Europe’s ambition to “become independent” of Russian energy imports is becoming increasingly difficult as the war in Ukraine turns steel, copper and aluminum into rare and expensive materials.
The speed with which states are trying to get rid of Russian fossil fuels intensifies the continent’s efforts to use more liquefied natural gas and more alternative energy by 2030, notes the Bloomberg. Germany has pledged to set up two LNG terminals, France wants to continue talks with Spain on pipelines connecting the two countries, and Britain is looking for more alternative energy sources within its borders.
However, the prices for the necessary materials are moving upwards. Steel, copper and aluminum prices have reached new heights in the past 12 months, and the Bloomberg Commodity Index has risen 46% over the same period. The spike in prices is hampering the European Union’s effort to triple the wind and solar energy it uses by the end of the decade – a huge investment that may have required up to 52 tonnes of steel.
Fred van Beers, CEO of SIF Holding NV, which builds steel platforms for wind turbines, says: investment “. “It brings ups and downs in our market,” he says.
Before the invasion, Russian gas was relatively cheap, easy to transport, and plentiful. These factors, together with the expected launch and use of the Nord Stream 2 pipeline in Germany, managed to convince the Europe reduce its own production and start closing coal and nuclear power plants to switch more comfortably to greener forms of energy.
The EU imported about 155 billion cubic meters of gas from Russia last year, according to the International Energy Agency. After the end of the war, the EU wants to end its dependence by 2/3 this year.
Nearly 30 billion cubic meters can be replaced by other sources, such as alternative energy, nuclear energy and changes in consumption, the IEA estimates. For the EU, the increase in infrastructure costs could be as much as 20% compared to the pre-war period, says Grant Sporre, an analyst at Bloomberg Intelligence.
“Building the right infrastructure will be more expensive than the governments of the various countries had estimated,” Sporre said. “As prices rise, we may see some projects being delayed.”
The European Commission’s plan for the transition to alternative energy sources includes the installation of 290 and 250 gigawatts of wind and solar energy. The bill for the amount of steel that will be used alone amounts to 65 billion euros, at current market prices.
Russia and Ukraine are among the most important exporters of aluminum, which is used in the construction of turbines and pipelines. natural gas. While there are alternative suppliers, the cost in these cases is 50% higher than usual, according to Rysted Energy AS.
Complicating matters is China’s decision to shut down a steel plant in the Tangshan region as part of a policy to curb pandemics.
“There are rising costs across the steel supply chain across Europe,” said James Ley, senior vice president of energy metals at Rysted.
Copper is another important material, which is characterized by high conductivity, which makes it ideal for use in internal wiring and external cables. Europe needs about 7.7 million tonnes of copper to meet its 2030 target, and according to Bank of America, the price rally this year adds $ 7.6 billion to the bill.
Then there is the aluminum needed to build solar panels, wind turbines, and the networks to which these structures are connected. Europe is facing a significant shortage of these materials, as their production has declined following rising electricity prices, which has reduced profits in the metals industry.
THE Russia is the largest producer after China, with Russian aluminum production accounting for 5% of world production. The market was already experiencing significant difficulties and prices soared in March, according to Bloomberg. The risk of a halt to Russian exports due to international sanctions was a growing concern.
“The international community may need to survive without Russian raw materials,” said Andrew Forrest, president and founder of Fortescue Group Metals Ltd. “It is certainly possible, but it will take a transitional period,” he added.
More grids will be needed to deliver large quantities of alternative energy to places that need electricity. About $ 1.5 trillion in total investment from 2020 to 2050 is needed to add new connections, according to Bloomberg estimates.
However, it is not just about new infrastructure in clean energy. Liquefied natural gas is being boosted by Germany’s decision to build two new terminals by the end of the year and the Dutch plan to provide a floating storage and regasification plant by March. Italy and Estonia are also making moves to secure similar infrastructure.
Britain and France plan to expand nuclear power. About 230,000 tonnes of steel reinforcement will be used to build an Electricite de France SA station in south-west Britain, and plans are being made to build another reactor with the same characteristics.
“Everyone is talking about the energy transition, and everyone needs the same materials,” said Julian Kettle, senior vice president of metals and mining at Wood Mackenzie Ltd.
Money Review
Follow Skai.gr on Google News
and be the first to know all the news
