The real test of Europe’s energy supply is here. As temperatures have started dropping on the continent in recent days, power prices spiked again, and the natural gas shortage could worsen in case the winter is colder than usual.
There isn’t an immediate fix to the power and natural gas supply crunch, and the colder and longer the winter is, the worse the situation could become, analysts say. Currently, the only thing that could ease the pressure on tight energy supply in Europe is demand destruction in industries due to high natural gas prices, some note.
Some have even said that gas stores could fall to zero this winter if cold weather abounds.
Russia is fulfilling its contractual obligations with customers to send natural gas to Europe via pipelines, but it has not significantly raised additional supply amid the gas and energy crunch in recent months.
Meanwhile, the controversial Russia-led Nord Stream 2 project hit a snag earlier this month after Germany said it had suspended the process of certification of the Nord Stream 2 gas pipeline. The Federal Network Agency of Germany, Bundesnetzagentur, said in mid-November that it suspended the procedure to certify Nord Stream 2 AG as an independent transmission operator until an operator of the pipeline in Germany is incorporated under German law.
The setback delays by at least a few weeks the earliest possible in-service date for the pipeline, which could potentially alleviate gas shortages in case of a colder winter in Europe.
With uncertainty about the start date of Nord Stream 2, European gas and power prices could exceed the record highs they had reached in October.
“I wouldn’t rule out a return to the record highs of October if you look at how short the market is and limited Russian flows,” Wayne Bryan, an analyst at Refinitiv, said last week, as quoted by Reuters.
“If the weather gets cold in Europe there’s not going to be an easy supply solution, it’s going to need a demand solution,” Adam Lewis, a partner at trading house Hartree Partners, told Bloomberg.
Some energy-intensive industries using a lot of natural gas—including ammonia, fertilizer, and steelworks—have curtailed operations in Europe in recent months as record natural gas prices made their production unprofitable. (RT)
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