Europe’s Energy Crisis: The Wood Squeeze and Other Stories
A worker holds pellets at the production line at the Total Energie plant specializing in wood pellets in Grand-Couronne, France, September 22, 2022. (Jean-François Monier/AFP via Getty Images)
October 20, 2022 7:40 AM
From IER (the Institute for Energy Research):
As much as 70 percent of European heating comes from natural gas and electricity, and with Russian deliveries drastically reduced, wood — already used by some 40 million people for heating — has become a sought-after commodity. Prices for wood pellets nearly doubled to 600 euros a ton in France, and there are signs of panic buying. Hungary has banned exports of pellets, and Romania capped firewood prices for six months. Wood stoves that are high in demand can take months to deliver. In France, there are signs of hoarding as some buyers have bought two tons of wood pellets, when less than one ton is normally enough to heat a home for a year . . .
Since the crisis began, Germany has increased its coal-generated electricity by almost 5 percent. Coal currently accounts for nearly a third of all electricity generated in Germany.
In an interesting foreshadowing of how the politics of climate may evolve:
A poll taken this summer found that 56 percent of Germans were in favor of turning coal plants back on, with just 36 percent against, which compares to 73 percent of the population that supported ending coal use “as soon as possible” in a 2019 poll.
As a reminder, many of Germany’s woes stem from the decision, taken under the wise guidance of Angela Merkel (the “indispensable European,” etc.), to move its energy policy in an allegedly climate-friendly direction — its Energiewende — with massive investment in renewables and ever-deepening dependence on natural gas — a less greenhouse-gas-intensive fuel — supplied by that dependable Mr. Putin. For unrelated but supposedly green reasons, the country also reaccelerated the phase-out of its nuclear-power stations, a program that had reached its final stages this year (although two of its last three power stations are now to be kept on standby).
Meanwhile, Qatar’s energy minister warns (and this should not be news) that getting through the winter of 2022/23 will not be the end of Europe’s problems.
Qatar’s energy minister has warned that while Europe should have sufficient gas for power and heating this winter, the tougher challenge will come in 2023 as reserves are depleted.
Saad al-Kaabi said it would be “much worse next year” if there was a harsh winter, adding that the energy crisis could extend to the middle of the decade if President Vladimir Putin’s war in Ukraine continued and gas “does not start flowing back again” from Russia.
“This coming winter, because of the storage capacity being full, it’s fine,” said Kaabi, who is head of state gas company QatarEnergy. “It’s really replenishing the reserves, or the storage, for next year that’s going to be the issue.
“So . . . next year and the following year, even up to 2025, are going to be the issue.”
The Economist clearly believes that even that might be too optimistic a view:
On the surface Europe’s predicament seems less perilous than it did. Despite Russia this year reducing flows of gas into Europe to half their normal levels, the EU’s gas-storage facilities are over 90% full, having been topped up with abundant imports of liquefied natural gas (LNG). October looks likely to be unseasonably warm, reducing energy demand. The price of European gas for delivery in December is down about 33% from mid-September and 50% from its highs during a panic this summer.
Yet this balmy picture is fuelling complacency. Long-range weather forecasts suggest November and December could be cold. And gas storage is not enough to replace lost Russian inflows. If these fall to zero, normal energy consumption would leave storage perilously low by March, which can be chilly. Cold weather in Asia or a rebound in China’s economy may make LNG dearer.
And the magazine’s writers bemoan the complacency still being shown in some EU countries:
Germany is reluctantly extending the life of two of its nuclear plants, but only until April 2023. France objects to a new gas pipeline from Spain to Germany, which would enable more of Spain’s lng imports to flow to the rest of the continent. The French government says the pipeline clashes with Europe’s climate goals, but cynics suggest its real aim is to protect its nuclear-power industry.
Most short-sighted is Europe’s failure to take advantage of its own gas reserves. The Netherlands boasts a gasfield in Groningen which could, without any new infrastructure, provide about half as much gas as Russia used to supply to Germany. Yet production is minimal and the field is scheduled to close by 2024. The Dutch government fears the wrath of local homeowners who have suffered in the past when pumping gas has triggered earthquakes.
Only about 22,000 houses that are yet to be reinforced are assessed as being at risk of damage should Groningen produce at full capacity. The costs of compensating those homeowners, or indeed all residents of Groningen, for their losses are only a fraction of the revenues that could be earned from the field’s gas. And those revenues do not account for the knock-on economic and strategic benefits of replacing Russian gas. Given the stakes of the conflict in Ukraine, closing the Groningen field as scheduled would be astonishingly blinkered.
From another Economist piece (from late September):
Europe’s crisis will not end come spring. Goldman Sachs, a bank, recently projected gas prices in summer next year to be around €235 per MWh, higher than they are today (the pre-pandemic price was around €20). German electricity futures for the fourth quarter of 2023 are more expensive than for the fourth quarter of this year.