Restaurant entrepreneur Maher Chikli’s gas bill was at its worst 2,800 euros/month – KL found out what the energy situation of the coming winter looks like in Europe

The price of natural gas has stabilized in Europe. In mid-August, the gas storages of the member states of the European Union were already 90 percent full for the upcoming winter season.

A restaurant entrepreneur from Brussels has also noticed the leveling off of the price Maher Chkili. He runs a restaurant called Nuits Saint-Georges in the tourist area of ​​the city center.

The restaurant uses gas not only for heating but also for cooking. In particular, gas is used to use the pizza oven, because the oven must be constantly on in order for the pizzas to be prepared quickly.

Chkili says that in 2019–2020, his monthly gas bill was around 1,100 euros. When the war in Ukraine started and the energy crisis started, the bill jumped to 2,800 euros per month.

“The price almost tripled. Many entrepreneurs filed for bankruptcy at that time. Fortunately, I have a fairly affordable rent,” says Chkili.

Due to the price of gas, he had to raise the prices of the portions a little. Now the situation has calmed down, and gas currently costs around 1,300 euros per month.

Chkili has been a restaurant entrepreneur for 25 years. He has not considered installing heat pumps in the restaurant, as it is a historic building with a protected facade.

Many simultaneous phenomena

There are many reasons for the drop in the price of natural gas, says a gas market expert from the Energy Industry Heikki Lindfors.

One of the reasons is that the imbalance of supply and demand in the world market created in 2022 will begin to level out. The major producers of liquefied natural gas, the United States and Qatar, have been able to meet the increased demand by increasing their production and export capacity.

“A global balance is being found, and it can be seen as a drop in prices. At the same time, industry is in a downturn, and thus industrial energy consumption is relatively small.”

In addition to this, temporary and permanent instruments have been introduced in the EU to equalize the market. One of the ways is a gas procurement platform. We want to make it a permanent instrument. In addition, the gas storage regulation obliges to fill the gas storages for the winter season by 90 percent until 2025.

The fact that last winter was really mild has also lowered prices. When the winter ended, the gas reservoirs were still quite full, so there was very little need for filling this year.

“This year there have been quite a few discount sales in the price of gas, when compared to the years 2022 and 2023,” says Lindfors.

Finland also benefits

In the long term, Finland will benefit from the stabilization of the gas price, because it will help keep the price of district heating moderate. The benefit is especially at the time of peak consumption.

“In winter, during the coldest weeks of all, the use of gas in the production of district heating may be half of the city’s heat needs. When cheap gas is available and stored, it evens out all energy prices,” says Lindfors.

This is because there is no need to purchase substitute fuels such as wood or oil in the most expensive weeks for the production of district heating.

The low gas price also promotes industrial competitiveness. Gas is still used in significant quantities in the chemical, forestry and metal industries in Finland.

Ukraine plans to end the transit agreement

Ukraine has planned not to continue its state-owned company Naftogazin and Russian Gazprom transit agreement between them, which expires at the end of the year.

It may have an impact on the gas market. Some European countries still buy Russian pipeline gas. The group includes, for example, Hungary, Slovakia, Austria and Italy.

“There may be a shortage of gas in these countries. Within Europe, there is a shortage of transmission capacity from west to east. These countries therefore do not necessarily get gas, even if it is available on the market,” says Lindfors.

According to him, efforts have been made to fix such transmission capacity bottlenecks after 2022.

The EU does not agree to long contracts

The European Union is trying to get rid of Russian gas, and it has promised to diversify its supply sources.

At the same time, some gas-producing countries, such as the United States and Azerbaijan, complain that they cannot invest in increasing production because the EU does not agree to sign long-term supply contracts with them.

Lindfors says that long contracts are really long in the gas market, for example 20-year contracts.

He suspects that the EU’s reluctance is related to two background factors. The first is the EU’s climate goal. The Union does not want to tie its hands for 20 years because it is preparing for an energy revolution.

“In the EU, we are cautious about how much gas will be used in 20 years. Has the green transition progressed so far that it has been possible to replace natural gas with renewable energy.”

Another reason may be that the EU is also preparing for the end of the war in Ukraine, and one day trade with Russia may resume at cheap prices.

Pure investments stand still

Lindfors says that when the energy crisis started, there was a lot of talk in the EU about replacement technologies, such as electrification and the hydrogen economy.

“Right now, this pattern is going in the wrong direction. Pure investments have not progressed because interest rates have been high.”

For example, industrial processes have not been updated to use hydrogen instead of natural gas. Projects have been postponed or cancelled.

“Gas became cheaper in Europe faster than thought in 2022, so the competitiveness of replacement solutions is quite weak. The future commission will have a lot to think about in terms of how to get rid of dependence on fossil fuels, when this is the market-based situation,” says Lindfors.