Explore our expert insights and analysis in leading energy and climate news stories.

Energy Explained

Get the latest as our experts share their insights on global energy policy.


Hear in-depth conversations with the world’s top energy and climate leaders from government, business, academia, and civil society.


Find out more about our upcoming and past events.

Columbia Energy Exchange

Europe’s Winter Outlook


Anne-Sophie Corbeau and Dr. Tatiana Mitrova


Jason Bordoff [00:00:02] Europe is getting a bit of much needed relief in the midst of its energy crisis, although prices are still high. A warm October and a surge in liquefied gas imports. Bright spot prices down from record levels and gas storage near full capacity. A worst case supply crisis may have been averted for now, but tensions are still high. There are fears over Russian sabotage of North Sea pipelines, the possibility of cold weather and a coming embargo on Russian oil add yet more uncertainty to an already volatile market. European households and businesses will still see prices for natural gas and electricity well above average. And the dramatic decline in Russian gas sales to Europe will make it even harder to prepare for next winter. So risks loom for several years to come. So what lies ahead? Has Europe seen the worst of its energy crisis? What are the options for EU leaders to manage the energy crisis during the frigid winter months? And how will further measures to pressure Russia economically affect the European economy? This is Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University. I’m Jason Bordoff. Returning to the show today Anne-Sophie Corbeau and Tatiana Mitrova. Anne-Sophie is a global research scholar here at the Center on Global Energy Policy. And Tatiana is a research fellow here at the Center on Global Energy Policy. I talked with Anne-Sophie and Tatiana in July about the European gas crisis and wanted to bring them back again to discuss the outlook for winter and the options for managing energy supply. I hope you enjoy the conversation. Anne-Sophie Corbeau, Tatiana Mitrova, welcome back to Columbia Energy Exchange. This is a back by popular demand episode since we had you are not long ago to talk about the European energy crisis. I think one of our most popular episodes, and certainly the one that got the greatest response where people said we need them back again and we need to hear from them more So and we had you this week at our annual Global Energy Summit. So as much of Anne-Sophie and Tatiana as we can get, that’s our goal. Thank you for making time to be with us in person here in New York. It’s great to all be together. 

Anne-Sophie Corbeau [00:02:22] Indeed. It’s really great to be with you and also Tatiana. 

Tatiana Mitrova [00:02:25] Thank you. Really happy to be here. 

Jason Bordoff [00:02:27] So even another podcast of up to, you know, somewhere close to an hour won’t won’t be enough probably to talk about everything we need to talk about. But you are both sitting in the middle in different parts of Europe of this severe energy crisis in Europe, and it’s having ripple effects in other parts of the world, too. We will talk about that, but it seems to change quite rapidly. So let’s just figure out for our listeners where we are in Europe today, what is happening with the energy crisis. There’s a sense that inventories and storage are very high. Countries have done a good job filling those prices will be high this winter, but we can get through it. And so maybe tell me if the energy crisis was overblown. Are things looking better than before or is the situation still pretty dire from your standpoint? And so. 

Anne-Sophie Corbeau [00:03:19] What? I mean, prices today are still at about $45 per MMBtu, which is of close to $500 per barrel. So I would not say that the situation the crisis is over. I mean, we are still seeing extremely high gas prices. We are seeing a big reduction in terms of our demand. And we are not seeing only a gas crisis. We are also seeing a power crisis. And I think this is quite important to understand why are we seeing a power crisis? This is because we have a reduction of nuclear generation by about 6% over the first nine months compared to last year. This is mostly because nuclear in France is having some issues, but also because Germany has decommissioned nuclear power plant last year and is planning to do so again in 2023. But on top of that, we have also a very big reduction of hydro generation by 25%. And this is probably something that people had not anticipated. So in order to compensate for that, we are adding, of course, wind and solar generation and they are contributing themselves of replacement of this missing hydro and nuclear generation, but not enough. That’s why we are restarting coal power generation. But we are also consuming more gas in the power generation sector. And that’s very important because this is basically counterbalancing the overall effects in the other sectors. 

Jason Bordoff [00:04:38] Yes, So that’s an important point. I want to clarify that you just said we’re in the middle of what people think of as a gas crisis. Russia cut off the gas. There’s no more gas. You just said you’re using more gas in power. 

Anne-Sophie Corbeau [00:04:49] We are using more gas in power. Yes. And this is really because of this nuclear and hydro problems and also because we have not really focused so much on trying to reduce the electricity consumption. So remember, we advise plans to save gas for winter plan in July and to focus was very much on saving natural gas demand except but natural gas and power sectors are interlinked because about 20% of the electricity generation in the EU is coming from natural gas. 

Jason Bordoff [00:05:24] And let me just make sure I understand the nuclear point and I will come to you. Tatyana. You said you want to be conserving as much gas as possible, limiting how much you need given what’s happened with Russia. And you’re saying more is needed in power because of what’s happening with other sources of electricity. Nuclear is an important one. Policy decisions that some people think make no sense, like shutting down nuclear maintenance problems. Well, like with EDF in France. And then there’s also this issue related to climate change of warmer waters. And do does nuclear need to be curtailed because of challenges with cooling the power plants? Help us understand. Those are three different reasons why nuclear might be down. Which of those is most important? What’s what’s causing lower nuclear? 

Anne-Sophie Corbeau [00:06:03] I think the French is probably the biggest problem. And because, you know, a combination of maintenance and cohesion issue. So we had the both high profile nuclear power plants don’t usually in France, we produce about 400 terawatt hours of electricity per year. We are going to be below. Field. Would you tell her what that was? So that’s really a substantial reduction. Germany This is a policy decision. I think the reduction is going to be around 30 to 45 terawatt hours. So, I mean, on the French side, you know, this is basically a legacy of COVID and also a technical issue which is affecting a certain number of nuclear power plants. Maybe also a little bit of policy issue, because, you know, since the government of Mr. Hollande, there has been a willingness to decrease the wall of nuclear in France. I mean, 70% of our electricity was coming from nuclear, but we wanted to eventually decommission or basically let this nuclear power plant be decommissioned after all of our 40 or 50 years lifetime. But now suddenly they realize, oh, actually, maybe we need more nuclear. But, you know, we don’t have a lot of enough young engineer. So nuclear is no more 2060 anymore. But, you know, we will need to keep these nuclear power plants for longer. 

