EU faces potential natural gas shortage in 2023

A report from the IEA has found that the EU could face a natural gas shortage of almost 30 billion cubic metres in 2023.

The IEA has found that the European Union will face a potential shortfall of almost 30 billion cubic metres of natural gas in 2023. However, this gap can be closed through stronger efforts to improve energy efficiency, deploy renewables, install heat pumps, promote energy savings, and increase gas supplies.

It is believed that 2023 may be hard for Europe’s energy industry, as Russian supplies could fall further, global supplies of liquified natural gas will be tight, and the unseasonably mild temperatures seen at the start of the European winter are not guaranteed to last.

The report, ‘How to Avoid Gas Shortages in the European Union in 2023,’ proposes a set of actions that Europe can take to build on the progress made in 2022 to reduce reliance on Russian gas supplies.

Reducing reliance on Russian natural gas

The report was launched in December by IEA Director Fatih Birol and European Commission President Ursula von der Leyen ahead of the Extraordinary Meeting of EU Energy Ministers and the Meeting of the European Council.

“We have managed to withstand Russia’s energy blackmail. Our REPowerEU plan will reduce demand for Russian gas by two-thirds before the end of the year, with a mobilisation of up to €300bn of investments. The result of all this is that we are safe for this winter,” said von der Leyen.

“So, we are now turning our focus to preparing for 2023, and the next winter. For this, Europe needs to step up its efforts in several fields, from international outreach to joint purchasing of gas and scaling up and speeding up renewables, and reducing demand.”

“The European Union has made significant progress in reducing reliance on Russian natural gas supplies, but it is not out of the danger zone yet,” said Birol.

“Many of the circumstances that allowed EU countries to fill their storage sites ahead of this winter may well not be repeated in 2023. The IEA’s new analysis shows that a stronger push on energy efficiency, renewables, heat pumps, and simple energy-saving actions is vital to head off the risk of shortages and further vicious price spikes next year.”

natural gas
© iStock/spooh

At the start of December, the amount of gas in EU storage sites was well above the five-year average due to the measures taken by European governments and businesses throughout 2022 in response to the energy crisis, and the demand destruction caused by huge price spikes. This provided an important buffer as we entered winter. Russian deliveries also dropped in 2022 due to the mild weather, and consumer actions increased non-Russian gas supplies.

The size of the potential gas supply-demand gap in 2023 should be reduced by the measures previously taken by EU governments on energy efficiency, renewables, and heat pumps. This gap is also set to be narrowed by a recovery in nuclear and hydropower output from their decade-low levels in 2022.

However, despite these actions, the EU’s potential shortage of natural gas could reach 27 billion cubic metres in 2023 if gas deliveries from Russia drop to zero, and China’s liquified natural gas imports rebound to 2021 levels.

Measures to close this gap

The report proposes that this natural gas shortage can be minimised through additional actions on energy efficiency, renewables, heat pumps, energy savings, and gas supplies.

It is suggested that fast improvements in energy efficiency can be incentivised by expanding existing programmes and increasing support measures for home renovations and the adoption of efficient appliances and lighting. The report recommends using more smart technologies and encouraging industry’s transition to electricity.

To speed up permitting for renewables, administrative resources should be added, and procedures should be simplified. There should also be an increase in financial support for heat pumps and changes to tax laws that currently penalise electrification. The report also states that there should be improved campaigns to get consumers to reduce their energy consumption.

Europe could also reduce reliance on Russia’s supply of natural gas, as there are a handful of countries with a spare export capacity that could increase exports by capturing gas that is currently being flared. There are also opportunities to scale up the production of low-emission biogases.

These measures can provide a pathway, consistent with the EU’s climate goals, to avoid price spikes, factory closures, and increased use of coal for power generation.

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