“WWe are Safe for this winter. Russia’s blackmail has failed.” European Commission President Ursula von der Leyen was confident on December 12, speaking during the first cold spell of the season. It was a confidence born of a confident start to winter. It may also turn out to be premature.
The continent enjoyed a warm autumn, with October and November being much milder than normal. But the Arctic chill hit in early December, when temperatures in Berlin, London and Paris fell below freezing, raising fears gas supplies would be affected and power grids would falter. In France, every degree Celsius drop in temperature requires an additional 2.4wt Generating capacity, the equivalent of an average nuclear power plant.
So far, however, Europe has stood the test. Consumers have shown a willingness to make cuts. According to Bruegel, a think tank, German industry, small businesses and households cut gas consumption by a quarter in November from the three-year monthly average. Gas has been withdrawn from storage, but only at levels well within historical limits (see chart). Liquefied natural gas (length) has flowed into European ports in record quantities. Gas futures prices for early 2023 rose as traders factored in the weather, but the rise wasn’t as sharp.
Backup plans have come into effect across the continent. France has asked its neighbors to supply a lot of electricity. The UK grid operator ordered two reserve coal-fired power stations to prepare for generation, but later decided they were not needed. One of the four network operators in Germany, Transnetbwvia its phone app urged consumers to reduce their need for dirty fuels.
But the willingness to save seems to be dwindling. Germany’s gas regulator estimates temperature-adjusted consumption was just 17% lower last week. If the trend continues, it could become a problem. “The gas supply security is not at risk in December when the storage facilities are full. The critical phase is a cold snap at the end of March,” says Andreas Schroeder Ice, an energy consultancy. Half-empty storage tanks release gas much more slowly than full ones.
Despite surviving the first cold spell of winter, Europe remains at the mercy of the weather. The International Energy Agency calculates that the mild autumn saved the continent around 10 billion cubic meters (bcm) of gas. A recovery in hydropower from last year’s drought-induced lows could save an additional 8 billion cubic feet. But a colder winter would further deplete gas storage and risk rationing towards the end of the season, especially if China demands more length.
Bank Goldman Sachs forecasts that gas prices will remain above 120 euros ($128) per megawatt hour next year. A group of countries, led by France, are now trying to cap prices. This would be extremely counterproductive as it would boost demand and risk long-term supplies. Europe has survived the first cold spell of winter. It would be absurd for the continent’s politicians to become complacent at this early stage. ■
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