Ed Conway Profile picture
Feb 16 20 tweets 7 min read
What would happen to Europe if Russia turned off the gas?
Short (and perhaps surprising) answer: the UK would play a crucial role in keeping the lights on and homes heated across much of the continent.
Longer answer here: news.sky.com/story/energy-c…
Quick run through the numbers, tho it’s worth underlining this is v much a worse case scenario & it’s v v v unlikely Russia would cut off European gas supplies. However such exercises can actually tell you quite a lot about the way the world works - that’s certainly the case here
At current typical usage Russia provides roughly 270m cubic metres of gas a day to continental Europe via main pipelines. Most via Nord Stream I, then Ukraine, then Yamal (and note this numbers can vary quite a lot). Current usage is actually a bit lower than historically...
Let’s imagine all of that disappears. What does Europe do? Well one route is to reduce the amount of gas it’s burning, by cutting off non-essential industrial supplies. This would leave an economic dent but it could reduce demand by nearly 100m cubic metres per day.
Next option would be to use some of the gas the EU has in storage. But here we run into a problem: there's not much in there by recent standards. European gas storage is currently at the lowest level for this time of the year since 2011.
Based on current usage* this storage will be exhausted by mid April - in other words just as winter is over. European countries could run down storage faster to help make good the gap. But the upshot is they're likely to run out far sooner. When temperatures are still cold
* worth saying storage use is unlikely to continue at the current rate. It slows as winter turns to spring.
Sidenote: Europe v fortunate that this is all happening alongside one of the warmest winters in a long time. Means gas usage actually lower than normal
Anyway, back to that 270m cubic metre gap. It's already been narrowed down to 175m or so because of reduced demand. Potentially 110m of that could be filled with gas from storage. So we're closing in on the dotted line. But now there's a problem...
The extra gas has to come from somewhere. A wee bit could come from the Groningen tho the recent Dutch plan to expand it won't be ready til April - too late for this winter. Hard to see much immediate potential for increasing North Sea gas from Norway & UK uk.news.yahoo.com/netherlands-ne…
That leaves a final option: liquefied natural gas, imported from the US or Qatar. But here there's another problem. Even if you could lure the tankers in, it's not clear Europe has enough capacity *in the right places* to get that gas to Germany et al
This is not to say the EU doesn't have some big LNG hubs. Spain, for instance, has TONS of capacity and lots of terminals. Problem is it's quite hard to pipe gas from Spain to the rest of the continent. Good @Bruegel_org piece which touches on that here: bruegel.org/2022/01/can-eu…
There are some N European LNG hubs in France, Netherlands, Belgium, but it's not clear you could entirely fill that remaining 70m cubic metres gap. @OxfordEnergy reckons maybe continental European LNG could provide 27m of it, leaving just over 40m. Where will that come from??
You need ideally to find a place with lots of LNG ports which could easily pipe that gas straight to where it's needed. Problem is most are already near full capacity (and not obvious all that much more could come from N Africa) with one exception...
The UK. It has more LNG capacity than Dunkerque/Zeebrugge/Rotterdam combined. It also has plenty of pipeline capacity to send gas to Europe, from Bacton to Belgium/Netherlands. Those pipes are usually used to send gas to the UK in winter (and back the other way in summer)
But this winter the UK could plausibly feed its own network with LNG, prob mostly from the US, and allow its N Sea gas to go straight to the continent. Actually to some extent this has already been happening in recent weeks
With the result that Britain, helped out by the US, could come to Europe's rescue in the event of a catastrophic cut-off of Russian gas, providing enough extra gas to prevent the lights going out and homes going cold. And here's the kicker...
None of this would necessitate political agreement or grandstanding. It's simply the way the European gas market functions. Despite leaving the common market, the UK remains plugged into an even more frictionless energy market, where prices determine where gas flows #Brexit
Indeed understanding that the UK is plugged into this market sheds a somewhat different light on the discussions abt whether we need more gas storage. For in practice we already have a massive storage facility: Europe. We send gas there in summer & (usually) withdraw it in winter
Now, what none of the above depicts is the extent to which gas prices would go through the roof if something like this happened. Even beyond today's eyewatering levels. And whatever happens this winter the next challenge is refilling storage over the summer. No mean feat.
Still: it's a more nuanced story than you might have thought. And underlines that in some senses at least the European market is quite functional. We are very unlikely to "run out" of gas. But gas at a reasonable price? That's another story. More here: news.sky.com/story/energy-c…

