Last year at this time, Europeans worried about freezing without natural gas imports from Russia. That didn’t happen, and won’t this year.
The European Union enters the winter of 2023-2024 with gas storage tanks nearly 95% full. Germany and its neighbors have activated half a dozen terminals for importing liquefied natural gas (LNG). France laid plans for six new nuclear power reactors. Thermostats are down and solar power capacity up by a quarter.
The EU supertanker turned with an alacrity that surprised Vladimir Putin, and just about everyone else. “We can say that we have done it,” says Ana Maria Jaller-Makarewicz, lead European energy analyst at the Institute for Energy Economics and Financial Analysis. “The REPower EU plan has worked.”
But there has been a cost. European gas prices have settled at about twice their 10-year average, says Dimitar Lilkov, a researcher at the Wilfried Martens Centre for European Studies. EU governments shelled out more than 600 billion euros ($647 billion) in consumer energy subsidies last year, he figures, an unsustainable pace.
The heaviest blow could fall on industry, though. Cheap Russian gas accounted for a third or more of EU supplies before Putin invaded Ukraine last year.
That helped keep a range of energy-intensive factories pumping out aluminum, steel, fertilizer, or ceramics in Germany and elsewhere. EU steel production dropped 11% in 2022, and has fallen again this year.
That’s one reason Germany is facing its first recession in three decades, excepting a pandemic dip, Lilkov says. “If you break the German industrial model, that’s what’s driving all of Central and Eastern Europe too,” he warns.
Cyclical factors like weak Chinese demand and soaring interest rates are also slamming industry. Still, the energy shock could do lasting damage, says Jacob Mandel, a gas analyst at Aurora Energy Research. “There’s a risk that some industry is gone forever,” he says.
A more optimistic view comes from Anne-Sophie Corbeau, a scholar at Columbia University’s Center on Global Energy Policy. Global LNG supplies are on track to jump by half by 2028, mostly thanks to the U.S. and Qatar, she says.
China, which was expected to gobble much of this extra output, may actually use less LNG than it has already contracted for as its economy slows, she adds.
Europe can add import infrastructure fast and flexibly thanks to the emerging technology of “floating storage and regasification units,” which can be anchored offshore and relocated as necessary. Germany alone has leased five of them.
France and Germany have both sealed long-term LNG supply deals with Qatar over the past year, which should help stabilize prices, Lilkov says. Germany’s governing coalition, which includes the Green Party, faced down activists fearing that the rush for new gas supplies would endanger renewable energy goals.
“We may not need all these regasification terminals,” Jaller-Makarewicz comments. “Everyone panicked at the same time.”
One future no one in Europe is talking about is a return to dependence on Russian natural gas. Putin himself, not EU sanctions, cut most of the export flows, presumably hoping that would weaken Western support for Ukraine. His gamble didn’t work out.
Russia’s plans to sell its gas to China instead are creeping forward slowly and at enormous cost for new pipelines.
“Most of Russia’s gas is stranded in the Western part of the country,” Mandel says. “The era of massive sales to Europe is over.”
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