From Ukraine to the Strait of Hormuz, the second energy crisis in five years is undermining resistance to the green transition

The second energy crisis in less than five years — both triggered by wars, first in Ukraine and then in the Middle East — is dismantling resistance to a shift away from fossil fuels. Month by month the debate over electrification gains momentum: powering economic sectors that still rely on coal, oil, and gas with electricity. If there were few arguments left —environmental, economic, and strategic autonomy — in favor of a rapid electrification, gasoline and diesel prices in Europe have delivered the final blow.

Signs of change are piling up amid the price shock. Renewable installations set a new record last year, rising 15.5% worldwide. Electricity storage, a critical complement for solar and wind, will double globally this year. And electric car sales have surged since spring in the main European markets. In the Nordic countries, internal-combustion cars (those that run on gasoline and diesel) are already marginal. In Portugal and Belgium, fully electric vehicles now account for one in two new cars. In France and Germany, one in three. Even in Spain, which lags behind, there are already 400,000 electric cars on the road: although belatedly, the main Iberian market also appears to be catching up.

“Brands don’t have stock to meet demand, because electric car sales have exploded across the continent,” Luis Valdés — perhaps the analyst who best gauges electrification in Spain — says by phone. “Traditional manufacturers can’t keep up: in many European countries almost everyone is ordering electric cars now, and they are still fulfilling orders from March and April, when demand started to spike.”

Oil companies themselves are beginning to acknowledge the shift. “Over the past six months, we’ve seen an increase in electric vehicle sales in many regions. It’s spectacular,” TotalEnergies’ chief executive admitted a week ago. He also acknowledged that, as is already happening in China, the electrification push in transportation — with trucks also knocking at the door: that is the next revolution — will affect crude oil demand sooner rather than later.

Bruce Douglas, chief executive of the Global Renewables Alliance, says the advance of renewables and electrification “will cause a significant decline in fossil fuel demand.” He cites a 16% year-on-year drop in oil demand for transportation in China as an example. “Part of that decline is due to behavioral changes — driving less, working from home — but another part is a structural shift toward alternative transportation, such as electric vehicles,” he says. “It’s the beginning of the end of the fossil fuel era. It won’t be immediate, it won’t be a sudden drop: it will take time. But it is a transition.”

If the previous energy shock, in 2022 and 2023, was the decisive wake-up call to back renewables, now it is the turn of the electric car, aerothermal systems (heat pumps) and grid-connected batteries.

Last year the EU spent more than €300 billion ($334 billion) on oil and gas. A bill to which, as Jan Rosenow of the University of Oxford points out, the closure of the Strait of Hormuz has added another €50 billion. “The European Commission itself estimates that electrification will reduce that burden by up to €260 billion by 2040,” he wrote in an email.

For years the electric car has competed head-to-head with combustion models when total lifetime cost is considered: for drivers who cover many miles a year, savings at the pump more than offset the higher purchase price. That calculation, however, is already outdated: in China, with comparable specifications, electric cars — whose biggest burden is battery cost, which is clearly falling — are already cheaper than their gasoline counterparts. In Europe, purchase costs are now virtually the same. And from the moment they leave the dealership, it’s all savings.

“There’s no better advertisement than driving past a gas station and seeing everything at €2 ($2.23). Even those who aren’t environmentally minded are sensitive to economics,” energy communicator Xavier Cugat says. “For once, everything adds up: the only opposing arguments come from the oil industry, which is going to be hurt,” he argues. “And that’s even though fuel prices don’t reflect the full reality, because they still include a €0.20 per liter subsidy [in Spain],” adds Pedro Fresco, author of El arte de impulsar el cambio (The Art of Driving Change). “We have to start accepting that permanent geopolitical conflict and oil used as a weapon of war are the new normal,” Fresco adds. “In the future we will regret the steps we didn’t take today to electrify.”

Price, trade balance, strategic dependence, and emissions are not the only issues: the jump in efficiency is dramatic. In short, they consume far less primary energy. “Electric cars and heat pumps are between three and four times more efficient [than their fossil-fuel equivalents],” Rosenow estimates. “Every gasoline-powered car and every gas-fired boiler sold today leaves us vulnerable to the next oil crisis for 15 years. And every new industrial facility that runs on fossil fuels entrenches an infrastructure dependent on imports for decades.”

Electrification

Studies that quantify the extra costs that the crisis linked to the U.S. attack on Iran is imposing on importing countries overlap. It is a burden measured in billions of dollars. “The rise in fossil fuel costs means importers are spending an additional $1.8 billion a day,” Douglas says.

That is why electrification is the buzzword, in economic debates and also in environmental ones. The president of the next UN climate summit — COP31, to be held in November in Antalya, Turkey — Murat Kurum, has put forward a proposal he hopes the nearly 200 countries attending will adopt: that by 2035, 35% of final global energy consumption will be supplied by electricity — a marked jump from the current 23%.

But the devil is in the details. Analysts and activists warn that electrifying alone is not enough. That is only half the problem. The other half is how electricity is generated. In many markets, like Spain’s, generation is largely emissions-free. But other countries cannot yet say the same: coal and natural gas, which emit greenhouse gases, still have a substantial share. Savio Carvalho of the climate NGO 350.org summed it up after Kurum’s proposal was published: “Electrification can be a powerful part of the energy transition, but electrifying the economy while leaving fossil fuels at the center is not a transition. We need to electrify fast, power that electrification with renewables, and phase out fossil fuels at the same time.”

This same concern was echoed a few days ago by the Council of the EU, the body that represents the 27 member states. In papers preparing the common EU position for COP31, it was stressed that the proposal “does not commit to ensuring that this increase [in electrification] is driven only by clean energy sources.” Whether the EU will ultimately draw a red line there to back the COP declaration remains to be seen.

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