your source of wind solar, So the value of solar and wind from a political perspective has really gone up because energy security has come to the forefront of many policymakers minds, and they now see renewables as part of that strategy. One thing that's also been in the news for all sorts of reasons is Europe's push to actually reduce energy demand.

One of the big stories that came out, I think it was back in September when France says, past midnight, the Eiffel Tower, our greatest national monument, will no longer be lit up. How successful his Europe been reducing its

energy needs and demands. So one thing we expected when we were looking at this story right after the war began was that if Europe or to take some of the lessons of previous energy crises, it would have gone on into a propaganda mode to urge citizens to lower their termal stats, to burn less oil, to use cars only on alternate days. Those are all things that were done in nineteen seventy three, and there was another crisis,

would be so very little of it. And while there were efforts to limit how warm swimming pools could be and to lower the thermostats and office buildings and public buildings, and just politicians urging people to try and cut down. The most effective way to cut demand for energy last year was just the weather. We had a incredibly warm fall and winter. I know, I didn't turn on my heat until December, and because of that, there was an incredibly successful ability for Europe to cut demand. And that

was kind of an easy way to cut demand. And there was also a difficult way, which was that a lot of industries were seeing the price of gas and electricity go up to five times what they were used to paying and it just wasn't economical anymore to continue

to produce. So a lot of industries shut down and some of them may never turn back on right And according to the figures that you used annual article, those jobs a massive industrial gas use fell by eighteen percent in twenty twenty two, higher than the fourteen percent drop during the first year of the pandemic, and demand for

residential gas fell by fifteen percent. But coming back to your headline figure that this time year ago, Europe was sending as much as one billion dollars a day to Russia and that's now being reduced to a fraction of what it once was. That is a real transformation, and the speed of it has been remarkable. But what has been the cost of responding to this energy crisis. Well, while Europe wanted people to use less, they didn't want them to be forced to not turn the heat on

because they couldn't afford it. And so according to the International Energy Agency, the EU spent about three hundred and fifty billion dollars subsidizing fossil fuel consumption last year, and the overall price was much higher than that just to account for the energy that people did pay for that wasn't subsidized, to hundreds of billions of euros, which meant you ended up spending more than what you would have paid poutin. But that was the goal to try and

not pay pootin as much money. You talked about the number of solar installations rising to record high levels, But what clean tech we've seen being adopted that will impact the demand Heat bumps. Look, heat bumps are magic. They take one unit of energy from the grid and give you four units of energy. And that's exactly what everybody

understood across Europe. As it turns out from sales figures, we've got recent figures suggesting that sales across Europe grew by thirty seven percent year over year, and so clearly heat bumps are things, at least for those who can afford it, because the upfront cost is high something that people are turning to because the long term running cost

of a heat bump is much much lower. The other one is electry vehicles, which have been on an upward trajectory and last year they increased about twenty percent according to our colleagues at PNF, and that's not going to cut that much demand in the short term, but overall, over time, evs should cut down on how much oil

and petroleum products Europeans need to burn. And of course evening numbers are lower because prices of evs have gone up because of supply chain constraints, inflation, and of course the cost of living crisis, which made it harder for people to make big purchases like evs in the past year. There is also one big motivation that will come through in the future years as Europe titans its carbon emission standards, which will make evs just much more attractive, and so

that transition continues at pace. So you mentioned the cost of living crisis there. We've talked a bit about how much this is will cost now that we're through the worst of winter. Can we expect prices for energy to fall in twenty twenty three, Well, so far that is what we're seeing. Prices are now below what they were at the start of the war, which is still high. Gas in Europe went below fifty euros for the first time since the start of the war, but back in

twenty nineteen gas could be fifteen euros. Is still quite high, but we're seemed to be for now out of the real crisis that happened last summer when gas prices looked like they could just keep going up forever. Also this year, there is expectation that hydropower will return, and so will nuclear power. And if you combine more renewables, more hydro, more nuclear with lower demand, what you get is a

pretty spectacular outcome. According to bloom Bogenne, this year, Europe is set to burn forty three percent fewer fossil fuels for electricity compared to last year. Prior to the war, year have already had relatively ambitious plans to reduce its emissions. Back in July twenty twenty one, it launched fifty five, which was its program to cut emissions by fifty five by twenty thirty across Europe. But with the war, it's had to expand coal use, he said, by seven eight percent.

