European energy crisis: what role will renewables play?

by | Sep 1, 2022

Lewis Aubrey-Johnson, Head of Fixed Income Products at Invesco, shares his thoughts on the role renewable energy companies will play in helping Europe achieve energy security.

“European energy markets are undergoing significant change due to not only the long-term target of decarbonisation, but also the rather acute short-term challenge of the cutting of Russian gas supplies.

“Russian gas accounted for around 40% of all European gas demand, and so that is a very big hole to fill in a short space of time.

“In the short term, European governments are responding by securing other supplies of natural gas and LNG as well as coal. They are also thinking of ways to cut the demand of both gas and electricity this winter, in order to reduce the risk of rationing. But I think, no matter, it’s likely that high gas prices are here to stay.

“In the longer term, we think that the challenge of European energy security can at least in part be met by the growth of renewables, and I think this bodes well for the power generation companies that we hold in our ECO Bond Strategy that are really among the leaders in this field.

“In fact, the momentum in Europe for renewable energy is already very well established. For example, already, according to EU Stat, nearly 40% of electricity generated in Europe comes from renewable sources, in comparison to 36% from fossil fuels.

“Renewable energy can be generated locally. It’s of course carbon free, if we exclude the carbon emitted during the construction phase, and it can produce power at a very low marginal cost.

“So while renewable energy is not the whole answer for Europe’s energy crisis, certainly in the medium term, it’s a key part of it.”

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