Saturday, October 23, 2021

Can Europe pay through the nose for Russian gas | Matthew d’Ancona

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The reduction in heat from the Russians could also raise carbon emissions, forcing EU to consider soaring prices

From now until Thursday, temperatures could start to drop to freezing for much of Europe, as Russia’s gas supply to EU countries plunges by almost half.

The price of gas has soared and if Russia pulls the plug for another three days as forecasters suggest, Berlin is one of the German cities that will be threatened with heating and water shortages.

Experts are reporting bills of tens of thousands of euros for households who currently use around £170 a year of gas to heat and light their homes.

Britain, at least, can still rely on Norwegian gas for now but fears of damage to a UK-EU joint infrastructure scheme that could deliver British gas as a substitute to Russian imports have also been raised.

What happens next depends in large part on the next few days and how quickly new supplies can be brought in to help Europe compensate for the shortfall.

But it is also imperative that the threat to gas supplies from Russia is not just seen as a short-term blip caused by the ongoing cold snap.

A cold snap this winter was again responsible for reducing the amount of Russian gas available to EU countries, at least on the short term, as earlier this year.

In February the Russian gas supplies dwindled by almost half as a result of a shortage in pipeline capacity caused by an unexpected clean-up by a gas turbine engineer.

Readers of this column will know that I am of a most unusual disposition.

So I have already thought highly of the EU and its EU gas strategy.

I have also previously advised that continuing to buy Russian gas would be unwise on the basis that we are still relying on an extremely volatile and unreliable supplier.

But for much of the past 15 years it seems that the EU has been relying on the inertia of inertia among Russian politicians, making them impotent to do anything.

The price of Russian gas is still high, and in some places the deficit has been a hell of a lot higher.

The cost of electricity from Russian generators – much of which is still blacked out as a result of the coldest winter on record in Russia – has been under a quarter of that from new, cleaner-burning coal.

This costly negligence appears to have many governments – along with the fossil fuel industries and the energy companies – happy to allow Russian gas to continue to flow to Europe.

What a lot of governments must be wondering at the moment is whether this is a good decision and whether new pipelines are going to be built fast enough to prevent the EU from having to endure another gas crisis.

Some European leaders are already starting to prepare the country’s energy prices, taking steps to ensure there is an ample supply of gas on their shelves in time for later in the year.

We may also be in for a prolonged period of high gas prices, which may only be made possible by the actions of countries such as Russia which are buying up the gas that is most cheap and abundant on the market.

But higher prices will also make renewables, which at present cost about half the price of fossil fuels, even more attractive.

We may also have to reconsider the terms under which western governments continue to accept Russian gas and electricity in such a disproportionately large volume.

In the shorter term, there are at least two solutions: short-term price rises; or the departure of significant amounts of the 100 coal-fired power stations that are expected to be dismantled by 2035.

But would either of these be sufficient to improve the situation?

When price rises of £10 a week are set against the current gas price and the gross income of the UK average family, I wonder whether increased gas and electricity prices are the only long-term solution.

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