From the Covid-19 pandemic and supply chain shocks to rising inflation and Russia’s invasion of Ukraine, governments and businesses around the world are trying to deal with and resolve major crises – many of them intertwined – on several fronts.
Against this difficult background, energy markets have been tumultuous, with gas and oil rising prices and fears of security of supply – Russia is a major exporter of hydrocarbons – have risen since the war in Ukraine.
All of the above comes at a time when major economies and large firms are formulating plans to move away from fossil fuels to low- and zero-emission alternatives.
Events in Europe in recent months have thrown the fragility of this planned energy transition into sharp relief. Speaking at the World Economic Forum in Davos last week Fatih Birol, the executive director of the International Energy Agency, said he thought we were “in the midst of the first global energy crisis”.
During a separate discussion at Davos moderated by CNBC’s Steve Sedgwick, a panel of experts and business leaders discussed how best the world could find a way out of the tumultuous situation it now faces.
“We’re at a crossroads,” said Maria Mendiluce, CEO of the We Mean Business Coalition. “One might think that because of the energy crisis, it makes sense to invest in fossil fuels, but it’s rather the opposite,” she said.
Gas was now more expensive than solar or wind, Mendiluce argued. The goal is to keep global warming at 1.5 degrees above pre-industrial levels – key part of the Paris Agreement – it was, she said, “quite dead unless we speed up the transition.”
Clean energy, Mendiluce said, provided energy security, jobs, a healthy environment and cost competitive. “So it’s now or never … if you invest, you’d rather invest in renewable energy than … in an asset that could be blocked soon enough.”
Patrick Allman-Ward is CEO of Dana Gas, a natural gas company listed in Abu Dhabi. Appearing alongside Maria Mendiluce on CNBC’s panel, Allman-Ward, perhaps unsurprisingly given his position, made the case for the continued use of gas in the years ahead.
“As you can imagine, I firmly believe in gas as a transitional fuel and the combination, especially of gas along with renewable energy, to solve the intermittent problem,” he said.
“Because yes, we have to go with renewable energy as fast as possible to reach our net zero goals. But … wind doesn’t blow all the time, and the sun doesn’t shine all the time. So we have to solve that intermittency problem.”
The idea of using gas as a “transitional” fuel that would bridge the gap between a world dominated by fossil fuels to one where renewable energy is in the majority is not new and is the source of heated debate for some time now.
Critics of the 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 set out its position on the matter. “The role of fossil gas in the transition to 100% renewable energy is limited,” it said, “and does not justify an increase in fossil gas production or consumption or investment in new fossil gas infrastructure.”
Back in Davos, Mendiluce considered the arguments put forward for the use of gas. “I understand, you know, maybe now the market will demand more gas,” she said.
“But when I talk to companies that are now dependent and have a high risk in gas, they’re looking for ways to change it. Maybe they can’t do it soon, but they know they’ll do it. Do it in the middle.”
Renewables, she went on to say, were a “competitive source of energy,” adding that speed of deployment is now key. “So if I were to invest … I’d be very careful not to invest in infrastructure that would get stuck.”