How to keep the lights on next winter: ABBL Energy savings guidelines updated

For the past two consecutive years, the holiday seasons were tainted by fears, frustrations and protests, as well as sorrow due to the COVID-19 pandemic. As most public health precautions around the Coronavirus were lifted, a return to normalcy seemed finally within reach. Yet the last holiday season wasn’t without its own dark cloud. In 2022, war returned to Europe, and brought an important energy crisis with it. In France, Christmas time was marked by public debates on the possibility of power outages. The energy crisis fed discussions during family gatherings as much as they worried European policymakers through most of last year.

Yet this crisis started before the invasion of Ukraine in February 2022, though it was significantly aggravated as a result of it. Unfortunately, it is also here to stay. Decision-makers were quick to respond. By May, the European Union had already adopted the REPowerEU  plan, essentially a package of action plans and regulations to end the EU’s reliance on Russian fossil fuels as quickly as possible. EU Member States then demonstrated their solidarity by shaving off their own natural gas consumption by 20% on average between August and November, thereby exceeding the voluntary target of 15% set by the EU.

Should we worry about blackouts or disconnections from the electricity grid in Luxembourg?

Probably not. Imbalances between power generation and demand can generally be anticipated several days in advance. This allows European system operators to coordinate and manage the transmission and distribution of natural gas and electricity in a timely manner. If the EU had to cope with severe energy shortages, cutting off the power would be one of the very last measures system operators would resort to. But for situations calling for system operators to pull the plug, a pre-established electricity system defence plan arranges for industrial companies to be disconnected first. This alone would allow for significant electricity savings, as the industrial sector accounts for about half of Luxembourg’s total electricity consumption, making it very unlikely for most citizens and businesses, including ABBL member banks, to be left in the dark because of the crisis.

Does this mean our efforts to save energy are pointless?

Quite the opposite, in fact. The International Energy Agency (IEA) warns in a recent report that a total cut-off of Russian natural gas supplies would cause a supply-demand gap of 57 billion cubic metres in 2023, about 15% of what Europe consumes in a year. At the same time, the re-opening of China’s economy is expected to drive up its liquefied natural gas (LNG) consumption, which has been considerably lower in recent years due to the pandemic. In 2022, the EU turned to LNG markets as an alternative supply source to fill up its gas reserves ahead of the winter, mostly from Qatar, the United States, and several African countries like Nigeria and Algeria. An economic rebound in China would lead to tighter LNG markets, possibly leaving less of the liquefied gas available for the EU to purchase. About half of the gap assessed by the IEA may be covered by policy changes that are already in motion, such as those promoted by the REPowerEU package. However, more efforts would be needed to compensate for the remaining difference, including further behavioural changes.

Russia has not turned off the tap completely just yet, but EU imports of its gas keep plummeting. Currently, they represent about 14% of what they used to be two years ago at the same period. As the war in Ukraine drags on, it is more and more unlikely these imports will ever reach their previous levels again. Perhaps that is for the better. A recent report of the Shift Project, a France-based think tank, points out that EU gas production has been declining since the past decade, while half of Russia’s gas production has also reached a plateau. This suggests that current production of gas has already peaked, and underground gas deposits are slowly being depleted.

Never mind what the EU Taxonomy on environmentally sustainable economic activities says. As less and less natural gas will become available to purchase, its role as a transition energy between more polluting fossil fuels and clean sources will have to be cut short. Last year’s unprovoked invasion was the wake-up call to pick up the pace in rolling out renewables and in making our buildings more energy efficient. If the climate argument was not convincing enough, everyone will agree on the importance of safeguarding Europe’s energy security and independence. The 2022-23 winter was only the first stage of the energy crisis. The next heating seasons will truly put European resiliency to the test.