As Russia’s invasion of Ukraine continues to intensify, so too does the world’s condemnations of this groundbreaking conflict. But while the United States and its Western allies increase their sanctions against Russia, their fight comes with a troubling trade-off. In exchange for following their collective conscience, the West’s decision to block Russian oil exports is compromising its energy security.
While a troubling prospect, the energy uncertainty faced by nations across the globe poses a unique opportunity for green energy stocks.
The Tensions Builds
While the United States and its allies placed an array of sanctions on Russia at the start of its armed incursion, special precautions were taken at first in order to avoid hitting the nation’s oil and gas industry, thereby protecting what is a major supply to Europe.
With Russia supplying close to 40% of Europe’s natural gas and 25% of its oil, the continent still heavily relies on Russia in terms of its energy capabilities.[1]
Even as official sanctions were avoided at first, several major oil companies pulled out of Russia in retaliation for its invasion of Ukraine. including BP, ExxonMobil, and Shell, while TotalEnergies has decided to halt new investments.[2]
Major energy companies were not alone in their withdrawals, however. The German government decided to halt the Nord Stream 2 gas pipeline from Russia, capable of delivering more than 50% of Germany’s annual consumption.[3]
Before any official sanctions had been implemented by the United Kingdom, the nation banned any Russian ships from docking at British ports. At the same time, British dock workers refused to unload Russian oil and gas imports that had already arrived at the docks prior to the ban.
While the European Union remains split over whether or not an official ban on Russian fossil fuels is the right call, a consensus has been reached on reducing the reliance that its member states place on Russian oil and gas. The European Commission announced a plan to decrease the bloc’s usage of Russian natural gas by two-thirds by the end of the year.[4]
After holding talks with the European Union over the potential sanctions on Russian energy exports, the United States announced its own ban of all Russian oil and gas imports.[5] But while nations such as the United States, Germany, and the United Kingdom have decided to take action, their fight on moral grounds could come at a significant cost.
Russia’s Oversized Influence
It’s not just the European nations that rely heavily on Russia’s oil and gas supplies. The world’s third largest oil producer, Russia is the leading exporter of oil worldwide as well as the second largest exporter of crude globally after Saudi Arabia.[6] By curbing Russian energy exports, energy security across the globe is being brought into question.
As world powers seek to overcome this energy security issue, more and more energy leaders are turning to green energy sources as a potential solution.
Sustainable Goals
Germany is looking towards clean energy as a mechanism to reduce its dependency on Russian fossil fuels, announcing its intention to introduce an amendment to its Renewable Energy Sources Act that would see its 100% clean energy target brought forward to 2035.[7]
British Secretary of State for Business, Energy and Industrial Strategy Kwasi Kwarteng announced that the United Kingdom would be accelerating its renewable energy efforts in order to decrease its reliance on Russian fossil fuel imports,[8] while European Commission President Ursula von der Leyen declared, “We have to accelerate the green transition, because every kilowatt-hour of electricity Europe generates from solar, wind, hydropower or biomass reduces our dependency on Russian gas and other energy sources.”[9]
Renewable energy is at the core of the International Energy Agency’s (IEA) plan to reduce European dependence on Russian gas and oil. Its plan involves expanding green energy applications such as solar and wind energy.[10] Thanks to the forward momentum of the green energy movement, hydrogen stocks are enjoying a particularly strong performance as of late.
Gaining momentum
As the Russia-Ukraine conflict intensified at the start of March, green hydrogen stocks surged in value. Ballard Power Systems and Bloom Energy stocks spiked by 13.7% and 14.3% respectively, while fuel cell stock Plug Power surged by 12.2% in the same period.[11]
Plug Power CEO Andy Marsh expressed his belief that the transition to green energy will continue to advance in the future, not only because of the energy security concerns posed by Russia’s invasion of Ukraine but concerns surrounding CO2 emissions as well. Plug Power’s goal for 2022 is a 90 percent year-on-year revenue growth, with its targeted earnings within the range of $900 million and $925 million.[12]
Several major energy companies have expressed agreement with Marsh’s sentiment. Chevron has decided to take the plunge into the clean energy space by purchasing biofuels producer Renewable Energy Group for $3.15 billion,[13] while FuelCell Energy secured a $6.8 million investment through a competition organized by Canada’s Clean Resource Innovation Network to be used in a carbon capture project in Alberta, Canada.[14]
The future is green
As Europe and the United States push to end their dependence on Russian fossil fuel exports, it’s becoming clear that the transition to clean energy sources is emerging as a widely accepted solution. This notion has instilled confidence in investors that has consequently spurred an upward surge in the value of hydrogen stocks while also accelerating the momentum of the green energy movement at large.
