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Ella Otterbeck: The Problem with Natural Gas

Updated: Jan 27, 2022


During the last few months, the EU has faced an energy crisis brought on by a severe shortage of natural gas (The Economist, 2021). Between May and October this year, prices for oil, gas and coal increased by an enormous 95 percent (The Economist 2021). A combination of factors, such as a lack of wind in the EU, droughts in South America, and flooding in Asia has limited renewable energy generation and hindered coal deliveries, causing demand for natural gas to spike in many parts of the world (The Economist 2021). After Russia - the EU’s main supplier of natural gas - recently indicated that more natural gas will soon reach the EU mainland, prices’ levels have started to abate (Reuters 2021). While in the past, crises such as these could be mitigated by increasing consumption of other energy sources, such as coal or oil, the EU’s race for more climate-friendly energy means that increasing consumption of fossil fuels is no longer a viable option. Furthermore, the EU tends to avoid signing long-term gas contracts with pegged prices, instead preferring to rely on market pricing and a “buy-as-needed-principle”. This means that the EU is hit particularly hard when energy prices spike. When disaster strikes, such as it has during the last few months, the EU is left in an exposed position. Moreover, the EU, due to weather conditions such as the La Niña phenomenon, is thought to be in for a cold winter (The Economist 2021). Therefore, the worst may be yet to come.


Natural gas is supposed to be the “greenest” fossil fuel, since it emits the least carbon dioxide, and is therefore relied on as a bridging fuel as the EU moves towards renewable energy sources (The Economist, 2021). In the years to come, it is thus likely that the EU will be increasingly vulnerable to gas shortages or squeezes. One step which the EU has taken to secure more gas is installing a controversial new pipeline, Nord Stream 2, which runs from Russia’s gas fields to Germany (Boeffey & Sauer 2021). It would therefore bypass the Ukrainian pipelines and cost Ukraine about €1 billion in transit (Boeffey & Sauer 2021). This opens up the possibility for Russia to pressure its Eastern European neighbours with targeted energy cutoffs (Kramer 2021). Since final German approval of Nord Stream 2 is pending, political hawks have theorized that Russia has been “playing politics'' during these last few months by purposefully withholding gas to speed up the approval process (The Economist, 2021). The Ukrainian President, Volodymyr Zelenskiy, has also pointed out that Nord Stream 2 could give Russia undue geo-political influence over the EU (Furlong 2021). Whether the suspicions turn out to be correct or not, Nord Stream 2 will undoubtedly increase the EU’s reliance on Russian natural gas - therefore opening up the possibility of energy being used as political leverage.


While so-called “fuel switching” (i.e., switching the fuel source to a dirty energy source such as burning coal, or a clean energy source, such as nuclear power) has been practiced in the past to relieve energy crises, the EU’s climate policies make this option increasingly unattractive (The Economist 2021). Anti-nuclear power activism has led to nuclear power development slowing down in Europe. Notably, Germany started phasing out nuclear power after 2011 (The Guardian 2021). Furthermore, many European coal plants have shut down (The Economist 2021). Carbon regulations also mean that coal is becoming an increasingly expensive source of energy (The Economist 2021). This has backed the EU into a corner with few alternatives to the expensive natural gas. One suggestion currently on the table is that EU countries should be obligated to keep a reserve of natural gas in case of crisis, just as they do with oil (Hernandez 2021). However, this will do little to alleviate the current crisis, or crises that might occur in the near future given the above fluctuations. As it stands now, storages of natural gas in the EU may run out if this winter turns out to be particularly harsh (The Economist 2021).


There may be many paths forward for the EU in regards to the future of its energy supplies. In order to mitigate the political influence of autocratic gas-rich states, such as Russia, the EU could diversify its supply of natural gas. Increasing imports of Liquified Natural Gas (“LNG”), which is transportable by boats and the like, means that the EU could lower the relative proportion of its import of Russian gas. The EU could also make sure to further diversify its sources of renewable energy. Individual EU countries who are highly dependent on wind power end up in a precarious position when the wind stops blowing and the wind turbines stop turning. Having backup sources for electricity is key for supply stability. The EU can also look into developing an electric grid which enables countries to import and export electricity quickly and efficiently. If the wind stops blowing in Germany, a between-nations electrical grid could enable imports of, for example, Spanish or Moroccan solar energy. These three paths forward are just some changes that the EU may need to make in order to secure its vision of a green future (The Economist, 2021). However, they are all dependent on investment levels in the EU energy sector, which are now calculated to be only half as high as they need to be to reach net-zero emissions by 2050 (The Economist, 2021).


The current natural gas crisis is a reckoning for EU parliamentarians. The energy security of the EU will be a core issue as it tries to move towards a more climate-friendly existence. Furthermore, how the EU deals with this first crisis of the transition to clean energy will signal to EU citizens and the rest of the world how committed to a green path the EU really is. If the price of turning towards renewables gets too high for individual EU consumers, the EU may face backlash for its novel green energy policies. Weakening popular support for climate-friendly policies would risk slowing down political change too much to reach the goal of keeping global warming under 2°C. How well energy markets can be kept stable may determine the future of climate politics in the EU. How to secure a reliable, diverse source of natural gas is surely just the first hurdle that the EU has to overcome if it is to be a leader in mitigating climate change. The EU’s actions in the months to come may be a maker or breaker for the future of its green energy sector.



Written by Ella Otterbeck, Amsterdam Chapter of European Horizons



Bibliography


Boffey, Daniel, and Sauer, Pjotr. “Europe’s Soaring Gas Prices: Does Russia Hold Solution to


Furlong, Ashleigh., “Ukraine Insists Nord Stream 2 is ‘Dangerous’ Despite German


Hernandez, America. “The Geopolitics of Gas Looms Large Ahead of Tuesday’s Summit”.


Kramer, E, Andrew. “Putin Suggests Germany Approve Nord Stream 2 to Solve Energy


The Guardian. “Like It or Not, With Nord Stream 2, Putin Has a Foot on the Gas Europe


The Economist. “The First Big Energy Shock of the Green Era”. October 16, 2021.


The Economist. “It is Tempting to Blame Foreigners for Europe’s Gas Crisis”. October 16,


The Economist. “Could Europe Manage Without Russian Gas?” October 27, 2021.


The Economist. “Why Has the Price of Electricity in Europe Reached Record Highs?”


Reuters. “Europe Gas-Prices Fall as Supply Fears Ease”. October 29, 2021.

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