War, winter and the energy crisis in Europe
The article has been authored by Ananya Raj Kakoti and Gunwant Singh, scholars of international relation, Jawaharlal Nehru University.
With the Russia-Ukraine war continuing for the last 10 months, without any serious attempts at de-escalation, it seems that the conflict is bound to threaten the delicate balance of the world order which was already dwindling.
The global community is concerned with the conflict escalating beyond control. Various global leaders are extending their support to mediate the process of de-escalation as the conflict is taking a more violent turn. India, for instance, has officially stated that it is deeply concerned with the ongoing war and is ready to support any kind of de-escalation efforts.
The ongoing war has pushed Europe into a severe energy crisis. Europe, which was already reeling under stress post-pandemic like the rest of the world, became the arena of this conflict making the region more vulnerable. With Russia weaponising energy in response to Europe supporting Ukraine, energy security has become a major cause of concern for the continent.
The energy crisis affected the industrial sector the most as the factories were the first to be targeted by the governments to lower energy use to save energy for the winter. The crisis has caused electricity bills to soar due to a lack of adequate supply, affecting citizens. Inflation of prices of basic goods and services is resulting in demand-side shortages and is also causing the economy to slow down. Increased input cost due to high inflation is bound to make the European industry uncompetitive globally which will ultimately result in causing the global supply chains to move away from Europe to other markets.
However, despite Russia halting its gas supply to Europe, the region has been able to secure its energy needs for this winter by taking various steps through legislation such as incentivising citizens to lower their energy bills, using public transport, and being more efficient and mindful of usage. Even before the complete halting of the Russian gas supply, the European Union was able to store enough with 90% of its gas storage facilities filled, which was enough to avoid any major energy crisis this winter.
But, what is to be noted is that the winter of 2022 might be much more manageable compared to what is coming in 2023. This is because whatever production will be available in the first half of 2023 will be considerably less than what was available in the first half of 2022.
Europe faced this winter with 90% of its gas storage according to the International Energy Agency, which will not be the case the next winter, because a significant proportion was the contribution of Russian gas, which will not be available any time soon, and other gas sources as China was importing less due to its economic slowdown, which might not be the case next year.
The prices of gas have declined from their peak in recent months which made it slightly easier for Europe during this time of crisis, but this situation might reverse with the global economy recovering, especially with China gearing up its economic activities, there will be a global increase in demand for energy. This will force Europe to compete for energy resulting in a bidding war thus increasing the prices higher
Although Europe still has time till the next winter arrives to look for alternatives, the solutions available are either time taking or expensive. For instance, it takes approximately 2-5 years to develop LNG terminals, which are required for gas imports. Another option, such as building direct pipelines will also take 1.5-4 years. Europe is also looking at renting floating LNG terminals, but this is not a long-term alternative as the cost involved is enormous. It is also very difficult to find investors who are willing to pour their money to develop the energy infrastructure which will be redundant in the coming decades as in the face of the climate crisis the world is moving towards renewable sources of energy.
The prospect of developing renewable energy is also on the cards, however, it must be noted that both wind and solar energy, which although relatively cheap and easier to develop cannot be used for heating on a large scale because most households are only equipped with gas-powered heating systems, and it will take more than a year to completely revamp an entire country's heating system
It is highly unlikely that Russia will reinstate its energy supply to Europe anytime soon. The Russian government under President Vladimir Putin will continue to punish Europe for backing Ukraine. The Russian action of sabotaging their gas pipeline Nord Stream 1 and 2, shows that they are not even considering exporting fuel to Europe in the near future, instead, they will stretch this crisis long enough to cause very high inflation in Europe, thereby igniting popular unrest, strong enough to even topple governments.
It will be difficult for Europe to find a sustainable replacement for Russian gas imports. Although the United States has stepped up its LNG export in recent times, it is highly unlikely that it will be able to compensate for the immense demand as it has already maxed out and even the required infrastructure is inadequate to meet the sudden surge in demands amidst the western sanctions on Russia.
Although due to several factors as mentioned above, Europe will be able to sail through this winter comfortably without any major energy crisis. However, the crisis is not just limited to Europe, in 2023 the surge in global demand for energy can cause a global energy crisis. Forcing the countries to compete to secure their needs, and in this race, it is often the poorer and under-developed countries which will face the brunt, as already seen in cash-strapped countries like Ecuador, Sri Lanka, Pakistan and Haiti which are facing fuel shortages, energy inflation, triggering unrests. Ultimately, the real test that awaits Europe is the next winter when its energy preparedness will be challenged.
The article has been authored by Ananya Raj Kakoti and Gunwant Singh, scholars of international relation, Jawaharlal Nehru University.