A rock-hard landing

In case you’ve missed the news, Germany managed to clinch a deal for LNG supply with Qatar. Long-term. Fifteen years. Great rejoicing must have been had in Berlin but I was most impressed by what the German economy minister said about the deal.

“I also wouldn’t be opposed to 20-year or even longer contracts,” Robert Habeck, said, as quoted by Bloomberg, following the deal. “The companies should just be aware that the buying side in Germany will become smaller, if we want to keep the climate goals.”

The first part of this statement may be a bit surprising to those who remember Habeck’s failure to secure an LNG delivery deal with Qatar earlier this year precisely because of his refusal to make a long-term commitment.

The second part, however, is just precious. What that part means is that Germany will — per plans — buy less and less LNG over the years but is willing to pay the full price because I seriously doubt QatarEnergy would have forgotten to include a take-or-pay clause in the contract.

What this means is that Habeck’s government has got really desperate. Nothing says desperate like going from a firm opposition to long-term contracts to a 15-year contract over a matter of months, and for volumes representing a tiny portion of total German gas demand (2 million tonnes annually equal 6% of former Russian gas export levels to Germany, which in total accounted for over half of Germany’s gas consumption).

Yet the deal is certainly good news because it demonstrates the German government has finally recognised the existence of actual reality where transition plans mean little but the availability of gas means everything. The problem is once reality begins reasserting itself, it doesn’t stop.

Over the past couple of weeks media have been reporting on the mild European autumn and its contribution for the comfortable levels of gas in storage. Reuters’ John Kemp even suggested Europe may make it to next spring with a pretty sizeable gas cushion still in storage because of that mild autumn that allowed for the almost 100% fill of storage facilities. I’m afraid he spoke too soon.

“Temperatures across Europe likely will plummet this month after a relatively mild November, and the heightened pressure on natural-gas supplies will test the region’s fragile energy networks,” Bloomberg reported this week, and then went on to quote a couple of meteorologists using complicated words in long sentences that all meant the same thing: winter is, if you’ll excuse the abused quote, coming.

It comes every year around that time, in fact, in the temperate climate of Europe. Also every year, it tends to be colder in the northern parts of the continent, which I can’t see being a surprise to anyone but, apparently, Bloomberg has thought it pertinent to note it in a news report.

As a result of this weather pattern, heating demand in Europe tends to increase in December and stay increased through February at least, although lately I’ve become accustomed to six-month heating seasons. It must be climate change. And a prolonged heating season means prolonged elevated demand for energy.

Germany, however, doesn’t need a prolonged heating season to find itself in some pretty serious trouble, if we are to believe the head of its energy regulator. All it needs is a few days of regular winter weather.

“Just a few freezing cold days are enough for a dramatic increase in gas consumption,” Klaus Mueller said in October, when the weather was still warmer than usual. “We will hardly be able to avoid a gas emergency in winter without at least 20% savings in the private, commercial and industrial sectors,” he also said at the time and I’ve quoted him before.

I will now have to repeat myself, for which I apologise, but it does bear repeating. Energy savings are easy to make when it’s warm outside. They are impossible to make when it’s sub-zero. Habeck et al may have realised they need to make a long-term commitment to LNG but it seems they have yet to realise the above simple fact.

While Germany enjoys its newly contracted LNG supply, the Swiss appear to have legislated limits to the use of, wait for it, electric cars. According to this story, which links to the legislation and I’d appreciate it if a German speaker can confirm its actual accuracy, Switzerland is preparing for electricity shortages.

As part of these preparations, the country plans to ask — or mandate, as I understand — EV drivers to reduce their use of the vehicles to only strictly necessary occasions. Satire risks soon becoming obsolete in the face of Europe’s energy reality.

In Bulgaria, meanwhile, we are going to try and crash our grid with air conditioners. Demand for ACs is om the rise because people are fretting about central heating costs —and availability in this uncertain gas supply situation — and betting on what they think is safe: electricity.

But the grid, apparently, has not been planned for so much electricity use in winter: central heating is still quite popular in the cities. In villages, firewood is king. So, according to one consumer group executive, “Except that buildings are not designed to undergo a change of the type of heating, the network may not endure, which may lead to breakdowns and power cuts.”

This sounds bad but it’s actually grimly hilarious when you learn that Bulgaria is the largest electricity exporter in Europe as percentage of total output. I won’t lie, I felt a bit of pride when I saw that. Of course, we’re also among the biggest emitters but I’d say the lower the thermometer’s column creeps, the less people tend to care about emissions.

Mean-meanwhile, people on Twitter are making cruel fun of Germany because solar output has become virtually non-existent and it’s having to generate more electricity from coal. At the same time, I’m glimpsing shy admissions that winter in Europe is not the best time for solar power, which I think is brave, courageous, and overall a good thing, not that anyone in Brussels will notice.

“The cold is getting nearer,” Jonathan Westby, senior VP for LNG at Jera Global Markets, said at the World LNG Summit, as quoted in the above-linked Bloomberg report. “People are starting to constantly worry about what is actually going to happen.”

The statement echoes what is perhaps the loudest talking point in energy reporting these days: uncertainty is growing, there’s uncertainty everywhere and it’s only going to get worse as the weather gets colder.

Let me correct this misapprehension. There is no uncertainty. The colder it gets, the greater energy demand will become, this is a literal certainty. In fact, it is one of the few certainties in life, along with death and taxes. The uncertain thing is exactly how badly politicians will fail at managing this certain situation.