Jason Bordoff [00:07:23] I’m excited about our nuclear power initiative here at the Energy Center. We will make it trendy and sexy again for people to study moving forward. Tatiana, do you see the situation in Europe the same way to what Anne-Sophie said? 

Tatiana Mitrova [00:07:35] Actually? Jason I would like to even further extend this framework. I would speak not only about gas crises and electricity crisis, but actually this winter. Europe might face also to a certain extent at certain parts of continent oil and coal crisis. And the reasons are pretty simple. Russia used to be one of the key dominant suppliers of both for European consumers. Starting from August ten, the embargo on coal supplies came into force. No more Russian coal coming to Europe. And then those are heat waves and droughts, which Anne-Sophie has mentioned, which have led to lower hydrogen in the region. Actually, they’ve resulted also in much lower water level in the European rivers. So coal transportation, which was normally through the river transport, is no longer available and it is already creating some problems in north Western Europe. In addition to that, petroleum products when when there is no gas, no nuclear and no hydro. People are switching to diesel generators. And the recent decision of opec+ regarding oil quotas has resulted in higher oil prices. In addition to that, starting from December 5th, oil embargo from the European Union on the Russian oil and petroleum products, supplies will come into force and that will significantly limit availability, both of crude and products. The problem is that inside Europe there are still quite many Russian owned refineries. They will no longer be able to import crude and to process it. And there will be a need to very quickly change all the logistical chains in the middle of the winter. So I am afraid that, again, in certain parts of Europe there might be bottlenecks, there might be disruptions even in oil products, supplies. 

Jason Bordoff [00:09:49] I’m going to come back to Russian oil and the G7 price cap and other things. But just I just want to pause for a moment. There’s a coal crisis. And just for people listening who may have thought for the last couple of years, at least, maybe longer, coal is a dying fuel. We are having an energy transition. Renewables are falling in cost. Is this just because we’ve lost Russian gas and there’s temporarily a turn back to coal? Coal, as at record levels, coal prices, coal usage is going up in Europe and in Asia. Is this just a short term bump or what’s the role of coal now? And what does it mean to have a coal crisis in a continent that is has been a leader on climate change? 

Tatiana Mitrova [00:10:28] Well, I think in Europe it is just a temporary phenomena. First of all, due to the disruption of Russian coal supplies, but also lack of other fuels. But hopefully it will be it will normalize in several years. At the same time, for the rest of the world, it’s quite different because enormously high prices that we are experiencing now for the non-OECD nations make coal much more attractive than ever. So this competitive advantage is now with coal, and it’s not surprising that they cannot simply afford more expensive fuels and they all switch to coal. 

Jason Bordoff [00:11:10] And we’re seeing that, I think, in lower income countries and countries that have struggled to meet energy needs generally anyway. And we’re rolling blackouts now in Pakistan and Bangladesh. Very. High LNG prices, very high coal prices. This is having, as I said, it’s not just a European energy crisis. Right. 

Anne-Sophie Corbeau [00:11:27] This is a global crisis. Absolutely. And I think, you know, in Europe we are using more coal because this is the future. The one of the only fuel that we can actually increase in order to replace a missing nuclear tons of missing hydrogen on top of natural gas, of course. But in developing countries, I mean, you know, this is in order to replace with gas, which we cannot afford, it’s too high. I mean, $40 per MMBtu is simply unaffordable. And on top of that, Europe has been diverting LNG away from Asia. This is a very important thing that people need to understand. We do not have an infinite pool of LNG supply. So in this pool of energy, a lot of LNG has been actually re diverted towards Europe, Europe, the EU is going to increase its imports probably by 50% this year at the expense of Asia. 

Jason Bordoff [00:12:19] And when that LNG supply was built, the export capacity, a lot of it was intended for Asia and I think Asian countries were relying on it. So if it all goes to Europe now, they have to do something else. 

Anne-Sophie Corbeau [00:12:30] I mean, Europe was never able to get Europe was a balancing market. When you think in terms of growth and also when you were thinking in terms of pricing premium, let M in the growth market as always was always going to be Asia was always going to be China, India, Southeast Asia. Europe is a balancing market and also was a market which eventually would decline. 

Jason Bordoff [00:12:57] And what about clean energy? Renewable costs are falling dramatically. Solar and wind are much lower cost to deploy than people thought would be the case. Some people thought many years ago. How much can renewables pick up the slack here and how long does it take to build additional capacity? 

Tatiana Mitrova [00:13:18] Tatiana Well, renewables are definitely important, actually. Now we do not have this luxury of choice. We need all energy available that we can reach. So renewables are part of the solution. But I would say it’s really disappointing to observe how all these bureaucratic barriers and endless permitting processes are slowing down these construction and implementation of the new solar and wind plants in Europe. It’s really a disaster how long it takes to go through the environmental impact assessment. Therefore, actually this year and next year, we might not see significant capacity additions. That’s my impression. 

Jason Bordoff [00:14:01] Is that changing with, you know, we had a permitting we’re having discussions about permitting in the United States with all of this Inflation Reduction Act money and how quickly can we build projects in the Repower EU plan. There was a directive from Brussels saying renewable energy projects are urgent now, not only for reasons of climate change, but now for national security reasons as well. And you have a year to get them done. Is that having any impact? 

Anne-Sophie Corbeau [00:14:25] I think it has little impact, but I don’t think it has a tremendous impact. I mean, based on the objectives of people. Well, you you would that you would need to add every single year about 80 gigawatt of solar and wind. So I don’t think this is about 50 times higher than what we had before. I don’t think we are going to get there in 2022 or 2023. But we need absolutely to accelerate. And I fully agree with the general. I mean, you know, this is a no regrets solution. However, because of bureaucratic issues, I mean, we are still struggling in order to install vast capacity as fast as we need, because it’s not only NIMBY issues that people are facing, but also, I mean, it’s all very good to have a wind plan coming. But if it’s not connected to the grids which it uses. 

