This week’s report by the World Meteorological Organisation makes for alarming reading. The report warns there is a 66% likelihood of exceeding the 1.5°C threshold in at least one year between 2023 and 2027 and notes that such a rapid change in global temperatures will take the world into ‘uncharted territory’, with an anticipated El Nino weather system likely to push already high temperatures even higher this year. Since we have already seen the impact of a 1.1°C rise, the conclusions of the WMO report are deeply uncomfortable.
This blog looks at some of the data which give context to the Report’s conclusions.
Russia is the world’s largest natural gas exporter; the second-largest exporter of crude oil; and the third-largest producer of crude oil. The Russian invasion of Ukraine spooked global gas markets and pushed prices to record highs – the TTF European gas price peaked at a record €343/MWh in August (equivalent in oil terms to more than $500 a barrel). But as world gas markets have adjusted, the price has fallen – €75 per megawatt hour at the end of December and under €50/MWh by the end of April 2023.
Like global markets, the EU has demonstrated remarkable agility in its response to Russia’s invasion. In 2020, Russia supplied nearly 43% of all EU energy imports. The EU set itself the target of reducing Russian gas imports to 55 bcm/year by March 2023 (down from 158 bcm in 2021). At the time, this seemed ambitious, but in the event, the EU easily exceeded that target and, by October 2022, the EU’s Russian gas imports had fallen to 38 bcm (12 % of the EU’s energy consumption).
Last spring, the EU required that Member States’ winter storage be 90% full by the end of autumn. Again, at the time, that seemed a tough ask in the face of global constraints on alternative supplies. But in any event, the EU easily exceed the target, reaching 96% by the beginning of November 2022.
A combination of factors means the outlook for the EU is more positive than expected:
- A mild winter meant the EU emerged with record high gas inventories (EU storage was 56% full);
- The success of demand-side efficiencies (the Commission set a cross-EU efficiency target of 15% reduction in demand: the EU reduced demand by an average 19%);
- Global gas markets have been nimble in responding to EU demand for non-Russian gas. New and alternative supplies flowed in from Norway, Qatar, the US and (importantly) Algeria through existing, but under-used pipelines and new LNG capacity;
- The EU has built new LNG infrastructure at record speed – with Germany opening its first LNG jetty in November 2022.