Europe’s Energy Crisis Is About to Get Worse as Winter Arrives
By Paul Homewood
Energy prices in Europe are repeatedly breaking records even before winter really kicks in, and one of the most damaging cost crunches in history is about to get worse as the temperature starts to drop.
A super price spike in the U.K. last month forced some industrial companies to cut production and seek state aid, a harbinger for what could play out widely in Europe just as it contends with a resurgence of the coronavirus. For governments, it could mean tension with neighboring countries by moving to protect supplies. For households, it could mean being asked to use less energy or even plan for rolling blackouts.
The trouble is that any fix is unlikely to come from the supply side any time soon, with exporters Russia piping only what it has to and Qatar saying it’s producing what it can. The energy industry is instead faced with relying on “demand destruction,” said Fabian Roenningen, an analyst at Rysted Energy.
“We have seen it over the last couple of months already, and in many industries, it will most likely continue and even increase,” he said from Oslo. “It’s just not profitable to operate for a lot of the players in the current market conditions.”
A liquid natural gas tanker being loaded up with LNG at Raslaffans Sea Port, Qatar.
Source: AP Photo
The outlook adds to the sense of foreboding in Europe. The region is back at the epicenter of the pandemic again with Covid-19 cases surging and fears about a new variant identified in South Africa swirling the globe. Restrictions are being tightened in some countries, while household budgets are being squeezed by rampant inflation. On top of that, freezing weather could mean the lights going out. A return to lockdown like in Austria would help curb power demand, though few governments want to do that.
France, Europe’s second biggest economy, is particularly at risk. The possibility of a chill in January and February is causing concern for the nation’s grid operator. Availability at nuclear stations, the workhorse of the French power system, is low after the pandemic delayed the maintenance of some reactors, according to a report on Nov. 22.
Reactor buildings at a nuclear power plant, operated by Electricite de France SA, in Saint-Paul-Trois-Chateaux, France.
Photographer: Theo Giacometti/Bloomberg
Power prices there are the highest since 2012 as a cold blast creeps into France and is expected to take hold by Monday when workday demand starts to rise.
Last winter, the grid operator appealed to households to use less energy at peak times and activated some demand reduction contracts with manufacturers when things got really tight. The next step would be to reduce voltage across the network and then rolling blackouts of two hours per region as a last resort. All that would come ahead of a presidential election.
“If there’s a deep cold snap and there’s no wind, things could become tight given the lesser availability of nuclear plants and the recent closure of dispatchable generation assets using coal,” said Nicolas Goldberg, a senior manager in charge of energy at Colombus Consulting in Paris. “If it’s getting really cold and there’s no wind, it may become a problem.”
France is also a key exporter of electricity to neighboring countries, meaning that the effects of a crisis would reverberate in Germany, Spain, Italy and Britain. Maximum demand is expected to be 80.7 gigawatts on Monday, still some way off the record 102 gigawatts from February 2012.
The situation is already so dire this early in the winter season because of a blistering rally in natural gas prices. Stores of the fuel, used to heat homes and to generate electricity, are lower than usual and are being depleted quickly. Analysts have warned that gas stores could drop to zero this winter if cold weather boosts demand.
Rolling blackouts are a possibility, warned Jeremy Weir, chief executive officer of Trafigura Group, a Swiss commodity trading house on Nov. 16.
“If the weather gets cold in Europe there’s not going to be an easy supply solution, it’s going to need a demand solution,” said Adam Lewis, partner at trading house Hartree Partners LP.
On the supply side, what Russia does next will be key. President Vladimir Putin signaled he would help Europe with more supplies to stabilize the market, but while shipments have recovered after a slump at the start of November, they are low compared with last year. How much gas Russia sends to Europe in December remains an even bigger mystery.
The long-awaited start of the Nord Stream 2 pipeline to Germany from Russia would ease the continent’s energy crunch. The project is finished, but has run into regulatory hurdles and it’s unclear when flows will start.
The Nord Stream 2 gas receiving station in Lubmin, Germany, on Nov. 12.
Photographer: Krisztian Bocsi/Bloomberg
Qatar, the world’s biggest exporter of liquefied natural gas, says it’s already producing gas at full capacity. The Gulf nation, which has low production costs thanks to an abundance of easy-to-extract fuel, has ordered six more LNG ships from South Korea on top of four tankers purchased from China in October.
If things get really bad, countries could resort to curbing sales of natural gas to other regions. An even more extreme scenario could see them halt flows of gas and power to one another, sparking political acrimony and hitting economies.
The European Union has what it calls solidarity principles that are supposed to prevent any state blocking exports of power or gas and leaving another member short, especially when it comes to supplies for households.