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More from @EdConwaySky

Feb 12
The Humber Refinery in NE England.
This place looks and smells like a ghost of fossil fuel history. It's where they turn crude oil into petrol, jet fuel & many other petrochemical products.
It won't seem the obvious place to start a thread abt batteries.
But bear with me
🧵 Image
Because the gritty reality of how batteries are made is often skirted over in most reports.
But the deeper you go the more fascinating it gets.
So before we get to the stuff u know about - the gigafactories & lithium mines - let's ponder this place. Why? It's the missing link..
Actually before we head in, let's recall the basic chemistry of a battery, which isn't immediately obvious from the outside.
This is a typical cylindrical lithium-ion battery.
A Tesla is a big slab of thousands of these batteries with a car on top. But now let's look inside. Image
Read 31 tweets
Feb 11
🚨NEW🚨
- UK govt privately warned it's falling dangerously behind in its plans to build a battery industry.
- Plans nowhere near enough to save the car industry, according to documents seen by Sky News.
- Hundreds of thousands of jobs could be at risk as a result.
🧵
The key chart.
The higher the bars the more battery production capacity.
The leftmost bar is what the UK produces now
The middle one is where we’ll be in 2030, based on current projections
The one on the right is where we OUGHT to be aiming for by 2030.
DOUBLE the current plan. Image
Why does this matter?
Because the UK’s strength in car manufacturing was built in large part on our ability to design & make engines.
The EV revolution turns the industrial rules on its head: the main value-add comes not from engines but from batteries.
Matters for jobs & exports
Read 10 tweets
Feb 7
This is a long video - much longer than the @skynews explainers I usually make.
But it's about a very big and consequential question - one that deserves consideration:
Is Net Zero and environmental policy responsible for the current energy crisis?
This is my attempt at an answer:
Predictably there are quite a lot of people out there insisting the current rise in prices has nothing to do with net zero policy.
Predictably there are a lot of people out there insisting it’s all or mostly to do with net zero policy.
Predictably, they’re both wrong.
🧵
Let's begin with the big picture, and for the time being let's just look at where we get our electricity from (this being only a fraction of total ENERGY use). In the UK we've reduced our reliance on coal to v low levels. This is an impact of environmental policy.
Read 27 tweets
Feb 6
Do you think, on balance, that the young have been selfish or selfless in their conduct during the pandemic?
Still plenty of time left in this admittedly unscientific poll, but already the answer is pretty clear.
And frankly, that’s the way I would have voted too.
Nearly every piece of statistical evidence suggests the young have been remarkably SELFLESS during the pandemic.
Clearly they didn’t face the same health risks as the elderly during the pandemic, but most young people followed the lockdown strictures and rules.
Even when lockdowns end they remained remarkably committed and considerate.
This is an @ONS survey abt behaviour POST lockdowns:
Read 13 tweets
Feb 3
🚨NEW 🚨
Bank of England says UK households must brace themselves for the biggest annual fall in their standard of living since comparable records began three decades ago, as it:
- Raises interest rates to 0.5%
- Says inflation will surpass 7%
- Slashes GDP forecast
According to the Bank’s calculations, real post-tax labour income - perhaps the best measure of standards of living since it accounts for the rising tax burden as well as inflation and earnings - will fall by 2% in 2022
Biggest fall since comparable records began in 1990
The MPC voted 5-4 in favour of raising interest rates from 0.25% to 0.5%. But those four dissenting members wanted a hike to 0.75%.
So households will have to contend with higher borrowing costs as well as higher taxes, energy, goods and services prices.
Read 8 tweets
Feb 3
Landmark day in the cost of living crisis:
- Ofgem to confirm energy bills will go up by £hundreds from Apr
- @bankofengland expected to raise interest rates further
- New forecasts showing inflation to hit highest level since early ‘90s
- Chancellor to step in with £££ measures
According to my calculations, the rise in the energy price cap to around £2k will push up the energy bill burden (eg share of average household spending going on heat/power) to the highest level since the late 1980s:
If they go up further later this yr, as is widely expected, the energy bill burden gets to the highest level since at least the 1970s. Possibly even earlier. Eg in terms of the immediate domestic impact this could be worse than any modern energy crisis
Read 9 tweets

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