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The IEA has released a report to help the European Union reduce its reliance on Russian gas amid Eastern tensions, which have damaged supply security and significantly impacted the wholesale markets.
In 2021, Europe imported 155 billion cubic meters (bcm) of Russian gas, 45% of its total gas imports and 40% of its total gas consumption. These statistics show how much the EU relies on Russian gas and the recent tension in the East between Russia and Ukraine has only made this clearer.
Progression towards net-zero targets set out at the COP26 Summit will significantly reduce consumption and therefore imports of gas over time. However, the escalated tension in the East calls for action now and policymakers must lower imports for the near term.
The IEA report details immediate actions that can be taken to reduce EU imports while minimising the risk and vulnerabilities for consumers.
1 No new gas supply contracts with Russia
Long-term Russian import contracts covering over 15 bcm of gas per year are due to expire in 2022. This provides the opportunity for the EU to reduce their contractual minimum take-or-pay for Russian imports and diversify the supply by letting the contracts expire. Further contracts covering 40 bcm are due to expire by 2030.
2 Replace Russian supplies with gas from alternative sources
Production within the EU and imports from non-Russian pipelines must be able to account for the significant drop in Russian supplies. LNG imports from Asia could provide near-term security, but this market would become tight for supplies with all members importing in the same market. However, with increased transparency and efficient use of LNG, the EU could bring 20 bcm over the next 12 months.
3 Introduce minimum gas storage obligations to enhance market resilience
Gas storage has been more valuable than ever by providing security in uncertain times. Storage is vital to provide insurance against demand swings and unplanned events, such as Eastern tension or extreme weather. IEA suggest that fill levels of at least 90% capacity by October 2022 is required to provide an adequate EU buffer. Increased minimums will build the resilience of the gas network despite initial demand spikes.
4 Accelerate the deployment of new wind and solar projects
In 2022, with record additions to solar PV and wind power capacity, the EU’s output of renewable energy is expected to increase more than 100 terawatt-hours (TWh) or 15% compared to 2021. A fast-track effort could increase capacity further and deliver an additional 20 TWh within 12 months with simplified policies and responsibilities of permitting bodies. An additional 35TWh of generation over 12 months would reduce gas use by 6 bcm.
5 Maximise generation from existing dispatchable low-emissions sources: bioenergy and nuclear
Nuclear power is the biggest low emission energy source in the EU. However, several plants were taken offline for maintenance and safety checks in 2021. Returning these plants to safe operation will increase power generation by up to 20TWh in 2022. A temporary delay on plant closures, ensuring safe operation, would also reduce gas demand by 1 bcm per month. With bioenergy plants in the mix, 70TWh of low emission energy can be produced in 2020, removing 13 bcm of gas imports.
6 Enact short-term measures to shelter vulnerable electricity consumers from high prices
Energy affordability has been greatly impacted over the past year with the wholesale prices feeding through and having a direct impact on consumers’ bills. EU support spending has been estimated at around €55 billion. Meanwhile, the current market structure and conditions can lead to more than €200 billion in profits in 2022. A temporary tax on companies’ windfall profits could be considered and used to support vulnerable consumers.
7 Speed up the replacement of gas boilers with heat pumps
Heat pumps are efficient and cost-effective alternatives to traditional gas boilers. Although doubling installation rates would cost an investment of €15 billion, this would save2 bcm of gas within the year. These are also attractive alternatives for industry scale alternatives despite longer timeframes for scaling up. The demand would shift from gas to electricity; however, the savings from reduced gas consumption would be much higher.
8 Accelerate energy efficiency improvements in buildings and industry
Energy efficiency is critical for a secure and clean energy transition. However, only 1% of EU buildings are renovated per year. A rapid increase of an additional 0.7% would save 1 bcm within the first year. Tripling smart heating controls through incentives would reduce gas demand by 200 mcm or €1 billion worth of gas.
9 Encourage a temporary thermostat adjustment by consumers
The average building in the EU is heated at 22 degrees Celsius. Adjusting the heating provides an instant saving for the customer and ease on the network for demand. If all buildings reduced their thermostats by just 1 degree Celsius would reduce gas demand by 10 bcm per year. Public awareness campaigns, company targets and regulations can be used to incentivise the heating change.
10 Step up efforts to diversify and decarbonise sources of power system flexibility
A key target for the EU is to scale up alternative forms of flexibility in the system as gas is the dominant source and has created a link between gas and electricity security. Governments must provide sustainability and cost-effective methods to manage the flexibility required and provide adequate support for business investment. Over time, strong development and deployment of innovative ways to find alternative solutions will weaken the gas and electricity security link.
These actions could result in EU imports of Russian gas falling by more than 50 billion cubic meters, 1/3 of current imports, within 12 months. The measures are in line with EU net-zero ambitions and IEAs Net Zero Emissions by 2050 Roadmap, where the EU removes Russian gas imports by 2030.
There are also additional ways to reduce or remove reliance on Russian gas with trade-offs. Most notably in the near term, the EU could increase their coal-fired plants or use alternative liquid fuels with existing plants. This could displace a large proportion of Russian gas but does not go in line with critical emission-reducing targets.