How do recent events in Europe affect the opportunities in transitional energy?

Active is: Sharing insights How do recent events in Europe affect allianzgi.com the opportunities in transitional energy? March 2022 The invasion of Ukraine by Russian armed forces has destabilised security in Europe, creating a humanitarian crisis and market turmoil. With half of Europe’s oil and 30% to 40% of its gas imported from Russia, the invasion has escalated concerns over what Europe’s existing and long-term energy mix will look like in providing the region with dependable, affordable and climate-friendly access to energy. Here, we look at some considerations for Julien Girault investors assessing the energy market. Sustainability Research Analyst In recent decades, Europe has grown highly dependent on Russian oil and natural gas, Key takeaways and the invasion of Ukraine by Russian armed – The implications of the current forces has put Europe in a difficult position. crisis extend beyond fossil fuels The price of energy has soared even as Europe into renewable energy and feels growing pressure to increase economic climate solutions sanctions against Russia. This has reignited a discussion about Europe’s energy mix, the – Europe needs to remedy the impact of rising costs and how to make a faster significant underinvestment in transition to clean energy. energy infrastructure to counter – The energy mix: Europe has been grappling a risk of sustained energy poverty with a sustained, widening gap between – The decline in fossil fuel use is its investment in energy infrastructure and likely to be slower, so opportunities its dependence on energy – a trend that is exist in carbon capture and energy replicated globally (see Exhibits 1 and 2). storage solutions, energy efficiency Since 1990, Europe’s total energy supply has technologies and local sourcing of contracted overall. And while its dependence strategic metals and minerals on coal, oil and natural gas has fallen from 84% to 71% since 1990, its use of gas has risen from 20% to 26%. it is now cheaper for many power stations – The impact of rising costs: Given the to burn coal than gas. And costs aside, to disruptions to the supply chain caused by maintain current energy levels while burning events in Ukraine, the impact on energy pricing less Russian gas, it may be necessary to burn is already very evident. At current price levels, more coal – hardly a sustainable proposition. Value. Shared.