Upgrading the energy grid, technological innovation, cultural revolution

These, according to EY teams, are the future challenges for creating alternatives in energy production and consumption

The current European scenario has led European governments and the EU Commission to seek an alternative supply to Russian gas. The REPowerUE Plan, ratified by European countries and the Versailles Declaration in March of this year, has precisely the goal of overcoming this energy dependency and at the same time enforcing the Fit for 55 and 2050 net-zero targets.

The Ukraine war has brought a fundamental acceleration to the decarbonization plan, making each country aware of the risk of relying on a single partner for energy supply and at the same time establishing measures to respond to this objective:

• Energy saving, through behavioral change as an immediate and rapid weapon to reduce bills and prepare for the potential challenges of the coming winter.
• Diversification of supplies.
• Supporting international partners to enable voluntary joint purchases of gas, LNG and hydrogen.

This is an ambitious goal, considering that this crisis will impact Western European countries differently, depending on their current level of Russian gas imports and ability to find alternatives. Denmark, the UK, Belgium, Spain and Portugal are either minimally affected by the Russian gas supply detachment, or not affected at all. France has always focused on nuclear power and its dependence on Russian gas is low — equal to 24% of its total imports.

Germany is going to pay the highest price, as its import equals 49%. Italy follows second, importing from Russia 46% of its total imported gas.

According to EY data, only a coordinated response at European Union level could significantly affect Russia's ability to redirect current dedicated European Union supply to alternative buyers in the global market. What is certain is that the Russian-Ukrainian war is leading and will lead to a redrawing of the energy landscape and business models internationally.

According to EY teams, the energy mix will remain a long-term challenge for the European countries: while investment in infrastructure, for example capable of using natural liquefied gas through European regasification terminals, will lead to sourcing from countries other than the Russian Federation, the road to energy transition could help stimulate the development of alternative energy sources, including renewables and emerging fuels with blue and green hydrogen. In line with the Global Gateway, the strategy prioritizes the European Union 's commitment to a green and fair global energy transition, increasing energy savings and efficiency to reduce price pressure and intensifying energy diplomacy.

A major acceleration on the development of renewable energies used in manufacturing, transport and housing will move Europe towards energy independence simplifying bureaucracy to:

• speed up authorizations for large-scale renewable energy projects,
• double Europe's photovoltaic capacity by 2050,
• double the rate of deployment of heat pumps
• integrate geothermal and solar thermal energy into city heating systems
• reach the target of 10 million tonnes of domestic renewable hydrogen production and 10 million tonnes of imports by 2030 to replace natural gas, coal and oil in industries and transport sectors that are difficult to decarbonize.

According to EY teams, these are important inputs for a European industrial development that will lead to positive impacts on the GDP of member states.

In particular, additional funding of € 200m is earmarked to accelerate hydrogen projects, and the European Commission itself has pledged to complete the evaluation of the first major projects by the summer of 2022. It is precisely the technology push on these issues and the development of a system of incentives to support the costs of technologies that are still 'out of the market' that could be an element in exploiting the potential of renewable energy sources and covering part of the gas needs.

Such policies incentivizing renewable energy production could be further accelerated by the fact that the construction of new solar and wind capacity remains faster and more economically viable than coal or gas.

According to RePowerEU, the achievement of the energy targets will therefore depend on how European countries tackles three major challenges:

• The timing of upgrading each country's energy grid so that it can become receptive to new energy inputs.
• The technological innovation to adapt infrastructure for hydrogen transport and storage.
• The cultural revolution to spread responsible behavior among citizens and future generations in energy use, and increased awareness of renewable energy sources and their infrastructure.