Conor here: I’m sure Ursula and company think they succeeded by keeping the Americans “in” but bigger picture, they really are taking the Black Knight act to new heights:
By Tsvetana Paraskova, a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. Originally published at Oil Price.
- The European Union’s drive to replace Russian energy and achieve net-zero goals is making it more dependent on the United States for gas and China for renewable energy components.
- A new trade deal significantly increases the EU’s commitment to purchasing American energy, particularly LNG, raising concerns about higher prices and supply competition.
- China’s dominant role in solar panel manufacturing and critical minerals poses a challenge to Europe’s energy and industrial autonomy, despite aiding renewable capacity rollout.
The European Union’s drive to replace Russian energy imports within two years, boost renewable energy rollout, and meet net-zero goals has put it in a position to become even more dependent on the two antagonistic global powers, the United States and China.
The EU trade deal with the U.S. and the EU’s reliance on China-made solar PV panels, wafers, and critical battery metals are likely to keep shaping the pace of energy transition in the European Union, which remains firmly committed to decarbonizing economies and becoming a carbon-neutral bloc by 2050.
The new geopolitical realities in an increasingly protectionist world make the EU’s energy transition more dependent on trade and tariff policies by the U.S. and China.
In the goal to ditch all Russian energy by 2027, the EU is now more dependent on the United States than ever, while the target to accelerate renewable energy installations hinges on Chinese export policies for solar panel components and critical and rare earth elements.
“Balancing energy security and political realities will determine the pace and success of the EU’s energy policies in the coming years,” Reuters energy columnist Ron Bousso points out.
The reality under U.S. President Donald Trump is that Europe pledged to buy a total of $750 billion of American energy in three years, or about $250 billion per year. This would be more than tripling the $76 billion worth of American energy imports into the EU in 2024.
A large part of the planned increase is expected to come from additional purchases of LNG from the United States.
“Purchases of US energy products will diversify our sources of supply and contribute to Europe’s energy security,” the President of the European Commission, Ursula von der Leyen, said last week, commenting on the trade deal with the U.S., under which the American tariffs on most EU goods would be at 15%, half compared to the initially proposed 30%.
“We will replace Russian gas and oil with significant purchases of US LNG, oil and nuclear fuels.”
So far, so good.
But Europe is set to boost its reliance on U.S. LNG and pay higher prices for it, as soaring U.S. exports would drive U.S. benchmark prices higher, while competition for LNG supply with Asia will intensify.
Significantly higher EU purchases will need a significant increase in U.S. export capacity.
Even if all other planned or announced projects were approved today, they won’t make it on time for a significant rise in LNG exports to drastically boost EU imports within three years.
U.S. LNG exports are booming, but they won’t be anywhere close to helping the EU triple its imports of American energy, per the trade deal.
Europe, however, will become even more dependent on U.S. LNG.
The U.S. is already the EU’s top supplier of LNG, with 55% of LNG supply to the bloc from the U.S. so far in 2025, according to estimates by the European Commission.
The US is also the EU’s top oil supplier (17% of all EU imports in 2024), and a key supplier of nuclear fuel and fuel services.
The Commission insists that the EU-U.S. trade deal “does not undermine EU’s determination to decarbonise” as a jump in LNG imports over the next three years “is fully compatible with our medium- and long-term policy to diversify our energy sources and to implement the REPowerEU Roadmap so that we fully phase out Russian energy imports as soon as possible.”
The pillar of the REPowerEU plan and net-zero goals is the acceleration of solar and wind energy capacity installations.
And here comes the Chinese dominance in solar power panels and other equipment. In 2023, China was the EU’s largest supplier of solar panels, accounting for a whopping 98% of all imports, per the latest Eurostat data.
Cheap Chinese panels are helping with the solar capacity rollout, but they have put many European solar manufacturers out of business.
China’s stronghold in critical minerals and rare earths is also a serious concern for Europe’s automotive and renewable energy sectors. Stephane Sejourne, European Commissioner for Prosperity and Industrial Strategy, has even called for the creation of a strategic EU rare earths reserve.
