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Winter’s Approach Raises Stakes in European Energy Crisis

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Europe is as ready as it can be for a winter without Russian natural gas, but there is no margin for error.

Storage facilities of gas for heating and power generation are almost full, consumption is down and liquefied-natural gas tankers are steaming in. Europe in a stronger position than feared in recent months, after Moscow slashed gas deliveries in retaliation for Western sanctions over the invasion of Ukraine.

However, much could go wrong. One long cold spell or a busted pipeline could upset the region’s preparations, threatening emergency rationing, blackouts and a deeper economic recession. Officials and analysts say the willingness of consumers to cut back on gas use will be key for getting through the winter. A mild winter would help too.

“This will be a winter dominated by fear and uncertainty,”

Roberto Cingolani,

Italy’s minister for energy transition, said. “Barring catastrophes, such as extremely cold weather, if we keep consumption in check, we’ll get through the winter fine. We just have to hope nothing goes wrong.”

Europe is on the front line of the energy conflict running in tandem with the war in Ukraine. Since launching its full-scale invasion of Ukraine this year, Russia has throttled gas supplies in what European officials say is an economic attack designed to weaken their financial and military support for Kyiv. Europe, in turn, is targeting Russian energy revenues with a looming embargo on oil imports.

By buying as much LNG as possible from countries such as Norway and the U.S., Europe has filled storage sites to more than 90% of capacity. Russian gas arriving via pipeline accounts for 6% of the continent’s gas supply, according to S&P Global Commodity Insights, down from almost 30% before the war. Europe also imports a small amount of Russian LNG.

Floating LNG terminals are being moored off European coastlines, which will enable countries including Germany to unload and store more of the superchilled fuel. EU members have expanded cross-border connections, for instance between Poland and Slovakia, so that gas doesn’t get stuck in one country when it is needed in another.

Europeans are also cutting their energy use—a necessary step to prevent shortages later in winter, officials say. Where they can, companies in industries such as glass and papermaking have turned to coal and oil, or changed shift patterns to avoid using power when demand is at its peak. Some factories have closed. Power producers are burning more coal.

“Europe is probably as well prepared as it could be. The infrastructure is pretty much maxed out,” says Michael Bradshaw, professor of global energy at Warwick Business School. “We are up against the hard reality that there are physical limitations to the ability to replace Russian gas in the short term. That means that doubling down on the demand-reduction side of the equation is vital.”

A lot could go wrong. If freezing weather jacks up demand, stockpiles could drain and prices could shoot to levels that hammer companies and government finances. Low temperatures could also spark a contest between North America and Europe for LNG supplies. Still weather conditions, meanwhile, would slow down wind turbines, while a particularly cloudy winter would reduce solar-power generation.

Weather forecasts for this winter will firm up at the start of November. Early indications point to the potential for cold and still weather late this year, followed by milder conditions in early 2023, according to the European Union-funded Copernicus Climate Change Service.

“The start of winter could be really quite a tricky situation for all three of the major energy markets,” said Luke Boxall, director of consulting firm The Weather Perspective, referring to Europe, the U.S. and Asia.

Another risk is that gas flows could fall short because of technical malfunctions or politically motivated attacks. The suspected sabotage of the Nord Stream gas pipelines under the Baltic Sea and drones spotted near Norwegian gas platforms have highlighted the vulnerability of energy infrastructure.

Officials and analysts say Moscow might cut off the remaining gas that arrives via pipelines through Ukraine and Turkey. Central and Eastern European countries that still buy Russian pipeline gas, above all Moldova, which gets all its gas through Ukraine, are most vulnerable.

Other risks include the potential for long-lasting outages at French nuclear plants, which would increase the need for gas in power generation. The country’s nuclear fleet has been hobbled by maintenance issues, keeping many plants offline in recent weeks.

Keeping gas consumption low is a key part of Europe’s plan for the winter. The EU is targeting a 15% reduction in gas demand. In September, gas consumption was 11% below the five-year average, according to commodities-data firm ICIS.

One unknown is how consumers will respond to a combination of rocketing prices, entreaties to burn less gas and government-relief packages designed to reduce bills. One ominous sign: When cold weather struck Germany in September, demand leapt.

“We did not pass the first test,” said Gergely Molnar, an analyst at the International Energy Agency. Behavioral changes are likely to take time, he added.

Nighttime lights on monuments and in luxury shops in Paris are going dark in an effort to preserve energy. The move comes after Russia cut the flow of natural gas to Europe. Photo: Laurence Geai for The Wall Street Journal

Some countries have introduced mandatory energy-saving measures. France and Germany have restricted the use of lights in shops and public buildings at night. In Italy, France and Spain, the temperature of most residential and office buildings is now capped at 19 degrees Celsius, equivalent to 66 degrees Fahrenheit. In Italy, central heating in public and private buildings will be switched on a week later than in past years, and will remain on for an hour less a day.

Officials in some countries say supply isn’t the main problem. Italy moved quickly this year to replace most Russian gas, drawing more from North African pipelines and filling up LNG terminals. With storage facilities over 93% full, Italy still has enough gas to export to other European countries.

“The real problem isn’t shortage but pricing,” said Mr. Cingolani. “Citizens may be unable to pay their bills and businesses risk closing down.”

The EU’s political divisions have hampered parts of its response to the crisis. Italy is one of several countries pushing for a cap on gas prices, pitting it against Germany and other deeper-pocketed members that say a price ceiling could divert gas elsewhere. Leaders meet to decide on the proposals this week. Russia has said it would halt gas flows if a price cap were imposed.

Replacing Russian gas has come at great expense. Natural gas trades at about 140 euros, equivalent to $136, a megawatt-hour, down more than half since prices peaked in late August, but more than three times the level of a year ago.

If supplies run low, governments have readied plans to manage blackouts and ration energy to shield the most vulnerable. In Germany, the government would declare an emergency, handing responsibility for distributing and allocating gas to the national energy regulator. The EU could force member states to cut consumption if conditions worsen.

The U.K.’s electricity-grid operator said there could be rolling blackouts if there is insufficient gas in the country and electricity imports from the continent are severed. National Grid ESO said it would pay industrial and commercial power users to lower demand.

How Europe fares this winter will help determine the severity of the gas crunch looming in 12 months’ time. If storage levels plunge, analysts say refilling Europe’s gas reserves in 2023 with little or no Russian gas will be extremely difficult.

“We have to prepare for next winter, which will be even more difficult,” said French President

Emmanuel Macron

this month.

Write to Joe Wallace at [email protected] and Margherita Stancati at [email protected]

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