The Institute for Energy Economics and Financial Analysis warned in a report published on Friday that the European Union may be forced to cut natural gas consumption by 7% this winter, equivalent to about 14 billion cubic meters compared with last winter, amid falling storage levels and rising prices ahead of the full ban on Russian liquefied natural gas imports in January 2027.
The institute said European gas reserves had fallen to their lowest level for any autumn since 2011, while storage facilities in the European Union were about 72.4% full on October 3.
Storage shortfall and winter risks
The report estimated that storage facilities would make 7.3 billion cubic meters less gas available from November to March than last winter. It said lower storage levels did not mean reserves would run out during the winter, but could slow withdrawal rates and lead to supply shortages if a severe cold spell hit late in the season.
The institute added that lower storage levels would require buying larger quantities at higher cost to refill facilities next summer. It estimated that closing the storage shortfall through increased imports rather than demand cuts would cost the European Union about 3 billion euros, 12% more than the cost of buying the same volume last year, amid higher prices due to the war between the United States and Israel on one side and Iran on the other.
European gas network operators warned on Thursday that a harsh winter could leave the European Union facing a shortfall of up to 15% of its gas needs. The institute concluded that growing reliance on storage had become a major financial burden for Europe and that buying gas for storage had turned into a financial risk rather than a «profitable strategy».
Gas prices top 80 euros
Europe's gas market has been under pressure since the war with Iran broke out on February 28, accompanied by disruptions to shipping through the Strait of Hormuz, which carries about one-fifth of global liquefied natural gas trade.
Dutch gas futures at the TTF hub, Europe's benchmark for gas prices, rose to 84.5 euros per megawatt-hour in mid-September, the highest level since 2022, when the Russian invasion of Ukraine began. Prices again topped 80 euros on Thursday before trading at about 78 euros early on Friday.
Fossil fuel imports have cost the European Union an additional 100 billion euros since the end of February, without obtaining «a single additional molecule of energy».
European Energy Commissioner Dan Jørgensen called on governments last month to continue curbing energy demand as gas storage levels reached what he described as «exceptionally low» levels.
European measures to support storage
European governments have begun taking measures to support gas storage. In June, Dutch authorities approved funding of up to 993 million euros to help state-owned EBN build up reserves, while Germany asked state-owned gas importer SEFE to store 8 terawatt-hours by December 15.
Spain increased the volumes of liquefied natural gas held at its import terminals by more than 25%. The measures come as the full ban on European Union imports of Russian liquefied natural gas approaches its entry into force in January 2027.
Fewer opportunities for easy demand cuts
Gas consumption during the winter fell from about 222 billion cubic meters in the 2021-2022 season to 185 billion cubic meters in the 2022-2023 season, as prices rose and emergency measures to curb consumption were introduced. It then returned to about 200 billion cubic meters in each of the past two winter seasons.
The institute said the figures indicated that opportunities for easy demand cuts could be running out. With imports holding steady and not increasing, storage covered about 30% of European Union consumption last winter, compared with 25% in the 2021-2022 season, according to Eurostat data.
The institute called for investment to be directed toward renewable energy, heat pumps, the electrification of industrial processes and improved energy efficiency, rather than expanding storage facilities in ways that could entrench reliance on fossil-fuel infrastructure for decades. The aim would be to reduce the winter demand peak that drains reserves.
