US gas is the only thing keeping the lights on in Europe

LNG (liquefied natural gas) tanker 'Golar Igloo' arrives in the port of Eemshaven, north of Groningen, on September 4, 2022 - Siese Veenstra/AFP

LNG (liquefied natural gas) tanker ‘Golar Igloo’ arrives in the port of Eemshaven, north of Groningen, on September 4, 2022 – Siese Veenstra/AFP

Everyone knows that it is supplies of Western weapons and munitions, the great bulk of them from the USA, which are letting the embattled Ukrainians resist a brutal invasion by Russian forces. Not everyone has fully taken aboard the fact that it is supplies of liquefied natural gas (LNG), the bulk again from the USA, which have permitted the rest of Europe to resist Putin’s energy warfare and keep the lights on. Continued US support will be just as vital this winter, and probably for some years to come.

Last year, Europe imported 56 billion cubic meters (bcm) of US LNG, more than double the previous year’s level – and the White House has pledged that the US will send “at least 50 bcm” to Europe this year. The US also supplied half of the UK’s LNG in 2022, replacing Qatar as its largest LNG import source.

These massive shipments of gas have helped Europe and the UK stay afloat, but they have come at a cost for US consumers. In May 2022, US natural gas prices hit a 13-year high, reaching $8.78 (€8.32) per million British thermal units (MMBTU). US natural gas futures are now lower but remain volatile as geopolitical concerns impact market sentiment.

The US spike in prices was still small compared to the shifts seen in Europe, where natural gas hit €345 per megawatt-hour (MWh) (€101.19 per MMBTU) in March 2022, and consumers are still bearing the brunt of high prices despite various government support schemes. On both sides of the Atlantic, the impact is being felt through higher electricity bills and increased costs for other goods and services linked to gas prices, which is likely to remain the case for some time.

There are those in Europe who believe that the long term solution to getting off Russian pipeline gas should not be to simply substitute American LNG, but for the continent to reduce its gas consumption. This can be done to some degree by using less energy, but it’s unlikely that this can be the sole solution.

International Energy Agency (IEA) Executive Director, Dr Fatih Birol, explained to me last year that energy efficiency needs to be combined with the wider use of renewables. However renewables and the necessary grid connections for them take time to build, and switching homes and industries from fossil fuels to electricity is also a slow process. Thus, Europe and the UK are likely to need more gas from non-Russian sources for some time to come.

For context, before Russia’s invasion of Ukraine, it accounted for over 40 per cent of the EU’s gas demand, according to Eurostat data. This fell significantly in 2022, down to 12 per cent in October, due to sanctions, an EU price cap, and Moscow reducing pipeline supplies via Nord Stream 1. The UK never used much Russian gas, but its own North Sea production has long been insufficient to meet UK demand, a situation worsened by an effective government ban on further exploration. The new massive hunger for gas on the continent meant that the UK had to pay much more to obtain its imports, driving up its prices in line with Europe.

Ironically, the US has been able to meet this huge switch in demand largely because of its enthusiastic embrace of fracking, which is banned in the UK and several European countries. The US Energy Information Administration (EIA) estimates that in 2022, US dry natural gas production from shale formations – or fracking – was about 28.5 trillion cubic feet (Tcf) and equal to about 80 per cent of total US dry natural gas production in 2022.

Meanwhile, the UK has acted as a giant offshore gas terminal for the continent of Europe, importing LNG from the US and elsewhere through its three terminals and then at times piping the gas onward via interconnector pipelines to Belgium and the Netherlands. Imported LNG has also been used to generate electricity in UK gas-fired power stations, which can then be transmitted across the Channel to Europe via electrical interconnectors at times of high demand, as Europe’s limited LNG terminal capacity has struggled at times to get enough gas ashore on the continent.

Europe is now racing to build up its own LNG-receiving infrastructure, with Spain home to the greatest number of operational import terminals in Europe as of April 2022.

But some Europeans are keen to press on with making the continent less dependent on imports, and less dependent on fossil fuels generally.

Kim Fausing, CEO of engineering giant Danfoss, tells The Telegraph, “If we don’t act now to address the demand for energy it will be extremely difficult and more expensive to meet the Paris Agreement goal of staying below 1.5 degrees warming.

“In short, if we don’t curb our demand for energy, the build out of renewables will not be even near sufficient. One overlooked fact is that renewable energy comes in peaks and is used in peaks. Energy efficiency allows us to shave these peaks, for instance, by reusing the excess heat from industries, supermarkets and data centers to heat our homes.”

Excess heat is often simply thrown away via such mechanisms as industrial cooling towers or the outdoor ends of cooling, refrigeration and air-conditioning systems. This discarded heat could, in many cases, be used for heating and hot water. According to new data, for example, excess heat in the EU alone amounts to 2,860 terawatt-hours per year, which is theoretically almost enough to meet the EU’s total energy demand for heat and hot water in residential and service sector buildings.

Technological solutions from Danfoss and similar firms could capture a lot of that wasted heat and use it instead of burning gas to give Europeans warm homes and hot showers. But building the systems and infrastructure for this would be an enormous and expensive task. Current investment levels in energy efficiency are still far from enough to meet global climate goals.

“It should be crystal clear for everyone now that we will not meet the goals of the Paris Agreement unless we get better at reducing our energy consumption or recycling the green energy that is already produced … It’s not magic, we have the technology, and the payback times are even shorter now in light of the current energy prices,” adds Fausing.

In the meantime, American LNG will remain essential for Europe and the UK as they transition to a future largely without Russian gas. The situation should be reminding all sensible Brits and Europeans who their real friends and allies are, just as the flow of weapons and munitions has shown the Ukrainians who actually steps up when democracy is threatened by tyranny.

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