The Daily Telegraph

Europe has ‘solved’ challenge of winter without Russian gas

- By Rachel Millard

GAS prices in Europe are expected to fall this winter after the Continent “successful­ly solved” the challenge of getting enough gas into storage, a leading investment bank has said.

Goldman Sachs expects gas storage sites in Europe to be more than 90pc full by the end of October, following months of high prices which have cut gas usage in Europe and Asia and attracted more shipments of gas to the Continent.

Those stocks will help Europe get through the winter despite huge cuts to Russian supplies, the bank said.

It now expects European gas prices to fall below €86 (£75) per megawatt hour in the first quarter of 2023, compared with previous forecasts of €94 per MWH.

Prices are forecast to fall thanks to “market relief ” about making it through winter. While the price forecast is about four or five times higher than long-term averages, it is far lower than the current prices of around €200.

However, Goldman expects prices to start climbing again next summer. Europe will need to refill storage for the winter of 2023 but will likely have to do it without any Russia gas.

Nord Stream 1, the key pipeline running between Russia and Germany, was flowing at normal rates until June but Russia has now shut the pipeline indefinite­ly. Goldman estimates prices will climb back up to €235 next summer.

UK prices tend to track those on the Continent as the market is linked. The UK’S relatively small gas storage capacity means its prices are often higher than Europe’s during winter.

Despite the encouragin­g storage levels, officials are braced for a potentiall­y difficult winter if Russia goes further in cutting off gas supplies to Europe, or the weather is particular­ly cold.

National Grid, which helps to balance out gas supplies, is introducin­g fees of up to £5m in total this winter to encourage heavy gas users to cut usage. The Grid will pay users who are prepared to be on standby to use less gas when needed to prevent an emergency.

These option fees would be on top of payments for actually curtailing gas when needed, with National Grid arguing they are required to encourage uptake of the scheme. It has asked regulators for permission to bring in the incentives urgently, so companies could be put on standby by mid-december.

In consultati­on papers, the Grid says Russia’s invasion of Ukraine has created “material risks to global gas markets” and it would be “prudent to incentivis­e Demand-side-response market offers to be available as a mitigation against these risks” and against “the unlikely event of a gas deficit emergency”.

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