FEATURE: Russian invasion pits energy security against energy transition in US

Security concerns quickly took ahold of the European energy transition following the Ukraine invasion as countries shifted near-term energy policies back in favor of hydrocarbons and nuclear. And while US markets have remained relatively insulated from the full effects of the global energy crisis, experts note how national security priorities are beginning to shape, and possibly eclipse, the US energy transition as well.

There's a litany of ways Russia's Feb. 24 attack has already changed the course the European transition. Traditional fuels that were once taboo to European policymakers and investors have suddenly gained new appeal in a post-invasion world of surging energy prices.

On March 21, for instance, Belgium agreed to extend the lives of two nuclear power reactors by 10 years, reversing its earlier ambition to phase out all nuclear generation by 2025. And days earlier, Germany agreed to keep several coal plants in reserve that were previously slated for shuttering.

This trend has carried into the private sector as well. On March 7, the German power company Uniper announced that it was reviving a scrapped LNG import terminal project on Germany's north coast in order to bolster domestic energy flows while Germany reduces dependence on Russian imports. That terminal project was originally abandoned in 2020 after it failed to attract enough interest in the market.

"This geopolitical earthquake has made the Europeans shift their viewpoint on this," said Meghan O'Sullivan, director of the Geopolitics of Energy Project at Harvard, during the CERAWeek by S&P Global energy conference .

In the US, the crisis quickly reshaped climate and energy policy discussions, putting President Joe Biden's climate agenda on uncertain footing. Republicans quickly coalesced around calls for increasing domestic oil and natural gas production to bolster energy security, while Democrats have highlighted the importance of renewables and clean tech as a panacea volatile fossil fuel markets.

Although energy security impacts in Europe have so far been more acute than in the US, "I do think you'll start seeing that here as oil prices stay high for longer," said Randy Bell, senior director for global energy security at the Atlantic Council.

While high natural gas prices have incentivized European nations to push for more energy efficiency measures to help ween off Russian gas imports, high gasoline prices in the US provides occasion to frame the adoption of more electric vehicles as an energy security issue, Bell said. Other clean technologies that would immediately benefit from energy security framing include hydrogen, for its potential to replace natural gas in hard-to-abate sectors, and nuclear generation.

"There is a real opportunity to use this to accelerate the energy transition, but managing these short-term risks requires some decisions that probably aren't good for climate," Bell said. "There is this opportunity if the right choices are made."

And while framing energy as a US national security issue is nothing new, the timing stands the chance of moving the needle on the Biden administration's climate agenda. Whereas conflicts like Ukraine typically deprioritize climate and environmental policies, developing a low carbon economy would be a highly effective security strategy, said S&P Global Emissions and Clean Energy Analyst Matthew Williams.

"Framing energy issues as important to US national security isn't a new idea, but it is evolving," Williams said. "Russia's action may spur the Biden administration to take climate more seriously, as the major climate provisions within Build Back Better have stalled."

But while the crisis may give the energy transition an opportunity to gain ground, Bell said he's careful to not be excessively optimistic, especially considering how it's prompted counties like Belgium to extend the lifeline of coal.

"There's a big risk that it actually slows down the energy transition because of having to manage these short-term issues, where using coal, using oil for power – which is crazy – is the only option," Bell said.

O'Sullivan agrees; the geopolitical shock of the Ukraine invasion carries the risk of causing energy security concerns to outweigh climate imperatives.

"If the world sees national security and climate change mitigation and adaptation as being in competition with one another, national security will win out," she said. "It's an irony, but the geopolitics of this transition could end up being the greatest threat to the transition itself."

But there remains the possibly that near-term energy security and long-term energy transition can find a balance, where "creative policy framework thinking" can serve both imperatives at once.

"I remain a little hopeful," O'Sullivan said. "If we can elevate the energy security conversation alongside the climate change one, but see them as integrated, then there's no reason why we can't do both at the same time. But it will take some create policymaking."