While western sanctions against Russia for the Ukraine invasion have so far largely avoided targeting its oil and gas sector, the impact already is “forcing a major rethinking of Europe's energy-transition strategy,” particularly in expediting the move away from reliance on Russian energy, says Housley Carr, a global sector analyst for Houston-based consultant RBN Energy.

Just prior to the start of the Russian invasion, European Commission (EC) President Ursula von der Leyen said as much to participants at the Feb. 19 Munich Security Conference. “We must diversify both our suppliers and our energy sources,” she said, adding that “in the medium and long term, we are doubling-down on renewables.” There is much back and forth among experts about what that should or could mean, as specifics are scarce.

At a Feb. 28 European Union (EU) energy council press conference, four days into the conflict, member country energy ministers called for accelerating a “green transition” to achieve energy independence from Russia and climate neutrality; but only a draft strategy is in the works keyed to cutting carbon emissions 55% by 2030 from 1990 levels, Bloomberg reports.

About 45% of EU gas imports, and 40% of gas consumed, came from Russia in 2021, according to the International Energy Agency. A 10-point plan it released March 3 demonstrates a path to reducing that figure by one-third within the year, while keeping in mind the confederation's climate emissions targets.

Recommendations include a variety of strategies—including cutting off new supply contracts with Russia; seeking replacement sources, including increased LNG imports, from other countries; clearing permitting hurdles to expand wind and solar energy capacity; safely restoring nuclear reactors that have been taken offline while delaying the planned shutdown of others; and expedited building energy efficiency efforts and heat pump installations.  

The IEA plan may provide a hint of what is to come for the European Commission, which is set to release next week its own plan to reduce Russian gas dependence. “The IEA analysis outlines a number of concrete steps we can take towards that goal. It is a very timely and valuable contribution to our work,” said Kadri Simson, European Union energy commissioner in a statement.  

Meanwhile, Denmark Prime Minister Mette Frederiksen said on March 6 that the country would halt imports of Russian oil and gas but with no timetable set, Reuters reported.

Danish energy firm Orsted, formerly known as national utility Danish Oil and Natural Gas, said March 7 it will still buy gas from Russia under a long-term supply deal through 2030 that it cannot halt, but noted it faced disruptions due to sanctions and said it would donate profits from the contract to humanitarian aid in Ukraine. Orsted, which is 50.1% owned by the Danish government, sold its oil and gas assets in 2017 to focus on offshore wind energy.

Big European offshore wind turbine maker Vestas said March 8 it will halt work on four current Russian projects totaling 253 MW that were set to operate by year end and next year. The firm had already announced at the start of the hostilities that it would seek new Russian projects. The halt also is set to lead to work pause at its two turbine blade and nacelle factories in Russia, the firm said.

Danish grid operator Energinet announced on March 1 that the government allowed it resume construction of a 210-km pipeline to link Poland to gas fields in Norway and reduce its reliance on Russia. The project, which had been halted since mid-2019 due to environmental issues, is set to operate fully by January and includes €215 million in EU funding. It also will allow Poland to supply gas in Denmark.

Russia Gas Independence: Looking at Options

Country specific plans, especially in Germany, will also look to other energy sources, including liquefied natural gas. Germany is for now holding to its mandated exit from coal-generated power by 2038—possibly accelerated to 2030—and its goal to derive nearly all power from renewables by 2035. But the focus now is much more fixated on gas, coal and the possibility of extending or increasing nuclear power.

“Russia's invasion already has spurred Germany to fast-track the development of two LNG import terminals—a land-based terminal at Brunsbüttel and a floating storage and regasification unit at Wilhelmshaven—although it remains to be seen how quickly they can be permitted and put in place,” says Carr.

German state-owned investment bank KfW and the Dutch state gas grid operator, Gasunie, reached agreement on March 4 with German utility giant RWE to speed the estimated $488-milliion Brunsbüttel project, which had not been forecast to even be permitted until 2023. Gasunie will operate it, with the German state and RWE sharing ownership.

General contractor Cobra/Sener is now commissioned to begin prep work on the project.

