As the Russian invasion of Ukraine highlighted the need for the European Union to strengthen its energy autonomy, the International Energy Agency (IEA) presented a 10-point plan that would allow the EU to reduce its fossil gas imports from Russia by more than a third in one year, on Thursday 3 March at an online press conference attended by French Minister for Environmental Transition Barbara Pompili and EU Energy Commissioner Kadri Simson.
One of the proposed actions is to replace about 30 bcm of gas imported from Russia with supplies from other suppliers.
The IEA estimates that production within the EU and non-Russian pipeline imports (including from Azerbaijan and Norway) could be increased by up to 10 bcm.
For liquefied natural gas (LNG), the analysis indicates that the EU could theoretically increase its imports in the short term by some 60 bcm, compared to average levels in 2021.
However, such a level would lead to very high prices, as global LNG supply is limited and “all importers are fishing in the same pool for supply”.
The IEA therefore recommends instead an increase of 20 bcm in EU LNG imports over the next year.
Increase stocks
Another lever the EU has is its gas reserves.
In this respect, the Agency recommends introducing minimum gas storage obligations to enhance market resilience - a possibility examined by the European Commission (see EUROPE 12901/13) - “although higher injection requirements (...) will add to gas demand and prop up gas prices”.
According to its analysis, the EU should fill its stocks to at least 90% of their total capacity by 1 October, which would imply an injection of gas in 2022 about 18 bcm higher than in 2021.
Accelerating the deployment of renewables and heat pumps
The IEA also recommends accelerating the addition of wind and solar photovoltaic capacity by facilitating the permitting of these projects, which would allow an additional 20 TWh of renewable electricity to be generated over the next year.
In parallel, a short-term subsidy programme covering 20% of the costs of installing solar photovoltaic panels on the roofs of buildings would allow a gain of up to 15 TWh of renewable electricity, according to the Agency.
This additional 35 TWh of production over the next year would, together with the already planned increase in renewables, reduce the Union’s gas consumption by 6 bcm.
Furthermore, the Agency estimates that doubling the current installation rate of heat pumps in the EU would lead to a reduction in gas consumption for heating of an additional 2 bcm in one year, at an investment of €15 billion.
Maximising the use of existing infrastructure
One of the IEA’s other proposals is to maximise production from existing sources of bioenergy and nuclear power, which would generate an additional 70 TWh and reduce gas consumption for electricity by 13 bcm.
Increasing energy efficiency and reducing heating
On energy efficiency, the Agency proposes to rapidly increase the annual rate of renovation of the EU’s building stock from 1 to 1.7%, targeting the least energy efficient homes and non-residential buildings.
This action, together with others, such as tripling the current rate of installation of smart thermostats, would reduce gas consumption for heating by almost an additional 2 bcm in one year.
In addition, the IEA estimates that lowering heating by just 1°C could reduce gas demand by some 10 bcm per year (the average temperature for heating buildings in the EU is currently above 22°C).
A return to coal?
Without including this option in its plan because of the increase in EU greenhouse gas emissions that this would entail, the IEA also assessed the impact of a temporary switch from gas to coal or oil for power generation.
It said such a measure could reduce gas demand by around 28 bcm before there is an overall increase in energy-related emissions in the EU.
Coupled with the 10-point action plan, this would result in a total annual reduction in EU gas imports from Russia of over 80 bcm, or more than half of the approximately 155 bcm imported (in 2021) from Russia, “while still resulting in a modest decline in overall emissions”.
Soaring gas prices
The IEA publication comes as European energy prices, particularly gas prices, rise again following the Russian invasion of Ukraine.
Already particularly high in recent months, mainly due to the strong demand for gas as a result of the economic recovery, gas prices in Europe have risen above €170/MWh.
This increase, in addition to putting pressure on the EU, benefits Russia, which currently supplies around 40% of the EU’s gas and receives hundreds of millions of euros every day in exchange for its fossil fuel supplies.
According to the Bruegel think tank, the EU paid €660 million to Russia on 3 March 2022 for its fossil gas imports and €350 million for its oil imports.
On the same day, Kadri Simson assured that “the European Commission stands ready to propose extraordinary measures in case of an escalation of prices that threatens our social and economic resilience”, during a debate with MEPs from the Parliament’s Committee on Industry, Research and Energy (ITRE).
As the European Commission is expected to present guidelines next week on how to reduce the EU’s energy dependence and combat rising energy prices, the IEA’s plan proposes to consider temporary tax measures to increase windfall profit rates for electricity companies. The resulting tax revenues would then be redistributed to electricity consumers to partially offset rising energy bills.
Ineffective sanctions?
During the debate in the ITRE Committee, several MEPs asked the European Commission to strengthen sanctions on Russia in the field of energy.
The coordinator of the Greens/EFA group, Ville Niinistö (Finland), called for a maximum limit on energy purchases from Russia, in order to make the sanctions already in place more effective, notably the exclusion of seven Russian banks from the Swift system (see EUROPE 12902/1).
In an appeal to the EU, 25 European NGOs called for an embargo on all Russian oil and gas imports “in order to stop financing Putin’s war on Ukraine”.
This demand was also expressed by the Lithuanian Foreign Minister, Gabrielius Landsbergis, who called for “daring to refuse energy imports from Russia to Europe”.
Defending the European Commission’s actions, Mrs Simson said there will be a depletion of Russian revenues from refined oil “over time” as a result of the EU’s decision to ban the export to Russia of equipment and technology needed to upgrade oil refineries (see EUROPE 12899/10).
See the IEA plan: https://aeur.eu/f/lr
See the NGO appeal: https://aeur.eu/f/ll (Original version in French by Damien Genicot)