On the wholesale markets, the European gas price has recently continued its descent. The futures contract TTF for Dutch natural gas, which is trend-setting for gas trading, is currently around 70 euros per megawatt hour. European natural gas was last this cheap last February before the Russian invasion of Ukraine.
The gas price had been at a higher level since autumn 2021. After a temporary suspension of deliveries by Russia, it temporarily rose to 345 euros per megawatt hour last summer. The long-term average at this time of year was 20 euros.
“Trend reversal” not in sight
“All in all, the current forecasts show that wholesale prices will also settle at a higher level in the coming year than we have seen in the last few years,” says Dolna-Gruber. A “trend reversal” is currently not in sight, “short-term price reductions for electricity and gas are more likely to be seen as outliers,” says the energy expert.
The price swings made it painfully clear how dependent the continent in general and Austria in particular had become on Russian natural gas. They are also proof that Kremlin boss Vladimir Putin does not shy away from using energy as a means of pressure in the Ukraine war, even though Europe was by far the world’s largest export market for Russian natural gas in 2021.
Since the invasion began, Austria has greatly reduced its dependence on Russian natural gas. In November, 41 percent of the total amount of gas imported came from Russia, in February it was almost 79 percent, according to E-Control data. No figures are available for December.
China’s hunger for energy
The fact that Austria and other European countries were able to reduce dependency so quickly was a “surprise that hardly anyone expected in February,” said Dolna-Gruber. The departure was not purely voluntary and it was expensive, as losses of cheap Russian natural gas had to be offset with expensive liquefied natural gas (LNG).
The race for LNG resources is one of the big unknowns on which the development of gas prices will depend this year. China plays a central role. After the abrupt end of the zero-Covid policy, the government is trying to stimulate the economy, which has an impact on the LNG market.
“If the demand for gas in China increases, then that reduces the availability of gas in Europe for LNG,” E-Control board member Alfons Haber told ORF.at. Put simply, LNG is natural gas that is liquefied at temperatures below minus 160 degrees Celsius. Special equipment is required for this costly process. According to Haber, there could also be a bottleneck and the associated sharp price increase in the cargo ships with which the liquefied gas that is transported around the world.
Ukraine war and gas price cap
Another unknown is the development of the Ukraine war. NATO expects a new Russian offensive in the spring. However, Moscow’s troops have recently suffered some military setbacks. Whether and to what extent the Kremlin will use energy as leverage is difficult to predict. “With every delivery stop, Putin’s energy weapon has lost firepower,” says Dolna-Gruber. Nevertheless, one should assume that less Russian gas will have to be used than in the previous year, according to Dolna-Gruber.
Experts from the Climate Ministry, E-Control and the Energy Agency have given the all-clear for the heating period that runs until March. Even in the worst-case scenario, if Russia stopped supplying natural gas completely, the supply would be secure. This is mainly thanks to the strategic gas reserve owned by the Republic, which was created in 2022 in response to the shortage of gas and comprises around 20 terawatt hours, says Dolna-Gruber.
In order to prevent rapid price increases this year, the EU countries have agreed on a gas price cap that is to be activated on February 15th. It is triggered when the price on the TTF wholesale site exceeds EUR 180 per megawatt hour for three days in a row and is also EUR 35 higher than the international LNG price. Thus, when the mechanism is triggered, the price can also be over 180 euros per megawatt hour. Once triggered, the mechanism lasts for 20 days.
Climate crisis plays a complex role
The effects of the climate crisis play a complex role in the overall structure. Due to the unusually high temperatures for this time of year, gas consumption is currently low and the storage tanks can continue to be filled. In the previous year, however, longer dry periods and the associated low water levels in the rivers led to problems in the generation of electricity by hydroelectric power plants and nuclear power plants in some countries.
Saving gas “necessary in future”
The experiences from the short-term reaction in the previous year should be used to take a “sensible path” in the long term, says Dolna-Gruber. Dependence on imported natural gas must be further reduced. In his view, the key to this is the more efficient use of energy.
“Saving gas will certainly be necessary in the next one or two years,” emphasizes E-Control board member Haber. “The less gas we have to procure because consumption is lower, the more secure we are with the supply.”
Ambitious targets for renewables
The imported natural gas is to be replaced in the medium and long term by renewable energy from photovoltaics, wind power, hydropower and geothermal energy. In terms of photovoltaics, a record number of newly installed PV systems is expected this year.
Austria has set ambitious goals for electricity production. According to the Renewable Energy Expansion Act (EAG) passed in the National Council in 2021, 100 percent of the total electricity consumption should be covered nationally by renewable energy sources from 2030 onwards. The goal relates purely to the current.
On the other hand, there is no specific overall energy target, “after Austria wants to have achieved climate neutrality by then, one can assume a renewable share of over 90 percent,” says Dolna-Gruber. The current value is 36.4 percent.
Legislative project “over the finish line”
In order to enable rapid expansion, it is important “to finally get well-advanced legal projects such as the Energy Efficiency Act, the Renewable Heat Act and the Renewable Gas Act 2023 over the finish line,” says Dolna-Gruber.
In terms of renewable electricity generation, the EAG gives the expansion a permanent subsidy framework. In addition, “accompanying measures” are needed. According to Dolna-Gruber, this includes steps towards changing spatial planning in the federal states, securing skilled workers and the rapid expansion of electricity grids and storage facilities.
