Prague foggy sunrise, Czech republic

Europe’s winter mirage over energy savings

Gas consumption have dropped in most European countries due to high prices and mild temperatures. But this has not occurred in a just or sustainable way. Meanwhile, only a few EU States have taken the opportunity to implement stringent and coherent energy-saving plans.

Alberto Vela and Luke Haywood report.

Europe seems to have weathered its first winter in the energy crisis fairly well – gas storage tanks are brimming and serious energy shortages have been averted.

Although 2023 could hardly have started better for policymakers worried about the power supply, it’s too early to confirm that we are out of the woods. EU officials have already warned that the energy crisis is still far from over and filling gas storage ahead of next winter will be far more challenging.

What measures have EU governments adopted to save energy? How has the burden of reduced supply been shared? What lessons can be drawn for the next winter?

Determinants of lower gas demand

According to Eurostat, gas consumption in the EU dropped by 20% in the months ahead to winter (compared to the same period in the previous five years).

While this is good news and means that most EU countries are on track to reach the EU’s 15% gas reduction targets agreed upon in the summer (between August 2022 and March 2023), we should not draw hasty conclusions from these numbers. The reduction in gas demand has had little to do with coordinated government action. Neither has it been socially just nor necessarily good for the climate.

The fall in gas demand has been rather driven by a combination of exceptional circumstances:

First, the reduction was driven by consumers facing high prices, which prompted them to tighten their belts on their domestic energy consumption – especially those most vulnerable. Energy savings measures that reduce demand from a broad range of consumers could have reduced prices and avoided some of the high prices that contributed to energy poverty across the EU.

Second, unprecedented mild weather conditions –with some record-breaking temperatures in Central Europe on New Year’s Eve– reduced heating needs this winter. Thus the lower demand seen this winter is not necessarily an indication of a long-term reduction in demand.

Third, in many countries, lower gas demand simply signals a shift in energy sources, often for the worse. This means the reduction in gas demand did not always translate into lower carbon emissions. Countries like Estonia, Poland, Hungary and Germany have increased extraction and consumption of other fossil fuels (such as shale oil, oil, coal and lignite) to reduce their gas consumption. The German government gave the green light in June to restart 27 coal-fired power plants until March 2024 to fill the gas gap in the country.

A mixed bag of voluntary measures 

The EEB has examined the energy savings measures adopted so far by EU governments – both with respect to gas and electricity. The difference in stringency among adopted measures is striking.

Stringency of energy saving measures taken by EU governments

Most EU governments focused on voluntary saving measures via public information campaigns. For instance, Finland, Croatia and Estonia rolled out campaigns on how to save heating and hot water use. Czechia additionally offers an energy savings manual and free consultations for energy-efficient building renovations. Luxembourg has also offered consultation services for companies to help them implement appropriate measures to reduce gas and electricity consumption.

While raising awareness among citizens and businesses on how to save energy is helpful, measuring the results of such campaigns remains very difficult, especially when it comes to separating the effects brought about by warm weather and high prices. Current awareness-raising campaigns may work now, by highlighting high prices and their consequences, but their effect will vanish once prices fall back. Hence, voluntary measures are less reliable when it comes to reducing energy demand in the long run.

Wider scope and binding measures

Only 12 EU countries have established mandatory measures to reduce energy consumption and most of them target public spaces and buildings.

Target group and enforceability of energy saving measures taken by EU governments

From this group, only Germany, France, Italy and Spain have introduced compulsory measures to cut energy demand in both public entities and the private sector. For Rome and Berlin, Europe’s largest importers of Russian gas, targeting households, industry and small businesses with compulsory measures was imperative to reduce their dependence on Putin.

France and Spain, less dependent on gas than other countries, have put limits on the use of air conditioning and heating in businesses and ordered billboards and shop lights to be switched off at night. In France, companies were required to cut their energy use by 10% to avoid forced rationing of electricity and gas. Companies had to appoint an “energy sobriety ambassador”, and submit plans to the government to reduce their electricity consumption by October 2022.

