Some European countries run coal-fired power plants as gas costs soar

Energy supplies are tight and prices are going through the roof worldwide, raising concerns from Beijing to London as winter approaches.

Here is a look at the global state of play:

Natural gas prices have soared as the industry has been unable to meet massive demand in many countries.

Bitter winters in Asia and North America earlier this year, followed by heatwaves in Asia and drought in Brazil, lifted demand, according to the International Energy Agency.

At the same time, production of liquefied natural gas (LNG) has been hampered by outages and delayed maintenance, the IEA said last month.

The energy crisis in Europe has also been exacerbated by a lack of wind for turbine sites, while hydropower has not been enough close the gap in the United States.

The gas shortages have contributed to crude prices surging to their highest levels in years as consumers turn to oil instead.

Some countries in Europe, including Britain, have run coal-fired power stations in response to the rising gas prices, despite efforts to reduce the world’s reliance on the pollutant blamed for global warming.

China has ordered dozens of coal mines to expand production as the world’s second-biggest economy faces a nationwide energy crunch.

In India, the world’s second-largest coal-consuming country, several states have been hit by supply shortages, with utility providers resorting to unscheduled power cuts.

Monsoon rains have flooded coal mines and disrupted transport networks, leading to a sharp rise in prices for coal buyers, including power stations.

Electricity prices have jumped to their highest levels in over a decade in Europe, exceeding 100 euros ($115) per megawatt-hours (MWh), according to the IEA.

Prices in Germany and Spain have been around three or four times higher than in 2019 and 2020, the agency said.

The utility bills of British consumers could rise by as much as 30 per cent by next year, according to research firm Cornwall Insight.

Britain’s energy-hungry steel, chemical and glass industries have urged the government to step in to help as wholesale gas prices spiral.

The gas crisis has affected supplies of fertiliser, causing an increase of grain prices.

“The world has seen other (energy) crises,” said Marc-Antoine Eyl-Mazzega, energy expert at the French Institute of International Relations.

“But this one is quite unprecedented because it affects metals and agricultural prices, which feeds into a worrisome inflationary spiral,” he said.

The IEA has urged Russia to step up gas deliveries to Europe in anticipation of higher winter demand.

Critics have accused Moscow of intentionally limiting gas supplies to Europe in an effort to hasten the launch of Nord Stream 2, a controversial pipeline connecting Russia with Germany.

Russian president Vladimir Putin said last week Europe was to blame for the energy crisis as it has made “mistakes”, including the termination of long-term contracts in favour of the spot market.

Massimo Di Odoardo, vice president of gas and LNG research at Wood Mackenzie, said nature will also have its say.

“The key factor that will define whether demand will be met is weather dynamics, not only in Europe, but also in Asia and Russia,” he said.

“Under normal winter weather conditions across the northern hemisphere, Europe will not have issues in meeting demand,” Di Odoardo said.

Gas storage will be at a record low 78 per cent capacity by the end of October, while LNG imports will be limited due to high demand in Asia, he said.

“But a rebound in UK and Norwegian production, together with stronger exports from Algeria and Azerbaijan, will increase winter pipe supply compared to the summer,” Di Odoardo said.

The crisis has put a spotlight on the world’s dependence on fossil fuels.

Britain, which hosts a key climate summit later this month, announced plans last week to shift all of is energy production to renewable resources by 2035.

“Today’s situation is a reminder to governments, especially as we seek to accelerate clean energy transitions, of the importance of secure and affordable energy supplies -- particularly for the most vulnerable people in our societies,” IEA chief Fatih Birol said in September.

“Well-managed clean energy transitions are a solution to the issues that we are seeing in gas and electricity markets today -- not the cause of them.”