EU cuts gas storage mandate to 80% as winter buffer shrinks

Brussels wants Europeans to turn down the thermostat. The European Commission is urging EU governments to cut gas and electricity demand “for as long as necessary,” according to a letter from EU Commissioner Dan Jørgensen seen by Politico. Six months into the Hormuz closure, the letter warns that global LNG supply is tight enough that high prices risk turning into an actual shortage. Dutch TTF, Europe’s gas benchmark, is trading at c. EUR 72 / MWh, up EUR 40 / MWh since March.

Europe is heading into winter with less gas banked than it had in 2021. EU storage is currently 68% full, below the 71% it held at this point in 2021. The usual bar is 90% by 1 November — Brussels is now telling governments 80% will do, rather than force everyone to chase the same tight market and bid prices higher.

The measures on the table are the ones Brussels used in 2022. Governments are being asked to cut peak-hour power use, lower the heating in public buildings, restrict outdoor heaters, use smart meters and tariffs to shift demand, and switch off streetlights that don’t need to be on, according to Euronews. The commissioner stops short of mandatory measures.

Europe could have started cutting in the spring

The push could have come within weeks of Hormuz closing in March, mostly through public campaigns and lower heating in government buildings, Anne-Sophie Corbeau, global research scholar at Columbia University’s Center on Global Energy Policy, tells EnterpriseAM. Electricity is part of the ask because Europe burns gas to generate power. “If you reduce electricity demand, you also reduce gas demand,” she says.

An 80% start could still carry Europe through winter, if the weather cooperates. European gas demand is roughly 17% below pre-2022 levels, so entering winter at 75-80% could still hold, Corbeau says. But some 40% of demand sits with households, and power-sector gas use swings hard with the weather, hydro output, wind, and nuclear availability. Europe has also swapped its old, steady Russian pipeline gas for LNG, which means competing for cargoes in a market everyone else wants into too, she adds.

Most of the gap sits in two countries: “There are two countries which are problematic due to their low storage levels, Germany and the Netherlands,” Corbeau tells us. Both have large storage capacity sitting relatively empty, and Germany carries the added weight of heavy domestic demand. Along with Italy, France, and Austria, they’re among five countries whose storage facilities make up two-thirds of the EU’s total capacity. German sites were c. 53% full on 1 September, the lowest for that time of year in 15 years, according to storage industry group Ines. The Netherlands has already committed roughly EUR 1 bn through state-owned energy company EBN to support refilling, while Berlin “has done pretty much nothing until very recently,” Corbeau notes.

Officially, this is not a supply crisis yet. The Commission and EU governments reconfirmed last week that gas supplies remain stable and that protected customers, including households and essential services, will be covered even in a serious disruption. The sharper tools — including interruptible gas contracts, switching power plants off gas — stay holstered in national emergency plans in case things deteriorate.

Last winter is the reason not to relax: “Last winter, EU gas storage dropped by 55 percentage points from 83% to 28%. So we could end up in April next year with about only 20% in storage,” Corbeau argues.

REMEMBER- Europe has spent six months buying its way around the Gulf LNG squeeze. Missing Qatari supply pushed European and Asian buyers toward the same pool of flexible cargoes, but Europe has largely avoided physical shortages by paying more for LNG and drawing on storage. Most of the missing Qatari volumes got replaced — just not with enough extra to keep storage injections on pace, so the shortfall shows up as thinner inventories rather than empty pipelines.