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Energy experts expect gas crisis to continue beyond 2023

02 Jan 2023 5 minute read
gas burner by paloetic is licensed under CC BY-NC-SA 2.0.

Expert eyes are starting to turn to Christmas 2023, as Europe has kept the lights on through this festive period despite an energy crisis that has gripped the continent for more than a year.

While grids remain focused on ensuring there is enough gas and electricity to supply households over the coming months, experts are already concerned that all the same challenged could be repeated next winter, and perhaps even get worse.

And the impacts of the current gas crisis could last for even longer. In December, one of the UK’s most respected energy consultancies warned gas prices could remain high until the end of the decade.

It comes as people in the UK are being forced to shell out more than ever before to keep their homes warm this winter. The same goes for most countries in Europe, where gas and electricity prices have soared over the last year and a half.

The continent’s situation next winter will to no small extent, depend on how cold January, February and March prove to be, experts say.

If the weather is unseasonably warm, people are unlikely to need as much gas to heat their homes, leaving European gas storage sites with more reserves when winter ends.

This would make it easier for the continent to replenish its stocks over the summer, even without Russian gas.

Wind power

Martin Young, a senior analyst at Investec, said there will also be a little more wind power brought online before next winter, which will help with electricity supply. However, there is still uncertainty over some coal and nuclear electricity generators.

The Government struck a deal with old coal power plants that were being decommissioned that they would be available to power up this winter if needed. So far this has not been necessary, but ministers might want to extend that into next winter.

“My gut feeling is that we won’t see huge changes on the supply side in the UK, it will ultimately depend on where we exit winter if you look at the wider European context,” he said.

Although supplies from Russia were drying up last summer, some gas was still coming through, allowing Europeans to put it aside for a rainy day.

Next summer the pipelines that connect Russia to Europe are likely to be all but shut off.

As a result much of the gas imported to the continent will have to be brought in via ships from the US, Qatar and elsewhere.

However there are a limited number of liquid natural gas (LNG) tankers in the world, and a limited number of places where they can dock in Europe.

In a bid to be able to get more of this gas – which is cooled to around -160c to make it liquid so it can be stored and transported more easily – to European shores, projects for new terminals have sprung up or been fast-tracked in recent months.

In December, Germany opened its first ever LNG terminal – signaling a massive change in energy policy from the country which had tied itself so heavily to Russian gas imports in the past.

Two other LNG terminals are set to open in Germany next year.

The UK and Spain and Portugal have the biggest import capacities for LNG in Europe – allowing them to tap into global markets. But the Iberian peninsula does not have many gas pipelines that connect it to the rest of Europe, so the Spanish terminals are less useful for its neighbours.

Gas storage

Despite Centrica recently re-opening an abandoned old gas storage site, the UK has very few places that it can keep the LNG which it will import during the summer.

As a result a lot of the gas that comes into UK terminals will be directly re-exported to Europe, particularly the Netherlands, where it will be pumped into underground storage sites in preparation for winter.

Gas from Norway and the UK’s gas fields will also serve to replenish Europe’s stocks over the warmer months when households and businesses need less gas.

But although LNG can offer a partial solution to the supply of gas to Europe, it cannot push gas prices down to where they used to be. LNG is already an expensive way to transport gas – it takes a lot of energy and expensive equipment to get and keep it cold enough for the tankers.

And because LNG tankers can travel anywhere they want, to secure the vital gas that it needs, Europe will have to outbid what buyers around the world are willing to pay.

So by switching to relying increasingly on LNG tankers for its gas needs, Europe will lock in years of higher prices.

Cornwall Insight, a respected energy consultancy based in East Anglia, said that it expects prices to remain high until the end of the decade.

“The plausible scenarios are pipeline flows of Russian gas will be even further reduced on summer 2022, and we will also see gas prices remaining above pre-pandemic levels until at least 2030 as the market takes time to adjust to this change in supply and demand dynamics in Europe,” said lead research analyst Dr Matthew Chadwick.


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Jim
Jim
1 month ago

A crisis that lasts for 10 years or beyond is not a crisis….it is a sea change. High energy costs will have profound effects on the economy and society. Could we see extreme polarisation of politics as a result that will break the cosy consensus that currently prevails?

Charles Coombes
Charles Coombes
1 month ago

Gas prices will fall as other sources are found. Thus electricity production prices will fall. These savings will NOT be passed on as companies make bigger profits

Dewi
Dewi
30 days ago

and yet wholesale prices have fallen – we live in Rip Off Britain – ripped off by the Governement and the energy companies conpounded by sanctions imposed by Britian on cheaper Russian gas.This is deliberate government policy Tory choice.

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