Europe’s Energy Crunch
Europe's Blackout Worries Ease as End of Winter in Sight
As Europe approaches its final month of winter, even some of its strongest users of electricity are breathing a sigh of relief as the possibility of blackouts fades.
Sweden -- which has one of the region's highest per capita consumption levels -- downgraded its power-cut risk to “low” from “real” on Monday. The move offers the latest evidence that the worst of Europe's energy squeeze has passed, at least for this winter.
“Our new call is because of an improved energy situation in northern Europe, as well as reduced consumption during peak hours,” said Pontus de Mare, senior vice president of power-system operations at Swedish grid operator Svenska Kraftnat.
Worries over the possibility of power rationing and blackouts haven’t materialized due to a combination of factors. Policies to curb power use-- along with a bit of luck in the form of mostly mild weather -- have helped keep a lid on demand. Meanwhile, a rapid increase in imports of liquefied natural gas offset lost pipeline flows from Russia.
That's propelled inventories to higher levels than usual for this time of year, and has caused gas and electricity prices to plunge. On Monday, benchmark futures traded just above €50, the lowest level since September 2021.
Easing Energy Squeeze
Gas prices are at less than a sixth of last summer's peaks
Europe's energy supply might improve further after Freeport LNG, one of the largest export terminals in the US for the fuel, took an incremental step this weekend toward resuming full operations after a fire shut it down last June. France is also slowly recovering from a wave of extended nuclear outages, with several reactors returning to service.
That doesn't mean Europe has fully moved on from its energy troubles. Sweden in particular, while no longer facing severe blackout risks, has seen soaring electricity prices fuel inflation to such a degree that it's forcing households to cut back consumption. It's likely to be the only economy in the European Union to contract this year, according to European Commission forecasts released Monday, which also cited a construction slump.
The wider region's economy will probably fare better in 2023 than previously feared as the energy crisis recedes. However, as Economy Commissioner Paolo Gentiloni reminded reporters in Brussels, “better than expected doesn’t mean good.”
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