EU may face energy market split

Bloomberg
EU may face energy market split

The European Union is seeking ways to reduce natural-gas demand to avoid splintering energy markets as dwindling supplies from Russia test the bloc’s unity, Bloomberg writes. An increase in gas supply disruptions following the EU’s sanctions on Russia is prompting member countries to step up winter preparations as they seek to refill depleted storage sites. At a meeting of ministers on Monday in Luxembourg, EU energy commissioner Kadri Simson urged more energy savings and efficiency to reduce the threat of gas rationing. German Economy Minister Robert Habeck warned of a possible gas shortage in the country and appealed to European solidarity.

The biggest challenge for the EU is to ensure sufficient reserves to get through peak heating and power demand in the winter. They also act as a buffer that allows gas to move across borders within the EU to ensure all member nations have enough supply. Countries can help each other out if the crisis escalates.

 “The key risk looming ahead for Europe is the fragmentation of its energy market in case of a full interruption of Russian flows -- that is, a situation where countries react by closing down their energy market borders,” said Simone Tagliapietra, a researcher at Bruegel, a Brussels think tank.  

At mercy of foreign supply

Habeck said he can’t be sure that Russia will resume shipments after the Nord Stream work has been completed. Greek Prime Minister Kyriakos Mitsotakis called for a united approach, saying EU discussions have already begun. “Not every country can move on its own,” he said Friday after an EU summit, adding that “in interconnected markets we have an obligation to work together and coordinate.”

Reduced Russian flows are forcing EU members to revive coal power plants and accelerate the search for alternative suppliers. The concern is that Europe will fail to reach its target of 80% storage filling by Nov. 1 if Nord Stream operates at its limited capacity or halts completely, according to Wood Mackenzie Ltd. In the worst case, the region risks running out of gas stockpiles in the middle of peak winter demand.

“In order to meet the refilling target, greater intervention would be required,” Tagliapietra said. “In such a scenario emergency plans may be triggered in some EU countries to further reduce demand and allocate available gas between countries.”

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