The solidarity, though, has never been tested in a wide-scale crisis and grid operators say that they’re allowed to stop or alter power flows through inter-country cables if they have security of supply issues. When the nicknamed “Beast from the East” hit at the end of February 2018, it was quite late into the heating season. This year, it’s likely that a less severe weather event could have a similar impact.
“It shows how exposed Europe’s power system is to the volatility in commodity prices,” said Roenningen in Oslo. “In the short term, there’s not a lot that can be done.”
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NOT A LOT OF PEOPLE KNOW THAT 
‘Energy prices in Europe are repeatedly breaking records even before winter really kicks in, and one of the most damaging cost crunches in history is about to get worse as the temperature starts to drop.’
The cry of someone who has electricity. Lack of availability is a massively greater problem than price.
Nobody can say they weren’t warned. There are only so many ways you can tell politicians what reality looks like (and it isn’t based on unreliable renewables).
“The trouble is that any fix is unlikely to come from the supply side any time soon, with exporters Russia piping only what it has to …”
Russia is meeting its contractual obligations.
1. Nothing prevented its customers from contracting to buy more during the prolonged negotiations whilst Nord Stream 1 was being planned.
2. Germany upped the ante by playing silly buggers and suspending certification for the Nord Stream 2 pipeline.
https://www.dw.com/en/german-agency-suspends-certification-for-nord-stream-2-pipeline/a-59833502
It’s all geopolitics.
Gazprom could be raking in huge profits, selling gas at these inflated prices using all the available pipeline capacity, the same way Qatar is currently doing by contracting all available LNG tankers.
But the Russian government needs NS2 approved, so they are waiting until Europe is desperate enough to agree to it, while still of course pumping enough gas to fulfil obligations.
With NS2 operational, they will be able to close down the (already underused) pipeline through Ukraine, starving them of their transit fees and a fuel network connection. And perhaps finally causing complete economical and political collapse, at last achieving what Crimean annexation and Donbass war (followed by complete destruction of the region’s coal mining industry) couldn’t.
A friend of mine has a 2500litre heating oil tank that he rarely allows to drop below 500litres. Heating and hot water is fully covered. In addition he has four, 47kg propane cylinders so not only is his LPG cooking and absorption 3 way fridge/freezer covered but also his 3kW dual fuel silent inverter generator is stocked to last for a long while. His Land Rover is usually fully fuelled and he has six 20litre Jerry cans of diesel in the garage. For good measure he has a huge log store together with 200kg household coal to keep his two “back up” wood burners available and keep them “in” overnight if needs be.
I asked him what the f@@@ he was expecting and his reply was to show me his two shotguns!
Everyone used to laugh at preppers until they watched Tremors.
So liked that movie – on so many different levels – mainly ‘cos it was just so entertaining.
And now I know what a ‘prepper’ is. Thanks.
@ Ray Sanders – I’m curious: Why does your friend use an “Absorption 3 way fridge/freezer”? Is it because he’s fully “Off Grid”? The absorption refridgeration principle is very inefficient compared to a normal compressor type. They are handy in a caravan or motorhome, but only if you are paying a flat rate for your electric hookup. Mine uses 110 watts continuously, compared to a typical compressor fridge, which might draw 60-80 watts for approx 30% of the time.
Well done Greta! How many elderly will die because of your stupidity?
So far as Greta and her many fawning admirers are concerned, that is a feature, not a bug.
“Omicron” is a Greek word meaning ‘destroyer of demand’. Betcha.
“Omicron” is also an anagram of “Moronic”…
Hey.. Not to worry. Joe Biden has just released huge amounts of oil from the US strategic oil reserves. That will lower the price and add to the CO2 already in the atmosphere. He has put the climate emergency he has been so worried about on hold. Hang on…he may even make it disappear. Voters are not likely to want more shortages and higher prices.
“Joe Biden has just released huge amounts of oil ”
Sarcasm. The usefulness of this amount to the nearest whole number is Zero.
From what I’ve read on US sites, it’s mostly heading to China! And it’s also pointed out that the primary purpose of these reserves is to provide a supply to the US armed forces in the event of a major conflict restricting (or cutting off) normal sources…
Now will our very own Peppa Johnson start making plans for fracking our own gas, or is Mrs Pig going to over-rule him again?
Being Prime Minister and into pigs seems to be an Eton thing…….
Harry you have been on this site long enough to know that fracking isn’t the easy way out.
It’s A way, Vernon. Every additional cc counts. Especially when it’s home grown. There has to be SOMEBODY Johnson listens to that can talk some sense into him.
Perhaps (but, seriously, God forbid! 🙏🏻) it will take something like a power cut while Carrie is in labour to open this idiot’s eyes.
Mike, you have a more kindly view of Boris’s morals than I can muster.
He’d more likely be sniffing around the nurses in the dark, than worrying about Carrie, let alone contemplating the outcome of his energy “Policy”.
