The Factors on Energy Shortage in Europe

The energy shortage in Europe is a complex problem with many causes. These include low inventories, dependence on Russian gas imports, and challenges scaling up renewable deployment. A coherent energy policy is needed to solve this problem. There are two major options for Europe to address this crisis. One is to accept the high costs of energy and let the market do its thing. The alternative, however, is to provide some sort of relief to struggling households.

 

Low inventory levels

Low inventory levels are one of the main factors contributing to the current energy crisis in Europe. Historically low storage levels are the result of drawdowns of gas inventories to meet the demands for power and air conditioning. This is exacerbated by a lack of new inventories to compensate for the loss of old ones. As of May 2021, the EU had about 30 billion cubic metres of gas in inventory – much less than the 90 billion held in 2020. As of December, EU storage inventories were at just 55% capacity. Increasing demand is also contributing to the current crisis.

 

This situation has created a perfect storm of problems. Low natural gas inventory levels in Europe have triggered an increase in natural gas prices. Other factors have contributed to the shortage, including lackluster investor interest and labor shortages. Meanwhile, Europe’s natural gas production remains below pre-crisis levels. This could cause higher food and energy prices globally, slowing the economic recovery.

 

Dependence on Russian gas imports

The EU has been increasing its efforts to diversify its energy supply, including by reaching out to alternative gas exporters such as the US, Norway, and Qatar. Russia is Europe’s largest supplier of natural gas, but the United Kingdom, Norway, and the Netherlands are also big producers.

 

There is no single way to predict Russia’s future gas production. It depends on a variety of factors, including internal policies, increasing domestic consumption, and conscious efforts to limit production. The primary motivation of Russian gas producers is profit. However, with the recent deterioration in the treatment of foreign investors, the Russian government has been forced to restructure its energy sector.

 

Challenges in scaling up renewable deployment

Europe has set ambitious goals to increase renewable energy production. Its new energy policy aims to scale up renewable deployment and remove roadblocks to its implementation. The plan includes energy efficiency measures, fast-tracked deployment of solar energy and the production of 35 billion cubic meters of biogas per year by 2030. But the policy is not without its own challenges.

 

First, the continent must overcome the cost of delivering renewable energy to hard-to-reach sectors. Renewable energy requires extensive system infrastructure. It also requires more minerals than coal and requires recycling infrastructure. In addition, renewable energy disrupts fossil fuel supply chains, threatening both solar and fossil fuel jobs.

 

Lack of a coherent energy policy

Lack of a coherent energy policy in Europe has many implications. It may cause further economic and strategic challenges for the European Union. This incoherent energy policy exacerbates current problems. European countries need to diversify their energy supplies away from Russian natural gas. European institutions should promote an energy policy that is forward-looking and global-community-minded, rather than being mired in the nation-state parochialism that plagues major powers. It should address global climate change, and the gradual weaning away from hydrocarbons to renewable energy sources.