REPowerEU anniversary: cause for celebration and caution

REPowerEU is two years old. We believe it is cause for celebration, and for caution.

The plan’s objective was to reduce EU dependence on Russian energy imports.

In that sense, reducing Russia’s gas supply share from 45% to 15% is a significant achievement, one which the gas industry is proud to have helped deliver.

But let’s not celebrate blindly – this has come at a cost for consumers and the industry, and the current situation of prolonged reduced demand is not all good news for the European economy, especially as the availability of alternative gas supply sources is poised to increase globally.

Attracting them will be key if Europe wants to safeguard its industry in the long run.

Except now, #REPowerEU might stand in the way of doing so by sending the wrong demand signals.

Quick recap:

What did the gas industry at large help deliver?

  • An almost complete shift of flows from East-to-West to West-to-East.
  • Over 50bcm of LNG import capacity installed (most of which FSRUs) in two years.
  • Bringing the share of LNG in EU gas imports from 20 in 2021 to 42% in 2023.

Is Europe out of the woods yet?

  • No. Europe has only contracted 50% of the gas needed by 2040 on the way to climate neutrality (relative to needs under Fit for 55 scenario).
  • The LNG market is very tight and supply disruptions or cold winters cannot be ruled out.
  • Asian buyers are recovering and contracting a lot more than Europe (twice as more in contracts and volumes).

What’s at risk?

  • Increased reliance on other regions’ LNG demand behavior and re-exports.
  • Continued de-industrialization.
  • Resulting loss of competitiveness and strategic autonomy.

So what should Europe do?

  • Not get overconfident: despite all the celebrations, the market remains volatile and Europe is still vulnerable.
  • Use realistic gas demand assumptions: REPowerEU gas demand projections would imply severe de-industrialization – again, not cause for celebration.
  • A business case for investment: a European Industrial Deal that gives buyers the certainty needed to contract long term – we support the Antwerp Declaration.

Bottom line?

Europe wants to cut its reliance on Russian gas imports and reach climate neutrality. To do so it is reducing energy use, diversifying imports, and deploying alternatives energies.

Unfortunately, it’s also doing so in part by reducing/destroying industrial gas demand (still 17% lower than in 2021 as per the Columbia Global Center for Energy Policy – listen to our interview with Anne-Sophie Corbeau here).

With alternative gas supply options (mostly LNG export terminals) coming onstream, Europe will be able to substitute Russian imports without following the gas demand projections of REPowerEU. In fact, using these projections as basis for policy decisions could have the adverse effect of pushing supplies away by sending the wrong demand signal.

And without sufficient energy supplies, it will be challenging for Europe’s industrial activity to recover, especially in this current context of global competition.

Europe needs policies that balance Resilience, Competitiveness and Sustainability considerations.

By securing the necessary gas volumes, improving energy efficiency and developing low-carbon and renewable technologies,

It can achieve its geopolitical, climate and competitiveness goals together.