BAKU, Azerbaijan, Dec.12. Despite a series of measures adopted by the European Union and by individual European countries (see box below) to increase security of supply, a supplydemand gap could open up in 2023 that – if not addressed – could provoke a renewed period of intense price volatility and turbulence in gas markets, Trend reports referring to the International Energy Agency (IEA).
“The coming year presents clear risks to energy security and affordability in Europe and beyond, as Russia continues to seek leverage by exposing consumers to higher energy bills and gas supply shortages,” reads the latest report released by IEA.
The agency’s analysis of how this gap can be closed is a two-stage process.
The first stage involves considering all the elements that are already visibly in motion or planned, as well as structural changes that are underway, such as new renewable capacity, fuel switching in industry, improvements in energy efficiency, installations of heat pumps, and new biomethane facilities. A potential recovery in nuclear and hydro power output from the decade-low levels seen in 2022 is another crucial variable, and this is assumed to lower EU gas demand by around 10 bcm in 2023 (see box below). Altogether, these factors already account for some 30 bcm of the additional amounts required to balance the European gas market.
This leaves a remaining gap of 27 bcm that needs to be addressed with additional actions in order to satisfy the conditions of refilling gas storage levels to 95% and maintaining gas supply security through to the spring of 2024 without excessive strains on markets and European consumers1. These additional actions are discussed in the main body of this report. Without these additional efforts, Europe risks much less-desirable ways of bringing supply and demand into balance. These include higher spikes in gas prices to levels that force demand reductions through curtailments, alongside renewed pressure on energy bills, alongside the potential for rationing and emergency measures to protect consumers. This would have broader implications for economies and fiscal positions. Higher coal-fired generation in Europe and elsewhere could also reduce pressure on gas markets. In 2022, nearly 20 GW of coal-fired power plant capacity in the European Union had its lifetime extended, re-entered the market, or had caps on working hours removed. Coal power plants will generate around 45 TWh more electricity in 2022 than in 2021, resulting in an extra 35 Mt CO2 power-sector emissions. While additional gas-to-coal switching is possible in 2023, additional emissions would undercut the EU’s climate ambitions and are not assumed in our baseline level of demand.
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