The world has recently drawn its focus toward green energy development. The European Union has announced plans to achieve carbon neutrality by 2050. It does not mean the total ban on the use of hydrocarbons: carbon neutrality means having a balance between emitting carbon and absorbing carbon emissions.
Joe Biden has already made the first steps in this direction. One of the first things he did after taking the office was shutting down oil and gas lease sales from the country’s public lands.
In short, as the USSR first and only president used to say, the process is gaining traction. Naturally, the issue of renewable energy sparked conversation in our country as well, not about the introduction of new technologies and environmental protection, but whether Russia would survive if the world abandons hydrocarbon fuels.
Anatoly Chubais, Russian presidential special representative for sustainable development, warned that Russia could lose up to 10% of its GDP if the leading world countries reduce their use of fuels. However, he did not say when and how it would happen.
Will the world be able to quit oil and gas? What will it replace them with?
There are not too many choices. Nuclear fusion, the cleanest and the most viable source of energy, is not an option yet. The first experimental thermonuclear reactor is still under construction, and it is unlikely that it would be possible to use this energy source in the next 30–50 years. There are two challenges: to contain plasma, which requires super powerful magnets, and the construction of the first wall that separates the active zone from the coolant. This wall needs to resist high temperatures and radiation, but such resistant and reliable materials have not been created yet. So, fusion reactors are out of the question.
The same goes for boosting nuclear capacities. At the moment, it is the cheapest and cleanest way to produce energy, but the environmental groups will not support it, citing the examples of Chernobyl and Fukushima.
So what’s left? Solar and wind energy, and hydrogen. The first two require certain climate conditions. Russian-made wind and solar energy sources have the payoff period of 5–20 years. In Europe, it could be two or even three times shorter due to the higher cost of “industrial” electric energy, given that the equipment would work faultlessly. But it is hard to imagine a steel mill or even a small town that would rely solely on solar or wind power.
By the way, one of the causes of the February energy crisis in Texas, which is considered the center of the US’s oil production, was the dedication to green energy sources. Texas saw one of its coldest winters with temperatures dropping below minus 5 — minus 10 degrees Celsius. The winter storm caused the failure of the wind turbines and solar panels. At least 151 people died; the storm caused $200 bln in damage. So the solar and wind energy sources should only be used to supplement the existing energy supply.
Hydrogen is a totally different matter, with its inexpensive production, limitless reserves, and water as its only by-product. However, hydrogen is highly flammable and explosive; this is the reason why development of hydrogen-fueled vehicle engines is not advancing. An accident at a hydrogen-fuelled power plant may pose a threat incomparably greater than the effects of Chernobyl or Fukushima disasters.
So far, the world’s top automakers are moving towards electric vehicles, with Tesla Inc. being an undisputable leader: the company has recently reported on its activities during this year’s second quarter, with net income exceeding $1 bln. Yet, it is hard to say what particular field of activity has contributed most to such prominent outcome — electric vehicle sale, satellite launches, or revaluation of investments in bitcoin.
In early 2021, Audi announced it would cease development of new combustion engines and shift to manufacturing electric vehicles within the next 10–15 years. Jaguar car brand plans to go all-electric by 2025, while Volvo and Ford automakers said they will sell only electric cars by 2030, the latter adding it will produce electric vehicles mostly for European countries.
Only time will tell whether these plans will eventually come to fruition.
Electric vehicles are not a zero-emission solution. Electric traction will help reduce hazardous emissions — yet, electric cars will have to be charged; they will overload power grids that depend on existing sources of electricity generation such as coal, residual oil and natural gas.
Another issue is the use of batteries required for electric vehicles, as well as for wind and solar power sources; they need lithium and, less often, aluminum zinc, nickel and magnesium, whose production is by no means eco-friendly and requires massive power consumption.
So it appears that we have to stick to traditional power generation methods at least over the next few decades, and the oil lobby will make every effort to impede scientific and technological progress as regards developing new sources of energy.
So what is all this fuss about and why is there wishful thinking? First of all, European governments have to consider the stance taken by the green movement, which gains votes through its utopian ideas of a clean planet along with existing advantages of civilization. This has become a sort of trend similar to the BLM movement or recognition of same-sex relationships as normal.
Imposing duties on hydrocarbon procurement could help slightly replenish the budget — or at least compensate for losses from expenses on renewable energy. With profitability of oil and gas production amounting to hundreds of percents, it is only understandable that countries lacking natural resources are willing to make the world’s oil and gas producers to share profits with them.
We also cannot rule out lobbying efforts by China, the key beneficiary of the ‘eco-frenzy’ as a major global manufacturer of batteries and battery metals.
Meanwhile, Germany is planning to shut down its most pollution-intensive coal-fired power stations with capacity of 18GW only by 2035. By 2030, the amount of renewable energy sources in the country’s energy mix is expected to increase from the current 50% to 65%.
So there is no risk of any 10% GDP slump at least by the end of the current decade. Under a worst case scenario, we can expect a 0.5% fall, an insignificant amount given that far more is lost to corruption.
By Boris Solovyov, financial analyst