European households and businesses will need to significantly reduce energy consumption in order to maintain reserves through the upcoming winter, according to the International Energy Agency.
The group’s analysis, written before Russia severed natural gas flow through the Nord Stream 1 natural gas pipeline and prior to the Nord Stream system witnessing unprecedented damage last week, warned that “a complete shutdown of Russian pipeline flows to the European Union cannot be ruled out.” Ministers are contending with energy prices that have increased as much as twentyfold in some countries.
“As the summer ends in the northern hemisphere on new highs for natural gas prices and volatility and markets brace themselves for a winter of unprecedented uncertainty of supply due to Russia’s behaviour, security of energy supply has become a priority issue for consumers and policy makers across major consuming markets,” the International Energy Agency said.
Several nations, including France and Spain, have called for residents to reduce power consumption ahead of the winter months. The International Energy Agency found that a failure to reduce demand would bring power inventory to 18% of working capacity by March 2023, while a 9% or 13% reduction in power usage would lead to inventories of 38% and 45%, respectively.
“Implementing gas saving measures will be crucial to minimise storage withdrawals and keep inventories at an adequate level until the end of the heating season,” the group explained, particularly noting that changed household energy consumption would ideally account for over 40% of the 13% demand reduction scenario.
French President Emmanuel Macron accordingly urged citizens last month to use air conditioning and heating a “bit less than usual” — such as by keeping indoor temperatures no more than 19 degrees Celsius, roughly 66 degrees Fahrenheit, through the winter. The nation’s government is preparing energy rationing initiatives that officials could pursue “as a last resort.”
Meanwhile, European Commission President Ursula von der Leyen announced that the European Union would propose a “mandatory target” for reducing electricity consumption among member states during peak hours. International Energy Agency Executive Director Fatih Birol previously exhorted leaders in Europe to adopt several policies to save natural gas — including auction platforms designed for demand reduction, an increase in coal and oil-fired power generation, and temperature controls for households.
“The first immediate step towards filling European gas storage to adequate levels before winter is to reduce Europe’s current gas consumption, and to put the saved gas into storage,” he argued. “This is a big ask, but it does not exaggerate the scale of what is needed — or what is possible if the right measures are taken. It is categorically not enough to just rely on gas from non-Russian sources — these supplies are simply not available in the volumes required to substitute for missing deliveries from Russia.”
Russian shipments accounted for 40% of the European natural gas supply last year — a rate that had dropped to 9% as of last month. Germany, the continent’s largest economy, has seen dependence on Russian natural gas decrease from 55% to 35%.
The producer price index for industrial products in Germany has risen 45.8% year-over-year as of August 2022, according to data from the Federal Statistical Office of Germany, which followed increases of 37.2% in July 2022 and 32.7% in June 2022. Several firms are halting production in factories or laying off employees.