Rhein on Energy and Climate

For the second time in three years, the EU faces a cut of its gas supplies from Russia, which provides about 25 percent of its gas needs.
Millions of people in South-East Europe find themselves without proper heating after the Ukrainian transit gas pipeline has been shut off January 7th amid harsh winter temperatures.

The reasons for the cuts lie in unresolved disputes between Gazprom and the Ukrainian import/transit company about unpaid invoices and the prices to be paid by Ukraine for gas supply and by Russia for transit services. In addition, Russia may also want to signal to both Ukraine and EU its power to hurt and its unwillingness to make undue concessions. It can afford to do so, as Russia hopes to open the North-Stream pipeline before 2012, which will make it less dependent on Ukraine as a transit country.

Since the last cut three years ago, EU gas companies have helped improving the security of supply. Major gas companies hold – underground – stocks for several weeks. The European network of gas pipelines allows for more gas from Norway and Algeria, the two other supplier countries, to step in. The supply of liquid gas has increased thanks to higher handling capacity in major ports. But these are no more than make-shift solutions allowing Europeans to get over the winter.

The EU has to introduce more durable solutions, in the short-term and long term.

In the short term, it needs to complete its network of intra-EU gas pipelines, in view of allowing bigger volumes of gas to flow from Norway and German underground stocks to EU member states less well endowed with storage facilities. In addition, it will have to pass legislation for member states to hold minimum stocks of gas, comparable to the rules applying to oil since the first oil crisis in 1973, and to complete the single gas market by obliging companies to supply all customers regardless of their country o residence.
Both measures should be taken rapidly whatever the outcome of the ongoing gas dispute between Ukraine and Russia.

In the medium term, the EU should finally build the “southern” gas pipeline (NABUCCO) connecting it with the important gas reserves in the Caucasus region: Azerbaijan, Turkmenistan, Kazakhstan and even Iran, passing via Georgia and Turkey. The project has been under study for several years. Hopefully, the present supply crisis will lead to the creation of a pipeline consortium and the conclusion of supply agreements with several supplier countries. This is likely to succeed only with the EU assuming political leadership.

In the long term, the EU has to brace for dwindling gas reserves. On the basis of present consumption patterns and known reserves, gas will continue to flow well beyond the middle of the century. But assuming an increasing switch from oil to gas, humanity might face restrictions on gas supply well before.

The EU should therefore start thinking as of today on how to heat our homes towards the middle of the century. It will not be possible to switch overnight from gas to alternative methods of heating. This will take decades and be infinitely more difficult than the change from coal to oil and gas, which has taken half a century.

The two key components for heating our houses around 2050 should be lowering demand and heating with alternative energies.

• Modern buildings applying most advanced technologies of insulation and heating/cooling depend only marginally on fossil fuels for heating. It must therefore become progressively mandatory to equip every building with high quality thermal insulation in view of minimising heating.
But EU legislation is not enough. Governments must become serious with implementing the strict thermal standards for buildings – new ones and those to undergoing major retrofitting – that the EU has already adopted or is about to.

The EU Commission should press member states for a coordinated programme of strict implementation, and public financing. Optimal thermal insulation must become a key component of EU energy and climate policy.

• The remaining heating needs will have to be covered by power plants operated by wind, biomass and nuclear fuel and solar electricity imported from the Sahara.

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