How on earth did we let Gaz de France sign up for the entire output of Egypt’s LNG plant in an $80bn twenty year contract? Egypt has the nearest LNG production to the UK and we have long business attachments with EGPC for whom I worked in the 1990s. Italy I could understand because of long deep rooted connections in oil and gas going back to WW2 but France? I don’t recall encountering any involvement at all. Somebody, some where, has been sleeping om the job.
Closer LNG sources are Algeria (we bought a cargo from there not long back) and Hammerfest, Norway. Sabetta (Yamal) is also probably marginally closer than Egypt. Egyptian cargoes will pull to the Far East more easily than the other sites I’ve mentioned (at least in winter for Sabetta), although Idko is near Alexandria and thus on the Med rather than the Red Sea. We’ve been getting LNG from Peru and finally the US again and Algeria as well as Russia, Nigeria, Trinidad and Qatar.
And its even more bizarre when I read that the principal shareholder, along with EGPC, is BG Group based in Reading. This is now wholly a Shell company but has its roots in Brirtish Gas. What the heck is going on?
What Europe needs is a nice long lockdown to reduce energy consumption, I wonder how that could be arranged …
If the EU really think the French would cut off French consumers to send electricity to German consumers they are madder than I thought. The French are only in the EU to get what they can out of it, not to be some sort of Good European.
A cold, still winter would see carnage across Europe, with the UK suffering just as much thanks to our reliance on imports.
Ireland has suspended electricity exports to the UK. Norway has reduced exports of natural gas to Europe (supposedly because of mechanical problems).
Poland and Czechia have ‘phase transfer’ transformers which prevent Germany dumping excess wind generation (when that occurs) and probably could be used to block sudden demand from Germany.
France, Germany and Belgium (and Italy and Switzerland) are going to shut down nuclear plants in time for the following winter. France is having ‘technical difficulties’ and is importing electricity while reducing exports to the UK.
I hope all readers have already taken precautions. Good luck.
What odds are the bookies offering on a White Christmas?
And if this Winter doesn’t get you, there is always next time.
“The European Union has what it calls solidarity principles …”
…which will soon be sold off to the highest ‘sod the neighbours’ bidder.
Have we not learnt lessons from the realities of PPE & from vaccine ‘solidarity principals’.
An interesting and not irrelevant piece by Mark Hodgson over Climate Sceptism
“The next step would be to reduce voltage across the network”
This will undoubtedly help with demand reduction in a country like France, where electric resistance heating is commonplace. But elsewhere, these days, it won’t have as much effect as would have been the case 20 odd years ago. The reason is simple: virtually every household appliance (including LED lighting) now uses some type of “Switch Mode” power supply. These are multi-voltage devices (the rating label will often show anything from 90 to 270 volts) and they will simply draw MORE current if the input voltage drops, in order to maintain a steady output voltage.
“This will undoubtedly help with demand reduction in a country like France, where electric resistance heating is commonplace”
I’m sure you are right about switched mode supplies, but I’ve wondered about the above. Doesn’t the same switching happen over minutes instead of milliseconds? Turn the electric fire/cooker/freezer on and sufficient power is drawn to achieve the desired temperature – and then the thermostat turns off. Reduced voltage just means current is drawn for longer. It’s the fallacy of the EU mandated low wattage kettle!
The low wattage kettle, say 1kW, may have a place in a PV household, so that, yes, the overall energy needed would be the same, but on a ‘typical’ day, a 3kW system may only have 1kW available, meaning best use can be made of PV & potentially reducing network peak load.
Ideal might be a kettle which defaults to 1kW, with a manual hold down switch for optional 3kW quick boil.
“Reduced voltage just means current is drawn for longer”
Correct, but as you say this could take some time, and in the case of heating possibly long enough that the thermostat never switches off. But during a “Brown Out” Ohms Law comes into play: If the resistance stays the same, but the voltage across it is reduced, the power drawn from the source goes down. During peak demand this small reduction could be enough to keep a struggling grid stable, otherwise there would be no point in the operators reducing the voltage. However, a Switch Mode Power Supply will simply draw MORE current when the input voltage is reduced in order to keep the output constant. So the overall demand from the grid stays the same.
Old fogies like me can remember when the TV picture shrunk back from the edge of the screen during early evening peak demand, but you won’t notice any such behaviour with a modern telly unless the voltage drops to the minimum the power supply can handle. Then it simply stops working!
Reblogged this on WeatherAction News and commented:
It’s not looking good that’s for sure!
And don’t forget the extortionate TAX element (around seventy percent) of the actual price at the pump for petrol and diesel. Electricity and gas may be actual supply and demand but transport fuel costs are way out of order from politicians who hate their own populations.