Wednesday September 07, 2022

Europe in tight spot as Russia cuts gas

Europe in tight spot as Russia cuts gas

Russia used to supply 40% of Europe’s natural gas, and even more to Germany.

David McHugh, Associated Press

Europe is struggling to contain an energy crisis that could lead to rolling blackouts, shuttered factories and a deep recession. The primary cause: Russia has choked off the supplies of cheap natural gas that the continent depended on for years to run factories, generate electricity and heat homes. That has pushed European governments into a desperate scramble for new supplies and for ways to blunt the impact as economic growth slows and household utility bills rise. The crisis deepened when Russia’s state-owned exporter Gazprom said the main pipeline carrying gas to Germany would stay closed, blaming an oil leak and claiming the problems could not be fixed because of sanctions barring many dealings with Russia. European officials say it’s energy blackmail, aimed at pressuring and dividing the European Union as it supports Ukraine against Russia’s invasion.

Just about. The halt in the Nord Stream 1 pipeline means Russian gas shipments have fallen 89% from a year ago. Russia used to supply 40% of Europe’s natural gas, and even more to Germany, where inexpensive energy was a pillar of the economy.  There’s still some Russian gas flowing to Europe through a pipeline passing through Ukraine into Slovakia, and another crossing the Black Sea to Turkey and then to EU member Bulgaria. Russia started cutting back gas as early as last summer, before the war in Ukraine started. That sent gas prices sharply higher.

Then Gazprom cut off a number of European countries after they responded to the outbreak of the war by banning many dealings with Russian banks, businesses and persons. The reductions have led to soaring natural gas prices, which have hit records in the past few weeks. Given Russia’s slow constriction of supplies since last summer, experts say Europe needs to be ready for zero Russian gas this winter.  High energy prices are already threatening to cause a recession this winter through record inflation, with consumers having less to spend as costs rise for food, fuel and utilities. A complete cutoff could deal an even heavier blow to an already troubled economy.

Besides heating homes and generating electricity, gas is used to fire a range of industrial processes that most people never think much about — forging steel to go into cars, making glass bottles and pasteurizing milk and cheese.  Companies warn that they often can’t switch overnight to other energy sources such as fuel oil or electricity to produce heat. And, with everyone searching for alternate supplies, fuel oil and coal have also risen in price.  In some cases, equipment that holds molten metal or glass is ruined if the heat is turned off, and over the longer term, energy-intensive businesses may simply give up on Europe.

No. Electricity prices also have skyrocketed because gas is a key fuel to generate power. To make matters worse, other sources of power have lagged for reasons not connected to Russia. Drought has undermined hydroelectric power from rivers and reservoirs. France’s fleet of 56 nuclear power plants is running at half-strength because of shutdowns over corrosion problems in key pipes and repairs, updating and safety checks.

A heat wave limited use of river water for cooling power plants, and lower water levels on Germany’s Rhine River reduced supplies of coal to generators.  In a role reversal, France is talking about sending natural gas to Germany, while Germany is exporting electricity to France. Usually it’s the other way around.  Analysts at Rystad Energy say Europe could face a serious electricity shortage as soon as this month. This winter, a worst case of cold weather, low wind generation and a 15% cut in gas use “would prove very challenging for the European power system, and could lead to power rationing and blackouts.”

“Regardless of the exact scenario, the coming winter is certain to be the most challenging Europe has seen in decades — and consumers or governments are expected to pay the price,” said Carlos Torres-Diaz, head of power at Rystad Energy. “If gas demand needs to be cut, we expect to see power supply issues emerging this month and worsening into 2023.”  Europe has lined up all the alternative gas supplies it could: shipments of liquefied natural gas, or LNG, that come by ship from the United States and more pipeline gas from Norway and Azerbaijan. LNG is much more expensive than pipeline gas, however.

Germany is keeping coal plants in operation that it was going to shutter to reduce greenhouse gas emissions. It also is keeping the option of reactivating two nuclear plants it’s set to shut down.

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