Prof. ST Hsieh
Director, US-China Energy Industry Forum
July 13, 2022
EU is staring at an unprecedented energy crisis and preparing for an economic crisis because the war in Ukraine. Putin most likely will cut off natural gas export to Europe soon. IMF warns that EU economy could plunge into a recession, that is bad news for everyone, not just Europeans.
But EU’s plan, to be announced on July 20, 2022, at best is hedging for lacking Russian natural gas, it does not address the root cause of the problem. For example, the plan probably will not be able to set any dateline when sufficient natural gas will be available. Unfortunately a miserably dark and cold winter is almost inevitable.
Further, the plan will call for “power plants to switch to other fuels” simply means that more coal will be used in Europe soon. EU’s solemn pledges to the world that EU is fully committed to lead clean energy transition in order to combat the global climate change just have to wait till natural gas is available.
However, the most alarming signal is that EU expected the war in Ukraine will last at least to the end of 2022 and beyond. It will be terrible for the people in Ukraine if the war of attritions with Russia lasts another six months.
Somehow, EU leaders could not accept the fact that the war in Ukraine can be, and must be, ended as soon as possible. No one is seriously engaged in any peace process, rather more sanctions against Russia are being developed. If all the unprecedented economic sanctions against Russia have not weakened Putin to surrender, in the meantime, EU is facing an energy crisis and being weakened, how can anyone trust new sanctions against Russia will work? Is there any attention paid to the worst-case scenario when these new actions backfire?
Should all the smart brain powers in Europe be focused on developing and implementing an exit strategy for the war in Ukraine?
Hungary’s policy “Energy exports will be banned” may be justifiable. But if every member of EU nations exercises the same policy, then every nation will have to stand on its own feet: EU could obsolete soon.
EU to urge countries to curb gas use to buffer against Russian cuts
Kate Abnett Wed, July 13, 2022, 7:57 AM
BRUSSELS (Reuters) -The European Union will encourage member countries to cut gas demand by incentivising industries to use less, as it prepares for possible further cuts to Russian supply, according to a draft plan seen by Reuters.
Brussels is bracing for further drops in Russian gas deliveries, a scenario the International Monetary Fund chief on Wednesday warned could plunge economies into recession.
The European Commission plan, due to be published on July 20, will suggest countries launch financial incentives for companies to cut gas use, use state aid to encourage industries and power plants to switch to other fuels, and roll out information campaigns to nudge consumers to use less heating and cooling.
Measures targeting industry could include auctions or tenders where large consumers would receive compensation for using less gas, according to the draft, which could change before it is published.
Governments should also decide the order in which they would force industries to close in a supply emergency, it said. The order should consider how essential an installation’s services are, and how its closure would ripple through supply chains.
By acting now, the EU aims to push as much gas as possible into storage and build up a supply buffer for winter, when heating demand peaks. EU gas storage is currently 62% full, far short of the bloc’s goal of 80% of capacity by November.
Households are “protected customers” under EU law, meaning they would be the last affected by gas rationing. But countries could impose mandatory heating or cooling limits on other consumers, such as offices or shopping centres, if there was a severe gas shortage, the draft said.
“Early joint action at EU level at this critical moment of the storage filling process will reduce the need for possible and more painful demand reduction later in the winter,” the draft said.
The Commission declined to comment.
Before Moscow invaded Ukraine in February, the EU relied on Russia for 40% of its gas. That share has plummeted, and flows from Russia are now below 30% of the 2016-2021 average, the draft said.
Moscow has curbed gas deliveries to 12 EU countries since the war began, cutting some off completely over a payment dispute and affecting others by reducing flows through its Nord Stream 1 pipeline to Germany. That pipeline is now offline for maintenance, which governments worry might be extended because of the war.
Hungary declares ‘energy emergency’ over threat of shortages
JUSTIN SPIKE Wed, July 13, 2022, 9:36 AM
BUDAPEST, Hungary (AP) — Hungary’s government has declared an “energy emergency” in response to supply disruptions and skyrocketing energy prices in Europe, an official said Wednesday.
There is “unlikely to be enough gas in Europe for the autumn and winter heating season,” said Gergely Gulyás, Prime Minister Viktor Orbán’s chief of staff.
Hungary will increase its domestic energy production capacities to ensure adequate supply, Gulyás told a news conference in Budapest. Gulyás cited Russia’s war in Ukraine and consequent sanctions from the European Union as the cause of what he called an “energy crisis” on the continent.
“The prolonged war and the sanctions from Brussels have caused energy prices to rise dramatically across Europe, and in fact a major part of Europe is already in an energy crisis,” Gulyás said.
The Central European country will boost its annual production of natural gas from 1.5 billion cubic meters to 2 billion cubic meters, increase the extraction of lignite (brown coal) and put a currently non-functioning lignite-fired power plant back online, Gulyás said.
Energy exports will be banned, and Hungary’s only nuclear power plant will also increase its production by extending its operating times, he added. The measures will go into effect in August.
The announcements came after Orbán convened a meeting of his Cabinet earlier Wednesday to discuss what he called an “energy emergency” in Europe.
Hungary is heavily dependent on fossil fuels from Russia, and last year signed a 15-year agreement with Russian energy company Gazprom for the purchase of natural gas. Hungary gets around 65% of its oil and 85% of its gas from Russia.
- But after Moscow launched its war against Ukraine, the EU, of which Hungary is a member, sought to target Russian oil exports with sanctions.
- But the nationalist Orbán fought vigorously against such measures, arguing that blocking Russian oil would cripple his country’s economy. The autocratic leader managed to negotiate a concession which allowed a temporary exemption for oil imports delivered by the Russian Druzhba pipeline to certain landlocked countries like Hungary.
- Earlier on Wednesday, Hungarian Foreign Minister Péter Szijjártó said at a meeting of regional foreign ministers that Hungary would seek to buy an additional 700 million cubic meters of gas before autumn, but didn’t specify from where.