European countries need to act to narrow the potential supply-demand gap identified above. Circumstances vary widely; the opportunities to act – and the vulnerabilities in case of insufficient action – are not evenly distributed across the European Union. But all countries and consumers face detrimental consequences in the event of a return to extreme strains on gas markets. The risks are particularly strong for Europe’s industrial consumers, which would be first in line for cuts to gas supply if the situation deteriorates.

These five areas do not represent a full agenda for progress with energy transitions. The intention here is more specific: to deliver an extra 27 bcm to the gas balance of the European Union in the course of 2023 in ways that are consistent with the EU’s broader energy and climate objectives. Most of the solutions are to be found through reductions in demand for natural gas, via greater efficiency, faster deployment of renewables, behaviour changes and the electrification of heat. Time is of the essence, and the focus in our analysis is on pragmatic steps that can deliver quickly.

We estimate that a total investment of around EUR 100 billion is required for the additional actions that close the remaining gap of 27 bcm in 2023. Around half of this is for efficiency improvements, primarily building retrofits, and 40% is for renewables. The remainder is for heat pump installations, biomethane, and projects to cut flaring and methane.

This investment needs to be mobilised and spent over the course of 2023 and it would immediately start to yield savings through reduced spending on natural gas; these savings would continue to accrue in future years. Import bills would be lower as a result: we estimate that around EUR 30 billion would be saved in 2023 alone (based on current forward gas prices), and that savings on import bills would exceed the initial investment needed in 2023 within two to three years.

The investments to accelerate changes in gas demand would also reduce the likelihood that governments will again be asked for emergency support to shield consumers from excessively high prices. Since November 2021, European Union member states have mobilised an estimated EUR 330 billion in emergency packages to shield consumers from high prices, with budget costs approaching or exceeding 2% of GDP in some large economies. Some of these measures been applied widely across different categories of consumers, dampening in many cases the incentive to save energy.

Such emergency support measures may still be required in 2023, but need to be targeted to the most affected viable firms and to vulnerable households. Available funding can provide much more lasting benefits if it allows consumers to change their energy circumstances through greater efficiency and electrification. Interventions on end-user prices can also be structured in ways that retain strong incentives to save energy, for example by applying only to a certain percentage of the previous year’s consumption, with full market prices applying to the remainder.

The energy crisis has also increased the uncertainty facing some investors, in part because of near-term government interventions in prices, market operation and the introduction of new taxes and charges. As the IEA has argued, there is a case for temporary tax measures where current market conditions are generating highly inflated profits for some companies, to help defray the impacts on vulnerable consumers. But short-term measures taken by governments should not come at the expense of the investments required to transition Europe’s energy system.

The measures below require governments to fast-track the pace of change. The gains from doing so are huge but there are risks if the process is badly managed. Such an outcome could drain public support. Strategies to accelerate energy transitions will not deliver unless accompanied by safeguards for the integrity of the process, and clear communication on the need for change.

Energy efficiency actions accelerated in 2022 as governments and consumers increasingly turned to efficiency measures as part of their responses to fuel supply disruptions and record-high energy prices. Most of the near-term potential for additional gas savings in the European Union lies in residential and commercial buildings. In 2022, gas demand in buildings is set to be around 25 bcm (or 17%) lower than in 2021. Most of this decline was due to milder temperatures and behavioural changes, but there were also reductions from building retrofits and other efficiency measures. Continued improvements across Europe’s building stock – alongside efforts to accelerate industrial efficiency and electrification – can lead to structural decreases in gas demand, especially during peak periods such as colder winters.

Improved energy efficiency in buildings, appliances and lighting (insulation, controls, information, and audits) can play a vital role in direct and indirect savings of natural gas. The key measure is to raise the percentage of the buildings stock in the European Union that is renovated each year. Currently, around 1% of the EU’s building stock is renovated each year and with a strong policy push this could rise to 1.7% in 2023. Along with enhanced efforts to replace existing inefficient appliances and lighting, we estimate that these additional actions could save more than 2.5 bcm in 2023.

Expand existing programmes for quick-wins

Boost existing national renovation services, like FranceRenov’ in France, BedreBolig (BetterHousing) in Denmark and programmes supporting citizens to disconnect from gas, such as the Dutch AardgasvrijeWijken initiative. Involving sub‑national level governments, provinces and cities is an essential strategy to move forward quickly.

Offer more financial support

Deploy more public funds into grants and loans for home renovation; Germany's approach with the KfW renovation programme demonstrated how on-lending can double the original investment and stimulate job creation. Leveraging existing financing instruments created by the European Investment Bank (EIB) (e.g., ELENA, Smart Finance for Smart Buildings initiative) can offer capacity building and required funds to governments lacking the ability to set up comprehensive national programmes.

