EU Aims to Cut Dependence on Russian Gas by Almost 80% This Year

(Bloomberg) -- The European Union’s executive arm is mapping out a path to end the bloc’s reliance on Russian gas which could see import needs cut by almost 80% this year, according to two officials with knowledge of the matter.  

The European Commission is revising its energy strategy after President Vladimir Putin’s invasion of Ukraine in an effort to reduce the Kremlin’s leverage. The plan, to be presented Tuesday, will propose steps such as tapping new gas supplies and increasing energy efficiency already this year, one of the officials said, and aims to deliver independence from the region’s biggest supplier of the fossil fuel well before 2030 -- sooner than previous projections. 

For the plan to have a chance of succeeding, it will need action from member states, many of whom were already uncomfortable with the investment required for the commission’s energy-transition plans and are now struggling to contain the political impact of spiking energy costs.

In the weeks before the war, a gas supply crunch sent energy costs to record levels, pushing the issue to the top of the EU agenda. European governments have already spent tens of billions of euros to protect consumers and industries from the impact of the crisis and prices surged again on Monday.

The commission considers that the EU already has sufficient gas to get through the rest of this winter even in the event of an abrupt disruption of Russian supplies. The bloc’s executive arm will recommend that member states start work now on filling up storage tanks so they’re prepared for next winter.

Read More: European Gas Surges 79% as Market Mayhem Drives Prices to Record

The commission is set to say that accelerating the Green Deal, the bloc’s sweeping strategy aimed at reaching climate neutrality by 2050, will reduce greenhouse gas emissions, cut reliance on imported fossil fuels and shield the economy from price hikes, according to the official, who asked not to be identified, as discussions on the strategy are private. The proposals may still change before they are adopted.

As part of the clean shift, the EU is currently discussing a set of laws to meet a stricter 2030 goal of cutting greenhouse gases by at least 55% from 1990 levels. Full implementation of the “Fit for 55” rules would cut EU gas consumption this decade by 23%, or an equivalent of 82 billion cubic meters. 

Tuesday’s plans will add on higher LNG imports and pipeline supplies from outside Russia, more renewable gases, energy savings and a shift to electrification. Together, that will give the EU the potential to effectively replace the 155 billion cubic meters of gas it currently imports from Russia, with 112 bcm this year. 

Read More: EU Leaders Consider Vow to Phase Out Reliance on Russian Energy

As much as 50 bcm a year will come from new sources of LNG, 10 bcm will come through pipelines from other suppliers and 20 bcm will come from new wind energy capacity which will reduce the demand for gas-fired power stations. 

The push may mean more ambitious 2030 targets for renewables and energy efficiency. The commission is also set to prioritize work on connecting pipelines on the Iberian peninsula with the rest of Europe and joining up Bulgaria and Greece. 

Read More: EU Could Survive Without Russian Gas Next Winter, Study Says

While the EU has joined the U.S. and the U.K. in imposing sweeping sanctions on the Kremlin, the Russian energy sector has so far been largely shielded due to concerns about the impact on the European economy. Ministers have been talking about following the EU in banning oil imports from Russia but there is no clear consensus and German Chancellor Olaf Scholz has said Russian supplies remain “essential” for now. 

Phasing out Russian oil and coal may be simpler than gas as the EU has a broader range of alternative suppliers if can turn to, the official said.

Read More: EU Divided Over Russian Oil Sanctions as Calls for Ban Grow 

The EU’s executive arm will provide member states with detailed guidance on how to design measures on regulated prices that would protect retail consumers and the smallest businesses. It will also announce plans for a temporary framework, which will allow liquidity support for companies affected by the crisis. To finance such measures, member states could consider imposing temporary taxes on windfall profits of energy companies.

To ensure the bloc’s depleted gas reserves are replenished, the commission plans to put forward by April a proposal to require existing storage facilities in the EU territory be filled up to at least 90% of their capacity by Oct. 1 each year. With benchmark gas prices for the summer still elevated, the EU will propose increasing the rebate level to 100% as an incentive to refill storage.

The commission will also offer coordination to build up the reserves through joint procurement of gas.

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.