This year has started with a highly concerning trend for the EU's energy security and energy economics.
As is made clear in the attached Bloomberg article, the combination of less available wind and a significant cut in gas export volume from Russia, means that Europe has already used a significant % of its storage capacity - 250 terawatt hours, the second-largest ever for the period, and well above the 10-year average of 165 TWh.
This means that EU governments have a policy challenge. In order to protect energy security, storage sites will have to buy high and sell low. Europe faces the prospect of higher gas prices throughout the year.
Market analysts should also take heed of independent analyst Tom Marzec-Manser’s points that the last four winters are poor comparisons when considering EU natural gas storage withdrawals: 20-21 covid, 21-22 Gazprom underfill, 22-23 and 23-24 super warm.
The entire EU energy system was based on the assumption that cheap Russian gas would continue to flow until it was not needed. That bluff has been called. This is why we would advise all sovereign states - not just in the EU, but anywhere to maintain domestic gas production for as long as is physically and economically possible. The costs of Dunkelflaute, enhanced energy demand from data centres and grid upgrades are becoming more apparent.
For an alternative consideration, look at the Israeli dynamic. Domestic gas is secure and affordable, and physical molecular availability should not be scoffed at. Israel has built a secure and affordable energy dynamic that replaces coal and enables renewable development, based on domestic gas.
New year, same challenge – time for EU policymakers to learn lessons from Israel’s gas based energy security?
