Energy chief warns Europe’s gas security ‘without margin or buffer’

Energy chief warns Europe’s gas security ‘without margin or buffer’
# 04 December 2023 13:04 (UTC +04:00)

Europe is still vulnerable to gas supply shocks despite significant progress in cutting its reliance on Russia, the boss of one of Germany’s largest energy companies has warned, APA reports citing Financial Review.

Markus Krebber, the chief executive of RWE, said Europe needed to boost its capacity to import gas to make sure it could cope with any unexpected outages on pipelines or import terminals.

The warning came despite Europe entering winter with gas stocks about 99 per cent full after a major effort to fill them up over the summer to cope with cuts to supplies from Russia.

Speaking to the Financial Times, Krebber said: “Continental Europe is in a much better position than last year. Gas storage is at maximum capacity and we have built some infrastructure.

“But we are not where we need to be because we shouldn’t have an energy supply system which is without any margin or buffer.

“So it also needs to be able to cope with the situation where you have an ‘N-1 event’— [for example], problems with one of your big suppliers because the pipeline fails, or a liquefied natural gas terminal fails. We are not there yet, so I think more import capacity is needed to replace the full [lost] Russian gas.”

Gas prices soared last year as Europe scrambled to replace cheaper Russian pipeline supplies, climbing above €300 per megawatt-hour in August, more than 10 times its normal level.

Prices have since fallen, trading at €43 per MWh on Friday, but markets remain jittery and sensitive to global events, with worker strikes at gas terminals in Australia leading to a surge in prices in September.

EU gas storage alone can meet about two to two-and-a-half months of peak winter consumption. But depleting it too much during the winter heating months could make it much harder to refill storage ahead of next winter.

RWE, which has its headquarters in Essen and is listed in Frankfurt, trades and stores gas and runs a fleet of gas-fired power plants, alongside a growing portfolio of wind, solar and battery plants. It plans to close its coal-fired power plants by 2030.

Last week, RWE said it planned to invest €55 billion globally between 2024 and 2030. Just over one-third of that will go towards offshore wind projects, in a boost for the technology that has struggled this year because of rising costs.

“We see an attractive overall investment environment,” said Mr Krebber. “The energy systems where we operate are underinvested. And I think it is without doubt that the investments have to go into clean energy.”

However, he warned that Germany would struggle to meet its goal of “ideally” phasing out coal-fired power plants by 2030 unless the government designed the electricity market to encourage the development of new hydrogen-ready gas-fired power plants.

These will be needed as part of the future energy system to step in on windless days, but may only run for short periods of time so are difficult for developers to justify unless they are compensated for the important back-up role they provide.

“In Germany we have a problem because we are relying for security of supply on nuclear and coal and both are exiting,” he said.

“So we need to build a full new fleet of flexible generation capacity – but the coalition has not yet presented a framework for that. If we don’t get it this year or next year, I think it’s going to be difficult to phase out coal by 2030.”

He stressed RWE’s own plans to exit coal were “firm”, so others would need to step in.

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