Jason Bordoff [00:15:13] So what I hear you all saying is there’s a gap with lost Russian gas supply, with other sources of electricity production like nuclear. You can find some ways to fill the gap, but not all of it. So if you can fill all of it. As far as I can tell, there’s only one thing left, which is demand has to fall and that can be a managed, orderly, government led process or it can be high prices. Destroying demand is I think the latter is what’s happening now. 

Anne-Sophie Corbeau [00:15:38] This is exactly what is happening. So maybe for those who are listening, it’s important to take stock of the current situation. So first of all, when we will use the initial draft was published, the European Commission was aiming at reducing the imports of pipeline gas from Russia by two thirds by the end of 2022. It’s fair to say that Mr. Putin, as been a little bit faster than we had anticipated because right now as we speak, Russian flows, Russian pipeline flows, the equivalent of 25 billion cubic meters. In 2021, we were importing 140 billion cubic meters. So it was a two thirds objective as been literally overachieved by my. Estimate in 2022, we are going to import about 60 billion cubic meters of Russian pipeline gas. The LNG, however, is still flowing. We published a small paper on fatty acid flowing to Europe. That’s important. And actually I don’t think anybody neighbors of versions of the Europeans are complaining about that. What have we seen in terms of the supply? Well, we have seen higher end imports. We have seen higher imports from Norway. We have also seen higher imports from Azerbaijan. But really, I mean, the key has been LNG. We have also seen lower domestic production and lower imports from North Africa. So all together, if I add up all the numbers, I think we are going to have a plus 50 billion cubic meters of all this at the sources of supply. You compare that with the -80 billion cubic meters of Russian pipeline gas and you see both because of gas. And on top of that, we needed to increase the gas in storage to make sure that we would be able to face this winter because storage is absolutely critical in the region, which has so much of gas used for heating. So where do we get when we get at about 10% of demand reduction? This is where we are. Roughly. Roughly. But. We add the lower dimensions of residential sector, mostly because of the winter being middle has a beginning of the year. Now we are starting to see a price effect, but probably not as high as it’s really needed. People need to change their behavior and this is really complicated. You in the industrial sector, we are seeing a very strong reduction of gas demand and these worries me a lot. I am worried with our industrial sector is not going to survive the potential three years of very high gas and electricity prices and earnings of power generation sector, as I mentioned. When gas demand is up. So in order to survive this winter, it’s very important. But at a minimum we are at about 10% demand reduction. And then depending on how close we will ease, how much energy we can attract. What you hope we should be okay in terms of the storage levels, but it’s not over because we need to repeat that for the next two years because that is only but much of an energy which is going to arrive on top of what already exists. So next year we may be facing zero pipeline gas supply job because the only two quotes for which we are getting Russian pipeline gas right now are Ukraine. And there has been a bit of an increase in terms of military activity. For me, it’s a miracle that we haven’t seen any destruction of the pipeline infrastructure of Ukraine. And on top of that, there are some issues between Gazprom and Naftogaz in terms of the transit and the overhead, which is still flowing. It’s a Turkstream pipeline which is arriving just below Bulgaria and then is going up and supplying countries like Hungary with one maybe should be saying, because of the good relationship between the two, Prime Minister Orban of Hungary and Mr. Putin in Russia, maybe so we might just be down to 15 billion cubic meters per year next year compared to 140. So it’s going to be tough to replace this additional -45 pieces in 2023. Very tough. 

Jason Bordoff [00:19:56] So let me just say there was an incredibly interesting and detailed answer. I think if I summarize it very briefly, it is at the beginning of the crisis, the European Union had a goal of reducing Russian gas imports by two thirds. I always felt and I wrote this at the time, people seemed a little overoptimistic in how easy it would be to achieve that. And you’re saying we’re exceeding those goals because of the industrialization? In part. 

Anne-Sophie Corbeau [00:20:24] We are exceeding those goals because. Mr. Putin. 

Jason Bordoff [00:20:26] No, I know, but I mean. 

Anne-Sophie Corbeau [00:20:28] But on the demand side. 

Jason Bordoff [00:20:29] But then the question on the demand side is, if you don’t have the gas, what do you do? And the answer is shut down meaningful parts of industry and hope it doesn’t get cold. 

Anne-Sophie Corbeau [00:20:36] Well, actually, you’ll go where on industry was actually done by themselves because this. 

Jason Bordoff [00:20:41] Is I mean. 

Anne-Sophie Corbeau [00:20:41] This is too high. And and the funny thing is that, you know, I think only a few politicians are starting to understand how bad this is getting because, you know, in the gas coordination groups or we have a color coding. So if you have reduced your gas demand by a high amount venue are getting the green color or if you have increase your gas demand, which happens in some cases you are getting red. This is bad. And I have heard, you know, some European politicians saying, oh, this is great. We have reduced gas demand in the industry by many percent. And I’m like, No, please, can you understand? I mean, this is absolutely terrible. If we are shutting down our industry now, is it ever going to recover? And then what about the job losses? The unemployment? People are going to lose their jobs and they are going to face high energy prices. Can you understand what is going to happen? Hey, yellow vest, They’re back. 

Tatiana Mitrova [00:21:35] Well, I would add to that that indeed there was very overoptimistic estimation for the last half a year, actually until the explosion of North Stream regarding the prospects of Russian gas supplies to Europe in the future. So I’ve heard many times of this question. Okay. How much gas could Russia supply to Europe next year? So there was this perception that, okay, Russia, Ukrainian conflict will be settled down somehow and then we will get Russian gas flows back again. So now I think half a year was lost in this illusions and all this emergency action plan. It should have started in March, I believe, not later in the year. But okay, now it’s again, it’s very important not to be driven by the new illusions that, okay, next year the supplies could recover and now Nord Stream is gone. There is one string left and it is still not clear whether it was damaged or not. But I cannot imagine getting permission for its utilization given the whole geopolitical situation. Yamal Europe through Poland without a settlement of the war. It cannot operate. I completely agree with Sophie’s assessment of the Ukrainian transit. It’s really a miracle that it was still not damaged. But now it’s also very important to understand that the war has entered into the new stage with this massive military mobilization inside Russia and with the decision last week to start targeted bombing of the Ukrainian energy infrastructure. Last week, actually, it was approximately 20 to 30% of the European of the Ukrainian power sector gone out blackouts. Most of the cities were left without electricity. And this is something that. 

