Since Russia's invasion of Ukraine in February 2022, Europe has made remarkable strides in its energy transition, nearly eliminating its dependence on Russian fossil fuels and diverging from its reliance on gas imports from the country. As Europe's energy landscape has shifted, the EU has managed to avoid many of the worst effects of the conflict, from fuel shortages and price shocks to a brief uptick in coal usage this winter.
At the beginning of 2022, 40 percent of Europe's natural gas and 27 percent of its oil imports came from Russia, and the continent lacked pipelines and terminals to distribute gas from other parts of the world, such as the US. To fill the void, Europe turned to renewable energy, which had already been increasing in prominence. By the end of that year, solar and wind had generated 23 percent of the EU's electricity, surpassing the share of gas for the first time. This surge in renewables helped the EU avoid an estimated €12 billion in gas costs over the past 12 months.
In response to the crisis, the EU has set up five new floating liquefied natural gas (LNG) terminals in the Netherlands, Greece, Finland and two in Germany, providing an extra 30 billion cubic meters of gas import capacity. That capacity is set to increase over the next few years, with plans for more terminals going forward. This has helped the EU to fill storage facilities ahead of the winter, ending the heating season with healthy reserves above 50 percent of the bloc's roughly 100 billion cubic meters total storage capacity.
The EU's ability to refill storages to the new 90 percent target ahead of next winter will likely depend on continued reduction in gas consumption. According to Eurostat, the bloc's gas consumption fell 19.3 percent between August and January, exceeding the EU's target of a 15 percent reduction against the five-year average.
The reduction in gas consumption has helped to keep gas prices low, with levels hovering around $16 per million British thermal units, down from around $100/MMBtu last summer. Despite the relatively low prices, households around the world have still been burdened with higher energy bills due to the record-high wholesale gas and electricity prices sparked by supply constraints and the slashing of the normal amount of imports arriving from Russia.
Overall, Europe's energy transition has been remarkable, demonstrated by its ability to almost completely divest from Russian gas within the span of just one year.
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