Europe’s Winter of Uncertainty due to Poor Planning

January 4, 2022

Like Texas, Europe is running out of gas.

My recent Yale Climate Connections video (see below) was a look forward into this winter, and the energy crunch in Europe as rebounding economies energy appetites rebounded faster than expected, and not enough natural gas was put away for the coming winter. Exacerbating this was an unprecedented “black swan” “wind drought” , (since resolved), meaning renewable supplies were lower than expected over the summer. Meanwhile, French nuclear output has suffered from deferred maintenance coming out of Covid.

The crunch has given new political leverage to the Putin regime, which is a major supplier of natural gas to the European Union, and pumped up prices globally, as countries scramble to make up the gap with US supplied LNG (Liquified Natural Gas). Of course, this has an impact on US consumers, who, 5 years ago never had to worry about competition from a world market.

Lessons: higher gas prices can only create more pressure to accelerate the renewable transition, there is a need improve transmission connectivity, as well as more energy (especially long term electricity) storage.

Bloomberg has an update.

The retired salt caverns, aquifers, and fuel depots that hold Europe’s stockpiles of natural gas have never been so empty at this point in winter.

Just four months after Amos Hochstein, the U.S. envoy for energy security, said Europe wasn’t doing enough to prepare for the dark and cold season ahead, the continent is grappling with a supply crunch that’s caused benchmark gas prices to more than quadruple from last year’s levels, squeezing businesses and households. The crisis has left the European Union at the mercy of the weather and Russian President Vladimir Putin’s wiles, both notoriously difficult to predict.

“The energy crisis hit the bloc when security of supply was not on the menu of EU policymakers,” says Maximo Miccinilli, head of energy and climate at consultants FleishmanHillard EU. He expects the energy crunch to keep prices volatile and also trigger more political tension between regulators in Brussels and the leaders of the bloc’s 27 member states. 

Although the situation came to a head abruptly, it’s been years in the making. Europe is in the midst of an energy transition, shutting down coal-fired electricity plants and increasing its reliance on renewables. Wind and solar are cleaner but sometimes fickle, as illustrated by the sudden drop in turbine-generated power the continent recorded last year. 

Moscow’s increased leverage over its neighbors became apparent at the tail end of the last winter, an unusually cold and long one that depleted Europe’s inventories of gas just as its economies were emerging from the pandemic-induced recession. Over the summer, state-controlled Gazprom PJSC began capping flows to the continent, aggravating shortages caused by deferred maintenance at oil and gas fields in the North Sea and raising the stakes on a costly and long-delayed pipeline project championed by the Kremlin.

At the same time, countries from Japan to China were boosting their imports of liquefied natural gas (LNG) in preparation for the coming winter. All of this left Europe struggling to replenish its dwindling stockpiles during the warm months, when gas is less expensive.

Still, Europe’s leaders betrayed no alarm. On July 14, the European Commission unveiled the world’s most ambitious package to eliminate fossil fuels in a bid to avert the worst consequences of climate change. With their eyes trained on longer-term goals, such as reducing greenhouse gas emissions at least 55% by 2030 from 1990 levels, the politicians did not sufficiently appreciate some of the potential pitfalls that lay immediately ahead on the road to decarbonization. 

Europe’s natural gas production has been in decline for years, which has left it more reliant on imports. Now, Russia stands poised to further cement its position as the bloc’s top supplier. Gazprom and its European partners have plowed $11 billion into Nord Stream 2, a 1,230-kilometer (764-mile) pipeline running beneath the Baltic Sea from Russia to Germany.

Repeatedly delayed by U.S. sanctions, the decade-long project hit another roadblock this fall, when a new coalition government took power in Germany and the country’s energy regulator put final approval on hold. The move further roiled European energy markets, where gas prices had been breaking records day after day since July. Putin, in a televised speech delivered on Dec. 24, touted the benefits of the controversial conduit, saying “the additional volumes of gas on the European market would undoubtedly lower the price on the spot.” 

A recent bump in LNG imports from the U.S. has provided some relief, but it’s temporary at best. France needs to take several of its reactors offline for maintenance and repairs, resulting in a 30% reduction in nuclear capacity in early January, while Germany is moving ahead with plans to shut down all of its nuclear plants. With the two coldest months of winter still ahead, the fear is that Europe may run out of gas.


One Response to “Europe’s Winter of Uncertainty due to Poor Planning”

  1. rhymeswithgoalie Says:

    Just four months after Amos Hochstein, the U.S. envoy for energy security, said Europe wasn’t doing enough to prepare for the dark and cold season ahead….

    “Hey, guess what, guys….”

Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: