Europe is bracing for a tough winter as an energy crisis that’s been years in the making leaves the continent relying on the vagaries of the weather.
Faced with surging gas and electricity prices, countries from the U.K. to Germany will need to count on mild temperatures to get through the heating season.
Europe is short of gas and coal and if the wind doesn’t blow, the worst-case scenario could play out: widespread blackouts that force businesses and factories to shut.
The unprecedented energy crunch has been brewing for years, with Europe growing increasingly dependent on intermittent sources of energy such as wind and solar while investments in fossil fuels declined.
Environmental policy has also pushed some countries to shut their coal and nuclear fleets, reducing the number of power plants that could serve as a backup in times of shortages.
“It could get very ugly unless we act quickly to try to fill every inch of storage,” said Marco Alvera, chief executive officer of Italian energy infrastructure company Snam SpA. “You can survive a week without electricity, but you can’t survive without gas.”
Energy demand is rising from the U.S. to Europe and Asia as economies recover from the global pandemic, boosting industrial activity and fueling concerns about inflation.
Prices are so high in Europe that two major fertilizer producers announced they were shutting plants or curtailing production in the region.
And it’s not just businesses. Governments are also concerned about the blow to households already contending with higher costs of everything from food to transport.
As power and gas prices break records day after day, Spain, Italy, Greece, and France are all stepping in to protect consumers from inflation.
“It will be expensive for consumers, it will be expensive for big energy users,” Dermot Nolan, a former chief executive officer of U.K. energy regulator Ofgem, said in a Bloomberg TV interview.
“Electricity and gas prices are going to be higher at home than everybody would want and they are going to be higher than they have been for about 12 years.”
Europe’s gas prices have more than tripled this year as top supplier Russia has been curbing the additional deliveries the continent needs to refill its depleted storage sites after a cold winter last year.
It’s been hard to get hold of alternative supplies, with North Sea fields undergoing heavy maintenance after pandemic-induced delays, and Asia scooping up cargoes of liquefied natural gas to meet rising demand there.
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