With regards to NG the picture is quite diverse (in relation to import sources) in Europe. The Iberian Pensinsula relies more on US LNG than any other European region. In this case, transport costs are ultimately decisive and the transport costs from the US to Portugal and Spain are cheaper than, let’s say, for Italy, Greece or Germany. It is the case that in Spain and Portugal, US LNG is, this year at least, cheaper than Russian or Qatari LNG. No wonder why this year US share on LNG imports in Spain has increased compared to 2024. This is the logic of LNG imports and not a verbal compromise by someone who has no competence on NG purchases by European companies.
This said, I believe that forecasts for Henry Hub quotes are for (sharp?) increases and that would make a dent on EU companies willingness to increase their share of US LNG. NG markets are increasingly dominated by instant quotes rather than long term contracts. Volatility might become king.
As well, Italy and France import quite a lot of gas from Algeria, and both countries will try to expand their imports.
I am not sure what the relevance of the multiple projects in Morocco to connect to gas fields in Western Africa (Mauretania, Ghana), to exploit its recently discovered gas fields, and to build new LNG terminals will be regarding supplies for Europe.
Then there are those contested gas fields around Cyprus and offshore Gaza, as well as all those pipelines from Turkey bringing in gas from a variety of countries further in the Caucasus.
In other words: the sourcing of gas will remain quite diverse in the foreseeable future.
As for solar power: Europe had a strong industry producing photovoltaic panels two decades ago; it has now been largely wiped out by Chinese competitors. The utter dependency on China is an inescapable reality (and that is even without talking about batteries, a sector where Europe is floundering).
What has been quietly disappearing from the discourse on energy transition is hydrogen; as far as I know, most projects have been simply abandoned, as hydrogen does not make technical and economic sense in most cases.
There is still a lot of investment in hydrogen in Europe – the use hydrogen as a feedstock to the natural gas supply network is a fundamental part of the 2024 Directive on natural gas. The direct use of hydrogen as a motor vehicle or domestic fuel was always a unicorn, but using using surplus renewable energy to produce hydrogen which is then used as an industrial feedstock is growing very rapidly. Base feedstock production is one of those unglamorous areas of energy policy that is rarely written about (because its highly technical and boring), but hydrogen use is rising very rapidly in that area, and will continue to do so as the phenomenon of dirt cheap electricity during peak renewable supply periods continues to grow.
On another point, people often get very confused about European gas statistics because they don’t clearly distinguish the EU and Europe. The two biggest gas suppliers in Europe – Norway and the UK – are not in the EU, despite being entirely tied into the EU gas supply network, so its important to distinguish these markets to get a clear idea of supply. This is, I think, one reason why so many people were getting excited by the prospect of Europe running out of gas over the past two winters, when in reality this was never likely to be a problem.
Hasn’t higher gas prices led some gas intensive industries to scale down, like aluminum and fertilizer? Perhaps gas is less scarce in part is because of demand drops as industry relocates to cheaper energy sources.
Yes, LNG is a highly fungible market and an increasingly global one. It’s not uncommon for cargoes to change destination mid-voyage according to market demand. In many ways, it’s in the EU’s interest to promote US LNG as it creates a bigger pool of supplier which has the potential to drive down costs. What has often been overlooked in the discussion on LNG is that there is currently a boom taking place in ship supply thanks to China trying to muscle in on the market – this has the potential to make the market increasingly ‘international’. The role of Japan is also often overlooked – the Japanese are key players in financing and managing LNG.
The big problem for Europe is that it’s behind in constructing terminals. This is a key limitation on the supply market – it takes many years to get one through financing and regulatory controls.
In the bigger picture though, the price of solar panels and batteries continues to crash to historic lows. Large scale battery installations are now standard on wind and solar farms, without any subsidy being required – the main barriers now are regulatory – mostly for grid connectivity and stabilisation.
Solar panels have probably gone as far as they can go. They seem to be finally inching up, again China based.
Batteries are dropping dramatically, some 30-40% in the last 6 months alone, again China based.
For the US, well it all depends on what duties or tariffs or executive action Trump takes to limit deployment.
If it’s just the removal of tax incentives, then renewables will take a hit but it will still continue on.
I remember well the criticisms leveled at Europe (and particularly Germany) for its “foolish” dependence upon cheap Russian gas.
I have yet to hear a cogent argument why dependence upon more expensive LNG is somehow “better.”
The stupid “but freedom molecules” I suppose?
The American “deal you cannot refuse” will have a blowback effect on American domestic natural gas prices. Being fungible, American gas supplies will be diverted to the new, more “profitable” customers, setting up a “dynamic market” scenario that the energy suppliers will gleefully exploit.
