We are hurtling towards the coldest quadrant of the year, and with that in mind, many people are beginning to think about the cost of their fuel consumption over the winter period.
For those living in Europe, the next few months are going to be even more challenging than usual with an emerging energy crisis threatening to push prices up to catastrophic levels. At the centre of the crisis is a perfect storm that has destabilized the price of gas. As a result, conservative estimates suggest that gas bills this winter could be at least five times higher than last year.
Given that 45% of Europe is dependent on gas for heating, this is clearly an emergency situation. It can sometimes sound trite to suggest that ‘lessons need to be learned from such circumstances but it is critical that global leaders understand the geopolitics that has gone into the creation of this particular monster.
The ingredients of Europe’s winter of discontent
In a nutshell, the cause of the crisis is that every contingency that Europe has to ensure the consistent gas supply has failed at exactly the same time.
Europe is not a major producer of domestic gas and in times of high demand, has to rely on imports via Russian pipelines or via sea cargo from America or the Middle East. All three of these ‘routes to market’ have hit stumbling blocks.
Domestic supply: Of the world’s top twenty countries for producing natural gas, only two are from within the boundaries of continental Europe – Norway and the Netherlands. Of these, Europe’s largest gas field lies in Groningen, the Netherlands, a facility that has provided the EU with consistent and dependable supply until recent years.
Designed to be a significant supplier, Groningen has been causing problems of late for the Dutch Government. As demand has increased, gas levels have dropped within the field, causing earthquakes that have damaged homes and businesses in the surrounding area.
On the back of this, the field is now pumping three-quarters less than it did in 2018 and it’s been announced that production will cease altogether in 2022. Given that Groningen fulfils approximately 10% of Europe’s energy needs each winter, this is a substantial hit to continental self-sufficiency.
Sea cargoes: It’s no secret that the global community has rightfully put pressure on China to move away from coal. However, the partial success of these campaigns has resulted in China competing for the same gas resources as the West.
To put the demand into perspective, China connects up to 15m homes per year to the gas grid, which is the equivalent of adding another Portugal or Greece to the mix. All of these newly connected households need consistent supply, and as a result, the market is more competitive, making shipments of gas to Europe a lot less reliable.
Russian pipeline: A third of Europe’s gas supply comes directly from Russia’s state-backed monopoly pipeline supplier, Gazprom.
In a classic case of “too many eggs in one basket”, Europe is now feeling the effects of reported Russian power play, with Gazprom refusing to ship necessary supplies via Ukraine.
Some believe that the Russian supply-line problem is legitimate, with Russian supplies drained to low levels following a long and brutal winter last year, but others believe that politics are in play. If the latter, the game-plan is likely to be pressure tactics, to get Europe to approve a pipeline that bypasses Ukraine and crosses directly under the Baltic sea.
Whatever the case, Europe won’t be able to depend on Russian gas this winter.
A case study demonstrating the importance of decarbonizing at the earliest
When all of the above is considered, it becomes obvious that Europe – a continent rich in diverse landscapes and weather systems, world-leading technology and ambitious net-zero goals – needs to scale back its reliance on fossil fuels at the earliest.
Ruth Chapman, MD of renewables specialists Dulas, says that “critics of renewable energy production often cite it’s ‘unreliable’ nature but frankly if a mix of renewables is deployed en-masse, there will always be supply. The same cannot be said of gas. The other major benefit is that supply is localized and not threatened by global competition or monopolies playing power games.
Another mythology is that renewables are comparatively more expensive. But in actual fact, solar and wind consistently lead in terms of the cheapest cost per unit. Even without the multi-pronged disaster of Europe’s gas supply this year, gas is more expensive.”
Sometimes, it takes a disaster to mobilize systemic and lasting change. European leaders can do better for their countries and progress in this area can be relatively speedy. Let’s hope winter 2022 will be better supplied by renewables, releasing everybody from the stranglehold of politics, global monopolies, and decreasing supplies.
It makes sense.