Photo Source: Goldman Sachs
National Institute of Advanced Studies (NIAS)
Indian Institute of Science Campus, Bangalore
For any further information or to subscribe to GP alerts send an email to subachandran@nias.res.in
2023: The World This Year
Europe: An impending energy crisis and its economic fallouts
Padmashree Anandhan
|
TWTW#200, 29 January 2023, Vol. 5, No. 4
Europe: An impending energy crisis and its economic fallouts
Europe’s energy consumption mix has been dominated by natural gas, oil and coal for decades and only in recent years, the debate over the use of non-renewable energies and climate goals has sparked. Since Russia began to cut down its oil and gas supplies as a counter to the sanctions imposed by the West, Europe has been pushed into an energy crisis.
In 2021, the total gas delivered by Russia to the EU was 140 billion cubic metres (bcm), which halved down to 60 bcm in 2022. Although Europe was able to cope the shortage through the emergency mobilised funds of EUR 330 billion, bring control on demand by 10 per cent (50 bcm) and alternate supplies from Africa and Middle-East. In the long term, Europe’s energy future without Russian gas and oil seems bleak. Due to the crisis, energy prices turned vulnerable, pressuring gas-intensive sectors to re-direct their operational methods resulting in an add-on liability to the economy.
Forecast for 2023
First, coal, nuclear and hydro power use is likely to supersede renewable sources. In Europe’s energy mix, the usage of renewable has become a point of contest. Natural gas, oil, and coal have become the most consumed forms of energy. The Nordic countries, Denmark, Iceland, Norway, and Sweden, seem to rely more on therenewable especially hydropower. To meet the 2023 crisis, the Nordic plan to expand their hydro generation projects, Germany and Belgium retain their nuclear plants, and France and Finland are ahead to construct new plants, transition towards renewable energies and climate goals are about to take a backseat. According to the IEA report, hydro generation is predicted to recover to a five-year average which would benefit in keeping the electricity supply up by 45 terawatt-hours (TWh). Whereas nuclear generation is predicted to increase by two per cent in 2023.
Second, the household and manufacturing sector shortage will affect the economic recovery. Agreements with Algeria and Azerbaijan did help Europe in a minimal way to be an alternate for the Russian supplies, but still underrepresented the massive gas imports of Europe. At the industrial level, some of the oil and gas-intensive sectors such as manufacturing, fertilizers, chemicals, steel, and ceramics have faced critical challenges in maintaining production and have been forced to cut down profits. Those companies already have alternate sources such as biomethane, coal power and renewable have managed to sustain without huge cost-cuts, but the household sector took the most. The increased demand resulted in hike in prices, narrowing the affordability and reducing consumption. At the household level, subsidies and a slight reduction in demand can benefit only for a shorter time. Europe will need to fasten its internal production, mobilise investments into smart technology and find better alternatives to boost its energy storage. This is to ensure the energy crisis does not become a hitch to economic recovery.
Third, the domestic, regional and international energy generation efforts will realize by 2024, however 2023 will remain troublesome. The energy strategy of Europe to reduce the use of non-renewable energies is redirected to plan towards meeting the energy scarcity and increasing its production. In 2022, Nordic to eastern European countries have proposed new investments to build pipelines, and energy infrastructure to circumvent the shortage by improving the energy supply chain within Europe. Norway, Turkey, France, Belgium, and the Netherlands have become the forefront regional players in facilitating pipeline deals with Greece, Germany and other eastern European countries to replace the Russian energy supply gap. A major role has also been played by private companies such as Equinor and RWE in installations and production. Some of the promising projects being the Greece-Bulgaria pipeline, Bulgaria-Turkey pipeline, Norway’s extensive operation in the North Sea, and Germany-Norway hydrogen pipeline. At the regional level, the Renewable Energy Sources Act (RES Act), European Gas Demand Reduction Plan and Offshore Wind Energy Act are expected to materialize in 2023. There are also other efforts such as Fit for 55 package, the REPowerEU plan and a new storage regulation adopted in 2022 which does not seem promising for 2023. The mobilised funds so far come to EUR 330 billion, but to meet the crisis, Europe is estimated to have additional EUR 100 billion, can be possible only in two years through “lower gas import bills.” Therefore the speed of reforms being adopted and the time of realisation can be immaterial to Europe in 2023. At the international level, the US, Africa and Middle-East seem to be promising alternative for Europe, but the rising energy prices in the US, is a high-risk for Europe’s economy and the reduced exporting capacities despite the potential in Cameroon, Equatorial Guinea and the DRC limits the energy imports of Europe.
Rampant action taken by Europe in 2022 to increase internal energy generation does not promise results for 2023. Comparing the industries and households, the rising energy prices would cost industries and would burden the income of households.
![]() |
![]() |
Bookmark |
Sneha Surendran
Wildfires in Europe: Another year of devastation
Padmashree Anandhan
Return of the Heatwaves
Indrani Talukdar
Ukraine War and the International Order
Himani Pant
Germany-Russia Relations: What Next?
