June 14, 2024

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 attempting to tackle and solve major crises — many of them interlinked — on multiple fronts.

Against this challenging backdrop, energy markets have been roiled, with gas and oil prices surging and fears over security of supply — Russia is a major exporter of hydrocarbons — heightened following the war in Ukraine.

All the above is taking place at a time when major economies and big firms are formulating plans to move away from fossil fuels to low and zero-emission alternatives.

Events in Europe over the past few 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 middle 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 addressed how best the world could find a way out of the tumultuous situation it now faces.  

“We are at a crossroads,” María Mendiluce, CEO of the We Mean Business Coalition, said. “One could 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 of keeping global warming to 1.5 degrees above pre-industrial levels — a key part of the Paris Agreement — was, she said, “pretty much dead unless we accelerate the transition.”

Clean energy, Mendiluce said, provided energy security, jobs, a healthy environment and was cost competitive. “So it is now or never … if you’re going to invest, you’d rather invest in renewables than … in an asset that might become stranded pretty soon.”

Patrick Allman-Ward is CEO of Dana Gas, a natural gas firm listed in Abu Dhabi. Appearing alongside María Mendiluce on CNBC’s panel, Allman-Ward, perhaps unsurprisingly given his position, made the case for gas’ continued use in the years ahead.

“As you can imagine, I’m a firm believer in gas as a transition fuel and the combination, particularly of gas together with renewable energy, to solve the intermittency problem,” he said.

“Because yes, we have to go with renewables as fast as we possibly can in order to achieve our net zero objectives. 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 “transition” fuel that would bridge the gap between a world dominated by fossil fuels to one where renewables are in the majority is not a new one and has been the source of heated debate for a while now.

Critics of the idea include organizations such as the Climate Action Network, which is headquartered in Germany and consists of over 1,500 civil society organizations from more than 130 countries.

In May 2021, CAN laid 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 nor consumption, nor investment in new fossil gas infrastructure.”

Back in Davos, Mendiluce reflected on the arguments put forward for the use of gas. “I get your point, you know, that maybe now the market will demand more gas,” she said.

“But when I speak to companies that are now dependent and have a high risk in gas, they’re looking at ways to shift it. Maybe they can’t do it in the short term, but they know that they’re going to do it in the mid-term.”

Renewables, she went on to state, were a “competitive source of energy,” adding that speed of deployment was now key. “So if I was to invest … I would be very careful not to invest in infrastructure that will become stranded.”