EU warns members to cut gas use 15% to keep lights on this winter
Quantum Commodity Intelligence - The European Union has told member states to prepare to ration power demand this winter, setting out emergency plans that could see it cut gas use by as much as 15% each as it tries to shield itself from the effects of ongoing tension with Russia.
The European Commission said Wednesday that under the voluntary scheme, measures should be taken to lower consumption by 15% below the five-year average across the bloc from August 1-March 31.
"Russia is blackmailing us. Russia is using energy as a weapon… We have to be proactive. We have to prepare for a potential full disruption of Russian gas. And this is a likely scenario. That's what we've seen in the past," Commission president Ursula von der Leyen said.
The Commission estimates a complete cut-off of Russian supply, if combined with a cold winter, would see the EU's GDP contract by 1.5%, with central and eastern Europe particularly hard-hit by the energy politics.
IEA estimates from earlier in the week suggested the 27-state bloc needs to save at least 12 billion cubic metres of gas over the next quarter to avoid shortages. The EU imported around 155 billion cubic metres from Russia last year, around 45% of its imports and almost 40% of its consumption.
Hostility
Wednesday's announcement follows similar supply warnings from the EU that have been sounded in recent days, with bloc chiefs suggesting they saw little reason to suspect relations between Brussels and Moscow were set to improve anytime soon.
Underpinning the move is the EU's support for Ukraine after Russia attacked its neighbour in February, with a series of punitive sanctions against Moscow having ratcheted up tensions.
Along with intermittent flows along key gas corridors from Russia to Europe, the cancellation of the Nord Stream 2 pipeline by Europe has combined with a key turbine in the North Stream 1 pipeline having been impounded by Canadian authorities while undergoing repairs.
While the turbine is set to be returned to Russia after foot-dragging from both sides, hostility remains, and the EU is looking for backup plans that it hopes will keep the lights on this winter.
The EU's proposal follows a raft of similar measures taken at a state level, with almost half its members – primarily those that depend on Russia for energy supply – having activated some form of emergency system that could eventually lead to demand rationing.
Benchmark Dutch TTF futures were little changed Wednesday, although they have roughly doubled since mid-June, reacting to shortfalls from Russia and the US after the closure of the Freeport export terminal, while the market is left waiting on the restart of the Nord Stream 1 pipeline.
The Sep22 contract was trading 0.35% higher on the day, closing at €157.768/MWh compared to month-ago levels of €80/MWh, while Dec22 was up 0.44% at €163.518/MWh.
