EU response to Russian invasion of Ukraine: In response to the Russian invasion of Ukraine, the EU has introduced economic sanctions on Russia, including a full coal embargo (since August), an oil embargo (with exceptions) and a two-thirds reduction in gas imports by the end of the year.
Substitution of Russian gas in the EU: EU measures (more LNG and network gas from other locations, fuel substitution, and energy efficiency) leave a gap of around 20bcm. The EC has proposed voluntary (and forced if necessary) consumption cuts of 15% in EU countries.
This is roughly equivalent to the additional gas consumption that occurs during a cold winter in Europe.
Re-Power EU: EU policy, in particular the May 2022 Re-Power EU program, has remained consistent with the long-term goal of climate neutrality and the Green Deal strategy. In addition to diversifying gas supplies, it envisions accelerating the low-carbon transition, mainly through support for RES and energy efficiency.
EU shields package from high energy prices: On 14 September, EC President Ursula von der Leyen announced the following:
•A target to reduce gas and electricity consumption by 10% and by 5% during the peak winter season to a 5-year average
•A tax on excess profits of energy producers
•A €180/MWh price cap on low-cost technologies (mainly nuclear, lignite and RES) for the wholesale market in all segments and bilateral contracts
•A €3 million investment in hydrogen
The gas shock has already caused a significant reduction in natural gas consumption in EU countries, although market prices have not been passed on to the end user. In January-July 2022, gas consumption in the EU was 10% and in Poland 15% YoY lower than in 2021.
Natural gas consumption in JanuaryJuly 2022 (%YoY)
In the context of deep declines in gas consumption this year, the mechanism proposed by the EC in July to reduce consumption by 15% by member countries does not seem to be a major challenge for Poland. Twelve EU countries, including Poland, have already re duced gas consumption by 15% YoY in January-July 2022.
High storage fills, the launch of the Baltic Pipe pipeline from late September and new interconnectors with Lithuania and Slovakia reduce the risk of a gas shortage in Poland in the upcoming heating season. High prices are being boosted by negative events related to the war in Ukraine, including sabotage at Nord Stream.
Record high prices encourage gas substitution and directly affect the decline in demand and production in gasintensive sectors. Househ olds and the service sector are generally protected; hence price increases are most severe for producers of the chemical (including fertilisers), mineral and metal smelting industries.
Disclaimer
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