There are less than half a dozen weapons that have marked the development of the Ukrainian war. But beyond the battlefield, the most strategic weapon deployed by Russian President Vladimir Putin has been energy.
Already in the summer of 2021, Russia began to cut the supply of gas through its main gas pipeline, the Nord Stream I, to Europe, generating strong tension in energy prices. The outbreak of the war in February 2022 only exacerbated both situations, destabilizing European energy policy. “The war has catapulted a situation of tension in gas and electricity prices that had already come out of the pandemic and has triggered volatility,” explains Carlos Solé, partner in charge of energy at KPMG.
The price of gas in the international market of the Netherlands TTF, a benchmark in Europe, exceeded 300 euros in August 2022. Never imagined. The electricity rates of European households had been affected by this contagion for months. Spain had already sounded the alarm in the summer of 2021. The war placed 2022 as the most expensive year in history for the electricity market, which came to reflect peaks of 544 euros per MWh. “The year ended quite well, considering the strategic mistake Angela Merkel made in Germany regarding security of supply. That it has gone from not being in the debate to becoming the center of gravity of energy policy”, analyzes Luis Atienza, former president of Red Eléctrica de España (REE) and president of the energy consultancy Argo Capital.
This new environment leaves affected by the war beyond the Ukrainian territories. According to the International Energy Agency (AEI), 70 million people with access to energy have ceased to be able to pay for it in the last year. An extreme situation that has triggered strong political changes, especially in Europe.
“Spain, due to its peripheral condition, has always had the need to ensure supply. All the governments have invested a lot in that, and this crisis caught us much better than the rest of Europe”, says Atienza.
An advanced vision that the country has also displayed in this crisis. The Government of Pedro Sánchez was one of the first to detect the impact of the war on homes and managed to approve measures that would have been unthinkable in another context. Among these, the so-called Iberian exception stands out, which separates the price of gas from the price of electricity and has allowed savings of between 4,000 and 5,000 million euros for Spanish customers. A measure that even the CEO of Endesa, José Bogas, has requested that it be extended to all of Europe. Spain must also manage to open the debate on the reform of the electricity market to ensure the future of investment in renewables to compete with the incentives that the US has also approved.
A whole boost to green energy and future energy independence that coexists with the contradiction that 2022 resulted in a 1% increase in CO2 emissions, given the need for many states to resort to a greater use of polluting energies , like coal, to make up for the lack of Russian gas. In any case, the historical change that this energy shock has brought about has no brakes.
“The war has raised awareness of the need to reduce consumption and save. In the case of the industry, the demand for natural gas fell 22% from last August to January 31, 2023, compared to the demand of previous years. We do not know if the current situation is marking a floor in gas prices or not. It will depend on various factors such as the ability of the US to continue supplying LNG at the levels demanded by Europe and the behavior of demand from China”, points out Carlos Solé. Of what there is no doubt, at least for Luis Atienza, is that "Russia has lost the energy war, because Europe has reacted reasonably cohesively, the weather has helped, and time is playing in our favor because we have gained reaction capacity in the development of renewables and alternative international supply. In addition, oil and derivatives have to be sold at lower prices, and for pipeline gas there is no alternative in the short-medium term, ”he assures.