Just like with the tariffs, this American “own goal” will come back to haunt, who else, but the “great unwashed masses” in the United States. The cynic in me suspects that this could be another tool of the Jackpot. Immiserate the “lower classes” so they must “make hard decisions” among their critical use cases.
I have read it stated that modern industrial society relies on energy to function optimally. Reduce the “access” to energy and the resulting suboptimal living conditions have a classic Neoliberal result, “Go die.”
We used to be made fun of when we would state, “Get ready for the New World Order.” We were crackpots and conspiracy theorists.
The New World Order is here, now.
(What is curious here is that this New World Order looks suspiciously like the Old World Order, pre World War One.)
Stay safe.
Isn’t this US energy price increase the point?
The US can only frack shale for shale oil and gas at a high price for the product. Capturing EU demand in a limited market will raise prices and help ensure continued US energy independence, even at higher prices domestically, but the US remains the cleanest dirty shirt in the basket because it still has the lower price of energy relative to Europe and thus better terms of trade.
The only threat to this model is industrialisation of cheap energy BRUCS countries but the US is trying to prevent this or collect its vig on the profits anyhow….
From every metric I can find the US imports about 100% of its uranium. And most of its enriched uranium is also imported with Russia being the largest supplier to the world.
How exactly is the US supplying Europe ?
As to solar, the numbers have been poorly documented for a long time. There really hasn’t been much of any production of solar panels in Europe for a long time because they couldn’t compete with China since the early 2010’s. There are still European companies but most of the production is in south east Asia. REC is in Singapore for example.
The most recent numbers I’ve seen say Chinese panels are between 8-10 cents per watt, the US made ones with massive subsidies are around34-45 cents per watt. And these are assembled in the US from foreign parts not actually made here.
From a business perspective, getting high quality products for substantially less money just makes sense.
A question, what are the odds of some European countries buying Russian gas in the near future? Because of the price of LNG going up
“How exactly is the US supplying Europe ?”
My understanding is that the fuel used in atomic power plants comes in the form of rods that must be shaped and minutiously produced according to the design specific to each reactor technology. I think that the uranium must also be enriched according to precise specifications, especially if the fissile material is itself a mix of different components (such as MOX).
Since many of the power plants in Europe are from American firms, or use technology licensed from them, this implies that the rods are manufactured to precise specs in the USA and imported from there. The same issue affects the power plants of Soviet origin that are still operating in Eastern Europe: the fuel/rods may be imported from Russia — under waivers from EU sanctions.
These articles never mention the other parts needed to make solar or wind work, inverters. While there are a few European companies, there are no US ones. Now the Chinese are eight of the top 10 in the world. And these companies are growing.
And this is the reason that China shouldn’t worry about overproduction of solar panels. Use them as ‘loss leaders’ as part of the Belt and Road project. Bring independent PV sources to the Sahel, generating demand for inverters, and grow demand for other China products. African continent becomes an ally.
The renewables dependency on China (it’s not just solar – most made-in-europe wind turbines use Chinese components) might make the foreign policy types and industrialists wring their hands, but it really is not as bad as the fossil fuel dependency. Solar panels once imported last 20-25 years, and after that they still work, it’s just that capacity falls below 80% of initial capacity. Unlike gas, where getting cut off means you have nothing and must scramble for alternative supplies lest you freeze during winter.
Most comments echo this sentiment, but are they missing the fact that the goals can also be reached simply by keeping the export volumes constant and tripling the price?
I can recall a year or two ago, when there were hurricanes that shut down the Gulf of America, and the US told Europe to bugger off on their purchases of LMG. Now that is the type of stability Europe needs.
A year or two ago, there was no Gulf of America.
It will always be the Gulf of Mexico to me.
Isn’t this US energy price increase the point?
The US can only frack shale for shale oil and gas at a high price for the product. Capturing EU demand in a limited market will raise prices and help ensure continued US energy independence, even at higher prices domestically, but the US remains the cleanest dirty shirt in the basket because it still has the lower price of energy relative to Europe and thus better terms of trade.
The only threat to this model is industrialisation of cheap energy BRICS countries but the US is trying to prevent this or collect its vig on the profits anyhow through energy deals, pipelines etc (Turkey-Azerbaijan corridor)….