Quick action is required for Europe to learn to live with less gas

Autor: Article based upon analysis from Reuters Breakingviews | Link: EU has ways to learn to live with less gas
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Gazprom’s decision to stop the gas flow indefinitely via Russia’s Nord Stream 1 pipeline puts Europe in a difficult position, with a near-certain gas shortfall in the winter.

As expected, various measures to cut energy usage are to be introduced across the countries benefitting before from the Nord Stream 1 gas.

While some countries look better prepared than others depending on how much Russian gas they needed so far, quick measures could help the EU to avoid unwanted emergency rationing,

Since Russia’s invasion of Ukraine, it hasn’t been easy for the EU to partly replace annual Russian pipeline supplies of 140 billion cubic metres (bcm).

However, analysts say the bloc could have done more to reduce the gas demand as state operator Gazprom started reducing gradually their export capacity.

Government subsidies for consumers worth nearly 300 billion euros may even have worked in the opposite direction.

The Nord Stream 1 shutdown may lead to a shortfall of up to 20% in EU gas needs this year, according to RBC estimates, whilst Amundi analysts believe that it could trigger chaotic rationing, in addition to a 2% contraction in the region’s GDP next year.

The European bloc has leverage to cushion the Russian blow.

The European Commission has focused to increase their emergency gas reserves throughout the summer months and believes it could lower consumption by 15%, or 45 bcm, through targeted energy saving measures.

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Calculations show that redusing the temperature by one degree Celsius in public buildings and households could save the bloc 10 bcm of gas each year, or 7% of Russian gas imports. It would also reduce customers’ energy bills.

Firms are also expected to cut down by 15 bcm their gas consumption, by switching to other energy sources or using gas more efficiently.

Another 20 bcm is estimated to be saved if governments encourage more savings by offering financial compensation to companies that are willing to cut down on their gas usage.

Specialists believe that savings measures could be implemented quickly in case of shocks.

A good example is Japan after the Fukushima disaster in 2011. Then, Tokyo succeeded to
reduce its electricity consumption by 12% for industry and 10% among households through a mix of society mobilisation and compulsory measures.

Some EU countries are expected to struggle more than others, and this includes Italy, which relies on gas for 40% of its overall power generation.

By comparison, the same percentage is 26% for Germany and 16% for France. Yet Rome only dropped gas consumption by 2% in the first half of the year, against 15% in Germany.

Quick action is required for Europe to learn to live with less gas.