Putin´s war: Game-changer for the energy markets

War in Ukraine – Energy prices reaching new records

Russia´s invasion of Ukraine has caused the energy prices to reach new record levels, with oil prices reaching USD 132 per barrel and gas prices for Europe at USD 200 per barrel (oil equivalents). Electricity prices are following the gas-prices, reaching EUR 1 per kWh including taxes in southern Norway.

Sanctions send the oil prices sky rocketing

The sanctions by the US on oil and gas import from Russia sent the oil prices even further up. The Russians threatened to stop gas exports to Europe, causing havoc the European gas markets, as the Russians are the number one export country of natural gas to the EU, supplying some 40% of the total imports.

EU scrambles to reduce dependence on Russian energy

Two weeks into the Russian attack on Ukraine, Europe is putting massive efforts into substituting Russian gas with other sources. Having been warned for years about the dangers of being dependent on supplies from what already then objectively was an dangerous and dishonest player in the market, the war has moved this topic to the top of the EU agenda. A massive increase in the capacity to import LNG, combined with increased supplies from stable and reliable partners like Norway (the number 2 provider to the EU) are key elements in the plan to become independent of Russian supplies.

The green shift – will the war accelerate the transition to renewables?

A massive increase in renewable energy production is a very likely consequence of the war in Ukraine. Already on the path increased green energy, Putin's attack is a strong motivating force for increasing the tempo in shifting into emission free energy production. This also includes extending the life of several nuclear power plants planned for closing down this year. With the massive increase in oil- and gas prices, both solar and wind power are more competitive than ever. The challenge is primarily a logistical one, to be able to physically be able to install the requested capacity as soon as desired, combined with the need to establish storage solutions to ensure supply independent on sun and wind conditions.

Energy savings – low hanging fruit

Europe has the potential to save almost 23% of its energy use by 2030. This requires a number of measures, depending on the sector in question. For the residential sector, energy management systems can contribute to reducing the energy consumption with 30%, based on studies from Norway. Typically, an energy management system for a single family home will cost appr. EUR 3,000 installed, an amount that will rapidly be paid back with todays energy prices. The most advanced systems will be able to use real time energy prices as well as power outtake tariffs as parameters in controlling the consumption.