How Europe can kick its Russian gas habit

A pressure gauge is pictured at the Atamanskaya Compressor Station, a facility of Gazprom’s Power of Siberia project outside the Far Eastern town of Svobodny in Russia’s Amur region November 29, 2019. REUTERS/Maxim Shemetov

Join now for FREE unlimited access to Reuters.com

Register

LONDON, March 1 (Reuters Breakingviews) – Europe must wean itself off Russian gas. The Ukraine crisis has shown the folly of relying on Moscow for much of the continent’s 500 billion cubic meters (bcm) annual supply. Getting rid of this habit will take a concerted, decade-long push.

Last year, Russia shipped about 150 billion m3 of gas to Europe. Reducing this to zero over a decade means replacing 15 billion cubic meters per year. Yet Europe is also cutting 100 billion m3 of coal-fired electricity for climate reasons, and its own gas production is declining by 5 billion m3 per year. Europe should therefore fill an annual deficit of 30 billion cubic meters, according to Bernstein analysts.

Renewable energies can fill some of the gaps. If European countries continue to build at the current rate, new wind and solar projects will provide the equivalent of 11 billion m3 and 6.5 billion m3 respectively. If the United States sends a third of its liquefied natural gas (LNG) to Europe, compared to 20% last year, this represents an additional 6.8 billion cubic meters. Delaying the planned phasing out of existing nuclear power plants would replace 4.8 billion cubic meters of gas demand. Finally, investing in building insulation and installing 2 million new electric heat pumps every year instead of gas boilers would save an additional 4 billion cubic meters.

Join now for FREE unlimited access to Reuters.com

Register

All of this combined would provide 33 bcm of replacement electricity per year. But aside from starting wind and solar, which are already cheaper than fossil fuels, none of the other steps are straightforward. LNG suppliers ship where prices are highest, and European facilities that turn liquid fuel into gas are not evenly distributed. Nuclear energy is politically and environmentally controversial, and heat pumps require large subsidies.

To achieve this, European politicians will need help. Historically-minded analysts wonder if the United States can recapture the spirit of the 1940s, when it provided funds to rebuild Europe and mobilized an airlift to Berlin. For starters, America could pressure Qatar, Australia and its own private companies to divert LNG shipments to Europe. It could also help fund subsidies for heat pumps or bolster Europe’s inadequate gas storage facilities.

Domestic consumers could also help. If 500 million Europeans took a cold shower and turned off the heating one day a month, they would reduce their gas consumption by 4 billion cubic meters a year, Bernstein estimates. To shake off Europe’s dependence on Russian gas, everyone will have to get involved.

Reuters Charts Reuters Charts

To follow @gfhay, @LJucca on Twitter

(The authors are Reuters Breakingviews columnists. The opinions expressed are their own.)

BACKGROUND NEWS

– Germany aims to speed up wind and solar power projects, the country’s economy ministry said Feb. 28, as war in Ukraine underscored the need to reduce dependence on Russian gas.

– Berlin has also announced its intention to ensure that the country’s gas storage facilities are full at the start of winter, regardless of the interests of their operators, the ministry said.

– Economy Minister Robert Habeck plans to speed up the passage of the Renewable Energy Sources Act through parliament so that it can come into force by July 1. The law would see Germany suspend subsidy cuts for new rooftop solar panels this year and increase tenders for new solar projects to 20 gigawatts by 2028, from around 5 gigawatts now, and keeping them at this level until 2035, the ministry said.

– Germany would also increase tenders for onshore wind power projects to 10 gigawatts per year by 2027, from around 2 gigawatts currently, and keep them at that level until 2035.

– UK natural gas futures for delivery next month were trading at 254 pence per therm at 09:50 GMT on March 1, down from 10-year highs of 322 pence and 336 pence recorded on February 24 and 22 December, respectively.

Join now for FREE unlimited access to Reuters.com

Register

Column by George Hay in London and Lisa Jucca in Milan. Edited by Peter Thal Larsen and Oliver Taslic. Graphic design by Vincent Flasseur.

Reuters Breakingviews is the world’s leading source of financial news on the agenda. As the Reuters brand for financial commentary, we dissect big business and economic stories as they break out around the world every day. A global team of approximately 30 correspondents in New York, London, Hong Kong and other major cities provide expert analysis in real time.

Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

About Rhonda Lee

Check Also

Opioid Epidemic Response: Chicago Department of Health Announces New Hotline to Help People Struggling with Addiction

CHICAGO (WLS) — The opioid epidemic continues to plague the Chicago area and on Friday …