Jason Bordoff [00:23:38] Because the power plants were shut, were damaged. 

Tatiana Mitrova [00:23:40] Because they were bombed. Yeah, right. Yeah. And therefore and Russia is planning now with all these mobilized troops. It’s planning now for a counter attack. Yeah. So that means that there will be more intensive military actions. And really the pipelines probability of their damage is rising enormously. Plus, there is a commercial dispute again and again between Gazprom and Naftogaz. So I wouldn’t put my money that this route will function next year. And with the TURKSTREAM, it was a very interesting announcement by Putin just yesterday. They had a meeting with the gun and they’ve agreed to make Turkey European gas hub. Putin has promised to expand turkstream and this expansion is supposed to replace I’m citing to replace Nord Stream. Erdogan was, of course, very enthusiastic about this idea, though frankly, I cannot imagine this happening. First of all, due for very simple technical reasons, those pipelines in the Black Sea, they have to be bleed at much deeper layers than in Baltics, and they require Western technologies which are not existing in Russia. So physically, who will build this pipeline and who will find them? And then it’s, of course, the question of who will use this gas. Who the hell in Europe would agree to sign up for new long term contracts with Russia after all these disruptions and blackmailing and this whole mess that we were observing this year. But there will be still these speculations. There will be these carrots shown from Russia to the European politicians, like, look, guys, if you give up Ukraine, you will get cheap Russian gas. So it’s very important. 

Jason Bordoff [00:25:37] What you think. The announcement. 

Tatiana Mitrova [00:25:38] Yes. Basically, I don’t see any other reason for that. So Anne-Sophie has mentioned Hungary. Actually, Italy is still receiving Russian gas. Serbia is receiving Russian gas. Austria is receiving Russian gas. So these countries, they will have rather high temptation. And by the way, there is also very interesting fact that Hungary and Turkey have obtained agreement with Gazprom that they will not pay for the gas supplied currently until the end of the next year. So they are getting this gas for free, which is obviously affecting their position regarding the whole conflict. 

Jason Bordoff [00:26:18] What’s your assessment of. What caused the damage to the existing pipeline routes and if, as many speculate, it was. Putin and the Kremlin itself. What’s the calculation there? Why is that a sensible thing to do? And how worried are you or should we be about European energy infrastructure after that in Norway or elsewhere? 

Tatiana Mitrova [00:26:42] I will start if you allow with the second question, and this is something that I am repeating again and again. This is hybrid war, which includes a lot of propaganda, which includes a lot of blackmailing. All the hacker attacks and cybersecurity issues and all the potential damage to the critical infrastructure, not only energy infrastructure. I’m talking in a broader sense. So we have to be prepared for further disruptions around the whole globe. It’s not limited only to the European region. And as I said, even in the military dimension, this war has moved up to the stage where the critical infrastructure is addressed. Crimean bridge, Ukrainian electricity system. Just yesterday, Putin has reported that Russian special services have prevented sabotage of the turkstream. God knows whether you just throw or not. But I mean, this is becoming part of a bigger game. So being in the shoes of energy companies, I would pay much more attention to the prevention and protection of their infrastructure everywhere. Regarding Nord Stream sabotage, I’m afraid it’s like with the question who has killed Canada? I will never know the right answer. But looking at how the Russian authorities were reacting and the first two days after the explosion, I would say that I’ve got a feeling that what they were not prepared for such a development. They didn’t react in a typical aggressive manner, accusing like the US and UK in destroying a Russian flagship project. Therefore, I’ve got to hit protesters. And again, it’s just a guess. I don’t know. But this could be an attack organized by the Russian special services, by this so-called party of war, which has actually removed the lost argument in negotiations so that Russia had for first settlement of the conflict with Ukraine and with broadly with the West. So now Russian negotiating position is much weaker. And that means that Russia basically has no other way rather than to increase military expenditures, which is for the benefit of these guys and to increase military aggression in Ukraine. And I would say that the discussion inside Russia is now it sounds really terrible, but people are seriously discussing whether the tactical nukes should be applied for the Ukrainian infrastructure. So, yeah, we are talking about very marginalized group and this group has tremendous technical capabilities and financial capabilities. So therefore, again, I would warn everybody, please pay attention to the energy infrastructure. And one final thing that I want to mention, not to mention regarding infrastructure. There is a really terrifying situation now around nuclear power plant in Ukraine. Is a barracks. Any nuclear power plant which is basically occupied by the Russian forces, it is under Russian military control. It is being bombed actually every day. Several times during the last couple of months, it was left without any electricity supply, which means they’re using diesel generators just to cool down the reactors. And as you can imagine, if if something goes wrong with the diesel supply, which can be in the occupied territory, then we can end up with another Chernobyl. So this is another extremely frightening part of the whole hybrid war, which should be closely watched and monitored. 

Jason Bordoff [00:30:48] That’s a worrying outlook. You were talking about damage to power plants before. One, consequences, loss of power. But when you’re talking about nuclear power plants, the consequences can be quite a bit more severe. I do think, by the way, it was Lee Harvey Oswald. So I just want to say there there may be more uncertainty about Russia than there is about who killed Kennedy. In my view, there may be others who disagree. Let’s talk about the policy response in Europe, how people are handling this in the immediate crisis and what they’re doing for the longer term and whether it’s sensible. It seems like policy response number one is just step in to pay the difference and protect consumers. Madam. Massive amounts of government spending that seems fiscally unsustainable. You tell me if I’m wrong. To cap energy prices, to subsidize energy prices, to just deal with the fact that energy is becoming unaffordable for many people. And Sophie, what do you what do you see happening in the policy response in Europe? And is it a what should they be doing that they’re not doing? 

Anne-Sophie Corbeau [00:31:48] So I think the first policy response was to try to secure alternative gas supplies. And this is why we have seen a lot of our politicians going around and trying, you know, to talk to mean the Americans. So that was a deal in in earlier this year, going to Azerbaijan, going to many countries. I have to say probably the most successful among all the politicians was Prime Minister Draghi, because, you know, any visit could deal with Algeria. They went to Egypt and also they used the position that in years in many African countries in order to try to get additional supply of our politicians, we are not always that successful. I have to say that the Germans are not very successful at all. So the last trip of Mr. Short to the Emirates, Qatar and Saudi Arabia, what he came back with, one that in Chicago from the Emirates, actually to replace which pipeline gas you would need about 500 per year. So. 

