BAKU, Azerbaijan, February 21. The EU's natural gas demand is expected to decrease by close to 3 percent, or 10 billion cubic meters (bcm), year-on-year in 2023, Trend reports via the latest overview of European gas market from the International Energy Agency (IEA).
Thus, the EU's gas demand is projected to stand at 350 bcm in the current year, the IEA said.
According to the forecast, this decline will be mainly driven by lower gas-to-power demand, which will also decrease by about 20 percent year-on-year.
"Continued expansion of wind and solar power generation capacity is expected to reduce gas burn in the power sector by around 12 bcm. Hydro power generation is assumed to recover to its five-year average, further reducing gas-to-power demand by 8 bcm," the report noted.
At the same time, higher nuclear power generation in France in 2023 is expected to be mostly balanced out by declines in Germany and plant closures in Belgium (Doel 3 in September 2022 and Tihange 2 in February 2023).
So, the IEA expects that EU nuclear power generation will increase by around 2 percent (or 10 TWh) in 2023, leading to gas savings of 2 bcm.
"We do not expect further gas-to-coal switch during 2023 in the EU, despite higher available coal capacity in some countries, mainly Germany, as higher nuclear and renewable generation will reduce the opportunities to dispatch coal plants. In this regard, our analysis shows that gas demand for power is very elastic to gas prices as long as there is available coal –and oil- capacity. High emission allowances prices benefit gas versus coal in the merit order even at relatively high gas prices, which could in fact reduce coal –and oil- power generation in 2023 compared with 2022. However, when there is no available capacity of coal and oil, gas demand is very inelastic to gas prices as it remains as the main source of flexibility," the IEA explained.
According to the outlook, the sharp drop in natural gas prices from the second half of December 2022 is expected to support industrial gas demand. Given recent price trends along the straight curve, industrial gas consumption is expected to increase by 13 percent in 2023. At the same time, assuming a return to average weather conditions before the end of 2023, natural gas demand in the residential and commercial sectors is expected to increase by 3 percent.