Europe’s largest Russian gas purchasers were scrambling to find other fuel supplies and even considering burning additional coal to compensate for lower gas flows from Russia on Monday, which threatened an energy crisis in winter if reserves were not replenished.
Eni of Italy said it had been warned by Russia’s Gazprom that it will only get a portion of its request for gas supplies on Monday, bringing the country closer to declaring a state of alert and initiating gas-saving measures.
Germany, which has also experienced weaker Russian gas flows, announced its latest proposal to expand gas storage levels on Sunday, as well as the possibility of restarting coal-fired power facilities that it had planned to phase out.
“That is painful, but it is a sheer necessity in this situation to reduce gas consumption,” said Economy Minister Robert Habeck, a member of the Green party that has pushed for a faster exit from coal, which produces more greenhouse gases.
“But if we don’t do it, then we run the risk that the storage facilities will not be full enough at the end of the year towards the winter season. And then we are blackmailable on a political level,” he said.
After the West implemented sanctions in reaction to Moscow’s invasion of Ukraine, a gas transit route to Europe as well as a major wheat exporter, Russia reiterated on Monday that Europe was solely to blame for the gas issue.
The energy issue adds to the woes of European policymakers, who are already concerned about rising inflation in home electricity bills and food costs.
On Monday, the benchmark Dutch front-month gas contract was trading at over 127 euros per megawatt hour, up more than 50 percent since the beginning of 2022.
Markus Krebber, CEO of RWE, Germany’s largest power provider, warned power prices could take three to five years to fall back to lower levels, restricting household spending and dragging on the economy.
Russian gas shipments to Germany via the Nord Stream 1 pipeline, the major route supplying Europe’s largest economy, were still running at approximately 40 per cent capacity on Monday, despite having increased since the beginning of last week.
Both Eni and the German utility Uniper stated that they were receiving less Russian gas than they had bargained for.
According to Germany’s economy ministry, bringing back coal-fired power plants may add up to 10 gigatonnes of capacity if gas supply becomes crucial. On July 8, the upper house of parliament will hear a bill connected to the relocation.
Along with a return to coal, Germany will implement an auction system in the coming weeks to incentivize industry to consume less gas, as well as financial assistance for Germany’s gas market operator, via state lender KfW, to fill gas storage facilities faster.
Austria’s government agreed with utility Verbund on Sunday to convert a reserve gas-fired power plant to produce electricity with coal in the event of a gas supply crisis from Russia.
Germany and Italy are among the most reliant on Russian gas, but other European nations have also experienced gas supply difficulties, and consumption has grown abnormally high for the time of year following a heatwave that increased use of air conditioning.
An emailed request for comment on Gazprom’s shipments to Italy was not immediately returned.
Dmitry Peskov, a Kremlin spokesperson, claimed on Thursday that the supply cuts were not planned and were due to maintenance concerns. This explanation, according to Italian Prime Minister Mario Draghi, is a falsehood.
Italy, whose gas technical committee meets on Tuesday, has suggested it may declare a state of emergency this week if Russia continues to restrict deliveries.
The move would result in efforts to cut usage, such as limiting gas for certain industrial customers, increasing production at coal power plants, and requesting more gas imports from other suppliers under existing contracts.
(Adapted from Reuters.com)
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