The chairman of the International Energy Agency stated that Europe must dramatically reduce its natural gas use over the next months. To prepare for what is anticipated as “a long, severe winter.

In a commentary outlining steps Europe must take to avoid a significant gas shortage this winter, IEA Executive Director Fatih Birol said. The European Union has made some progress diversifying away from key supplier Russia. Any shipments from the country remain highly uncertain, with a complete cut-off not ruled out. It’s a very important announcement for the power generation sector. 

Why does Europe need to cut gas use? 

“I’m particularly worried over the next few months,” wrote Fatih Birol, Managing Director of the IEA. At the same time, Europe has made some progress in diversifying its gas supply. “Especially on the demand side, it wasn’t enough to prevent Europe from falling into today’s incredible instability,” Virol said.

 “Russia’s recent move to further curb the flow of natural gas  to Europe, coupled with other recent supply turmoil, has warned the European Union. As winter approaches, we see Russia Start understanding what you might do next. The next few months will be very important. “

The International Energy Agency (IEA) chief addressed on July 18. He said that to combat the “particularly perilous” state of the power generation and supply market, European leaders should reduce their use of gas in the power sector. They should temporarily increase their coal and oil-fired production use and accelerate their adoption of low-carbon sources.

Birol’s warning comes as Europe’s greatest energy crisis. Power generation reduction in decades is made worse by a severe heat wave. It increases the demand for gas-fired electricity to keep homes and businesses cool. As a result of warm air reducing wind power, warm water reducing nuclear plant output, and dropping river levels disrupting coal supply to power plants, there is a shortage of electricity.

Reasons to find the alternative methods of energy supply and generation: 

In recent weeks, European concerns that Russia might stop supplying gas to the continent came true. Russia reduced capacity through its main gas pipeline to Germany by 60%. It reduced exports to many other European nations after making selective cuts to a small number of those nations.

European power generation costs reached their highest level since December 2021, while natural gas prices increased by more than 50%. Ten members of the European Union have responded by announcing different levels of a gas emergency.

Meanwhile, oil prices remain at or near record highs despite limited global supply growth, restricted Russian exports, and reduced processing capacity. Inflation, financial stress, and political issues are all caused by high gasoline and diesel costs in capital cities worldwide. For instance, U.S. President Joe Biden recently requested that Congress suspend the federal gas tax in Washington.

Why is Europe focusing on finding the cheapest ways to cut the use of oil, gas, and coal? 

In response to the issue, most nations are increasing their coal usage and looking for other supplies of oil and gas and power generation. European countries are pursuing agreements with Qatar comparable to recent long-term contracts between the United States and Germany for the supply of LNG by ship. 

Europe will build new LNG import facilities according to plans stated by Germany, the Netherlands, Finland, France, and other countries. Germany still lacks a single LNG import terminal. It is more reliant on Russian pipeline gas and is now planning for the following projects; terminals, and the government just hired four floating storage and regasification units. 

Also, specialized ships can import gas more swiftly while the terminals are being built. The largest onshore gas field in the Netherlands, which was closed owing to earthquakes probably brought on by gas extraction, may be reopened.

 Additionally, last week, Biden met with representatives from the power generation sector to discuss methods to increase American oil production and refining.

Concept of the European Union’s energy security plan:

The RE Power EU energy security plan for the EU contains a target to increase efficiency energy savings from 9 to 13 % by 2030 compared to the EU’s 2020 reference scenario. For instance, France has declared that it will raise its subsidies for apartment retrofitting and installing electric heating. In turn, it replaces less-efficient boilers that utilize gas, which get initially implemented in 2018. 

Experts have determined that France’s building portfolio has some of the highest possibilities for reducing energy use because of its numerous older structures. Despite these initiatives, which they can only adopt to improve efficiency, most European governments still focus on energy supply and power generation rather than demand during the current crisis.

Is it easy to achieve the targets of this sector? 

“To understand the challenges Europe is currently facing, let’s consider a scenario. In this scenario, gas flows through Nord Stream return after July 21 to the low levels they were at before the current halt. But at the beginning of the winter heating season on October 1, Russian gas supplies to Europe are cut off completely,” Birol said. “In this situation, the EU will need to fill its gas storage facility to at least 90% of its capacity by then in order to survive the coming winter.

But if Russia completely cuts off gas supplies before Europe can boost storage levels up to 90%, “the situation will be even more grave and challenging,” Birol said. That’s not far-fetched, but by pursuing that scenario, Russia “would forgo the revenue it gets from exporting gas in Europe to gain political leverage,” he suggested. Since it invaded Ukraine, Russia has doubled its European-related oil and gas export revenue, he said.

Actions that were introduced in this situation: 

Among these is the implementation of “auction platforms” to encourage a decrease in demand from EU industrial gas users. Birol says, “Industrial gas customers can provide a portion of their contracted gas supply as demand reduction products in exchange for remuneration. It can result in efficiency gains and a competitive bidding process.

“In Germany and the Netherlands, auction mechanisms are already being explored and suggested. He said that governments ought to take steps to encourage households to reduce their electricity consumption. 

According to Birol, Europe should continue to increase the deployment of renewable energy sources and nuclear power, where appropriate, in addition to expanding its “temporary” reliance on coal and oil for generating. 

However, European leaders must also improve communication between gas and power operators regarding strategies like peak shaving. Furthermore, he added, European institutions must coordinate emergency preparation, including supply restrictions and solidarity mechanisms.

Birol said. “This winter could become a historic test of European solidarity—one it cannot afford to fail—with implications far beyond the power generation sector. Europe may well be called upon to show the true strength of its union.” For getting more details about power generation trends, Contact Prismecs field experts.  

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