It's had to build new fossil fuel infrastructure. We had Germany building alleng terminals and delay the closure of some of its fossil fuel run power stations. So macro picture hit what does the last year mean for Europe's clean energy transition. Well, we heard from Jennifer Morgan, the Climate Nuary for Germany that the goal, at least from Germany's side building all these allen Gy terminals is not to lock in the fossil fuel. They have said they will

make those terminals be hydrogen ready. How believable that is remains to be seen, but there are options that Europe is building into this new fossil fuel infrastructure to go clean. They also have tried to address some of the issues that have been holding back the development of renewables which

would permanently displace the need for fossil fuels. So the biggest one being permitting for wind farms can take an extremely long time, and Europe at the highest level at least has finally come to terms to that problem is trying to address it to up the deployment of not just solar but also wind, and we should recognize that despite more coal being burned llergy terminals being built, actually the emissions from Europe in twenty twenty two fell by

one percent, and so Europe's not being put off track. In fact, in some sectors like solar, the transition is actually years ahead of where people estimated it to be. Because the price signals drove people to clean energy sources. It's clear that they use long term directions toward renewables and other green tech. The war has spurred a huge

increase in deployment. Will that demand stay as high during twenty twenty three or now that the kind of initial crisis has begun to ease a little bit, do you think that demand will actually slow. In the case of solar, we know that Europe actually has something like seventy gig awards of solar already imported from many countries, and so deployment of solar is likely to stay high. Wind, on the other hand, may see a decline just because of all these other issues that are playing out for the

next couple of years, and then rise again. But batteries and evs have a pretty positive outlook. Batteries doubled in their deployment in a year. We may not see another doubling, but there's expected to be an increased deployment. And evs saw twenty percent increase and lightly will see another increase. I think it's important to think about what this speeding

up really means at the macro level. I talked to people this year who worked for the companies that were installing solar panels, and they were starting academies to train installers and hiring those people on and developing the supply chains. And once that's established, it's there. It's going to keep being there and can just keep growing. You get renewable

lock in. Yeah. So what we've seen with the war in twenty twenty two and into this early part of twenty twenty three is Europe's energy landscape being permanently altered. But there's another debate playing out, and that's the growing competition between the EU and the US. How is that going to affect transition? So far, Europe has relied a lot on imported solar panels or batteries to try and

push its green transition. The European Green Deal was supposed to bring in more manufacturing of batteries and other green

technologies into Europe. But because of the pandemic and then the war, that conversation had sort of died down, and that's suddenly been lit up by what's happened in the US with the Inflation Reduction Act, which has all these incentives to try and bring manufacturing into the US, and that's making Europe reflect on its own shortcomings in the green deal, in its regulatory nature and in its market structure to try and speed up the manufacturing of green

technologies in Europe. If it does that, and we don't know if Europe can match up to the big challenge that the US has put out, but if it does it, it's only going to make the green transition faster because it's going to bring manufacturing jobs tied to green industry in Europe and maybe even lower the cost of many of these green technologies further well Act charts. Thank you very much, thanks for having me, Thanks for having us

on the show, Oscar. Europe's move away from Russian fossil fuels towards other energy sources has happened at an extraordinary pace, and it's been beautifully illustrated in charts and figures as part of Will and Natschat's recent article, which we've linked in the show notes. In our conversation, we also discussed some of our previous episodes with German Climate on Void, Jennifer Morgan and austed CEO Mad Snipper. If you want to hear more from Zero, you can listen to those

episodes now wherever you get your podcasts. Thank you for listening to Zero. If you like this episode, please take a moment to rate and review us on Apple Podcasts or Spotify, send it to a friend, or share it with an energy executive. If you've got a suggestion for a guest or topic, or something you just want us to look into, get in touch. We're at Zero pod at Bloomberg dot Net. Zero's producer is me Oscar Boyd

and our senior producer is Christine Driskell. Our theme music is composed by Wonderley Special thanks to Todd Gillespie, John Angel and Kira Binjo. We'll be back with that Chat as host next week.