EU’s plan for winter without Russian Gas — Save Gas for a Safe Winter plan
Europe is in the middle of an energy crisis due to Russia’s weaponization of natural gas. There is a gap between demand and supply of gas for the coming winter months. Without gas, buildings cannot be heated and industries cannot produce.
I am not 100% sure about its effectiveness but at least Europe has now a plan to deal with the possible supply cuts this winter. On 20th July European Commission proposed a gas demand reduction plan — the “Save Gas for a Safe Winter plan”. The core of the plan is to reduce the gas demand to mitigate the impacts of sudden supply disruption and secure enough gas for vulnerable customers (including all households) and vital industries.
What is the current situation?
Currently, Russian gas imports to the EU are less than 30% of the average of 2016–2021 imports.
In May 2022, following the Russian Invasion of Ukraine, the EU set out the REPowerEU plan (a medium-term plan) to end Russian fossil fuel dependence. But this plan does not guarantee sailing Europe this winter safely.
Now EU is preparing for a full Russian disruption scenario for this winter but there is not enough supply available to compensate for Russian Gas.
On the supply side, new legislation entered into force this July 1st that mandates member states to fill at least 80% of their gas storage capacity by Nov. 1, 2022 (and to 90% by Nov. 1 in subsequent years). This improves the situation but this won't be enough (as per the scenario analysis by ENTSO-G).
On 20th July 2022, European Commission unveiled the new Save Gas for a Safe Winter plan.
What is this gas demand reduction plan?
The key proposal of the plan is the gas demand reduction target:
- All member states shall reduce gas demand voluntarily by 15% between 01/08/2022 to 31/03/2023 against their average consumption in the same period during the five preceding years (2016–2021).
- In case of a supply disruption, an “Union Alert” will be declared and the voluntary target will become binding, i.e., all members shall mandatorily reduce 15% the gas demand.
Point to note: Does this voluntary preparartion sufficent to motivate member states before the winter? Why Commission does not go for a binding target in first place, atleast 7% or 10 %?
Importantly, EU households and other essential users like hospitals will be the last ones to be affected as they are “protected customers” according to the EU security of supply regulation. (As per the Commission’s communication there should enough gas available to meet protected customers unless other unforeseen supply disruptions happen).
Point to note: Different countries have different dependencies on Russian gas. Spain and Portugal have low dependency but some countries like Germany and Austria have a high dependency. But the 15% demand side reduction target is universally applicable for all member states. A collective effort is needed to make the proposal work.
How the plan will work?
The simple answer is it is up to member states to figure out that because each member states have its own energy mix the actions might differ.
Commission also proposed some guidelines (recommendations, criteria and best practices) for member states to achieve this target demand reduction and to protect industries that are decisive for EU supply chains and competitiveness:
- Substitution of Gas
Shifting away from natural gas to other sources of clean energy or fossil fuel sources. In the electricity industry, it means making use of the demand side markets to cut gas use, re-introduce coal or oil power plants and prolong nuclear phase-outs.
Industries need to switch fuels where ever possible and check the possibilities of the market-based approaches of demand side management, like auctioning or tender systems, interruptible or swap contracts, etc. The possibility of EU auctions or tenders could also be explored between the Commission and the Member States.
Point to note: Substituting the natural gas with more fossil intensive fuels means more emissions. Burning oil instead of natural gas have impacts of local air pollution. Fuel switching has technical limitations and also alternative sources, like, oil or biofuels, can be costly.
2. Energy Savings
This is where all 450 million EU citizens can contribute against Russia’s weaponisation of natural gas by reducing energy consumption in heating, warming water and cooling buildings. The plan proposes member states start awareness campaigns. This is similar to mask-wearing or vaccination campaigns during pandemics. We can expect member states to put a targeted obligation on public authorities to reduce heating and cooling in buildings, swimming pools and shopping centres.
Point to note: Asking people to wear sweaters or reduce thermostats is not the sexy thing to do. Governments may feel bit concerned on how their voters feel. I doubt whether campaign alone will work without any financial incentives? Give households some bounty money for the demand reduction!!!!!
3. Merit order for disconnecting the non-protected consumers.
As said, protected customers, incl. households, are guaranteed the security of supply via the Gas Security of Supply Regulation. They will not be disconnected unless it is an act of last resort.
But what about non-protected but critical customers, like many industries, etc? The plan recommends criteria for member states for coordinated demand reduction on non-protected consumer groups to maintain the integrity of the single market. Commission only proposes the guidelines, but it's up to member states to draft the merit order for disconnection.
These criteria are input to the cross-border consultation and then to be included in the Member states national merit order in the emergency plan by the end of September 2022.
Point to note: Creation of national merit order with the consideration of the cross border or even global impact requires lot of work, especially those big industrial countries, like Germany with many industries and interests.
Before closing.
The commission’s proposal on demand reduction is only about the 15% reduction target of the gas and some bunch of guidelines to member states as best practices and recommendations. It's just a draft regulation. Now the action is on member states' side.
The 15% demand side reduction is not an easy target, especially since it involves the behavioural change of citizens, and dealing with various national and industrial interests. I hope politicians come up with some creative schemes. Good enough or not, at least the EU has now a plan to make preparation. One thing is for sure, only a united Europe will be able to sail past this winter safely. Solidarity is the key.
Key dates.
- July 26th 2022 — Extraordinary EU Council meeting to vote for Save Gas for a Safe winter(Energy), 26 July 2022. Fingers crossed
- August 1, 2022 — beginning of the 15% gas reduction target period (only if approved).
- End of September 2022, the Member States to update their existing national emergency plans so as to identify the specific demand reduction measures they decide to take accordingly.
P.S: The opinions expressed in this post are my own and not necessarily those of my employer. If you are interested in reading my analysis of European gas addiction to Russia then click here. Thanks for reading.
