EU energy crisis could worsen next year, agency warns

EU energy crisis could worsen next year, agency warns

While the European Union (EU) has largely been able to ward off an energy debacle this year, 2023 could prove to be a “sterner test” for the bloc, the International Energy Agency (IEA) warned in a report released Monday.

EU member nations have taken considerable steps this year to curb their reliance on Russian gas supplies following Moscow’s invasion of Ukraine and have pushed to fill up domestic storage facilities.

But come next winter, Russian provisions could plummet further and global stockpiles of liquified natural gas (LNG) may be tight, according to the report. Meanwhile, the unseasonably mild temperatures that Europe has experienced thus far this season will not necessarily persist.

“The European Union has made significant progress in reducing reliance on Russian natural gas supplies, but it is not out of the danger zone yet,” IEA Executive Director Fatih Birol said in a statement.

Birol launched the report alongside European Commission President Ursula von der Leyen ahead of a meeting of EU energy ministers on Tuesday and a European Council session on Thursday.

“We have been able to manage, we have been able to withstand the blackmail. We have acted, and we have acted successfully,” von der Leyen said at a press conference in Brussels.

She touted Europe’s success in carrying out its plan to reduce demand for Russian gas by two-thirds before the end of the year — a vision supported with investments of up to 300 billion euros ($316 billion).

The bloc has been able to diversify its energy resources by trading Russian provisions for “other reliable, trustworthy suppliers,” von der Leyen said. Member nations have also made strides in conserving energy, while increasing the roll-out of renewables, she added.

EU gas storage facilities are now filled to more than 90 percent capacity — an achievement that is well above the previous five-year average, von der Leyen noted.

“The result of all these actions is that we are safe for this winter. Russia’s blackmail has failed,” the commission president said.

“Preparing for the next winter of 2023-2024 starts now,” she continued, acknowledging the EU must “step up its efforts.”

The bloc faces a potential gas gap between supply and demand of 27 billion cubic meters in 2023, according to the report.

Such a situation could occur if Russia’s gas deliveries drop to zero and if China’s LNG imports rebound following a pandemic-related decline in 2022, the authors explained.

“Many of the circumstances that allowed EU countries to fill their storage sites ahead of this winter may well not be repeated in 2023,” Birol said.

“A stronger push on energy efficiency, renewables, heat pumps and simple energy saving actions is vital to head off the risk of shortages and further vicious price spikes next year,” he added. 

The IEA’s analysis projected that baseline demand for the EU in 2023 would be 395 billion cubic meters, with a baseline supply of 338 billion cubic meters — leaving an initial 57 billion cubic meter supply-demand gap.

That deficit will be partially filled by 30 billion cubic meters worth of expected changes in efficiency, hydroelectric and nuclear operations and the integration of renewables, according to the report.

But that still leaves 27 billion cubic meters that would be unaccounted for in a worst-case scenario.

Nonetheless, the IEA stressed this gap can be closed through additional actions on energy efficiency, renewables, heat pumps, energy savings and gas supplies.

The report recommends boosting support for home efficiency renovations as well as gas-to-electricity switches in industry. The authors also suggest simplifying permitting procedures for renewables, providing more funding for heat pumps and changing tax laws that discourage electrification.

Although Europe’s options to import more natural gas are limited, there are several countries with spare export capacity that could raise exports by capturing gas that is now being flared, or burned off, according to the report.