Going a step further, Germany introduced a gas auction model that incentivises industrial consumers to reduce their consumption. The state reimburses companies that reduce their gas consumption by interrupting some production temporarily or in the longer term, ensuring energy security for critical sectors. Surprisingly, this demand management measure has not been adopted by any other large industrial gas consumer, such as the Netherlands or Italy.

Reasons for inaction

As of the end of November 2022, a quarter of EU states had not introduced any energy savings measures to reduce gas and electricity consumption.

For most of these EU Member States, the reason additional energy savings measures were not implemented probably lies in high gas prices, which led to a sharp reduction in consumption. Even in absence of any voluntary or mandatory measures, countries like Latvia, Lithuania or Romania are leading the drop in Europe’s gas demand.

Fossil gas consumption during August-November 2022

The only surprising case is Slovakia, which, together with Malta, has seen an increase in gas consumption ahead of the winter (by 2.6% and 7.1% respectively). While Malta has limited heating and cooling in public buildings and encouraged households to adhere to a set of energy-saving recommendations, Slovakia has not instigated any public measure to save energy in the last few months.

The Iberian exception

As in Eastern European countries, energy prices alone are affecting gas demand in Spain  – but here increasing demand rather than reducing it.

The so-called “Iberian exception“, a cap on wholesale gas prices introduced in June, has brought down energy prices in Portugal and Spain while these were soaring in the rest of Europe. The Iberian model subsidises gas and coal-fired power plants above a certain wholesale electricity price with the objective of reducing electricity prices in wholesale power markets. While the mechanism was effective in reducing bills for consumers, as it allowed electricity prices to better reflect the lower costs of renewables, it has also had an unwelcomed side effect: more gas-fired power generation.

Fossil gas demand, production and exports rose in Spain just after the introduction of the price cap mechanism. Despite having one of the strongest energy consumption reduction packages in Europe, this increase in gas use has put Spain off track to meet the EU’s gas-saving targets.

It therefore remains unclear what effect will the new EU temporary mechanism have on limiting excessive gas prices on the bloc’s energy-saving efforts. Finally, there are definitely better alternatives to combat high prices than subsidising fossil gas producers, like direct payments to citizens in the short term and investing in reducing demand for fossil fuels in the mid-term.

Gearing up for next winter

Reducing the gas demand has helped to ease pressure both on energy security and high prices this winter, bringing effective relief to households and industry in several EU states. 

However, gas demand reductions have occurred largely due to high prices and mild temperatures. As a result, these savings have not been achieved in an equitable way, nor necessarily sustainable, and without reducing carbon emissions as much as they could have.

Our research suggests that governments could go further in encouraging public entities, businesses and citizens to cut down their energy usage. In the run-up to next winter, the EEB proposes five initiatives to facilitate energy consumption reduction:

  • Establish an EU energy savings monitoring task force to track action both at national and EU levels to verify the performances of the different energy savings measures. Each EU state should designate a national contact point responsible for reporting progress on energy savings to the monitoring task force.
  • A market for managing gas and electricity could become a key incentive for energy savings. This market could consist of a system that rewards the flexibility of consumers (even small, through aggregators) for the intermittent interruption of energy consumption.
  • Accelerate the diffusion of digital technologies that enable automatic monitoring of energy flows such as smart metres. This would allow people to monitor their energy consumption in real time and make savings more salient.
  • Introduce fair and harmonised, EU-wide rules on energy sufficiency measures.
  • Promote wide dissemination of the energy-saving status through coordinated media across the EU. This could provide positive feedback for citizens’ energy-saving efforts. Simple messages could be disseminated on national prime-time TV news and social media.

In the coming months, the EEB will continue to scan measures adopted by EU governments to mobilise energy savings and will update the status of each country. Stay tuned.