Jason Bordoff [00:32:47] And is that because they can just get a better price elsewhere or is it people don’t want to sign long term contracts because of the energy transition? Why is that? 

Anne-Sophie Corbeau [00:32:54] Because essentially, because there is a lot of concerns among the utilities that, you know, because the decarbonization of the European economy coming and how long do we need to use natural gas, especially when you are looking at the EU objectives which, you know, foresee a very strong decline of natural gas demand. And then when you are looking at the mix, you are looking at, you know, what is going to happen in terms of biomethane, what is going to happen in terms of the production, which is going to happen with all these pipeline suppliers that we are asking to supply more natural gas. So that is really this big gap between, okay, we need LNG, we need additional natural gas now in the next few years. But we don’t know what is going to happen post 2040. Now, with the second part of your question is about indeed this policy action and this action has been really focusing on trying to reduce sea price impact because the prices are really, really high. So on the gas price, I said already, I mean, we have seen prices of the equivalent of $3 per barrel for many months now, but also electricity prices. We have seen them going to over 1000 you to begin with. Our which is completely crazy. So the European Commission has come up on the electricity side with one mechanism, which is that for all the what we call the informational producers, which is typically nuclear height or wind, solar, there is going to be a cap at 1.80 or per megawatt hours. So whatever is between one and, what, 80 and the spot electricity price is going to go into a big phone, which is going to be distributed in order to supplement to to support the consumers. Another thing which has been done in Iberia is to cap the price of gas in the power sector that I have to say, as had mixed results, first of all, because a measure which is paid basis is a billion consumer. Segunda Because we have moved natural gas bulk plants done in the middle there. Guess what happen? Gas demand in the power generation sector has exploded because, I mean, you know, gas is suddenly cheaper. So this is what is happening. And then we have been also some side effects like more exports was planned because the price of the Spanish electricity was much too Wolf. And so, of course, you know, there has been B side effects. And this is something that they want to expand to the whole European system. But keep in mind, we are already consuming more natural gas in our generation in Europe. So if we do the same, I’m really worried about what could happen pan-European. Now let’s look at what is proposed on the gas side. Many things have been proposed actually to try to reduce the price of natural gas at the wholesale level. I’m not speaking at the end user level because this is what all countries are currently doing to some extent. So the first suggestion was let’s try to reduce the price of gas coming from Russia, as I mentioned before, Russia as well. Would you withdraw significantly its supplies towards Europe? So guess what would happen if we were capping the price of Russian gas? Well, probably Mr. Putin would cut all the gas going on by. Line and Comanche. Second thing. Well, let’s talk to our trusted allies. I’m quoting here the last letter of Mrs. The Legend on the 5th of October. No way. Which she’s a pipeline gas supplier to try to find an agreement on maybe capping the price of natural gas coming from Norway and other long term energy relationship with them. I don’t know. I mean, the kind of wording in, but it was a little bit strange. I was really wondering whether she was talking about, you know, hydrogen, maybe blue hydrogen coming from Norway eventually, but basically Norway. We like you very much. Can you please send us gas at a lower price? Do remember I mean, no. Where is the big gas producer? This is more than 100 billion cubic meters, which is going mostly to the EU, but also it was UK, which actually adds another problem. What if the EU gets a deal and you get those end ups? Maybe a small problem inside then where he’s where the biggest problem, which is we need to also reduce the price of energy which is coming to Europe. Aha. But yes, but we are in competition with Asia to get better energy. So if we kept the price of LNG. So he’s a potential risk president and she’s not going to come back to Europe. And a lot of people are thinking, so how can we actually reduce the price of gas but make sure that LNG is coming to Europe and this is really potentially difficult? And when is the fourth problem, which was already highlighted by Mrs. Van der Breggen in our State of the Union address on the 14th of September, which is about the idea of price support, its price which has been, you know, that’s the. 

Jason Bordoff [00:38:12] Benchmark price for gas. 

Anne-Sophie Corbeau [00:38:14] In Europe, which is a Dutch price, will be a certain number of spot prices in Europe, but the one in the Netherlands are TBTF as being the most liquid among all the hubs. They are all the hubs too, because they plug the hubs also in Germany, very big in France, etc. But it has been really used as a way for supplies for the whole European market, except for the UK, which has and BP so has not adapted again quoting the letter. So therefore we need to replace it by something else. Something else. What is proposed is we can use the north west European LNG marker and honestly this is not really a spot price. It is just a marker of the depth of liquidity, the transparency of TBTF. They want to create a new benchmark. But what we don’t understand is that in order to have a benchmark which is as transparent and liquid as ETF, I mean we needed a decade to develop that. This is not something which is going to develop overnight and also doesn’t address the issue of all the contracts which have been based on TBTF and how you are going to basically have to rewrite. And we do all these contracts for sure. The low years of lot of happy days in front of them. 

Jason Bordoff [00:39:30] Tatyana That was a great overview of all the options on the table and in many respects why all of them have have problems with them. But policymakers have to do something, I think. So what should they be doing? What’s the right policy approach here? 

Tatiana Mitrova [00:39:47] Well, I think that there are several things which I mean, which are low hanging fruit, which are obvious, and which are bringing lots of benefits both in the short term and in the longer term. And I’m not talking about unified LNG buyer or about price caps. I am talking about, first of all, energy efficiency. I mean, again and again and again, there are lots of opportunities to reduce energy demand without actually dent de-industrialization, without lowering the level of life. It’s rather about consumer behavior and self-discipline. And I mean, up to 20, 30% of the demand is simply wasted. And it is very important to focus on this part. And this is important not only to survive this winter and next winter, but also if we are serious about our climate goals and energy transition. And then on the renewable side, and I’m talking not only about solar and wind on the utility scale, but about the whole bunch of different technologies, about hydrogen, about heat and electricity storage, about heat pumps and many, many other technological solutions which are becoming available already, but they are not scaled up to the extent needed. And here we have these huge headache with the permitting process. And I keep repeating it again and again because I am facing it in my everyday life. Nine months I am trying to obtain permission. To install rooftop solar. That’s crazy. And then it is also about building the supply chains or building the expertise inside the EU. I mean, if there would be funding for education and preparing of the specialists to install those rooftop solar and even there would be like agencies buying those solar panels for rooftop solar and even there would be quite simple financial instruments like loans or any other available for the residential consumers so that you do not have to finance that yourself. I can assure you that many, many people in the European Union would prefer to make those steps to decrease their energy consumption and to increase their exposure to the green energy. And it will be again, it will be beneficial in the long term as well. 