For the Wilhelmshaven facility, energy company Uniper had shelved the project in 2020 due to insufficient industry interest, but now sees a floating LNG port with capacity of about 9.78 billion cu meters per year. While contracting details were not disclosed, a state-level environmental minister told German media that project could come online in 2024.

The plan has the backing of German Chancellor Olaf Scholz, who told a special session of parliament that the terminal that now takes in gas could be converted at some point to handle green hydrogen. As ENR previously reported in 2020, utility partners working on the Brunsbüttel facility were still in the exploratory phase of figuring out what would be needed to equip the import terminal to function as a hydrogen entry point.

Scholz also told the parliament that there could be a third LNG project sited in Stade.

Meanwhile, two state governors in German coal-producing regions have questioned whether the country's planned 2030 exit from that fuel is now realistic—with one further echoing calls to revisit Germany’s nuclear options.

Nuclear plants had also been slated for a phaseout. The country’s last three nuclear reactors are set to shut down by the end of 2022—an exit date that then Chancellor Angela Merkel called for in 2011 in the wake of the Fukushima disaster in Japan.

Robert Habeck, Germany's economic and climate minister and a Green Party leader, has now directed moves to determine if existing coal and nuclear plants could be given a longer lease of life. In January, he advocated closing the three nuclear plants to spur Germany's pivot to “massively increasing renewable energy and accelerating the expansion of the electricity grid.”

"I would not reject it on ideological grounds," he said in a recent media interview, a Feb. 27 Reuters report said. "There are no taboos on deliberations."

This may be a challenge, say some observers.

Manfred Fischedick, director of the Wuppertal Institute for Climate, Environment and Energy, says theoretically the nuclear plants could easily be extended—but practical considerations make it too expensive, with nuclear fuel running short, security standards needing shoring up and little interest from owners. “It is in no way a short-time option,” he says.

Lamia Messari-Becker, a civil engineer and professor of building technology and building physics at the University of Siegen, expects the conflict to prompt a much broader needed discussion. “All or most of the policy and discussion in renewables right now seems to be focused on electricity. We need to think about heating, about developing municipal heat planning, about biothermal heating, about hydrogen, and about heat transition and diversification,” she says.

Messari-Becker sees the need to get organized. “The German government urgently needs to hold an energy summit with a moratorium on previous energy policies," she contends. "It needs to do this in order to coordinate the acceleration or entry into renewable energy with the phaseout of fossil fuels, and to secure energy supply.”

According to the researcher, “a European interconnection would be welcome for this in order to be jointly resilient. Fluctuations in renewable energy could be better balanced out in a European strategy.” 

But what exists now indicates a long way to go. As of 2020, just over 22% of energy consumed by European Union countries came from renewable sources, according to EC statistics. The EU’s European Green Deal has a current goal to become a “climate-neutral continent” by 2050.

Materials and Construction Cost Impacts

Construction sectors in Europe—especially in Germany—weathered the COVID-19 pandemic, but with the Russia-Ukraine conflict so close, uncertainty still lingers. 

“We’re working at full speed with our economic experts at the German Trade Union Confederation on initial assessments,” says Frank Tekkiliç, a spokesman for IG BAU, the country’s large building and engineering trade union, about the invasion's impact on labor. The European Freight Association, a trucking and transport trade group, says driver shortages—especially of Ukrainian drivers based in Poland—are going to cause uncertainty and supply chain bottlenecks with effects rippling across the continent.

Already, the industry was seeing rapid price rises for raw and finished construction materials over the last year, according to sector business reports. Structural timber was up by 77%, with raw materials such as copper and bitumen also pricing skyward and overall industry costs expected to rise 4% in 2022.

“The construction industry is currently producing at the limits of its capacity. Additional increases in energy costs are therefore likely to have a direct impact on construction prices,” says Martin Gorning, an industrial policy researcher at the German Institute for Economic Research. “But any further dampening effects on construction demand are not expected—additional infrastructure and military spending are more likely to have a stimulating effect.”

But work continues at large European projects. Denise Juchem, spokeswoman for the Fehmarnbelt Tunnel between Germany and Denmark, says it has a large buffer in its budget related to ballooning construction material costs. The $7.7 billion project includes a reserve of $1.2 billion.