According to present trends, the European Union is on course to meet or exceed gas storage reserve levels in preparation for the winter. However analysts are warning, meeting gas storage objectives will not be enough to get the EU through the winter without reductions in consumption which so far have proven elusive to obtain, even as the price of gas has gone sky high and industry has aggressively curtailed production to save on energy costs during the price spike. Absent aggressive cuts in consumption, countries in the EU are still likely to run out of fuel at present consumption levels, even assuming Russia does not further curtail outputs.
Europe’s gas storage level is presently at 79.94% full, according to data from Gas Infrastructure Europe, so it is expected now that countries will exceed their target goals of 80% of full storage capacity by the winter.
Normally, that would cover Europe’s winter gas usage requirements, given a full supply of Russian natural gas. However Russian flows were at 20% through the Nord Stream pipeline earlier this year. Now Russia has announced that it is entirely stopping Nord Stream flows indefinitely, due to a maintenance issue with a turbine on the pipeline. That means, Europe will not have a regular supply of Russian gas to supply the majority of its gas needs, as it bleeds off its reserves throughout the winter.
If Europe were to reach 100% of full reserve storage capacity, it is estimated that will supply the European bloc for about three months of usage, according to a data analysis by Aurora Energy Research.
Germany, which houses roughly a quarter of Europe’s storage capacity, will only be able to supply its needs off that reserve alone, if Russia ceases all flows through winter, for an estimated 80 to 90 days, assuming average demand, and not an extra-cold winter.
Noting this, Simone Tagliapietra, a senior fellow at the Bruegel think-tank said in an interview, “To cope with this crisis situation, demand reduction will be even more important than storage.”
According to an analysis by data intelligence firm ICIS, if there are not major reductions in fuel usage, even in a scenario where the winter is not unusually cold, and Russian gas were to have continued flowing at 20% of capacity, Europe would run out of gas by March.
It is estimated that to avoid a supply crisis, all EU countries will have to restrict their gas usage by roughly 15% below their five-year average. That would leave Europe with 45% of their reserve capacity left at winter’s end, if Russia continued to supply gas at 20% of the Nord Stream pipeline’s capacity. If Russia cut flows entirely starting in October, Europe would have 26% of their reserve capacity left. There was, at the time of the analysis, no consideration of the reserve capacity left if Russia cut flows entirely, starting in late August, as appears to have occurred.
If there is no reduction in consumption, and there are no Russian flows, it is estimated that regular gas consumption in industries and buildings “could result in electricity rationing,” according to Mauro Chavez Rodriguez, European gas research director at Wood Mackenzie.
Yet so far, even as multiple industries have curtailed their production outputs due to extraordinarily high gas costs, sustained consumption cuts of the scale needed have not materialized, even as gas prices have gone sky high, and a cottage industry of specialists have cropped up to help consumers decide how to limit their own energy consumption through measures like cutting off rooms to their homes from heat, insulating sources of heat loss, and measuring and limiting usage of utilities to save on energy bills. It is even estimated that two-thirds of European fertilizer production has been affected by such voluntary limitations, due to the high usage of natural gas in the production of ammonia, a crucial feedstock in fertilizer production. Yet still the necessary reduction levels have not yet been seen.
Europe’s gas usage was only 11% lower than the five-year average in August, according to ICIS data. However that was not during winter, when heating is necessary, and usage levels are prone to be dependent on the variable of winter temperatures.
Already Germany has instituted new rules on energy usage, including a ban on gas for heating swimming pools, a reduction in external illumination of public landmarks, and a ban on heated shops keeping their doors open.
Matthias Buck, Europe director at Agora Energiewende estimates Germany will need to reach a consumption cut of 20-25% through the winter, which includes lower demand from households. He noted that will require an increase in governmental assistance for lower income households and families, to shield them from what will be a record surge in the cost of gas and electricity.
Analysts also note, this winter is not the only challenge facing the EU. Draining reserves this winter will make it harder to fill reserves next winter. If that happens, and Russian flows continue to be cut all next year, Europe’s storage could be drained by November, according to an analysis by the Oxford Institute of Energy Studies.
Although liquid natural gas has helped Europe rapidly fill storage this year, when applied in addition to Russian flows, the tight LNG market will not be able to supply enough gas to supply Europe’s daily consumption needs and fill storage, by itself, to comfortable pre-winter levels. That makes reducing consumption now vital to next year’s challenges.
Matthias Buck noted, “The storage is the safety net, but a very significant demand reduction is what we need as a priority in this crisis.”
