Winter is Coming: The Cause and Effect of the European Energy Crisis 

Ana Maria Jaller-Makarewicz shares much-needed insights on the cause of Europe’s energy crisis, the EU’s efforts in alleviating this crisis, the viability of finding alternative energy sources, and more in the session, Decoding the Energy Crisis: The Fight of a Price War Against a Cold Winter. 

What is the core cause of the current energy crisis?

The gas crisis has led to the energy issues we’re experiencing now. It’s the dependency of Europe on fossil fuels and Russian gas. The problems with the gas supply from Russia started earlier this year. Europe had already reduced the amount of gas coming through Ukraine and intensified the flows through Turkey, hoping that the Nord Stream 2 pipeline would be operating. In the last decade, Europe has depended too much on one supplier for gas and has not thought of diversifying sources. Why? Because it’s easier and cheaper to buy gas from Russia. Europe has led itself into this dependency. Last year, 37% of gas consumption in Europe was imported from Russia. Even though there’s an ongoing energy transition in place, it’s not happening fast enough.  

Europe chose to rely on the easy option of importing gas at a cheap price. It focused on finding short-term solutions, which is a very human way of reacting. There could be other geopolitical or technical issues that could affect gas coming into Europe. However, I think Europe has made some right decisions this year. For example, filling and taking control of the gas storage. Even the gas storage in Germany was controlled by Russia. Now Europe is reclaiming that control, at least for the winter. The long-term solution for Europe is to diversify energy sources and look for alternatives. 

What measures have the EU taken to mitigate the energy crisis?

There have been some good measures like the gas storage I’ve mentioned before. Also, Spain and Portugal have put a price cap on the gas used for electricity. This has helped reduce electricity bills for consumers. I believe the EU is in negotiations to buy gas in bulk. I think we are in a seller’s market right now and the EU needs to work together to make better deals as a buyer. Not all the measures are perfect, but the EU is aiming to help the consumer by offering security of supply and continuing with energy transition goals. 

The challenge is that the energy market is volatile, and we cannot predict anything. Gas storage is already almost 95% full in all of Europe. Also, there are so many industries where demand has been disrupted. The volatility of the energy markets affects the prices that consumers are paying.  

Do you think that the U.S. should be allowed to dominate the global energy market?

Since the U.S. has entered the international market, gas prices there have gone up too. There are people in Europe who are suffering from high gas prices because the U.S. is selling. Unless Europe reduces its gas demand, there will always be LNG sellers trying to break the European market. Other than the U.S., Qatar, and Nigeria are expanding their LNG export terminals. Sadly, it’s a crisis and we shouldn’t be where we are. At the same time, the U.S. is just playing the mechanisms of the market. 

Are there any hidden business opportunities amid this energy crisis? What is your advice for business leaders?

There has been a growing interest in taking control of the supply chain of solar panels. In addition, I am very much in favor of replacing gas boilers. For example, around 70% to 80% of homes use gas for heating. The heat pump industry is growing in Europe. So, there are business opportunities there. In fact, several Nordic countries have transitioned to heat pumps even before the crisis.  

Any business investment in the energy sector must have three components – energy security, control of energy prices, and energy transition goals. The investments have to result in a sustainable future and help consumers in the long run. There must be a balance between those three components. Smart business leaders in the industry can accelerate technologies taking those three components into consideration.  

My advice to business leaders is to not panic and keep calm. I think any decision made from desperation could have long-term implications. Continue with the energy transition goals that were put in place prior to the crisis and try to find opportunities to invest in other parts of the economy. 

How has the energy crisis affected the well-being of consumers?

People in Europe are worried about the possibility of energy poverty. Consumer confidence is going down and they fear economic collapse. The current uncertainty and being bombarded with news every day is affecting their well-being. Right now, we need to find quick solutions because winter is coming. People are going to suffer if their homes are not heated. Not only will there be not enough gas or electricity, but it will become unaffordable. People are concerned that they may have to choose between buying food and buying gas for heat. 

Do you think the energy crisis will be solved after the winter season?

I don’t expect the energy crisis to be solved after winter is over. Nothing can be guaranteed because things change all the time. But I think the energy sector will evolve in terms of consumer behavior with guidance from governments and industries. I’m also concerned that we’re talking too much about supply issues. If we can change our demand patterns, maybe we won’t need the same amount of Russian imported gas. While finding other energy sources, we need to work immediately on the demand side. For instance, demand side management, energy efficiency, and replacement of gas boilers. 

*The transcript has been edited for length and clarity.