The war in Ukraine has pushed up energy prices due to the continent’s dependence on Russian fuel at a time when the market was already very stressed. The crisis has had a direct impact on companies, with production stoppages, and on families, who have seen how their gas, electricity and gasoline bills have multiplied.
Europe lacks alternatives to Russian gas and oil in the short term, but it does have medium-term options that, according to experts, include increasing storage to guarantee supply next winter; increase imports of liquefied natural gas (LNG) from the US, Australia and Qatar; finish the Midcat gas pipeline that should connect Catalonia with France to transport LNG regasified in Spain to the continent; reduce consumption, and look for alternative oil suppliers such as Saudi Arabia. In the long term, the solution lies in the deployment of the Spanish renewable park, which the bureaucracy keeps stuck. 10% of the gas and 4% of the oil consumed in Spain come from Russia. European dependence is greater, since 40% of the gas and 25% of the oil come from Russian deposits.
This situation has caused large energy-consuming industries such as Acerinox, ArcelorMittal, Celsa, Megasa, Ferroglobe and Siderúrgica Balboa to have had to stop some of their facilities and others have already begun to reduce their production, as is the case of Asturiana del Zinc, as reported this week by the Association of Companies with Large Energy Consumption (AEGE). For these companies, the energy bill represents around 40%. The situation will be similar in the case of SMEs and domestic consumers, covered by the regulated price (PVPC) or with a contract in the free market but indexed to the pool, who will see their next electricity bill skyrocket, but also their gas bill and the fuels.
In the case of electricity, the solution seems easier because its price is artificially affected by the quoted price of natural gas. The Vice President for the Ecological Transition, Theresa Riveraensures that the European Union intends, in one way or another, to decouple the electricity rate from the cost of gas while waiting for the structural reform of the energy market to be approved in May.
Brussels laid out its roadmap this week, which includes the diversification of supply, coordination between States so that gas reserves are at 90% by October 1, the adoption of renewables to replace gas and the attempt to lower the impact of energy prices on consumers. The International Energy Agency (IEA) calculates that in a year Europe could reduce its dependence by more than a third with measures such as not signing more supply contracts with Russia, promoting renewables and even asking citizens to lower the heating. “Lowering the thermostat by one degree reduces gas consumption by 10 billion cubic meters a year,” said IEA President Fatith Birol.
The Socialist MEP Nicholas Gonzalez Casares, a member of the Industry, Research and Energy Committee, explains that the Ukrainian invasion has caught Europe off guard because gas storage was at a minimum and countries have not been able to “pull down” reserves. “We were coming out of a pandemic where consumption fell and there was a reduction in supply. The price fell a lot – a megawatt hour of gas was 20 euros two years ago compared to 200 euros now – and it was not worthwhile for producers to extract fuel. After the pandemic, the market decompensated. A second reason was how Russia behaved since late summer. She exported much less gas to Europe than in previous winters. In addition, China competed for the gas by paying premium prices and causing the diversion of LNG carriers to Asia,” he notes. Christian Castillo, professor of Study and Business Economics at the UOC, warns that ensuring that next winter the European gas deposits are full will depend on Russia. “We assume that Russia is not going to cut off gas supplies. If you don’t cut it, yes you can get it. Russia threatens to cut it, but is on the verge of bankruptcy due to the blockade and depends on gas revenues. Although it is unpredictable, ”he stresses.
France wants to relaunch its nuclear production, but it is an option that the Spanish employers assure that it does not contemplate, focused on complying with the scheduled closure of the plants that starts in 2027 and ends in 2035. Ignatius Araluce, president of Foro Nuclear, points out that in the last decade nuclear energy has been the only technology that has produced more than 20% of electricity. “Last year the seven nuclear reactors prevented the emission of more than 20 million tons of CO2 into the atmosphere, the equivalent of the emissions of 75% of the Spanish car fleet, and produced more than 30% of emissions-free electricity” he points out. But nuclear is not a long-term alternative because it lacks profitability. “They are 20-year investments and then you depend on uranium. Are you going to buy that uranium from Russia? Juan Antonio Martinez, energy consultant of Grupo ASE. Experts agree that an increase in gas imports from the US, Australia and Qatar is not an option in the short term because countries like Germany lack regasification capacity. “Right now we are stuck. There is no short-term alternative to Russian gas”, warns the consultant.
The regasifiers
Spain could be the energy mainstay of Europe but connections with the rest of the continent are failing. “We have seven regasification plants, but we lack good connections. Spain is the European country with the largest gas storage capacity. We have a storage capacity of 3,000 million cubic meters compared to the United Kingdom, which can store 2,000 million. It would be technically feasible to send gas to Europe through a planned connection between Catalonia and France (Midcat gas pipeline), which is halfway done. Spain could supply Europe with 40% of the gas it needs,” he says. Manuel Alcazarresearcher at the Institute of Energy Engineering of the Polytechnic University of Valencia and professor of Electrical Engineering.
In the case of oil, the short-term solution is not easy either at a time when a liter of gasoline has broken the barrier of two euros in Spain. The trip of a high-level delegation of US officials to Caracas to meet with members of the government of Nicolás Maduro with the aim of buying Venezuelan oil is striking. Another option is to release part of the strategic reserves. The International Energy Agency agreed in early March to release 60 million barrels from the reserves of all its members. But in the EU, the situation is complex. “The US and the UK can do without Russian fuel, but Europe has it more complicated. The US only has a 3% dependence on Russian oil and 7% on gas”, says Cristian Castillo. Alcázar acknowledges: “The price would drop if OPEC agrees to an increase in production.” A situation that is not contemplated at the moment.
Butane
The butane cylinder will reach a new historical maximum today and will cost 18.63 euros, 4.96% more. Butane increases are limited to 5%.