- “Oil Market and Russian Supply”, Accessed 06 March 2022, https://www.iea.org/reports/russian-supplies-to-global-energy-markets/oil-market-and-russian-supply-2 ↑
- “Russia’s War In Ukraine: The Beginning Of The End Of An Energy Superpower?”, 05 March 2022, https://www.rferl.org/a/russia-end-energy-superpower-/31737861.html ↑
- “Germany halts Nord Stream 2 and Russia responds with a stark warning”, 06 March 2022, https://edition.cnn.com/2022/02/22/business/nord-stream-2-germany-russia/index.html ↑
- “Europe faces pressure to join US, British ban on Russian oil”, 09 March 2022, https://apnews.com/article/russia-ukraine-putin-business-european-union-germany-60cd9af0e990d0e95547d2c7052f898f ↑
- “FACT SHEET: United States Bans Imports of Russian Oil, Liquefied Natural Gas, and Coal”, 13 March 2022, https://www.whitehouse.gov/briefing-room/statements-releases/2022/03/08/fact-sheet-united-states-bans-imports-of-russian-oil-liquefied-natural-gas-and-coal/ ↑
- “Oil Market and Russian Supply”, accessed 07 March 2022, https://www.iea.org/reports/russian-supplies-to-global-energy-markets/oil-market-and-russian-supply-2 ↑
- “Germany’s green energy goal and factories on stilts: The sustainability success stories of the week”, 06 March 2022, https://www.edie.net/news/7/The-factory-of-the-future-and-Germany-s-renewable-energy-vision–The-sustainability-success-stories-of-the-week/#:~:text=ENERGY%3A%20Germany%20sets%20100%25%20clean%20energy%20target%20for%202035&text=This%20commitment%20will%20be%20enshrined,of%20electricity%20generation%20by%202030. ↑
- “Amid war, Biden reluctant to unleash clean energy rhetoric”, 07 March 2022, https://www.eenews.net/articles/amid-war-biden-reluctant-to-unleash-clean-energy-rhetoric/ ↑
- “European Commission President Bats for Hydrogen and Renewables to Russian Overhang”, 07 March 2022, https://www.saurenergy.com/solar-energy-news/european-commission-president-bats-for-hydrogen-and-renewables-to-russian-overhang ↑
- “IEA’s 10-Step Plan For Europe: Diversified Gas Imports And Clean Energy”, 04 March 2022, https://oilprice.com/Alternative-Energy/Renewable-Energy/IEAs-10-Step-Plan-For-Europe-Diversified-Gas-Imports-And-Clean-Energy.html ↑
- “Why Shares of Plug Power, Ballard Power Systems, and Bloom Energy Are Soaring Today”, 28 February 2022, https://www.fool.com/investing/2022/02/28/why-shares-of-plug-power-ballard-power-systems-and/ ↑
- “Plug Power’s Outlook Remains Strong. The Stock Is Up Despite Mixed Earnings.”, 02 March 2022, https://www.barrons.com/articles/plug-power-stock-price-earnings-51646172487?tesla=y ↑
- “Chevron sees ‘bright future’ for Ames-based Renewable Energy Group as its biofuels headquarters”, 03 March 2022, https://www.desmoinesregister.com/story/news/2022/03/03/chevron-exec-promises-bright-future-ames-reg-3-billion-purchase/9340892002/ ↑
“FuelCell Energy wins funding for Canadian carbon capture project”, 24 February 2022, https://www.hartfordbusiness.com/article/fuelcell-energy-wins-funding-for-canadian-carbon-capture-project ↑