EU / Russian gas: dial down thermostat to avoid blackouts further down the line

Economy News


European policymakers are scrambling to balance gas supply and demand. Taking Russian gas out of the equation – if sanctions were brought to bear or so-called self-sanctioning escalates – would leave a 40 per cent shortfall.

What should home and business owners do? Switching on substitute sources takes time; you can not build a fleet of windmills or restock storage overnight. Time to consider rationing.

This is not an easy option. Households, consumers of about one-quarter of gas, are voters. In the UK, inflation and strikes are already resurrecting the specter of the 1970s without adding homework by candlelight into the mix. Industry, emerging from the two-year pandemic, is loath to re-shutter factories.

Lex charts showing European gas consumption, by sector, and demand reduction on different platforms

But it is not without precedent. Japan’s civil servants, schools and businesses sweltered with minimal air conditioning in the wake of the Fukushima disaster, which subsequently knocked out nuclear power that then supplied 30 per cent of the country’s energy. Similar measures followed this month’s earthquake.

Germany on Friday announced bold plans to wean itself off Russian gas by 2024. Already, curtailing usage is under consideration in Germany, where more than half of gas imports come from Russia. The infrastructure regulator is talking to business about “unavoidable shutdowns” if energy supply shortages occur. Some industrial groups have also been warned by local suppliers that deliveries may be curtailed.

Modest steps, taken universally, accrue savings. If all European households were to dial down thermostats by one degree, from a current average of 22 degrees Celsius, that could save 10 billion cubic meters (bcm) a year, reckons the International Energy Agency. Bolder estimates – there is more incentive to pile on the jumpers when bills are going through the roof – could triple this. Those savings range from 5 -15 per cent of Russia’s Gazprom’s annual exports had, prewar, planned on exporting to Europe and Turkey.

Industry is in a worse bind; closed production lines cost economic growth and jobs. Analysts at UBS, making assumptions on gas usage and reductions, conclude that 3.1 per cent of European economic activity would be affected by rationing; add in supply chains and other factors and that figure could double or treble. Far from a cost-free option, then, but one that European governments cannot afford to dismiss.

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