Europe targets coal as Russian gas flows decline
Europe’s biggest Russian gas buyers are rushing to find alternative sources of fuel supply and could burn more coal to cope with reduced gas flows from Russia that threaten a winter energy crisis if the stores are not full.
Germany, Italy, Austria and the Netherlands have all signaled that coal-fired power plants could help the continent through a crisis that has driven up gas prices and added to the challenge facing policymakers policies to fight inflation.
The Dutch government announced on Monday that it would remove the production cap for coal-fired power plants and activate the first phase of an energy crisis plan.
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Denmark has also launched the first stage of a gas contingency plan due to Russian supply uncertainty.
Italy has moved closer to declaring a state of energy alert after oil company Eni said it was told by Russia’s Gazprom it would only receive part of its demand for energy. gas supply on Monday.
Germany, which has also seen a drop in Russian flows, announced its latest plan to increase gas storage levels and said it could restart coal-fired power plants it intended to phase out. .
“It is painful but it is a pure necessity in this situation to reduce gas consumption,” said Economy Minister Robert Habeck, a member of the Green Party who has been pushing for a faster exit from coal which produces more greenhouse gases.
“But if we don’t do this, we run the risk that the storage facilities will not be sufficiently full at the end of the year towards the winter season. And then we are blackmailed at the political level,” he said.
Russia on Monday reiterated its previous criticism that Europe had only itself to blame after countries imposed sanctions in response to Russia’s invasion of Ukraine, a path of transit of gas to Europe as well as a major wheat exporter.
The first-month Dutch gas contract, the European benchmark, was trading around 124 euros per megawatt-hour (MWh) on Monday, down from this year’s peak of 335 euros, but still up more than 300% from at its level of a year ago.
Markus Krebber, CEO of Germany’s largest power producer RWE, said electricity prices could take three to five years to fall back to lower levels.
Russian gas flows to Germany via the Nord Stream 1 gas pipeline, the main route feeding Europe’s biggest economy, were still operating at around 40% capacity on Monday, although they had increased slightly since the start of last week.
Ukraine said its pipelines could help fill any gaps in supply through Nord Stream 1.
Russia has previously said it cannot pump more into pipelines that Ukraine has not already shut down.
Eni and German utility Uniper were among European companies that said they were receiving less than contracted Russian gas volumes, although Europe’s gas stocks continued to fill – albeit more slowly.
They were around 54% full on Monday against a European Union target of 80% by October and 90% by November.
Germany’s economy ministry said returning coal-fired power plants could add up to 10 gigawatts of capacity in case gas supplies reach critical levels.
A law relating to the move will be presented to the upper house of parliament on July 8.
Alongside a return to coal, the latest German measures include an auction system to encourage industry to consume less gas and financial aid to the German gas market operator, via public lender KfW, to fill more quickly gas storage.
RWE said on Monday it could extend the operation of three 300 megawatt (MW) brown coal power plants if necessary.
The Austrian government agreed with utility Verbund on Sunday to convert a gas-fired power plant to coal if the country faces a power emergency.
OMV said on Monday that Austria was to receive half the usual amount of gas for a second day.