Nord Stream 2

Energy crisis entering acute winter period, EU disjointed

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The energy crisis’ greatest challenges lie ahead with energy exchange futures indicating a fiery period that will last at least three months, until March, followed by a very slow de-escalation in prices.

The problem is not just the exorbitant price levels experienced over the past few months, but the even higher prices anticipated over the next few months. January gas futures are approximately 50 percent over November levels.

A series of support measures announced for consumers in Greece by Prime Minister Kyriakos Mitsotakis over the weekend would normally ease some of the strain, but, given the upward trajectory in prices, this support will soon be cancelled out.

In the absence of a uniform EU strategy to tackle the crisis, member states are being called upon to find solutions for themselves. European leaders failed to reach consensus at a summit meeting late last week.

EU gas reserves are at 62 percent capacity at the start of winter. The European Commission’s ongoing dispute with Russia over certification of the Nord Steam 2 gas pipeline, running direct to German via the North Sea, as well as the threat of a Russian invasion of Ukraine, are key geopolitical factors behind Europe’s energy crisis. Russia covers 60 percent of Europe’s natural gas needs.

 

Electricity prices could be driven further 13% higher in December

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Latest complications in the licensing procedure for the Nord Stream 2 gas pipeline running directly from Russia to Germany through the North Sea, as well as the EU’s deteriorated ties ties with Belarus, key transit territory for Russian gas entering the EU via Poland, appear set to push electricity price levels even higher in coming weeks.

Wholesale electricity in Greece averaged a price of 221 euros per MWh in the first half of November, up from 198 euros per MWh for October, overall.

If current conditions do not improve, suppliers estimate that retail electricity prices will reach nearly 300 euros per MWh in December, up 13 percent from the current November level of 265 euros per MWh.

Market players are being pushed to the edge. Some suppliers are waging survival battles, others are seeking to appease unsettled customers through campaigns offering energy-efficiency tips, while others are seeing their market strategies overrun by the continual flow of unfavorable developments.

Greek government officials are also jittery, realizing that household electricity subsidies of 39 euros per month offered for November and December for the first 300 KWh of consumption will not be enough.

 

 

Nord Steam 2 dispute sparks further gas price rises in Europe

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A new wave of electricity and natural gas price increases has been triggered by the German energy regulator Bundesnetzagentur’s decision to suspend company certification procedures for Nord Stream 2 AG, operator of the Nord Stream 2 gas pipeline running directly from Russia to Germany through the North Sea but not yet launched.

European markets have interpreted the regulator’s decision as a sign of further deterioration in the ties between Moscow and the European Commission over this new and controversial pipeline project, running parallel to the existing Nord Stream 1.

It has been fiercely opposed by some European countries standing to lose considerable amounts in gas transmission revenues. The project’s delayed launch has prompted a gas supply cutback from Russia’s Gazprom, resulting in higher prices throughout Europe as temperatures drop.

In response to the German energy regulator’s certification suspension of the Nord Stream 2 AG company, December contract prices at the Dutch TTF hub rose sharply to 89.5 euros per MWh yesterday, up 12 percent from a level of 79.9 euros per MWh a day earlier.

The German regulator’s decision also impacted the Greek energy exchange, its day-ahead market average for today rising 6.8 percent to an exorbitant 254.33 euros per MWh, the highest in Europe, where inconceivable gas prices are widespread.

Romania was ranked second with a gas price of 248.6 euros per MWh, followed by Bulgaria (€248.09), Italy (€244.99) and Hungary (€244.03). Prices were considerably lower in Germany, the Netherlands, Spain and Portugal.

EU leaders hesitate to take energy crisis action

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EU leaders, disunited by conflicting interests, have hesitated to take any decisive energy crisis action at a summit of the 27 member states in Brussels, whose agenda includes the energy crisis. The leaders have opted to defer the issue until October 26, when EU energy ministers are scheduled to meet.

The EU’s member states of the south, short on storage infrastructure for green energy, are pressing for solutions to the energy crisis, while Europe’s north, better equipped to weather the storm, sees no real need for urgent action, despite the exorbitant energy price levels.

Industrial producers in the south, consequently disadvantaged and under greater pressure, are calling for intervention.

Russian president Vladimir Putin, pressuring for EU approval of the new Nord Stream 2 pipeline running to Germany via the North Sea, yesterday informed that gas supply to Europe could only be increased via this new pipeline route. Russia’s reduced supply is a key factor of the current energy crisis.

In Greece, the only possible solution for the short term would entail reducing fuel taxes, an option the government may adopt to soften the effects of the energy crisis, which, if left unattended, will lead to political repercussions.

