Wed, May 29 2024 29 May, 2024

Europe risks 27 bcm natural gas shortage next winter

Europe is facing a 27 billion cubic meter natural gas shortage in the winter of 2023-2024, the International Energy Agency warned on Monday.

Mother with son trying to keep warm by radiator (Photo credit: Adobe Stock/Monkey Business)

Europe is facing a 27 billion cubic meter natural gas shortage in the winter of 2023-2024 due to the risk of a complete halt to Russian supplies, a tight LNG market and the potential for colder weather compared to this winter, the EU Commission and the International Energy Agency said in a joint press conference on Monday.

While Europe’s gas storage is now over 90% full “many of the circumstances that allowed EU countries to fill their storage sites ahead of this winter may well not be repeated in 2023,” Fatih Birol, the executive director of the International Energy Agency (IEA), said.

The LNG supply-demand balance next year remains critical, he stressed at the press conference.

The comments came amid the launch of the IEA’s report How to Avoid Gas Shortages in the European Union in 2023, which was published on Monday.

The European Union as a whole is set to add an estimated 40 bcm of LNG import capacity by the end of 2023, however, only around 20 bcm of additional LNG supply is expected to come onto the market over the course of the year.

China, a top LNG importer, “may eat up a big portion” of that, he warned.

Nonetheless, with Europe managing to secure 130 bcm of LNG this winter, the EU Commission’s President Ursula von der Leyen said she was “confident we will get the same volumes next year.”

Meanwhile, the REPowerEU plan has managed to reduce demand for Russian gas by two-thirds with a mobilisation of up to €300 billion of investments.

“The result of all this is that we are safe for this winter,” she said.

Russian pipeline imports have fallen to 60 bcm in 2022 against 140 bcm in 2021.

New pipeline interconnections have come into operation including the Baltic Pipe, the interconnector Poland-Lithuania, the Bulgaria and Greece link and the gas interconnector between Poland and Slovakia.

“We have managed to withstand Russia’s energy blackmail,” she said.

However, some of the proposals drafted in the past months are still under discussion, she said, calling “on the Council to adopt them swiftly, because preparing for the next winter of 2023-2024 starts now.”

Gas price cap

In particular, European leaders might reach an agreement on a controversial gas price cap in the coming days.

A “market correction mechanism” in order to prevent “price spikes at TTF level” is to be implemented, Von der Leyen said.

“The issue is to find the right balance” and to “cut off the price spikes and speculation but not cut off supply to the EU market.”

“Proposals are on the table… A lot of work has been done and the technicalities are set,” she said.

“What we need now is a political agreement” on a price threshold and on the scope of the measure, she said.

EU energy ministers are due to meet for an extraordinary meeting on December 13, with a meeting of the European Council also scheduled on December 15.

Moreover, the EU hopes to launch the first demand aggregation tender for joint purchases of gas by the end of March. “Discussions with companies” are still ongoing, she said.

The mechanism is aimed at avoiding the risk that EU Members “outbid” each other to secure gas.

Von der Leyen was also meeting with Norway’s Prime Minister Jonas Gahr Støre on Monday to discuss the country’s role in supporting Europe’s energy security.

Norway has already been “pushing its efforts to a maximum” amid gas flows to Europe rising a record 9 bcm this year, she stressed.

Renewables ramp-up

Meanwhile, the crisis has also led to a faster rollout of renewables, with a record 50 GW added over the past year, “almost doubling the additional capacity of renewable energy, mostly from wind and solar” she said.

Renewable growth is set to accelerate further next year, replacing 12 bcm of gas.

However, speeding up permitting of new capacity remains a key issue across the EU, she said, adding that public investment in the energy transition needs to be increased both at a national and an EU level.

To address that, the EU is looking at boosting the RePowerEU framework for investments in clean tech.

This will be the EU’s “response to the US Inflation Reduction Act,” she added.

Moreover, regulators are looking to set up a sovereignty fund “to make sure that Europe continues to be the global leader in clean tech.”

In that respect, a review of the EU’s budget would “open the door” to funding being made available for this new instrument, she said.

Additional measures on energy efficiency, renewable rollout, heat pumps adoption, energy savings and gas supplies are among the recommendations of the IEA in its new report, in order the close the projected supply gap.

To incentivise faster improvements in energy efficiency, the report recommends expanding existing programmes and increasing support measures for home renovations and the adoption of efficient appliances and lighting.

It also proposes the use of more smart technologies and encouraging gas-to-electricity switching in industry.

Furthermore, reducing gas flaring in exporting countries such as Egypt and Algeria would help to free up further gas supplies that could be imported to Europe, Birol said.

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