How did Europe avoid an energy crisis?

A vital role was played by a port in Germany called 'Wilhelmshaven'?which?became the country's first floating gas terminal.?A floating liquefied natural gas (FLNG) facility is?a?floating production storage and offloading?unit that conducts liquefied natural gas (LNG) operations for developing offshore natural gas resources.

Wilhelmshaven became a vital?gas supply facility across Europe?when Russia was tightening oil flows.?Constructed just?10?months after Russia invaded Ukraine, this vessel (Esperanza) can power 90,000 homes?annually. In 2023, it provided 6% of Germany's total gas consumption. But Wilhelmshaven is not the only facility in Europe. Since the invasion, at least 17 LNG terminals have been planned or are under construction?according?to the FT.?

Impact??

These facilities have helped replace 10% of the gas that came to the EU from Russia?which?helped reduce gas prices from record highs of over €300 per megawatt hour in August 2022 to near pre-crisis levels of around €30 per megawatt hour today. The energy crisis that everyone feared at the start of the invasion has?been avoided?quite remarkably thanks to unprecedented energy policy interventions and cuts in demand.

But there are always two sides to every story.?

The short-term response to avoid the crisis may have created bigger problems for the bloc in the future. A heavy reliance on volatile LNG markets has implications for both industrial competitiveness and the transition to green power. The Esperanza, for instance, is contracted to run at Wilhelmshaven for ten years - long after environmental groups hoped demand for gas would subside in favour of cleaner alternatives. It will be hard to meet the commitments enshrined in the 2015 Paris Climate Agreement. Especially when, as Alexandru Musta??, a campaigner at Beyond Fossil Fuels, put it:

“A large number of gas power plants don’t have a retirement date."

During the invasion when the European Commission met in Brussels, Gas supplies were of the utmost concern. Natural Gas in addition to being used to heat homes is a key resource to the fertiliser, petrochemical and steel sectors. In the image above, evidently, the EU's dependency on Russia for Gas has significantly decreased since the invasion in 2022. Russia slashed its pipeline supplies more than ever to pressure governments to reduce their support for Kyiv. That August, the price of Title Transfer Facility, Europe’s gas benchmark, surged past €340 per megawatt hour, an all-time high.

Renewable Energy

To meet the expected shortfall in energy supplies, the EU has also accelerated its rollout of renewable power. Together, wind and solar produced 27 per cent of EU electricity in 2023, above a quarter for the first time.

Conclusion

The newfound dependency on LNG poses potential issues for Europe down the road, introducing reliance on different partners for gas, exposing it to a highly volatile market and potentially delaying the bloc’s progress towards a legally binding goal of hitting net zero emissions by 2050.

Policymakers are hopeful that diversifying gas supplies and taking steps to boost hydrogen production and roll out renewables will help ease the deepening fears about industrial decline on a continent that is reliant on imports for fuel supplies.

Kadri Simson, the EU energy commissioner states that the EU aims to have almost 600GW of solar power by 2030 and more than 500GW of wind — a vast acceleration compared to the rollout before the crisis. Cutting greenhouse gas emissions goes hand in hand with energy security, she says.

Alice Hancock and Shotaro Tani from the FT wrote in their article:

“Putin switched off the gas. He cannot repeat that with the sun.”