- Oxford Sustainable Finance Group says it is possible for the EU to replace Russian natural gas in its system by 2028
- It would require incremental investment but up to 90% of it can be recouped withing next 3 decades with savings from spending on natural gas
- Government needs to provide financial, policy and permitting support to renewables
The European Union’s (EU) efforts to replace Russian natural gas for power and heat is possible with renewables and heat pumps by 2028, and the bloc can also recover up to 90% of additional investment required, over and above planned under the European Green Deal, over the next 30 years by eliminating spending on buying gas, says Oxford Sustainable Finance Group.
For context, close to half of the bloc’s natural gas supply in 2021 came from Russian gas, according to Oxford’s report titled The Race to Replace: the economics of using renewables to free Europe from Russian gas.
Under the European Green Deal, the European Commission has pledged to mobilize a minimum of €1 trillion in sustainable investments over the next decade.
Between 2023 and 2028, the EU would need €811 billion to do away with Russian natural gas, split across renewables at €706 billion and heat pumps at €105 billion. Of this, €512 billion is estimated to be incremental investment including 70% being business-as-usual scenario, as per the report. Around €238 billion or almost 50% will be operational savings over 30 years.
Estimating lifetime savings from using a lower amount of natural gas basis ‘reasonable natural gas price assumptions’, analysts estimate savings to be as high as 92%.
“The transition from Russian gas to clean energy is not only achievable, but offers multiple benefits. Replacing natural gas with wind and solar energy eliminates the need to pay for gas in future,” said Co-Author of the report and Head of Transition Finance Research at the Oxford Sustainable Finance Group, Dr Gireesh Shrimali.
By 2028 when the Russian gas is replaced, the bloc is expected to deploy 801 GW of renewable electricity under the report’s high scenario, but under low scenario by 2029 the deployment will be 854 GW.
On cumulative basis, under high scenario by 2028 it will deploy 1.303 TW renewable electricity.
For these savings to be achieved, the report recommends EU to have a holistic ecosystem in the form of:
- more conducive policy environment, including faster permitting for renewable electricity
- diversified and secure supply chains
- widespread weatherization of facilities, and
- supportive subsidy and financing ecosystem.
Part of the Smith School of Enterprise and the Environment at the University of Oxford in England, Oxford Sustainable Finance Group has made available The Race to Replace report for free download on its website.