Prioritise vulnerable households

Prioritise renovation of social housing to reduce energy poverty, support low-income households, and repurpose derelict and vacant buildings. There are multiple examples of policies that target vulnerable households, including sub-national initiatives in Opengela in the Basque Country in Spain, Wallonia in Belgium, the Midlands in Ireland, and national programmes in the Netherlands and Belgium.

Accelerate the adoption of high efficiency appliances and lighting

Replace existing inefficient appliances and lighting. At the consumer level, the use and promotion of EU energy labels encourages efficient purchase decisions. Switching to more efficient equipment can be made more attractive through the use of rebate schemes, for example in Switzerland, or direct swap schemes, for example in Malta, Bulgaria and Hungary. At the government level, purchase specifications can be changed to include a minimum efficiency target, for example as included in Luxembourg’s National Energy Efficiency Action Plan.

Deploy smart technology

Encourage the installation of smart thermostats for achieving cost-effective energy savings. Case studies show that 10% savings on heating costs and space cooling costs can be attributed to the installation of the thermostat alone. Smart thermostats offer a step-change in both the ease and speed of implementing energy-saving measures. In France, homeowners can take advantage of a “coup de pouce” subsidy, and receive a programmable thermostat. Belgium provides tax-free eco vouchers to private sector employees which can be spent on smart thermostats among other sustainability related items. These actions can also facilitate behaviour changes (see section 4).

Promote a unified interoperability framework. This will help enable appliances and equipment to send and receive data using a standard communication protocol, and allow small energy consumers to participate in demand response. Small energy consumers could save as much as 20% on their energy bills, and lower energy consumption. The European Commission will promote a code of conduct for energy-smart appliances in 2023, targeting manufacturers.

The public sector needs to take the lead with a strong push on energy efficiency, including buildings, water treatment and street lighting. Many measures have already been implemented in this space, but we estimate that additional efforts could generate savings on gas and electricity that would amount to nearly 3 bcm in 2023. These savings do not exhaust the potential, and higher levels savings can be achieved in individual municipalities, as outlined in the examples below

Enhance energy savings in public buildings

Mandate energy savings targets for public buildings and for public services. The Greater Nantes area in France has launched an Energy ‘Sobriety’ Plan targeting a 10% reduction in energy consumption. Other longer-term approaches can include dedicated energy efficiency programmes with energy audits, monitoring and targeting systems, energy awareness, and training of staff and building managers. Ireland’s Optimising Power at Work programme has realised annual savings of 25% across 300 large buildings. Additional funding for retrofit and energy saving measures in public buildings can play an important role, as with the French ACTEE2, national energy efficiency programme that supports local authorities to renovate public buildings.

Improve the efficiency of public lighting

Support early replacement to LED lights for all non-LED public lighting, as was done for example with the Latvia lightbulb replacement programme. Governments and municipalities can prioritise projects that also deploy digital smart control solutions, as was done with smart energy street lighting project in Dortmund, Germany that has achieved a reduction of 55% in electricity use. Another approach to scale up investments in energy efficient actions and bring down costs is through project aggregation and bulk procurement. One example is the EIB's ELENA funding for national projects that combine energy efficiency in streetlighting and public buildings, as in Lithuania, Italy, Croatia and other countries.

Optimise water and waste water treatment

Process optimisation for water and waste water treatment can deliver significant energy savings, through measures such as right-sizing equipment, replacing motors and pumps with high-efficiency models, installing variable frequency drives on pump motors and reducing the speed to low-flow rates, and carrying out preventive maintenance. Multiple examples from around the world include the United Kingdom, Mexico, Bosnia and Herzegovina, Armenia and Brazil. Additional measures related to implementing energy management monitoring and control in water and waste water services can bring down energy consumption considerably, with a 45% reduction in Brasov, Romania thanks to a new Energy and Water Monitoring programme.

Many SMEs and industrial players have already made efforts to save energy in today’s energy crisis, but we estimate that further support from policymakers could generate additional savings of 2.5 bcm in 2023.

Support for energy savings among small and medium-sized enterprises (SME)

Fund audit schemes for SMEs and include obligations to implement no-cost measures and provide assistance to realise additional energy savings. The latter can be facilitated via funding and an approved product list, for example via the EBRD Green Technology Selector. Support can also come in the form of vouchers (e.g. SEAI Energy Audit Voucher), or through expanding existing efficiency obligations schemes to put more focus on SMEs (see also this recent article from IEA). Examples of financial support mechanisms include the Dutch subsidy scheme for SMEs and Australia’s Energy Efficient Communities Program – Small Business Grants.

