The Price Each of Us to Pay for Abandoning Oil & Gas
The government of Russia will cut funding for a new programme supporting transformation to renewables by 22 per cent, to 313 billion roubles. As is told, the reason for the sequestration is a determination to prevent electricity prices from rising above the inflation rate. Eco-activists did not, of course, approve of the decision. They say Russia "is frantically clinging to the past instead of moving into the future as the entire civilised world does".
The advocates of green technologies, commenting on the future reduction of state investments in the construction of wind farms and solar plants, did not stint on using vivid and emotionally charged statements. The Kremlin "is ignoring the warning signs of the end of the fossil-fuel era". "Moscow overestimates the demand for natural gas, which emits less CO2 than oil or coal." These are a few of the 'better quotes' that have spread over the Internet.
They also compared Russia to a producer of film cameras that did not realise the world had changed and all of progressive humanity had gone digital. The company discussed is Kodak, which in 2012 filed for bankruptcy and asked the US government to protect it from creditors. By that time, the corporation had accumulated debts of $6.8 billion, whilst its total assets equalled only $5.1 billion.
It is a heartbreaking example, frankly speaking. Let us look at the situation without overemphasising it, however. What do the adherents of the energy transition suggest? It is not a secret that one of their unconditional demands is to forbid gas-fired boilers since their use results in substantial CO2 emissions into the atmosphere. These people advise replacing such heaters with similar electrical devices.
If one wants to learn what this step would lead to, it could be a good idea to acknowledge the way people in the countryside live. There are many small towns built around the bigger cities, which have not yet been gasified. As a man renting a semi-detached house in one of such settlements admitted, living next to nature involves certain inconveniences. For example, to boil the kettle requires turning off the underfloor heating first; otherwise, the fuses would blow.
It was pretty unexpected, but surprisingly it is not a matter of primary concern. My respondent was much more shocked on seeing the electricity bills. During the winter months, they averaged over 8,000 roubles. For a city dweller, who pays about ten times less, to say this is a lot would be an understatement.
It is evident that if we switch to generating electricity from wind (using solar panels in our climate conditions is somewhat unreasonable), energy costs will rise even higher. Such generators are not efficient enough. Their blades are unable to rotate in windless or stormy weather. There are also no commercially viable technologies to accumulate surpluses of energy generated on 'good days'. It means that in addition to the steep rise in energy tariffs, we will also face the problem of lowered energy security. Because without natural gas, there will be nothing to back up renewables if they suddenly fail.
Is it still the only way to stop pollution and reduce CO2 emissions? Honestly, no one would want to live through the energy transition, with periodic power cuts becoming the new normality, even for such a good cause as improving the environment.
"There is no use in blindly copying what post-industrial states with highly developed economies, such as the US or the Federal Republic of Germany, do," says Vladimir Litvinenko, Rector of St. Petersburg Mining University, a leading expert in fuel & energy. "What works for them would not work for Russia. Let's look at the expenditure budget of Germany. Every year, they spend 4-5% more on the energy transition. We neither can afford it nor need it. We should follow our path, which is to work on minimising the negative impact of traditional energy sources on ecosystems. For instance, it may include developing and implementing cost-effective technologies that reduce carbon dioxide emissions at energy generation facilities, primarily by eliminating steam generation. Thereby we would at least double the use efficiency of hydrocarbons. We would also improve the energy efficiency of the country's economy as a whole. It seems a much more realistic outlook. Betting on alternative sources is unwise now. If we do so, it will bring about a drastic reduction in the domestic economy's profitability and cause the entire system of social relations in the state to collapse. A gradual increase in the share of renewable energy in the total energy mix is what we need to ensure, as this is our future. We should be careful in achieving this, though."
Will it mean the rest of the world moves on while our country goes into stand-by mode, left near a rusty reservoir with oil that no one wants and is no longer worth a thing? Taking some time to think about it, it is unlikely to happen in the foreseeable future. There is an explanation: according to the International Renewable Energy Agency (IRENA), the energy transition will cost us $131 trillion.
This amount spanned over the next 30 years should suffice to construct wind turbines, solar panels, and infrastructure for hydrogen storage and transportation. In other words, annual spendings will amount to $4.36 trillion. A question arises here: who is going to pay for this?
"There is a common belief that shifting the energy paradigm will come about solely as a result of switching to renewable sources - wind turbines and solar panels, as well as hydrogen," says Vladimir Litvinenko. "Hence, Western banks and transnational financial groups, facing the pressure from politicians, are reducing expenses on projects related to the exploration and extraction of hydrocarbons. Over the last six years, annual capital investments in petroleum production have decreased from 900 to 400 billion dollars globally. Meanwhile, the EU decision-makers are considering the introduction of a carbon tax. Or, to put it differently, it takes much effort with the sole goal of accelerating the energy transition artificially."
"Nonetheless, it would be a crazy idea to think that the whole world would join forces and abandon fossil fuels in favour of renewables. We will have nothing to be left with then, as many of our detractors would undoubtedly want. Let's have China as an example. Last year, it saw significant growth in energy demand, despite the pandemic. Yet the sun and wind fuelled this growth only by a third, whilst gas, coal, and petroleum accounted for almost a half of it. It means the demand for hydrocarbons is on the rise even in China, the world's second-largest economy, which has been investing heavily in renewable energy. The vast majority of developing countries in Asia, Africa and South America cannot afford to invest much in the energy transition. They know it is a burden they cannot bear; these countries will go bankrupt if they go down this path. Therefore, regardless of who says the opposite, natural gas, coal and petroleum will be in great demand by the global economy for decades to come. As for Russia, it must ensure it retains its role as one of the leading hydrocarbon exporters worldwide. We should also intensify the replenishment of our resource base to assure that the domestic fuel & energy sector remains sustainable in the future."
By the way, Kodak, the company to which the eco-activists compared Russia, emerged from bankruptcy back in the autumn of 2013, having paid its debts in full by then and reengineered business processes. Last year, the US government invested $765 million in Kodak. This money will go towards setting up the production of pharmaceutical materials and creating several hundred jobs domestically. Indeed, it has nothing to do with renewable energy.