But with prices rising amid competition for scarce supplies and industrial users already being asked to reduce demand, further market disruption through government intervention remains a risk. The leaders appealed for unity. “A supply crisis in one member state will lead to an economic crisis in another,” Robert Habeck, Germany’s economy minister, said last month. “We are both obligated here and we rely on solidarity.” After Russia cut off gas supplies through Ukraine in 2006 and 2009, the EU stepped up measures requiring member states to help each other with gas supplies. Bilateral solidarity agreements have since been signed between Germany and Denmark and between Finland and Estonia. In principle, the pipes between Member States should be set up so that they can quickly change flow directions. In practice, several exceptions apply. Although the UK is less exposed to Russian gas disruptions – typically importing less than 4% directly – it suffers negative impacts from Europe. Meanwhile, its exit from the EU means it is no longer protected by the bloc’s solidarity rules. While Britain usually exports gas to the EU in the summer, it imports both gas and electricity in the colder months, effectively using up storage capacity in Europe. More electricity cables connecting the UK to the continent have also been built in recent years, balancing wind and solar power supplies. Russia’s invasion of Ukraine and its threat to natural gas supplies has set off a scramble to replenish European gas storage sites ahead of this winter. High prices have attracted additional imports from around the world. The U.S. sent about 75% of its natural gas shipments to Europe as of mid-April, compared with about 35% in the same period last year. The pace has since picked up, according to Caspian Conran, energy economist at Baringa Partners. The UK has also served as a bridge to Europe, converting LNG shipments back to gaseous form at terminals in South Wales and Kent and funneling it to Europe. Overall, EU natural gas storage stocks are almost 60% full, slightly higher than the average for this season. But recent cuts in Russian supply have slowed things down, raising the risk that the EU will miss its target of 80% stockpiles being paid by October. This would weaken Europe’s hand in trying to stop Vladimir Putin’s war and increase his leverage over Europe. “It was going really well, and indeed Putin stepped in to make our lives more difficult,” says Tagliapietra. Difficulties in supplying natural gas, a key fuel for power plants, come as electricity markets are already under pressure. The output of France’s nuclear plants, owned by state-owned EDF, is expected to fall by around 20% this year due to outages in the aging fleet. Hydropower capacity in Norway, Sweden and other markets has also declined due to warmer weather. “There is definitely risk,” says Dan Eager, European energy market specialist at Wood Mackenzie. German electricity prices hit a record high last week as markets priced in threats to Russian gas. In the UK, National Grid’s contingency plans include the possibility of cutting gas pipelines to Europe via Belgium and the Netherlands, the Financial Times reported. Bart Jan Hoevers, chairman of the European Network of Gas Transmission System Operators [Entsog]urged the UK to “reconsider” the prospect, noting that the pipelines were “good for the UK in the winter”. Britain also relies heavily on Norway, which supplied around 60% of its natural gas last year, overtaking domestic drilling as the biggest supplier for the first time. Analysts say there is a risk the EU could divert some gas supplies from Norway, which is inside the single market, to the bloc in an emergency under solidarity rules. The same rules could also be used to block the UK’s access to EU gas storage. However, spare pipeline capacity between Norway and the EU is limited, with many gas rigs on the Norwegian side of the North Sea supplying Britain directly. The Brexit deal also provides some cover, obliging the EU and the UK to work together on security of energy supply and “only activate non-market-based measures as a last resort”. Despite the risks, it is hoped that mutual interest will be enough to keep the buying flowing. “The analysis and modeling we’ve done shows that the best overall outcome is collaboration,” says Caspian Conran, at Baringa. Eager, at Wood Mackenzie, agrees. “Sometimes you benefit from connections [connecting electricity markets] and sometimes you feel worse. But overall, it’s an opportunity to spread the pain.” A UK Government spokesman said: “We remain absolutely confident about the security of our winter supply, with the UK having one of the most reliable and diverse energy systems in the world.
