Europe Set Itself Up for This Energy Crisis

from Wired

VACATIONS IN MANY German cities are a little different this summer. Visitors to the local swimming pools in the northwestern city of Hanover have to take cold showers after their dip. A trip to Berlin will look a little less wow-worthy as the city switches off lights that illuminate 200 of its major tourist landmarks at night.

On June 23, the country’s economics and climate ministry declared a major gas alert. “The situation is tense and a further worsening of the situation cannot be ruled out,” they said in a statement. Nord Stream 1, a major pipeline delivering gas into Germany and on to the rest of Europe, is due to undergo unexpected maintenance at the end of August. Skeptics say the decision, taken by Russia, which sits at one end of the massive pipeline, is a deliberate decision designed to tighten the screws on Europe for its support of Ukraine as the country repels a Russian invasion.

There’s uncertainty about whether flows going through Nord Stream 1 will resume on September 2, as they’re meant to. Russia has already said it intends to supply gas at only 20 percent of the pipeline’s total capacity when it goes back online. European countries have said they intend to cut gas consumption by 15 percent this winter.

Yet at the same time as Germany rations its energy use ahead of a tricky winter, it continues to let gas flow through the country to others elsewhere in Europe. It’s the same when it comes to electricity: Power prices have hit record highs in Germany this week, but it is supplying electricity to France, where supply is even more constrained, rather than keeping it for itself.

It’s the result of a Europe-wide initiative, first triggered in 1996 and strengthened in 2003 and 2009, that was designed to ensure better competition, destroy energy monopolies, and ensure security of supply. But failures to fully implement the so-called liberalization of the market may be coming back to bite the continent.

More here.

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9 Comments

  1. Europe Set Itself Up for This Energy Crisis
    You may think that Europe’s energy crisis derives from that of the Russian invasion in May of 2021, but this is not true whatsoever various factors contribute to the high energy prices and scarcity of energy in Europe and the invasion of Ukraine only worsened such. Starting in 1996 European countries such as Germany, France, Netherlands, and various other European countries took initiative in mowing down energy and gas monopolies. The idea was to bring better competition amongst corporate energy providers in hopes of bringing security to energy supplies. This initiative has been reinforced throughout the 21st century and so far, is not going to plan. This so-called liberalization of European energy was meant to unite Europe’s energy supply and drive down energy prices, however it is creating an opposite effect. Safety of Europe’s energy supply became secondary to driving down energy prices (typical politicians) and in turn has created a mess.
    Per what is expected, the public seeks to get there fix of energy from the best provider, the one that is the cheapest and most accessible. Essentially making every country fend for themselves for energy rather than relying on a diversified spread of different European energy providers. European regulations succeeded in creating a more competitive and diversified market, however failed in uniting countries energy supplies meaning most European countries are still fending for themselves in regard to sourcing of energy. The failure of creating one core diversified and competitive market amongst Europe in turn compromised the safety of energy supply as seen in very recent news. With Germany and various European countries still relying on the Nord stream pipeline coming from Russia as their main supply of Energy, the invasion of Ukraine had detrimental effects on the European energy market especially after sanctions were put in place by the EU. The last quote of the article tells it all, “I think this crisis will stop the liberalization and integration process, and we’ll revert to each state looking at its own security of supply and energy markets,” he says. “I think this is the end of the theory of a unified gas market in Europe. Vladimir Putin is playing exactly this game.” (Gladkyhk). Europe’s approach to the ongoing energy crisis is almost laughable and will only worsen this coming winter without revised regulations, however this unlikely due to stringent regulations.
    Work Cited
    Stokel-Walker, C. (2022, August 26). Europe set itself up for this energy crisis. Wired. September 7, 2022, from https://www.wired.com/story/europe-set-perfect-conditions-for-energy-crisis/

