The recession may have provided a stay of execution for European energy security but dangers persist, according to Datamonitor. Latest research by the independent business analyst suggests that while improved interconnections within Europe and continuing advances in energy efficiency should ensure security of supply is reasonably well assured, collective reliance on external gas supplies will increase to unprecedented levels.
Kash Burchett, energy analyst at Datamonitor, says: “It appears that the period 2016-20 will see problems emerge. The construction time required for new nuclear reactors and even new combined cycle gas turbine plants, in conjunction with a planned nuclear phase-out and coal-fired generation shutdown, present potential capacity constraints in many countries.”
He adds: “Reliance on non-EU gas supply in the total primary energy mix will be greatest at this point. Should an unforeseeable interruption to supply appear at this time, the consequences could be dire. In light of this, it seems increasingly likely that, although governments have not yet admitted it to their electorates, nuclear phase-out will be delayed in many member states.”
Datamonitor’s research also reveals that Europe’s security of supply hinges to a large extent on the continued expansion of global LNG (liquefied natural gas) output and limited competition from the US for deliveries within the Atlantic basin.
Given the shale gas revolution, this seems a reasonable assumption to make for the next five years, but it becomes riskier after that; well-decline rates may yet limit the long-term impact of unconventional extraction techniques.
Furthermore, slowing investment in global liquefaction capacity as a result of the recession will make itself felt around 2017 and Asian (specifically Chinese and Indian) demand for LNG remains a wild card. The current LNG glut may well tip into a seller’s market just at the point at which Europe shuts down coal and nuclear plants and dependence on LNG reaches its peak.
“This reinforces Datamonitor’s conclusion that European nuclear phase out must be delayed,” explains Kash Burchett. “The ‘perfect storm’ brewing on the horizon is well recognized in European capitals and many governments have already announced plans to push back the shutdown of their plants. Those which have not, particularly Spain, Germany and Belgium, need to make the case to their electorates and soon.”