No cold winter for EU citizens, Commission says

If the EU’s member states co-operate, households in Europe could enjoy a warm winter even if Russia stops supplying gas to the EU.

The European Union’s energy system is now flexible enough to ensure that European homes would remain heated throughout a loss of supplies of Russian gas if the EU’s member states co-operate fully, the European Commission has concluded.

The Commission’s study, which it published on Thursday (16 October), suggests a substantial improvement on the situation in 2009, when tens of thousands of homes across Europe had their gas supply interrupted. However, the study also highlights a range of weak points in Europe’s energy system, particularly in the Baltics and the Balkans, where the Commission found that disruptions could be caused by a lack of interconnectors or problems with interconnectors between Bulgaria and Greece, Macedonia, Romania and Serbia.

Together with Estonia, Bulgaria emerges as the most vulnerable EU state, though the Commission believes that, even in the event of a six-month disruption, Bulgarians could escape the effects of the days-long interruption in 2009, during which some Bulgarians died.

The study was ordered even before Russia halted supplies of gas to Ukraine in mid-June. Russia, which provides two-thirds of the EU’s gas, continues to send gas through Ukraine to the EU. The EU’s stress-tests assume that Russia cuts supplies to the EU for six months. To date, Russia has restricted its actions against the EU to a reduction of supplies to a number of Ukraine’s EU neighbours for a matter of days.

However, the study also assumes that the EU makes full use of flexibilities within the system – including reversing the flow of gas through the system to the country in most need – as well as responding to price signals, buying up a large proportion of the world’s stock of liquefied natural gas (LNG), and switching to alternative fuels. With such measures, only Estonian households would find themselves cut off from gas even in the most extreme scenario, which envisages six months without gas over a particularly cold winter with the coldest weather at the end of the season.

Lack of co-operation
The findings will give EU leaders some cause for calm as they prepare today to meet for a European Council dedicated to climate change and to energy security. However, the study also highlights the need for co-operation between leaders and the importance of meeting an EU deadline of 3 December by which member states must be able to meet peak demand even in the event of a disruption of the single largest infrastructure asset. The deadline is linked to a 2010 regulation, not the stress-tests.

The study says that “in the absence of co-operation between member states and of additional national measures, serious supply shortfalls of 40% or significantly more could materialise” in Bulgaria and Romania (if Ukraine halts the transit of Russian gas) and in Lithuania, Estonia and Finland if Russia entirely halts supplies. Hungary and Poland are also vulnerable.

The study does not try to assess the economic costs of ensuring that European households are protected from the halt to Russia gas supplies, but the costs would be substantial, with prices likely to rise sharply and, in some cases, industry would be obliged to use less gas in order to ensure that homes remain heated. The Commission says, citing a study by the International Energy Agency, that large-scale use by the EU of LNG to replace Russian natural gas might double the global price of LNG.

In the Baltic states, the most significant means of averting major disruptions for households will be ready on Monday (27 October), when the Lithuanian government will officially open the region’s first LNG terminal. Lithuania expects the Klaipeda terminal to meet about one-third of Lithuania’s own gas needs in its first year, and eventually to be able to meet 75% of the gas annually consumed by Latvia and Estonia, as well as Lithuania itself. The prospect of the terminal has already persuaded Russia to lower the price for gas to Lithuania to $370 per 1,000 cubic metres, roughly the price that Ukraine has unsuccessfully been seeking to agree with Russia.

A protracted loss of Russian gas could have a “very serious impact on household consumers” in Bosnia, Macedonia and in particular in Moldova, the Commission said.

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• The EU’s stress-tests were precipitated by the political and military crisis between Ukraine and Russia, which also became an energy crisis when Russia cut off gas supplies to Ukraine in mid-June. A settlement of the gas dispute now appears within reach after the latest meeting, on Tuesday (21 October), between Russia, Ukraine and the European Commission. The outgoing European commissioner for energy, Günther Oettinger, said that a number of “cornerstones” for a deal were now “undisputed”, including the price for past gas deliveries to Ukraine and the price for deliveries over the winter. The three parties will meet again next Wednesday (29 October), three days before Oettinger takes up a different post in the Commission.