EnergyTech Q&A: Russia's War on Ukraine and Global Impacts on Power, Gas, H2, Nuclear & Renewables

It was not a complete surprise, but the still shocking Russian invasion and war waged on the Ukraine has sent the world reeling in ways that are personal and business.

Energy exporting is the mainstay of the Russian economy, and has proved an ample supply resource for nations throughout Europe and Asia, even the U.S. Putin’s foray into a neighboring country will perhaps have energy impacts for years to come.

EnergyTech gained a little time and larger energy insights with Jacob Shapiro, chief strategist of geopolitical commodities consulting firm Perch Perspectives. Shapiro has analyzed the global commodities market and its interaction with events for years.

Prior to founding he was senior analyst at Geopolitical Futures and head of the Watch Officer Team at Stratfor Worldview. He hosts a regular podcast via Apple and spent the time Monday answering questions from EnergyTech.

The conversation, via email, ranges on natural gas, battery storage, nuclear and renewables and its potential impact on the Energy Transition to Net Zero.

EnergyTech: Pertaining to the Energy Transition, how are European nations dealing with high electricity costs due to natural gas, of which Russia is a major supplier? How will the invasion of Ukraine impact broader trends around the energy transition?

Shapiro: “Right now European nations are still importing natural gas from Russia. In other words: the potential for even higher electricity costs is imposing limits on how far the EU and the U.S. have been willing to go in terms of sanctions.

“That said: the longer the conflict goes on and the more Ukraine seems to be having unexpected success defending itself from Russia, the stronger sentiment in both Europe and the U.S. is getting to support harsher sanctions. The UK, for instance, has proposed a cap on imports of Russian oil and natural gas.

“At the broader level, the Russia-Ukraine war will significantly accelerate Europe's embrace of LNG, renewables like solar and wind, and even nuclear. Europe can't wean itself off of dependence on Russia quickly -- but it will make doing so as quickly as possible one of its primary goals going forward.”

EnergyTech: What are European nations doing in response to the invasion? Will this impact power generation supply and costs? If so, does this make things like waste to energy plants more attractive? Other alternative sources of power plant fuel resources?

Shapiro: “Imposing sanctions on Russia's financial system and openly shipping defensive weapons, like anti-tank missiles, to Ukrainian fighters. The billion euro question is whether Europe's response -- which already in the last few days has become much more significant than the first round of sanctions announced last Thursday -- causes Moscow to respond by limiting energy exports to Europe in retaliation.

“The logic would be if European sanctions are making it impossible for Russia to accept payment for exports anyway, why continue to send them, despite the damage to the Russian economy. This would be a true worst-case scenario. I think across the bloc any source of power that isn't dependent on Russia is infinitely more attractive than it was before the war began.”

EnergyTech: Does Russia’s aggression bolster U.S. LNG (liquified natural gas export) efforts?

Shapiro: “Absolutely. It bolsters any country's LNG efforts -- a Europe sized customer eager to buy LNG to make up for any potential shortfalls from Russia is a colossal opportunity for any LNG exporter.

“Arguably the biggest development of the war so far is the sea change in German policy in general, especially energy policy. The German government for instance said it is going to build two new LNG terminals in the near future. You can bet Berlin is hoping to import lots of U.S. LNG via those terminals.”

EnergyTech: What about renewables? Is there a Russian interaction with that sector? Are any broadly engaged, global companies involved there and rethinking their positions the same as BP leadership just did (divesting from Russia’s national oil firm)?

Shapiro: “It is hard to think about this now, but just 6 months ago, Gazprom was presenting ambitious plans about becoming the world's leading blue hydrogen exporter by 2030, and envisioning that Europe would be its primary customer.

“Ultimately though Russia's relationship with renewables is primarily around commodities like nickel that are crucial to the technologies that will enable the energy transition. Any companies in the renewables space with ties to Russia are even more likely than companies like BP to reconsider their relations with Russia because there is less at stake for them.”

EnergyTech: Rosatom is working on some pretty big nuclear projects internationally. Are those partners rethinking that (maybe, considering they have to finish projects in some cases)?

Shapiro: “From what I've been hearing anecdotally, almost every industry is rethinking any relationship with the Russian government and/or Russian companies. The longer the war goes on, the greater the potential for sanctions resembling the U.S. sanctions against Iran, which means companies can't just be concerned with their own relationships with Russian companies, but with their suppliers and the 2nd/3rd tiers of their supply chains as well.

“There are still potential scenarios for de-escalation -- a Ukrainian and Russian delegation did meet for a reported 5 hours near the Ukraine/Belarus border -- but I think it is hard to imagine those talks produce much. If Russia doubles down on the war, any countries that are working with Rosatom but also rely on the U.S. economy at all will face a difficult decision.”

 EnergyTech: Russia’s economy is so dependent on energy. Will backlash from invasion potentially devastate that economy more than even sanctions?

Shapiro: “Energy is a significant chunk of Russia's economy -- it is also, however, a major player throughout several types of commodities, like for instance, nickel (which is critical to lithium-ion batteries in electric vehicles) or wheat, of which Russia is one of the largest exporters in the world.

“Global dependencies on Russian commodities is the only thing that has kept the first rounds of sanctions from targeting the entire Russian economy. The U.S. in particular is trying to thread a needle between imposing maximum damage on Russia while inflicting minimum pain on its partners and allies. Putin knows this better than anyone -- the whole reason he became Prime Minister in 1999 was because of a massive economic crisis brought on by Russian government policy.”

“The ruble is plummeting, Russia's Central Bank is in danger of being cut off from the global system, and public opinion in Europe has turned against Russia. This is a very dangerous position for Putin to be in."