As for longer term solutions, EU member states could agree, at the upcoming meeting of energy ministers, on the prospect of placing joint natural gas orders as protection against future crises. This would send a signal to markets that Europe possesses the political will to stand up to crisis situations, which could prompt some degree of price de-escalation.

Ministry official to hold strategic energy talks in Washington

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Strategic opportunities emerging as a result of the Greek energy market’s ongoing transformation as well as the geopolitical significance of certain major projects, such as the Southern Gas Corridor, intended to diversify Europe’s gas sources and reduce the continent’s dependency on Russian gas, will be discussed by the energy ministry’s secretary-general Alexandra Sdoukou with American officials during her visit to Washington this week.

The Greek official, travelling to Washington today, plans to hold discussions covering the entire range of energy policy issues, from new RES technologies, hydrogen, the energy mix, as well as investments of geopolitical nature, including Balkan gas interconnections, the Alexandroupoli FSRU project in northeastern Greece, the underground gas storage (UGS) facility at the almost depleted gas field of South Kavala in the Aegean Sea’s north, as well as Greece’s role as a regional hub for energy source and route diversification.

Inevitably, the talks will also cover the current energy crisis troubling the world, especially Europe.

US Secretary of Energy Jennifer Granholm has directly criticized Moscow for deliberately subduing its gas supply to Europe in order to manipulate the energy market and pressure Brussels for approval of Nord Stream 2, an underwater gas pipeline directly connecting Russia with Germany through the North Sea.

Certain countries that stand to lose significant gas transit revenues oppose this new pipeline. It has also generated years of conflict between Berlin and Washington. Nord Steam 2 has almost been completed and is now undergoing trial runs.

Europe is heavily dependent on Russian gas, while some countries in central and eastern Europe, including the Balkans, are almost entirely dependent. The US is seeking the greatest possible share for supply of American LNG.

More energy price hikes feared as Europe searches for solution

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Another round of record-breaking energy price increases throughout the continent could be looming. Europe is primarily placing its hopes on an increase of Russian gas supply, which would greatly ease the ongoing price ascent, but, for the time being, energy prices are continuing to rise at unfathomable rates.

Under the currently alarming conditions, shaped by an unfavorable combination of international market trends, including main supplier Russia’s subdued gas supply to Europe, Dutch TTF hub futures for November contracts are set to once again reach levels of 160 euros per MWh. This would skyrocket wholesale electricity prices to 350 euros per MWh, a 70 percent increase on the current record level of 204 euros per MWh and 300 percent higher than a year ago.

Russia has cut back on its gas supply to Europe as a means of pressuring the EU for approval of its Nord Stream 2 gas pipeline, running through the North Sea to Germany. The project is opposed by some EU members as they would lose significant sums in transit revenues.

The EU has been left without a Plan B and greatly dependent on Russian gas supply for a number of reasons, including a gas reserve drop in many countries due to the summer’s prolonged heatwave, as well as increased LNG demand in Asia.

In Greece, roughly 50 percent of the country’s electricity generation is produced by natural gas-fired power stations, meaning gas price levels directly impact electricity prices.

 

Factors pushing up gas prices, economic activity threatened

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A combination of market conditions and structural matters has unbalanced natural gas markets throughout Europe, driving prices higher, which is severely impacting electricity prices.

Recovering economies following pandemic-induced flatness, combined with a policy applied by Russia, Europe’s main supplier, to significantly restrict gas outflow to the continent, has created energy crisis conditions.

In mid-August, Russian gas outflow through the Yamal pipeline, running across Russia, Belarus, Poland and Germany, has not exceeded 20 million cubic meters per day, following levels of as much as 49 million cubic meters per day just weeks earlier, still well under usual levels averaging 81 million cubic meters per day.

According to analysts, this reduction has been attributed to Gazprom’s preference to supply Russian gas through the Nord Stream 2 pipeline, bypassing Ukraine and Poland.

LNG supply to Europe has also fallen in recent times as Asian countries appear more willing to pay higher prices.

In addition, prices are also being impacted by EU climate-change policies designed to limit the use of fossil fuels, lignite as well carbon emissions, all of which has greatly increased demand for natural gas, not only in Europe, but Asia and the US, too, pushing up prices to levels of 48 euros per MWh in recent days.

Natural gas shortages have driven wholesale electricity prices higher. In Germany, for example, wholesale electricity prices have risen by 60 percent over the past year. In Spain, the government has reduced energy consumption taxes in an attempt to subdue the wave of price rises.

The situation in the energy market is extremely worrying as it affects economic activity and is placing millions of households at risk of finding themselves in energy poverty.