Jason Bordoff [00:42:30] I want to turn to another topic, But but just quickly and Sophie, you talked about the balances, how much Russian gas has been disrupted, pipeline gas. And I believe you said LNG from Russia continues to flow. Is that. Likely or unlikely to continue. 

Tatiana Mitrova [00:42:48] Tatiana While I think it’s likely to continue on, unless the EU will sanction it. So that’s the only reason which can stop these supplies. They are slowly more and more diverting to Asia, I would say, because there was some self sanctioning in Europe now. Well, when European workers in the seaports were simply refusing to reload those tankers. But basically, yeah, those volumes are still coming. And it’s not only, let’s say Russia owned volumes, these are also volumes owned by total by CNPC. And therefore it’s they have Russian origin, but they can have different labels when they come to the customer. 

Jason Bordoff [00:43:36] You just wrote about this. 

Anne-Sophie Corbeau [00:43:37] Yes, indeed. But I mean, it’s very important that Russian that energy continues to flow because, again, you know, I mean, we have a global market. Russia is a fourth largest LNG exporter. We do not want to be 40 billion cubic meters to go. They have to continue to flow and they have to say, I mean, Europe is indeed continuing to import all of that. And g. I mean, the only two countries which are pretty stop between Europe and the United Kingdom’s rest of the countries, including France, is happily importing all this special LNG and nobody cares because this is LNG. 

Jason Bordoff [00:44:08] Whether Putin wants to continue it. Maybe that’s a question. I don’t know. 

Anne-Sophie Corbeau [00:44:12] If that is indeed a risk. And I could see the LNG being used as a tool against unfriendly countries and in favor of friendly countries. So we talked about, you know, the difficulties of countries that use Pakistan and Bangladesh to get affordable LNG. Imagine, you know, Putin is saying, okay, you European countries, Japan and Korea, you’re really unfriendly. And these are the biggest buyers of that energy available two quarters of all the Western LNG. I am going to market as a guest with a friendly countries who wants an oil indexation contract for the next ten years. And I am sure, I mean, Bangladesh, Pakistan and all these countries would potentially sign immediately because or indexation right now it’s maybe, you know, 12 to $15 per MMBtu, which is a bargain. 

Jason Bordoff [00:44:59] On December five. The ban goes into effect in the EU on insurance and financing on services and Europe’s purchase of Russian crude. And then February of next year, Russian refined petroleum products. Leave aside for the moment, the idea of a price cap will come to that in a minute. But forget the price cap when this ban goes into effect December 5th. Is it a big deal or is it not? Is it pretty easy for a Russian oil to find other insurers and other tankers and find other global markets, or is it going to be disruptive to how much oil there is in a tight market? 

Tatiana Mitrova [00:45:33] Well, it’s not an easy switch, definitely. The Russian oil companies have been preparing for that for already more than six months. So they are building up a new supply chain. So they are looking for new insurance companies. They are creating insurance company inside Russia. They are building a relationship with the insurance companies in China, India and elsewhere. So they are looking for all these bypasses which would allow them to keep operations despite this new regulation. But obviously, supplies which are going now to Europe will have to stop. They are at the highest level in July or August because all the customers are trying to offtake as much as possible as long as it is possible. 

Jason Bordoff [00:46:23] And just to be clear, for people listening, it’s a ban on seaborne. 

Tatiana Mitrova [00:46:26] Yes, crude. And part of the pipeline supplies which are going to not Western Europe, to Germany in particular. And then so, of course, for Russian oil industry, it will be quite painful. And I think that part of those supplies, despite all the, you know, optimistic statements of the Russian authorities, that they will not be able to completely replace those lost volumes with Turkey in the Middle East and the other customers. But at the same time, it wouldn’t be a complete collapse. So they will lose probably maybe one 1.5 million barrels per day, which is unpleasant, but it is still far less than the volumes lost in 2020 during COVID and then redirecting those volumes. So then we come to the most interesting part of this global equation, because Russia is looking now for the new markets. First of all, already quite traditional customers in China and India who were actually buying growing volumes of Russian crude and products since February. But we see actually that they are these purchases are reaching plateau. So it is cheap oil at good discounts, but their capacity to absorb more of that is not clear. So where exactly this oil will be diverted, I am not quite sure that it will find a place at an acceptable price for Russia. And here actually we are moving to the question of the price cap. So what will be the reaction of different players? I mean, with the US, UK and the EU, everything is clear. These countries anyway have already announced oil embargo, so it doesn’t matter actually whether they are implementing price cap or not. Russia made it very clear that it will not supply any oil to any country which has announced oil price cap. 

Jason Bordoff [00:48:36] And you think they will stick? 

Tatiana Mitrova [00:48:37] Yeah. Yeah. Here are I am quite convinced that they will stick because. 

Jason Bordoff [00:48:41] I asked the deputy Treasury Secretary this week in Columbia, why does Russia just not refuse to sell? And he said they need the money and they don’t want to hurt countries that are more friendly to them, China or India or others. Do you think that’s wrong? 

Tatiana Mitrova [00:48:52] Yeah, but China and India are not joining price cap. Okay, So, so those who officially announced price cap, I think they will not receive any Russian oil at all. So the key question is about the rest. There are no secondary sanctions in this whole framework of oil price cap. And I think the governments of China in they at least made it very clear that they are not supportive to the very idea. Now, not even mentioning all the other countries which seem to be quite irritated by this idea for very obvious reasons. So then there could be a very interesting combination when the governments of these countries are saying, oh, no, no, we are not supporting this price cap and we are ready to cooperate with Russia and to buy a Russian oil, and then Russia doesn’t have any grounds to stop supplies to these countries. But on the corporate level, when it will come to the real price negotiations with CNBC, let’s say, or with any Chinese independent refineries. The companies ought to be able to tell their Russian colleagues, Look, guys, there is a price cap and yeah, okay, we are ready to buy your oil, but maybe 50 $53 per barrel would be a good price. Or you can go elsewhere and look for the other customers. 

