European residential storage may speed up again due to natural gas shortages in winter
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Countries with high residential electricity prices in 2022
Directly proportional to the new capacity of household savings
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At the beginning of 2022, European sanctions on Russian natural gas due to the Russia-Ukraine conflict pushed up electricity prices in the short term, and also caused energy shortages and power outages in many regions. Faced with high electricity prices and unstable power supply, residents are choosing optical storage equipment. According to EESA statistics, among the top nine markets in 2022, 2/3 of the countries are from Europe. Among them, Germany (1.9GWh added) and Italy (1.7GWh added) not only rank first and second, but also account for the entire Europe 70% of the market capacity.
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The core drivers of household savings growth in Europe in 2022:
Wholesale electricity prices spiral out of control as natural gas prices spiral?
?The average wholesale electricity price in European countries will increase by more than 400% year-on-year in 2022 due to the impact of natural gas.
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The main reason is that the power generation structure of most European countries consists of a large number of uncertain renewable energy generating units, and the call to abandon nuclear power and coal has contributed to the core position of natural gas units in the energy structure. Italy's power generation through natural gas will account for more than 50% in 2022
; while the average power generation through natural gas in other European countries will account for about 18% in 2021. Europe will begin to increase the proportion of natural gas power generation in 2021 because renewable energy (Europe's mainstream renewable energy power generation units: wind, solar, water, nuclear) power generation units are seriously affected by weather. For example, Norway's hydropower generation accounted for more than 80%. The dry climate has transformed the country from an electricity exporter to an importer in 2021. Since 2022, many nuclear power units , which account for 70% of France's power generation, have experienced pipeline corrosion and other failures, and many more need to undergo nuclear fuel replacement or other maintenance operations. Coupled with this year's widespread high temperature and drought, river water levels have lowered and cooled. Due to insufficient water, only 40% of EDF’s units can operate normally, turning the country from an electricity exporter into an electricity importer. Because coal power units produce polluting gases, natural gas units have become perfect marginal units (units that meet the demand when renewable energy generation is insufficient).
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Countries such as Germany, France, Spain and the United Kingdom are developing rapidly in renewable energy. However, the uncertain characteristics of renewable energy sources such as wind and solar have aggravated the instability of the power system. During periods when power generation from renewable energy sources is low, gas and electricity are marginal clearing units, which determine the day-ahead electricity price. Increases in gas prices directly affect the day-ahead market electricity price. The supply and demand curve of electricity determines the marginal cost and price of electricity. In the past, natural gas units were usually used for peak shaving. However, in 2022, the output of primary energy sources such as nuclear power, hydropower, and wind power is insufficient, and electricity is in short supply. Gas and electricity need to continue to operate most of the time to meet demand and become marginal clearing units. Gas prices completely determine electricity prices. , and at the same time, it also drives up the power generation price of coal power units.
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European natural gas in 2023
Still at risk of shortages in winter
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A report from the IEA, "How Europe Can Avoid Natural Gas Shortages in 2023," proposed that natural gas demand in 2023 will increase to 395 billion cubic meters compared with about 360 billion cubic meters in 2022. The increase in demand mainly comes from climate regulation, industry not limiting production capacity, and support for natural gas from Moldova, Ukraine.
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Three reasons on the supply side will lead to an even greater shortage of natural gas in 2023:
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There is a risk of further declines in Russian gas supply levels. Since the Russo-Ukrainian war, natural gas supplies from Russia have continued to decrease, from a supply level of 140 billion cubic meters in 2021 to 60 billion cubic meters. The supply shock in 2021-2022 has put the EU's natural gas market under severe pressure, and price fluctuations have also been transmitted to the electricity prices of many countries. The high level of natural gas prices makes the price of European natural gas purchased outside Russia also remain high. Natural gas supply in the winter of 2023-2024 still faces the risk of declining due to political factors.
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The supply of LNG (liquefied natural gas) will be tightened by the recovery in demand in China and other Asian regions. The EU plans to increase imports of liquefied natural gas by 40 billion cubic meters in 2023. In 2022, Europe's LNG imports from China will decrease by approximately 20 billion cubic meters year-on-year, but as of June this year, China's LNG imports have increased by 32% year-on-year, close to the 2021 level. Resurgent demand for natural gas in more Asian countries will make competition for natural gas even more intense when it is in short supply.
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The rare mild winter weather in 2022 may not be repeated in 2023. According to IEA calculations, the rare warm winter climate in 2022 will help Europe reduce natural gas demand by about 10 billion cubic meters.
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The sum of the three factors will create a natural gas demand gap of about 57 billion cubic meters in the EU. A series of existing measures in the EU are expected to solve the demand problem of 30 billion cubic meters of natural gas, but about 27 billion cubic meters of it will Demand gaps cannot be solved by currently existing programs and measures. To sum up, given the current situation, Europe still has the possibility of similar natural gas supply uncertainties causing natural gas prices to spiral out of control.?
In order to solve the problem of supply shortage, the European government will only subsidize electricity prices to protect residents' electricity expenditure of about 300 billion euros in 2022. To solve the problem at its root, the European government may tend to increase its investment in renewable energy, change lifestyles, and seek Additional natural gas suppliers, thermal electrification and policy support to improve energy efficiency. A milder and more likely scenario is that residential electricity prices are still likely to rise slightly in 2023 due to fluctuations in natural gas supply, accompanied by the instability of power supply equipment and heat pumps (average daily consumption of 21kWh, which is about 1.5 times that of a European household of 3 people) . The growth rate of electricity) penetration rate (heat pump penetration rate in 2022 is about 7%, conservative case is 9%, optimistic case is 11%), which will jointly promote the demand growth of European household storage in winter.