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| Fri, 3rd Feb 2023 5:18:00 |
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How Putin’s plans to blackmail Europe over gas supply failed |
Within eight months of Russia invading Ukraine, the EU’s 27 states had replaced about 80% of the natural gas they used to get from Moscow
The worst-case scenarios piled up over the summer months. Germany’s economic minister warned of “catastrophic” industrial shutdowns, fraying supply chains and mass unemployment. France’s president urged citizens to turn down the heating. Spain asked why countries that hadn’t got hooked on Russian gas should bail out neighbours who had lectured them about fiscal discipline in the past.
Former Russian president Dmitry Medvedev, meanwhile, gleefully predicted that Europeans would be “freezing in their homes” because they hadn’t thought through the consequences of throwing their support behind Ukraine. “The cold is coming soon,” he said, menacingly, in June last year.
But as the European Union enters the last month of the meteorological winter in 2023, signs are becoming clearer that its members have weathered a historic crisis – and not just because “General Frost” has proved a milder adversary than Medvedev predicted.
Within eight months of Russian troops setting foot on Ukrainian soil, the bloc of 27 European states replaced about 80% of the natural gas it used to draw through pipelines with Russia, by rapidly building up new infrastructure for liquid natural gas, finding creative ways to help each other out amid shortages, and successfully pursuing energy-saving policies.
The Netherlands, for example, the EU’s largest natural gas producer, had relied on Russian gas for 15-20% of its supplies as it wound down its huge Groningen field, but doubled its LNG import capacity with storage and regasification units in Rotterdam and Eemshaven.
It used the extra capacity to meet domestic demand – which it managed to reduce by 22% compared with previous years’ averages – and supply surplus gas to the Czech Republic, Germany and France. As elsewhere, consumer energy prices soared, but were subsidised and capped.
“There was a point last autumn when I worried that some European governments would respond to the crisis by prioritising their own energy supplies and stop sharing with their neighbours, which would have been economically and politically devastating,” said Simone Tagliapietra, an energy expert at the Brussels-based thinktank Bruegel.
“But Europe managed to avoid the temptation of protectionism and managed to keep its internal market intact.”
Gas spot prices dropped to about €55 a megawatt hour (MWh) on Monday, a level last seen before the start of the war in September 2021, down from €330/MWh at the end of last August.
Over the course of the whole of last year, gas demand in the European Union was 12% lower than the average from the period 2019 to 2021, Bruegel estimates.
Germany, always destined to bear the brunt of Putin’s gas blackmail effort due to its high reliance on energy exports from Russia, managed to use 14% less gas in 2022 than it had done on average in the years from 2018 to 2021. It enters February with its gas storage tanks 80% full, compared with 36% at this point last year.
Even though high gas prices have taken their toll on German industry, the damage has so far not been catastrophic. While GDP in Europe’s largest economy fell by 0.2% from October to December, the government last week improved its forecast for the coming year, predicting the recession to be “shorter and milder” than expected.
The Nordic countries were even more successful at reducing gas consumption, with Denmark cutting total demand – for power generation, industry and domestic heating – by 24%, Sweden by 36% and Finland by a mighty 47% (although natural gas accounted for only 5% of its overall energy needs).
Last summer, some southern European states had initially signalled reluctance to equally share the burden of energy saving. Spain agreed to a 7-8% reduction in gas use after arguing that the uniform 15% target was simply not fair on countries which, like itself, were not heavily dependent on Russian gas and that had “done our homework” when it came to diversifying energy supplies.
Yet it didn’t shy from the task. In July, the socialist-led coalition government announced a series of measures intended to help reduce the country’s energy consumption and its use of Russian oil and gas. Many of the initiatives were based on thrift and common sense.
The measures, which will remain in place until this November, set strict limits on air conditioning and heating temperatures in public and large commercial buildings.
Under the decree, heating in shopping centres, cinemas, theatres, rail stations and airports should not be set above 19C in winter and air conditioning should not be set below 27C in summer.
As a result, Spain ended up meeting the very target to which it had been reluctant to commit: between August and November, the country reduced its demand for natural gas by 15% compared with the level of consumption for the same period in the last five years.
In France, the energy-saving effort became an uphill struggle because several key French nuclear reactors were undergoing maintenance or safety work just as they were needed more than ever.
From the start of May to the end of October, about half of France’s 56 reactors sat idle due to repair works, turning the country from Europe’s biggest electricity exporter into a net importer. One of the countries upping its electricity exports to France in that period was Germany, which in turn imported more gas from its western neighbour.
After French local officials had prepared contingency plans for the worst-case scenario of power cuts in December, the situation has stabilised. By mid-January, 73% of France’s nuclear fleet was back in operation, helping it to regain its spot as the EU’s top exporter of electricity.
When nuclear plants struggled, renewables came to the rescue. According to an analysis by thinktank Ember Climate, the European Union in 2022 drew 22% of its electricity from solar and wind power, with renewables surpassing gas for the first time.
Remarkably, Sweden, with an energy mix long-dominated by nuclear and hydropower, became Europe’s largest power exporter in 2022, selling 20% of its output abroad – in part thanks to the rapid growth of onshore wind.
Wind is now Sweden’s third-largest source of electricity and scheduled to expand further. Finland’s wind power capacity increased by 75% last year alone, allowing the country to increase energy self-sufficiency “at a really good pace”, officials said.
Plans to expand renewable energy production have, in fact, been radically accelerated by the energy crisis in all three Nordic countries, with onshore wind and solar power now forecast to more than double by 2030 and wind the dominant energy source.
Ultimately, Vladimir Putin’s energy war decision will have helped put Sweden on track to produce 65% of its energy from renewables by the end of the decade, Finland 51%, and Denmark 55%.
A year of rethinking energy supplies has not made Europe cleaner across the bloc. In Poland, which still relies on coal for much of its heating needs, the government has introduced a coal allowance and frozen electricity prices for individual households. After small and medium-sized businesses were struggling with energy bills multiple times the size of those in previous years, the government introduced a freeze for them.
The crisis has meant a slowdown in plans in numerous countries to phase out coal, with the issue slipping further down the agenda in Poland, while in Bulgaria MPs voted recently to postpone plans to phase out coal-powered plants.
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