Europe’s power crisis has ‘very little to do with Putin’: CEO
This image, from September 2022, shows a liquefied natural gas carrier arriving at a port in the Netherlands.
Siese Veenstra | AFP | Getty Images
The energy crisis hitting Europe has little to do with Vladimir Putin and one could argue that the Russian leader’s actions have helped improve the situation, according to Per Lekander, managing partner of Clean Energy Transition LLP.
During an extensive interview with CNBC’s “Squawk Box Europe” last week, Lekander – formerly a fund manager at Lansdowne Partners – explained how the situation in energy markets has evolved in recent months.
“This summer, after Russia cut off the gas…I thought the winter would be extremely disastrous,” he said.
“I really thought that…might be a lot of German industry shutting down…widespread cuts…and it’s been going – so far – much, much better.”
Referring to solar power capacity additions and liquefied natural gas terminals, Lekander then stressed the importance of reducing demand.
“I would say electricity demand is down 10%, gas demand is down about 20%, a little higher on industry, a little less on … personal, a little further north , a little less south, but … that’s about it,” he said.
“So I would say on the gas side, the worst is over from a security of supply situation.”
He was then told that while many experts believed the worst was over for now, the worst was yet to come next year.
“That’s wrong,” Lekander replied. “And…assuming those gas savings remain – because we can see it now, we’re having really, really cold weather, we’re still pulling less than the typical seasonality.”
“The main thing is that we hang on to the demand economy,” he said. “If we do that, and as long as we have access to LNG, which I would say seems very believable…we’ll see high prices for another one, two years, but I wouldn’t say on the gas side, it’s is a problem of security of supply.”
The situation with power was “a bit different”, however, he said. “Why we have an electricity crisis in Europe has very little to do with Putin,” he said. “I would almost say that Putin actually improved the situation,” he added.
Expanding on his point, Lekander explained that he believes the current situation is due to a number of factors.
“It’s the consequence of the long-term underinvestment in conventional long-term renewable energy red tape and then these political shutdowns of nuclear, coal, lignite, etc.,” he said. .
“You could already see it in 2018 and it’s starting to materialize,” he added. “What I’m saying is that [it] is better now, it’s because… some of these closings have been canceled… [in] Germany, for example. Second, you have this 10% reduction in demand.”
Lekander’s comments come at a time of huge disruption in global energy markets following Russia’s invasion of Ukraine in February.
The Kremlin was the EU’s largest supplier of natural gas and oil in 2021, according to Eurostat, but Russia’s gas exports to the European Union have fallen this year.
Major European economies have also tried to cut their own consumption and bolster supplies from alternative sources for the colder months ahead – and beyond.
At the same time, major industrial players such as Germany decided to bring a number of coal-fired power stations back into service to make up for the lack of Russian gas.
With regard to use, at the end of September the European Council announced that EU energy ministers had reached an agreement on “emergency measures to reduce energy prices”.
“The Council has agreed on a voluntary overall reduction target of 10% of gross electricity consumption and a mandatory reduction target of 5% of electricity consumption at peak times”, he said. he adds.
Security of supply is a hot topic at the moment, and on Wednesday it was announced that the UK and the US were forming a new energy partnership focused on boosting energy security and lowering prices.
The UK-US Energy Security and Affordability Partnership, as it is known, will be spearheaded by a joint UK-US action group led by White House and UK government officials.
Among other things, the group will undertake efforts to ensure that the market accelerates the supply of liquefied natural gas from the United States to the United Kingdom.