Jason Bordoff [00:50:17] Well, that’s the Treasury Department’s view, right, that nobody wants to pay more if they don’t have to. And now they have a mechanism to say, you know what, We really do prefer Western insurance. We really do need the financing from the banks. And sorry, we need an extra five or $10 discount to get below this price cap. You think Russia’s response to that will be sorry, we’re just keeping it on the ground? 

Tatiana Mitrova [00:50:37] No, here I think Russia will have to sell this oil at a discounted price because it is already selling this country’s oil at a discounted price. And as I’ve mentioned, it is already selling gas to some of its counterparties at zero price. If we are talking about Turkey and Hungary. So in order to prevent this relationship, in order to keep at least some cash inflow, I think Russia will accept it. And there is this hypocrisy in this whole scheme. But that’s the world, the way how it works. 

Jason Bordoff [00:51:12] Let me ask you a question and Sophie, comment on it to the end. We’re talking a lot about oil. And then in February, there’s refined petroleum products and talk about the situation. People think there’s often more attention paid to oil than there is to gasoline and diesel. But in many ways, the risk to Europe is even greater from a disruption in gasoline and diesel exports. And the implementation of a price cap seems to be harder or more complicated. It’s an extra step removed. How do you even set the price cap? What will be the market, in fact, and what will be the effect on energy price and supply? You said earlier that there’s a big risk coming for Europe that we’re not talking about, not just because of gas. And you said coal, but you said. Gasoline and diesel, particularly diesel, too. Yep. 

Anne-Sophie Corbeau [00:51:59] Yep. 

Tatiana Mitrova [00:52:00] You see how in a normal life, if these measures would have been implemented slowly, I think the oil market and petroleum product market, it is quite liquid and flexible. And there is an opportunity to replace Russian oil products by the oil products from India, from the Middle East and elsewhere. But when it happens at such a urgency and with all the mess which normally accompanies urgent decisions, with the disruptions and barriers suddenly arising to which people were not properly prepared and the regulators were not properly prepared, and there are no protocols actually how to follow and how to enforce this price cap decisions and how to deal with the companies which are violating, for example, insurance restrictions and so on. This will generate a lot of mismatches and disruptions, and so it simply takes time to settle it down. But it wouldn’t be such a problem if not for the winter, if not for already extremely tight market, where any disruption can result in a much bigger spillover effect. 

Jason Bordoff [00:53:20] You agree with that? 

Anne-Sophie Corbeau [00:53:21] I absolutely agree. I mean, you know, I think in some extent in some sectors, I mean, you know, in order to replace natural gas, some industry was able to switch to refined products. So, you know, even those refined products are missing. This is going to just walk into a situation in the industrial sector. 

Jason Bordoff [00:53:39] The I want to conclude by asking you to look a little bit further out, not 2050, but but what comes next down the road? I think the common perception now is with economic pain, Europe will get through this winter, but now people are even more worried about next winter and maybe the winter after and after. This is a multi-year crisis, not a one year crisis. So in terms of the market outlook and also the policy outlook, what do we expect for additional policy measures? Europeans are talking about restructuring electricity market. So pricing is set not for renewables, not based on the marginal price of gas. What are the additional policy measures you see too? So both the market and the policy outlook for the next couple of years. 

Anne-Sophie Corbeau [00:54:22] I think first of all, I mean, as you mentioned, I mean, very soon need to have a really pragmatic focus on demand and reducing demand. I mean, when I see the reaction of some people to the measures presented by the government, like you are a shop owner, you are using air conditioning during summer and you do not want to close your doors. I mean, does that make sense? It doesn’t, but this is a reality. You I mean, I went to several hotels and, you know, they were heating and the windows were open. Does it make sense, though? It doesn’t make sense. I went to a train in Italy. The air conditioning was blowing. It was actually extremely cold. I had to put my jacket on. It was 40 degrees outside. Does it make sense, though? It doesn’t make sense. There are so many things which, I mean, shouldn’t make sense and are not implemented that it’s really blowing my mind. So absolute focus on demand and really reducing demand. I mean, without, you know, becoming give man an ability in the -15 degrees. No, but I mean, there are things which can be done. Then on the policy aspects where I mean, first of all, keeping, you know, my favorite subject, keeping nuclear power plants in Germany would be a good thing. But, you know, generally, I am absolutely amazed at how much government intervention is happening with this. And they have the impression and this is actually shared by many observers of the European market, that we are going back to decades ago to somewhere where we have a lot of regulation and market intervention. So it’s as if, you know, all the liberalization that we have done over the past two decades is just going away and people wished, why don’t we have these all good fashion integrated companies again that can streamline those infrastructure and we not have, you know, all these problems with permitting, etc., or maybe less. But everything is going right because there is a real question, can the market actually solve our problems? And I think this is absolutely key. Fundamental question for you. Hope for both next coming years, can we leave it to the market or do we have to basically do everything out of the market, which is what has been happening for many years? I mean, if you are thinking of some investments that happened because they are outside of the market. 

Jason Bordoff [00:56:45] Yeah. I mean, Meghan O’Sullivan and I had a piece in Foreign Affairs this summer about why the longer term implications of this crisis would be a much larger role for government intervention in the energy sector. And I think we’re seeing lots of near-term ways in which that’s that’s right. Just quickly, the the outlook for next winter, how bad will it be if Russian gas remains at incredibly low or zero level? 

