Insight
How to save energy in a smarter way by Elisabetta Cornago, 14 November 2022 Reducing energy demand can help Europe cope with high energy prices. Consumers need more than pleas to save energy: governments need to provide a mix of prompts, advice and rewards. Since Russia’s February assault on Ukraine, Europe has rushed to replace natural gas from its largest gas supplier, Gazprom. Russia has weaponised Europe’s gas dependence, cutting exports to the EU and enjoying the windfall profits that come from high global gas prices. The only durable solution for European energy security is to reduce Russian fossil fuel imports, and fossil fuel dependence more broadly. Europe is in a vulnerable position ahead of winter. Both gas and electricity prices reached historic highs in summer, respectively above €300 and €400 per MWh. A warm autumn has delayed the start of the heating season, and this together with nearly full gas storage across Europe brought spot-market gas prices in October closer to the 2018-2021 average of €23. But futures gas prices for delivery in February 2023 and February 2024 remain well above €100 per MWh, which suggests that traders believe gas supply will remain tight in the near future, and with it prices will remain above the recent average. Europe is at the mercy of the weather: a cold winter snap would increase the risk of gas shortages. Furthermore, refilling gas storage facilities next year will be harder with Russian gas supply at its current level, and still harder if Russia turns off the tap entirely or sabotages pipelines, though EU countries are seeking to increase imports of liquefied natural gas (LNG) from elsewhere. In this market context, energy savings are critical. European governments need to put in place specific policies to lower energy demand, both of gas and of electricity. Long-term solutions are necessary, but they take time to deploy at scale – think of improving buildings’ energy efficiency, and replacing gas boilers with heat pumps or district heating. So what can be done quickly as the start of the heating season looms? A solution governments have been shy about: encouraging energy savings. Voluntary behavioural changes can immediately shave off chunks of energy demand at a time when every little bit counts, and consequently reduce energy prices and consumer bills. Some consumers have already cut demand, prompted by rising prices. But others may need more than energy-saving pleas to take action: they need prompts to cut consumption at peak time, when demand is highest, clear advice about which cuts can make the greatest difference, and rewards for doing so. CER INSIGHT: How to save energy in a smarter way 14 November 2022
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