  2. As a harsh winter is quickly approaching, European nations are scrambling to solve their energy crisis. As the Russian-Ukrainian war rages on, and the Covid-19 supply chain effects continue to linger, all twenty-seven governments reliant on the Nord Stream Pipeline have failed to keep up with these changes. The unfortunate events which have led up to this crisis do not capture the entire scope of the issue. Prior to both the war and covid-19, participants of the 2019 Fourth Energy Package came to a consensus on continuing to further the goal of obtaining a liberalized European energy market. This package outlined the necessity for its participants to develop and coordinate contingency plans to prepare for a crisis, strengthen intercontinental transportation of energy supply, as well as to build upon prior security measures (EU). However, the liberalization aspect of the deal rose to the priority of nearly all nations, as governments became reliant on Russia’s energy supply rather than appropriately splitting their supply amongst various sources. This prioritization neglected the other terms, more specifically, security and crisis planning. Nations have been forced to allow energy to flow through their borders to reach surrounding states as Russia has slashed the capacity of the pipeline to only 20% in response to European sanctions (wired).
    The timeline of events clearly paints Europe as gravely naive despite clear initiative. Following the 2008 and 2014 Russian-Ukrainian conflicts, which arose numerous energy challenges (not equivalent in scale to today), the need for collaborative measures in crisis prevention was emphasized. Yet, these measures were not met. European nations free-riding their peers, failing to plan ahead, continuously underestimating and ignoring the blunt warnings shared by the Kremlin. Instead of tackling the issue early, Germany and many nations even strengthened their dependency on the Russian supply. Europe did not designate an adequate substitute for Russian supply nor did it stock efficiently, directly violating both Regulations 2017/1938 and Directive 2009/119/EC, which call for prevention and response to the crisis and maintaining sufficient energy stock, directly referencing previous unreliable Russian energy.
    However, this lack of planning may not paint such a collaborative picture for the continent this coming winter. As Russia has cut off Europe indefinitely, the question still remains as to whether or not the nations will be able to continue to share such a crucial supply and how long liberalized markets will continue. With such dire circumstances, it is likely the liberalization of the energy market will crumble. Further, how will relations continue moving forward? States will not be able to continue to share for too long, it is a self-help world, and nations will ultimately act upon their national and public interests. If people begin to suffer, governments will not be able to continue on the same route. The unified front present today may change in a few months, with nations resorting to cutting pipelines off past their borders, easing sanctions, or worse, finding deals with Russia. In my opinion, I believe the EU will perform any and all tasks necessary to avoid a continent-wide recession. This could leave Europe to adopt competitive markets once again, forcing nations to rely on their own extraction and production of energy. This may change the unified functionality of not only regional economics but also the way in which states approach their own interests in the future, reshaping their stance on the war. Nations across Europe may find it necessary in the near future to focus on funding the protection of the Ukrainian energy supply, or to create leverage over Russia with the threat of invasion if energy means are not met. These worrisome questions will only worsen in the next two years.

  3. This was a great post to read, and taught me about an issue that I was completely unaware of. The article talks about the gas and energy shortage which is affecting nearly every country in Europe and changing the way they have to live day to day life. This article highlights two main factors as the reason why Europe is experiencing this crisis. The first being the regulatory issues that they face due to the energy policies in Europe started in 1996. These policies brought many countries in Europe together in trying to rid the continent of the gas and energy monopolies. They relied on transparency and each other to secure cheap, consistent gas and energy. The issue however is that each country was left to make their own decisions about their energy integrity and who they wanted to buy from. So while they succeeded in diversifying the market, they failed to unify in terms of regulations. This has led to the situation that they are in today, where nearly every country is left to fend for themselves.

    The Russian invasion of Ukraine has only made these issues worse, however despite what many may think, is not the root cause of the issue here. Russia is a huge supplier of gas to Europe, and one of their biggest pipelines which is known as the Nord Stream 1 was due to undergo maintenance last month. To me, it is clear that Russia is doing this to get back at the rest of Europe for their support of Ukraine in the invasion, and to make matters worse, they only plan on supplying the pipeline to 20 percent capacity when it is repaired. Their tactics clearly work however, because European officials have already made plans to reduce energy consumption by 15 percent. While I don’t think that lower energy consumption is necessarily a bad thing, I believe that the circumstances which are forcing them into lower consumption are morally incorrect.

    Even when the war in Ukraine subsides and things in Europe hopefully return back to normal, there will still be much work to do to fix their energy crisis. For this to truly be resolved, each country will need to come together, and decide on a uniform set of energy regulations, so that they can have a diversified market, while also achieving their goal of working together to lower prices.

