To preempt a potential energy crisis in winter and patch up gaps in their energy sectors left after Russia had decided on Monday to significantly reduce gas for Europe, top buyers of the Russian fuel have been looking for alternatives including burning more coal.
Italy’s Eni said it had been informed by Russia’s Gazprom that it would receive only part of its request for gas supplies on Monday, pushing the country closer to declaring a state of alert that will spark gas-saving measures.
Germany, experiencing the same hardship, announced on Sunday its latest plan to increase gas storage levels while simultaneously restarting coal-fired power plants that it had aimed to phase out.
“That is painful, but it is a sheer necessity in this situation to reduce gas consumption,” said Economy Minister Robert Habeck, a member of the Green party that has pushed for a faster exit from coal, which produces more greenhouse gases.
“But if we don’t do it, then we run the risk that the storage facilities will not be full enough at the end of the year towards the winter season. And then we are blackmailable on a political level,” he said.
Russia continued to sing its favourite song of “Europe only has itself to blame for the gas crisis.” Remaining comfortably oblivious of the order of events, Moscow claims that it was the West’s sanctions that triggered the crisis while disregarding the fact it had invaded Ukraine, a gas transit route to Europe, as well as a major wheat exporter. This, in turn, pushed the West to respond with sanctions.
The energy crisis makes the situation more difficult for European policymakers who have been scratching their heads trying to figure out a way to slow down surging inflation in household energy bills and food prices.
The Benchmark Dutch front-month gas contract was trading at about 127 euros per megawatt-hour TRNLTTFMc1 on Monday, up more than 50 percent since the start of 2022.
Meanwhile, the chief executive of Germany’s largest power producer RWE, Markus Krebber, said power prices could take three to five years to fall back to lower levels, crimping household spending and weighing on the economic outlook.
Eni and German utility Uniper both said they were receiving less than their contracted Russian gas volumes.
While Germany and Italy feature among the most reliant on Russian gas, other European countries have also had to grapple with supply shortages. With the advent of heatwaves, Europeans turned on air conditioners which drove energy consumption high.
Back in black
Once the most vocal proponent of phasing out coal, Germany is now making leaping steps to bring it back. The country’s economy ministry said restoring coal-fired power plants could add up to 10 gigawatts of capacity in case gas supplies hit rock bottom. Germany’s Upper House Bundesrat will receive a law designed with that end on July 8.
Germany will launch an auction system in the coming weeks to encourage lower gas consumption in its industry and financial help for Germany’s gas market operator, via state lender KfW, to fill gas storage facilities faster.
Meanwhile, Austria’s government agreed with utility Verbund on Sunday to convert a gas-fired power plant to produce electricity with coal in an event that restricted gas supplies from Russia result in an energy emergency.
Russia says reduction not premeditated citing “maintenance issues”
Reductions in supply were not premeditated and were related to maintenance issues, the Kremlin’s spokesperson, Dmitry Peskov said on Thursday. The explanation was deemed a lie by Italian Prime Minister Mario Draghi and dismissed. Having summoned its technical committee for gas to a meeting next Tuesday, Italy considers declaring a heightened state of alert on gas this week if Russia continues to curb supplies.
Consumption reduction, including rationing gas for selected industrial users, increasing the production at coal power plants and also asking for more gas imports from other suppliers under existing contracts, are some measures set for implementation in Italy.
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