Factors that can determine Europe’s gas problem

Europe races to save energy as Russian gas supplies are cut off, but the factor that could determine their future is winter weather.

A long and harsh winter will increase heating demand and could leave European countries with severe gas shortages, threatening efforts to recover from the pandemic. The amount of wind and rain on the continent will also determine how much energy European countries can produce from cheap renewable sources.

Weather has played an important role in many military conflicts. In the current economic war between Russia and the West, weather will also be a factor in determining whether Europe runs out of gas in the winter and how much higher electricity prices will do to their economy. , according to commentator Georgi Kantchey’s WSJ.

Before winter, many fertilizer factories and smelters in Europe have reduced production, while officials in countries have urged people to save energy by reducing heating temperatures, bathing less. attempt to avoid the gas shortage scenario and have to allocate energy according to norms.

“Weather will be the key,” said Henning Gloystein, director of energy, climate and resources at consulting firm Eurasia. “A winter that’s not too cold would make things a lot easier and most Europeans could get through without Russian gas.”

Conversely, if this year’s winter is very cold and long, European governments will have to allocate energy more tightly, according to Mr. Gloystein.

Since Russia launched its military campaign in Ukraine in late February, supply disruptions have hit European energy markets hard. Russia has sharply cut gas flows to Europe, in what Western officials describe as an economic attack to punish Europe for backing Ukraine.

On September 2, Russian energy group Gazprom announced the indefinite shutdown of the Nord Stream 1 pipeline, the main gas supply to Germany, to fix a technical problem at a gas compression station.

Supply disruptions in the US are also affecting exports of liquefied natural gas (LNG), which Europe sees as a solution to its long-term dependence on Russian energy. To complicate the situation, a prolonged drought has reduced hydropower output, while many French nuclear plants have also had to shut down for maintenance.

German Economy Minister Robert Habeck visits the facility of gas company VNG AG in Bad Lauchstaedt, Germany on July 28.  Photo: Reuters.

German Economy Minister Robert Habeck visits the facility of gas company VNG AG in Bad Lauchstaedt, Germany on July 28. Image: Reuters.

In that situation, a lot of things in Europe depend on the weather.

“We won’t be short of gas unless we have to consume more if the winter weather is extremely cold and electricity production from other sources is short,” said Catherine MacGregor, chief executive officer of French energy company Engie SA , said.

The European Commission said in July that an unusually cold winter would increase the risk of a shortfall in gas reserves.

Europe has been racing to fill its gas reserves at breakneck speed. Gas reserves across the EU have reached 80% of total capacity, a target the bloc was previously expected to complete by November 1. Germany, which has the largest gas storage facility in Europe, has reached 85%.

Energy consulting firm Wood Mackenzie sees weather as the biggest risk in the near future. According to calculations, an unusually cold winter could reduce Europe’s gas reserves from 80% today to 4% by March.

The difficulty will last until next winter, when countries can only fill up to 63% of gas reserves before temperatures drop again in the fall, according to Wood Mackenzie. The company also warned that such a scenario would force countries to consider the gas allocation plan according to the norm.

A warmer autumn and winter will have a softer effect, as European energy companies and governments typically fill up gas reserves in the summer when demand is lower and use them in the next few months. cold winter months. Higher winter temperatures will help reduce gas consumption.

Dominik Jung, director at the weather forecasting service Q.met GmbH in Germany, predicts that this winter will be quite mild, with temperatures 0.8-1.9 degrees Celsius higher than the average from last year. 1991 to 2020.

“I don’t feel too worried about winter. Given current trends, I don’t think gas consumption will be too high,” he said.

Alexandre Fierro, senior meteorologist at brokerage Marex, said winter weather will be warmer and drier through December. AccuWeather says temperatures in Europe this fall will be 1-2 degrees higher this fall. C than normal.

This small temperature difference is enough to make a big impact on gas demand. S&P Global Commodity Insights estimates that 1°C warmer temperatures could reduce gas demand by 6% during the winter months in Germany and the UK.

Conversely, a very cold winter could lead to a 5% increase in gas demand in Europe, according to estimates by Fitch Ratings. This makes it difficult for the EU to achieve its voluntary 15% reduction in gas consumption as committed.

Another factor that could affect this winter is La Nina, a phenomenon where ocean surface temperatures drop sharply every few years. AccuWeather forecasts that due to La Nina, this winter will have more fluctuations in temperature and storms.

Warmer weather during the fall months also comes with some disadvantages. It could prolong the drought in Europe, rated the worst in 500 years in some places. The lack of rain has caused hydroelectricity production to drop by 20% compared to last year. The dry Rhine also affects the transportation of coal to thermal power plants, according to Carlos Torres Diaz, head of energy at consulting firm Rystad Energy.

“If the mild winter weather forecast comes true, it will help the power generation industry, but energy prices will continue to be influenced by many other complicating factors,” Diaz warned.

Thanh Tam (Theo WSJ)

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