  4. The energy crisis that has affected the European Union was long expected. It is a well-known fact that for the last 30 years, European Union has been largely relying on Russian oil and natural gas. The crisis that is unraveling right now is a direct outcome of such blind reliance on one exporter. While some of the European countries managed to find alternative ways of oil import, like France which has their oil reserves currently full, Germany is experiencing a major economic crisis due to the increase in gas prices. When we look at German geography, we may conclude that Germany doesn’t have any major seas that would connect it to the oceans. Such little detail could be the explanation to the reason why Germany was so heavily reliant on Russian oil. As we know, Saudi Arabia and The United Arab Emirates who serve as the largest oil exporters, are situated on the Arabian Peninsula which makes their oil only available through the exports by the means of water travel. Hence, for Germany that has no major water routes that would connect it with the Arab oil, Russian oil was the cheapest and the most convenient way of importing oil. As a result, German citizens are now facing home bills that are triple the usual amount, gas prices that are 50% higher than they were before the war, and the highest inflation that is expected to be 8.30 percent by the end of this quarter.
    Even though German citizens have to cope with economic hardships, in the long run, it will be beneficial for their economy. Currently, the German government is developing measures for coping with the energy crisis. They are increasing their reliance on self-sustainable energy, they find alternative ways of importing gas and oil from other nations, and implementing low carbon footprint policies for their citizens. The war in Ukraine and the energy crisis that followed have pointed out major issues and problems that Germany had. Now, after acknowledging them, Germany will hopefully make programs into becoming energetically self-sustainable. The war has finally woken the German government up and forced them to implement changes. While those changes and improvements cannot be completed overnight, they will help Germany become independent and economically stronger than now.

    • Reading your comment about the article was really helpful in understanding the specifics of this energy crisis in Europe at the moment. I do like how you went in depth about Germany’s standing as well as how their geography affect this entire crisis. I also thought it was helpful and essential to mention Saudi Arabia and the UAE in this because a lot of readers don’t understand their role in this as well. I also thought the comment about “the war has finally woken the German government up” is of substantial relevance to the entire article because it helps see how this situation has been necessary for countries to see their dependence on others and that they need to start being able to fend for themselves.

  5. The energy crisis in Europe is caused by a gas shortage. There are a few reasons as to why Europe is struggling to receive gas. One of the main reasons is the Russia-Ukraine War. Russia sits on one end of the Nord Stream 1 pipeline, so this means that Russia can control how much gas is being supplied. Since the start of the war, Russia has only been supplying twenty percent of the total capacity of the pipeline. Now, it might seem that a few countries would be affected by this, but another issue is that countries are forced to share their supply even when they are struggling themselves. Back in 1996, Europe took an initiative to share their own supplies with each country even if the country needs the supply themselves. This method does seem reasonable because it ensures no country will be left out of the supply, but on the other hand countries like Germany will be forced to share their own supply even though they need it more. The European initiative is a great idea, but the problem that arose was that many countries chose to have few suppliers, when it was suggested to have at least three different ones. I do hope that Europe keeps this method of supply. Even though many countries are struggling, it is mainly due to the poor planning of how each nation would receive their supply. There are no signs of when the war with Russia and Ukraine will stop, but when it does Europe should take the time to revise this initiative. The idea of never being left out of a supply gives a sense of comfort to each nation. So, there are a few things that can be fixed to make this a better system. The first step would be better planning. As I said, many countries rely on Russia as their main supplier. No one expected the war, therefore there was little consideration about the problem with having one main supplier. Another thing to change would be about the sharing rule. The rule about sharing their own supply should be more reasonable. Should a country be forced to share when they need it more? This should be one of the few exceptions to the rule. Other than that, I do believe that this system does have the potential. It was the unpredictable event of the Russia-Ukraine war that caused this system to fail. When the war is over I would not be surprised to hear that the initiative would be discontinued. As of right now, I am very curious to see how each nation responds to this initiative if the war does continue.

