EU charts expensive path towards energy freedom - Reuters.com

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European Union flags flutter outside the EU Commission headquarters in Brussels, Belgium, June 20, 2018. REUTERS/Yves Herman

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MILAN, March 8 (Reuters Breakingviews) - The European Union is ready to kick its Russian gas habit read more . The European Commission has a plan to replace over 70% of Russian gas imports this year by ramping up liquefied natural gas purchases, green energy and gas storage. But energy freedom will likely come at a cost.

President Vladimir Putin’s invasion of Ukraine has been a tragic wake-up call. The 27-nation bloc imported 155 billion cubic metres (bcm) of gas from Russia last year, including LNG. That’s equivalent to nearly 40% of its annual gas consumption.

Replacing most Russian gas by next winter will be complicated. The Commission wants to cut 112 bcm of it this year alone, a draft seen by Breakingviews shows. The biggest chunk of the so-called RepowerEU plan, 50 bcm, involves boosting LNG imports.

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The EU has more than 200 bcm of capacity to turn LNG into usable gas per year, including UK terminals. Yet Spain and France are not well connected with the rest. And to ensure a European destination for LNG cargoes, which often ship to wherever prices are highest, consumers might have to pay in line with inflated gas prices that have already risen 10-fold in a year. A 20 bcm hike to LNG imports is more realistic, the International Energy Agency suggests.

Other measures are similarly eye-catching. The Commission assumes a 14 bcm saving of gas largely by EU citizens turning down their thermostats by 1 degree Celsius. And its aspiration to replace 20 bcm of gas with accelerated wind and solar projects is three times what the IEA pencils in.

Still, replacing 10 bcm of Russian pipeline gas by importing more fuel from places like Algeria looks doable. And a proposal to ensure that the EU fills up 90% of its gas storages before the winter is a legislative no-brainer. These facilities supply up to 30% of EU gas in winter, but some are controlled by Russian gas giant Gazprom .

RepowerEU will be a stretch, but nations could use state subsidies to limit the impact. Or they could tax windfall profits from energy companies, which the IEA says could raise 200 billion euros this year. But as with Covid-19, the shock will hit EU countries unevenly. The bloc showed unity in the pandemic by pooling resources to fund a 750 billion euro stimulus plan to help badly hit countries. Doing so to deal with an epic energy crisis is a logical next step.

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(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

CONTEXT NEWS

- The European Commission is set to unveil on March 8 a plan to drastically reduce European Union dependency on Russian gas.

- The plan envisages replacing 112 billion cubic metres (bcm) of Russian gas by year-end, through higher liquefied natural gas purchases, greater usage of wind and solar energy, efficiency measures, and the use of biomethane and other measures, according to a draft seen by Breakingviews. The planned reduction is equivalent to 72% of the EU annual import of Russian pipeline gas, which last year amounted to 155 bcm, including LNG imports, International Energy Agency figures show.

- Other EU measures would ensure a complete elimination of Russian gas usage by 2030, according to the draft.

- Under the Commission proposal, EU states would have to fill up their gas storage facilities by 90% at the beginning of each winter. Storage data shows that these facilities are currently 27% full.

- The Commission is also proposing to suspend some state aid rules to allow member states to compensate citizens and companies for the increase in energy costs following Russia’s invasion of Ukraine.

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Editing by George Hay and Oliver Taslic

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