Sep 8, 2022 - Energy & Environment

The U.S. can't solve Europe's energy crisis

Illustration of the EU flag made of red neon stars indicating danger.

Illustration: Aïda Amer/Axios

Europe is entering the most treacherous terrain yet in its bid to move away from Russian energy — and the U.S. can only provide limited help, at least for now.

Why it matters: The West's response to Russia's invasion of Ukraine has seismically upended the global energy trade at a pace and scale unseen in decades.

  • The stakes for Europe couldn't be higher. Consumers face soaring costs, and energy-hungry European industries are already in distress and cutting output.

Driving the news: President Biden pledged that the U.S. would send more natural gas to the EU in a bid to help Western allies wean themselves off Russian supplies.

  • And it has — but the two regions face physical constraints that put a ceiling on how much near-term supplies can keep growing.
  • The U.S. is basically using all of its available capacity to liquefy natural gas — a process necessary to ship gas overseas — and Europe has limited infrastructure to actually accept the imports.

Where it stands: Before the invasion of Ukraine, Russia provided roughly 40% of EU gas supplies.It has fallen greatly already, and tight markets and geopolitical risks have sent prices soaring.

  • Earlier this year, the U.S. and EU announced an agreement for additional supplies this year and a major rise through 2030.
  • The near-term target seems fairly easily achievable — in no small part because the U.S. shifted much of its Asia exports over to European customers.

But, but, but: That might not work again this year.

  • Anna Mikulska, an expert in gas markets and geopolitics, tells Axios that while U.S. companies have ramped up liquefied gas shipments to Europe, greater competition for those supplies could loom.
  • And either way, it's still just a small share of European needs. Replacing the entirety of the gas Europe received from Russia last year is taller order, and won't come from any one country.

The intrigue: The U.S. gas industry is keen to continue ramping up shipments overseas, and more export infrastructure is already slated to come online in the coming years.

  • Industry is also calling for steps including faster permitting for export projects, pipelines to ship gas to the coasts for liquefaction and other policies.

However: These industry goals may run up against climate policies on both sides of the Atlantic.

  • President Biden is under pressure from environmentalists to curtail fossil fuel development. EU nations are already attempting a rapid and permanent move away from Russian coal, gas and oil by not only diversifying suppliers, but speeding transition away from from those sources.
  • That means a tricky dynamic when it comes to Europe's development of new import infrastructure and pipelines. Projects often rely on long-term contracts, but officials are standing by vows to deeply cut greenhouse gas emissions in the years and decades ahead even as nations need more gas now.
  • Major new gas infrastructure "kind of goes against often what's acceptable in many of the countries by both the government and the society, because they feel that one shouldn't be grandfathering natural gas into the system," Mikulska tells Axios.

What's next: EU energy ministers will gather Friday to discuss emergency measures to shield residents and industries from sky-high power and gas costs.

  • The crisis is already prompting European nations to unveil major aid packages to support consumers, including Germany's $65 billion plan announced over the weekend.
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