  6. This blog post was extremely interesting to read and in my major I feel like this is such an important subject that people didn’t understand as much. The article addresses how the scarcity of gas and energy is impacting nearly every single nation in Europe and altering how they must live on a daily basis. This article describes two major factors for the crisis that Europe is presently experiencing. Primarily  the regulatory challenges they experience as a consequence of the 1996 beginning of Europe’s energy policies. In an endeavor to remove the energy and gas cartels from the european mainland, these strategies united numerous nations together. To secure affordable, efficient gas and energy, they depended on openness and one another. The concern, however, is that each state was left to decide on its own whom they would purchase from and what stable their power source was. As a result, although their success in broadening the industry, they weren’t able to consolidate on a set of guidelines. It has culminated in the dilemma they are presently in, where almost every nation is left to fend for it’s own. Contrary to what many individuals may assume, this Russian invasion of Ukraine is not the key cause of the issue, which has simply made it worse. Russia is a major provider of gasoline to Europe, and the Nord Stream 1 pipeline, one of their longest, was scheduled due servicing last month. To make the problem worse, they only aim to increase the pipeline to 20 percent efficiency once it is restored, rendering it apparent to me that Russia is striking in punishment for the rest of Europe’s backing of Ukraine in the war. Nonetheless, their approaches clearly work, as European politicians already had declared goals to decrease energy consumption by 15%. Although I don’t consider that few energy use is inherently a negative thing, I consider the conditions that are pushing people to reduce their energy are wrong. Regardless of whether the situation in Ukraine has ended and, presumably, everything in Europe returns to normal, there will continue to be lot of work to be accomplished to tackle the country’s energy crisis. Each nation will have to agree on a standard set of energy laws that allow to maintain a competitive market and accomplish their common objective of bringing rates down for this issue to be really handled.

  7. The blog provides a great insight on the current energy crisis happening overseas in Europe. Obviously, the European Union has a vastly different economic and social system than there is here in the United States. Here in the United States, we rely on a competitive market with many buyers and sellers and often minimal regulation to avoid government intervention. Due to the nature of our system it enables there to be often high periods of economic property as there are many seller of energy in the market. The European union relies on its regulatory energy policies as whole consisting of the many countries that consist of the union. Therefore, because there are many different countries that make up of union, trade and specialization is very important when regarding energy. For example, throughout Europe different countries specialize in different types of energy like the Netherlands has many wind farms for wind energy. However, the problem with this market that Europe operates in is the scarcity of supply that occurs due to this. The emphasis on energy was to have low competitive prices but it does not account the lack of energy present at periods of time when there is not substantial regulation. Another major problem that is causing this energy crisis is obviously the russo-ukranian crisis that is occurring. Since Russia has cut off their oil supplies to Ukraine in 2014 there has been a lack of oil supply streaming into Europe. As of a year ago when Russia invaded Ukraine the oil trade between Europe and Russia has hit an all-time low. As of now there is not an affordable and explainable solution to this mess. Unfortunately for the winter we will expect Europe to have to ration and for the most part have a difficult period as this conflict continue to drag across.

  8. The site offers some excellent insight into the present energy crisis taking place in Europe abroad. Undoubtedly, the economic and social systems in the European Union and those in the United States are very different. In order to avoid government intrusion, we here in the United States rely on a competitive market with numerous buyers and sellers and frequently little regulation. Due to the nature of our system and the abundance of energy sellers on the market, there can frequently be high economic property times. The numerous nations that make up the European Union as a whole rely on its regulatory energy policy. Trade and specialization are therefore crucial when it comes to energy because the union is made up of so many diverse nations. For instance, many nations in Europe specialize in certain forms of energy, such as the Netherlands, which has a large number of wind farms. The lack of supply that results from this, however, is the issue with the market that Europe competes in. The focus on energy was to have affordable, competitive rates, however this does not take into account the absence of energy during times when there is little to no regulation. The russo-ukrainian issue is undoubtedly a significant factor contributing to this energy catastrophe. There hasn’t been much oil flowing into Europe ever since Russia cut off its oil shipments to Ukraine in 2014. The oil commerce between Europe and Russia has reached an all-time low since Russia invaded Ukraine a year ago. There isn’t yet an accessible or clear answer to this issue. Unfortunately, as this battle drags on, we anticipate that Europe will have to ration over the winter and generally have a difficult time.

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