From the Covid-19 pandemic and supply chain upheavals to rising inflation and Russia’s invasion of Ukraine, governments and businesses around the world are struggling to deal with major crises – many of them interconnected – on multiple fronts.
Against this challenging backdrop, energy markets have been shaken, gas and oil prices have risen sharply, and concerns about security of supply (Russia is a major exporter of hydrocarbons) have intensified since the war in Ukraine.
All of the above is happening at a time when major economies and major firms are making plans to shift from fossil fuels to low-emission, zero-emission alternatives.
Events in Europe over the past few months have highlighted the fragility of this planned energy transition. Speech at the World Economic Forum in Davos Fatih Birol, chief executive of the International Energy Agency, said last week that he believes we are “in the middle of the first global energy crisis.”
During a separate panel in Davos, moderated by CNBC’s Steve Sedgwick, a panel of experts and business leaders discussed how best the world can find a way out of the difficult situation it is currently in.
“We are at a crossroads,” said Maria Mendiluche, CEO of the We Mean Business Coalition. “You might think that because of the energy crisis it makes sense to invest in fossil fuels, but it is rather the opposite,” she said.
Mendylus argued that gas is now more expensive than solar or wind. The goal is to keep global warming 1.5 degrees above pre-industrial levels. key part the Paris Agreement — was, in her words, “practically dead unless we speed up the transition.”
According to Mendilyus, clean energy ensures energy security, jobs, a healthy environment and is cost-competitive. “So it’s now or never… if you’re going to invest, you’re more likely to invest in renewable energy than… in an asset that could get stranded pretty soon.”
Patrick Allman-Ward is the CEO of Dana Gas, an Abu Dhabi-listed natural gas company. Appearing alongside Maria Mendilus on a CNBC panel, Allman-Ward, perhaps unsurprisingly given his position, advocated the continued use of gas in the coming years.
“As you can imagine, I strongly believe that gas is a transitional fuel, and the combination of gas with renewables in particular solves the problem of interruptions,” he said.
“Because yes, we need to transition to renewables as quickly as possible to reach our net zero goals. But…the wind doesn’t blow all the time and the sun doesn’t shine all the time. So we have a way to solve this intermittent problem.”
The idea of using gas as a “transitional” fuel that would bridge the gap between a world dominated by fossil fuels and a world dominated by renewables is not new and has been a source of heated debate for some time now.
Critics of this idea include organizations such as the Climate Action Network, which is headquartered in Germany and consists of more than 1,500 civil society organizations from more than 130 countries.
In May 2021, CAN outlined its position on this issue. “The role of fossil gas in the transition to 100% renewable energy is limited,” the statement said, “and does not justify either increased production or consumption of fossil gas, or investment in new fossil gas infrastructure.”
Back in Davos, Mendilus considered the arguments put forward in favor of using gas. “You know, I understand your point of view that perhaps now the market will demand more gas,” she said.
“But when I talk to companies that are currently dependent on gas and have a high risk, they are looking for ways to change it. Maybe they can’t do it in the short term, but they know they’re going to do it in the medium term.”
She went on to say that renewables are a “competitive source of energy”, adding that speed of deployment is key now. “So if I had to invest… I would be very careful not to invest in infrastructure that would get stranded.”