Anne-Sophie Corbeau [00:57:07] It’s going to be particularly complicated because as I mentioned, I mean, you know, we were at one of, what, 40 billion cubic meters in 20, 21, 20, 22, 60 billion cubic meters if we keep turkstream and only TURKSTREAM 15 billion cubic meters. So you can see that we have lost about 1.25 billion cubic meters. So on the supply side that he’s never going to be enough supply, period. That’s it. So we have to reduce demand one way or another. So we need to solve all our problems at once. We need to solve so we see the problem. We need to reduce a little bit of the mining industry without completely decimating our industry. And we need to address the problems in the power generation sector. And we hope that, you know, on the weather side, the window is not too cold, the summer is not too hot, and we have decent wind force of that height always coming back. 

Tatiana Mitrova [00:57:59] Yeah. I just want to add that some silver lining to this really dark and gloomy cloud. But still, I’m convinced that it is a unique opportunity. Painful, difficult, really difficult, but opportunity for Europe to very quickly rebuild its energy. Sector, first of all, to rethink its energy demand. It is very important and it takes ages before people start to change their behavior. Now they will be forced to do it now. On the other hand, I mean, indeed, the governmental interventions, they can lead the process. But my God, it’s so important that the governmental interventions do not create additional bureaucracy and the additional barriers. And there are some areas where the intervention should be focused on removing these barriers and allowing the markets to work. When you have €2,000 per month electricity bills, you will invest in rooftop solar. Just please allow me to do that. Don’t prevent me from doing that and it will work. And there are many other solutions which will be implemented by the individuals, by the commercial users, and by the industrial users, all the solutions of the own generation. They will be implemented and it’s a unique incubator for all the green technologies. Just don’t prevent them from happening. 

Anne-Sophie Corbeau [00:59:36] You know, we’ve my husband, we looked at, you know, could we actually set up our own PV blockchain and developing that by ourselves? It’s not possible. Also, you know, trying to install a whole rooftop solar. I mean, there are so many obstacles to do that for on your own. And this is really, I mean, infuriating much more my husband and myself. But you know, so many things that could be removed so that, you know, intelligent, clever and capable people can actually, you know, take the fight to their own ends and do something about it. 

Jason Bordoff [01:00:05] Yeah, I certainly agree. There’s opportunity and crisis. And I think I said in the session this week, our big conference, you know, we will never forgive ourselves if we look back on this moment of real crisis and pain and think we missed the opportunity to now combine the urgency of decarbonization with the imperative of energy security and move toward a different energy system, as you said, thinking more about demand energy efficiency alternatives like renewables and electric vehicles to reduce our dependance on globally traded oil and diesel gasoline. The part that I’m not sure I know is how does Europe remain an industrial powerhouse without cheap Russian gas? LNG is expensive. Green hydrogen isn’t quite there yet and is pretty expensive. Is there a path forward for industrial sector in Europe? 

Anne-Sophie Corbeau [01:00:55] This is exactly the key question and this is a particularly complicated one. I mean, even, you know, with the previous politics I had, we did that because so if we are importing hydrogen, which is going to be much more expensive, I mean, how is that really helping us with the Japanese version of our industry? If, you know, first countries which are producing hydrogen can actually export the semi-finished finished product to us? Yeah, and I think there is a real risk. Some people in Europe may actually be very happy that, you know, we are removing these important parts of the polluting, you know, which are emitting a lot of CO2 emissions. But you know, from an economic and industrial perspective, this is actually going to one direction. Don’t forget about one thing. One thing that we discovered with COVID is that it would be nice to actually have a pharmaceutical industry in Europe which would be producing, you know, the mask and all these products because we were too dependent on China. We have been trying to we show a lot of industrial capabilities, building batteries, Electrolyzers How exactly is that going to happen? We vote electricity or energy to power all these factories. But two key question and nobody seems to answer this in theory that, oh yes, we are going to build all these things. Yes, we’ve which energy exactly are we waiting for? 2025 and all of you said energy to arrive. So let’s finally, you know, we can build new things. Difficult. 

Jason Bordoff [01:02:19] And Sophie Corbo, Tatiana Mitrovic, thank you for joining us again on Columbia Energy Exchange. A really fascinating hour. I’m sure there’ll be a third and a fourth part. I think eventually what we should really do is just add to our Columbia Energy Exchange podcast, a weekly podcast with the two of you, which would probably have far higher listenership. So it really fascinating conversation. I learned an enormous amount. Thanks for being with me and for the work you do here at the Center on Global Energy Policy every day. 

Anne-Sophie Corbeau [01:02:46] Thank you. 

Tatiana Mitrova [01:02:47] Thank you, Jason, for great questions. 

Jason Bordoff [01:02:52] Thank you again, Tatiana and Anne-Sophie. Thanks to all of you, our listeners, for joining us on this episode of Columbia Energy Exchange. The show is brought to you by the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs. The show is hosted by me, Jason Bordoff, and by Bill Loveless. The show is produced by Aaron Hartig, Stephen Lacy and Cecily Mesa Martinez from Post Script Media. Additional Support from Akash Loj Pierpaolo Cazorla, Adi Fishman, Daniel Prop, Natalie Volk and Kyu Lee Greg Vill Franke engineered the show. For more information about the podcast or the Center on Global Energy Policy, visit us online at Energy Policy dot Columbia dot edu or follow us on social media at Columbia View Energy. And please, if you feel inclined, give us a rating on Apple Podcasts. It really helps us out. Thanks again for listening. We’ll see you next week. 

Europe is getting some much-needed relief in the midst of its energy crisis. Although energy prices are still high, a warm October and a surge in liquified gas imports brought spot prices down from record levels and gas storage to near full capacity. A worst-case supply crisis has been averted — for now.

But tensions are still high. Fears over Russian sabotage of North Sea pipelines are causing concerns about cuts to remaining gas supplies. Impending winter weather and a coming embargo on Russian oil are adding uncertainty to an already volatile market. European households and businesses will still see prices for natural gas and electricity well above average. 

Has Europe seen the worst of its energy crisis? What are the options for EU leaders to manage the energy crisis during the frigid winter months? How will further measures to pressure Russia economically affect the European economy?

This week host Jason Bordoff talks with Anne-Sophie Corbeau and Tatiana Mitrova about the winter outlook and the options for managing the energy supply. This conversation was recorded on October 14, 2022. 

Anne-Sophie is a global research scholar at the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs.

Tatiana is a research fellow at the Center on Global Energy Policy.

More Episodes


Relevant Studies

See All Work