Russia is set to lose the energy war it started

Today's Take: Out in the Cold

With the world facing its first truly global energy crisis, the International Energy Agency's annual World Energy Outlook could hardly be clearer: There's no going back to markets and trade flows as they were. We're still underspending on the green transition, but policies today mean fossil fuel use could peak within a decade. The upside for coal is temporary, the golden era for gas is over. 

And the clearest loser is Russia.

The hydrocarbon-dependent economy was vulnerable well before its invasion of Ukraine. Moscow made only token efforts to adapt to climate imperatives even as its key customers did, relying on oil rents and overestimating the role of gas as a transition fuel. Now, the IEA says, that's over.

Russia will never go back to fossil fuel exports at levels seen in 2021. Its share of internationally traded gas is seen shrinking from 30% last year to half of that by 2030. The country exported over 7 million barrels per day of oil last year, but the IEA estimates that falls by a quarter by 2030, even in the least-demanding scenario. By the mid-2020s, North America is exporting more oil than Russia.

Russia has defied bleak IEA predictions before. The agency said not long after the war began that oil exports would immediately plunge by a quarter as buyers shunned Moscow. That didn't happen. But it's hard to disagree with the trajectory here — Russia has struggled to reorient its gas towards Asia and coal exports have been constrained by rail and other logistical bottlenecks.

Then there's the grim prospect for future Russian production, hampered by the lack of access to Western capital, service providers and technologies. Without those Moscow will struggle to tap hard-to-recover oil deposits and expand in liquefied natural gas, where its homegrown tech has floundered. That's before considering longer-term demand shifts, accelerated by Moscow's own actions. Right now, a Power of Siberia-2 gas pipeline to China looks like wishful thinking.

Vladimir Putin won't take lessons from all this, but will the West? After all, vulnerabilities remain in the green energy supply chain and the sources of critical minerals remain too concentrated. With Russian roulette, once is enough.

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H2 Woah

Growing momentum for hydrogen policies will see annual electrolyzer installations soar, with Europe and China dominating deployment

There's a boom decade ahead for hydrogen. Led by Europe and China, cumulative electrolyzer installations will grow from two gigawatts in 2018-2022 to roughly 240 GW by 2030, according to BloombergNEF's Global Electrolyzer Outlook 2030, a fleet that could produce around 25 million metric tons of green hydrogen per year. Policy support, manufacturing expertise and investment remain concentrated though, and the report highlights that outside Europe, US and China, expansion is driven by demand for exports to Europe and Japan.