Ramya Balasubramanian
Russia and Europe: Understanding Moscow’s strategies
Lakshmi Parimala
Hybrid Warfare in Ukraine
Padmashree Anandhan
The War in Ukraine: Four Issues to watch in 2023
Harini Madhusudan, Rishika Yada, Sneha Surendran, Prerana P, Sreeja JS and Padmashree Anandhan
Russia: Anatomy of Wagner Revolt, and its Fallouts
Rishika Yadav | Research Assistant, National Institute of Advanced Studies, Indian Institute of Science Campus, Bangalore
Serbia: Mass shootings, protests and instability
Rishika Yadav and Nityashree RB | Research Assistant and Research Intern, National Institute of Advanced Studies, Indian Institute of Science Campus, Bangalore
Turkey’s Elections: Unravelling the Political Spectacle of 2023
Padmashree Anandhan | Research Associate National Institute of Advanced Studies, Bangalore
Belgorod drone attacks: Who, What and Why?
Indrani Talukdar
Russia's Position in the Arctic: New challenges
Rishika Yadav
Turkey’s Election: Issues, Actors and Outcomes
Padmashree Anandhan
Pentagon document leak: Russia-Ukraine Conflict From a Tactical Lens
Indrani Talukdar
Belarus’s endgame in Russia-Ukraine Conflict
Padmashree Anandhan
Russia: Drone attacks escalate the Ukraine war
Padmashree Anandhan
The UK: Conservative party put to test as worker strikes continue
Harini Madhusudan, Rishma Banerjee, Padmashree Anandhan, Ashwin Immanuel Dhanabalan, and Avishka Ashok
What next for Russia, Ukraine, Europe, South Asia & India, and China
Padmashree Anandhan and Rishma Banerjee
UNGA 77: Who said what from Europe?
Rashmi Ramesh
Ice Melt in Alps in Europe: Three impacts
Rishma Banerjee
Tracing Europe's droughts
Padmashree Anandhan
Major causes behind Europe’s continuing heatwaves
Emmanuel Selva Royan
100 days of the Ukraine war: US Responses in the war
Padmashree Anandhan
100 days of the Ukraine war: What next for Europe?
Ashwin Immanuel Dhanabalan
100 days of the Ukraine war: More loss than gain for Russia
Angelin Archana | Assistant Professor, Women’s Christian College, Chennai
China's response to the Ukraine crisis: Shaped by its relationship with Russia and EU under the US Shadow
Shreya Upadhyay | Assistant Professor, Christ (Deemed to be University), Bangalore
Transatlantic Ties in the Wake of Ukraine-Russia War
Uma Purushothaman | Assistant Professor, Central University of Kerala, Kerala
Ukraine and beyond: The US Strategies towards Russia
Debangana Chatterjee | Assistant Professor, JAIN (Deemed-to-be University), Bangalore
Lessons from Ukraine War: Effectiveness of Sanctions
Himani Pant | Research Fellow, ICWA, Delhi
Ukraine and beyond: What next for Russia and Europe?
Sourina Bej
Elections in Sweden
Padmashree Anandhan
Italy's far-right wins 2022 elections
Padmashree Anandhan
Putin’s address in the Valdai Discussion: Six takeaways
Padmashree Anandhan
Queen Elizabeth: End of an era
Padmashree Anandhan
Russia and Eastern Economic Forum 2022: A sturdy Far East
Padmashree Anandhan
Who will be the next UK prime minister: Liss Truss v. Rishi Sunak
Padmashree Anandhan
France: Uber files leak, and Macron’s trouble
Emmanuel Selva Royan
Italy: Three factors about its current political instability
Padmashree Anandhan
What does Macron's victory mean for France and the EU
Rishma Banerjee
The rise of Marine Le Pen
Sourina Bej
Four challenges ahead for President Macron
Ashwin Immanuel Dhanabalan
Lecture report: Ukraine, Russia and Europe
Joeana Cera Matthews
Into History: Northern Ireland and Bloody Sunday, 50 years later
Padmashree Anandhan
Munich Security Report: Six takeaways
Joeana Cera Matthews
Europe and Africa: An elusive search for an equal partnership
Ashwin Immanuel Dhanabalan
Femicides in Europe: The case of France
Padmashree Anandhan
Post Brexit: Three challenges in Northern Ireland
Ashwin Immanuel Dhanabalan
Lithuania and China: Vilnius has become Beijing’s Achilles heel. Four reasons why
Angelin Archana
Russia in 2021: Expanding boundaries
Joeana Cera Matthews
In Europe, abortion rights are "a privilege." Four reasons why
Padmashree Anandhan
Mapping COVID-19 protests in Europe: Who and Why
Vaishnavi Iyer
France, Algeria, and the politics over an apology
Joeana Cera Matthews
NATO-Russia relationship: Looking beyond the suspensions and expulsions
Padmashree Anandhan
Facebook's Metaverse: Why it matters to Europe
Joeana Cera Matthews
Poland, EU and PolExit. It is complicated, for three reasons
Harini Madhusudhan
Europe's Energy Crisis and Gazprom
Chetna Vinay Bhora
Europe's Energy Crisis: It could get worse. Five reasons why
Sourina Bej
France: Paris Terror Trial
Harini Madhusudan
Belarus: Weaponization of the Migrant Crisis
Joeana Cera Matthews
From Crimea to Navalny: Putin's calibrated Europe strategy
Joeana Cera Matthews
Nord Stream-2: Why is the region unhappy about the pipeline?
Sarthak Jain
Nord Stream 2 is Russia’s geopolitical victory
Keerthana Rajesh Nambiar
The EU Summit 2021: Five Takeaways
Chetna Vinay Bhora