Has Europe failed its first winter energy savings test

If Europe was a school student, last week it sat its first exam in Energy Savings 101. It failed. And that doesn’t bode well for much tougher tests to come in January.
Despite strong imports of liquefied natural gas to replace Russian shipments, Europe needs to reduce gas consumption — by a lot — if it’s going to make it through the winter. Extra supply won’t be enough. Conservation is absolutely paramount.
The exact amount varies from country to country, but on average, the European Commission has suggested a 10%-15% demand reduction. Germany and a few other nations, which in the past relied on Russian gas significantly, need to cut consumption even more, by as much as 20%.
Because these savings targets are fixed, a warmer winter would make conservation a lot easier, a colder one much harder. But irrespective of how harsh the winter gets, Europe needs to consume less gas than it did in 2021 and what it averaged over the last five years.
High prices so far have encouraged industrial firms to reduce consumption. In some cases, particularly in the chemical sector, some companies have simply shut down production. As a result, gas demand across Europe has been running as much as 20% below normal.
Household and small businesses’ gas demand, which in Germany account for about 40% of the country’s consumption, is highly seasonal, with the bulk concentrated during roughly 25 weeks of the heating season, from around Oct. 15 to around March 15. Until now, we didn’t know how households would react, although the assumption was that public messaging about the need to save energy, coupled with higher retail prices, would discourage consumption.
The reality? As the first autumnal cold snap hit the continent, German households and small firms, commonly known as the private sector, increased their gas demand 14.5% above the five-year average. Klaus Muller, the German official in charge of monitoring the gas network, called the figures “sobering.”
To be sure, it has been cold: Mean temperatures in northwest Europe fell below the 30-year average. The mean temperature on Thursday was of just 10.5 Celsius, a figure that was not reached last year until mid-October, according to Bloomberg data. And yet, as Muller rightly said, “gas must be saved, even if it gets even colder.” Europe desperately needs a warm winter, but it cannot bank on a mild season similar to last year’s. The region may get lucky, but it will be in serious trouble if it doesn’t. Even an average winter would be problematic.
What’s at stake? “Without significant savings in the private sector, too, it will be difficult to avoid a gas shortage in winter,” says Muller.
In the last four weeks, European governments have intervened to cap utility bills, curbing the price impact, but they haven’t redoubled their public messaging on conservation. Families and small businesses were previously hearing “prices are going to be high and you need to save gas.” Now, they are hearing “the government is capping your bill, so rejoice.” That’s the wrong memo.
—Bloomberg