Push efficiency and gas-to-electricity switching in industry

Concentrate industrial energy efficiency programmes, and information support measures, on actions with immediate impact. These actions can include installing or repairing insulation, replacing and upgrading motor systems, and installing monitoring systems. Delivery mechanisms can be via tax incentives such as the PFE programme in Sweden, where the government steps in to cover the price difference between conventional and greener production methods until parity is reached, as in Austria, or through Energy Efficiency Agreements as in Finland.

Prioritise investment that introduce substitutes for natural gas. These can include the direct use of waste heat and electric technologies for generating low‑temperature process heat, both of which are often very cost-efficient. Efficiency gains can also come from changing the heating source from steam to hot water.The Danish Business Pool programme is an example of a funding scheme that has been switched to prioritise a shift away from natural gas in response to the current crises.

Policy momentum and market conditions were already signalling faster growth in renewable energy, even before the start of the energy crisis. Following Russia’s curtailment of gas supply, several EU member countries have introduced more ambitious renewable energy goals and improved the policy environment. In 2022, EU renewable electricity generation is poised to increase by 6%, despite a significant fall in generation from hydropower, thanks to record additions of wind and solar PV capacity.

Our baseline expectation for 2023 is that wind and solar PV generation in the European Union will rise by more than 80 TWh compared with last year, displacing around 12 bcm of natural gas. Additional actions could result in a further 55 TWh of output from wind and solar PV (displacing a further 7.5 bcm). This will require a near-doubling of wind and solar PV annual additions in 2023 compared with our baseline expectation, a huge undertaking. This upside potential hinges mostly upon easing the path to operation of new utility-scale and onshore wind projects in the coming months, accelerating the deployment of rooftop solar PV systems and commissioning large offshore wind projects more rapidly. This would result in the European Union commissioning around 60 GW of new solar PV and 25 GW of wind in 2023, nearly tripling the bloc’s average annual deployment over the last three years. Achieving these faster growth targets will require policy action along three main lines: reducing permitting timelines; increasing investor certainty; and promoting the integration of renewables and distributed resources.

Today around 80 GW of onshore wind and 150 GW of solar PV projects (utility-scale) are under various permitting stages in the EU. While most of these projects are in the early stages of permitting, a significant share is waiting for final approval to begin construction. Several member states have already introduced policy tools and regulations to accelerate permitting; filling the gas supply-demand gap will require widespread implementation of these improvements across all EU countries.

The European Commission included a Recommendation on permitting in the communication package of the REPowerEU Plan, and in November 2022 proposed a temporary emergency regulation to accelerate renewables deployment. The IEA recommends prioritising the five main action areas listed below, that have high potential in the short-term. 

Coordinate, simplify and digitalise permitting processes

Facilitate coordination, including through the use of digital form of documents, e-communication and digitalisation of the whole administrative process, to accelerate permit processing. Facilitating effective coordination among administrative authorities at different levels (e.g. national, regional and municipal authorities) and identifying clear responsibilities and deadlines is essential. Several countries, including Denmark, Finland, Ireland and Sweden, have set up one-stop shops for administrative procedures. Preventing single jurisdictions from holding up permitting can also be addressed through the ‘positive silence’ concept, which has been introduced in Spain. Digital platforms can significantly improve communication within administrations and with project developers and stakeholders. Germany and the Netherlands have already digitalised permitting for wind and PV projects while Italy has initiated full digitalisation.

Identify priority areas for renewable energy projects.

Accelerating the identification of suitable areas for renewable energy projects subject to faster permitting can accelerate deployment. The German government requires each Federal State to identify areas favourable to onshore wind. Italy has identified preferential areas for renewable energy projects, which include classified agricultural areas, areas within industrial factories and old offshore oil platforms. Priority zones can be combined with simplified permitting procedures. Moreover, involving local administrations and other stakeholders in spatial planning can also reduce social acceptance issues over time.

Lower hurdles for specific short-cycle projects

Ease the authorisation process for smaller rooftop projects to provide fast returns. These contribute to the majority of installations in the faster case for PV deployment. Italy implemented shorter permitting process to install commercial rooftop PV system with capacities up to 200 kW, instead of 50 kW. Draft amendments in Poland include a proposal to increase the capacity limit for PV projects not requiring building permits from 50 kW to 150 kW. Greece, Portugal and Ireland have prioritised the processing of applications for small-scale renewables by households and energy communities. There are also EU proposals to accelerate permitting for the ‘repowering’ of existing onshore wind installations if the increase in capacity does not exceed 15%.

Improve auction design

Adapt the design and frequency of auctions to current circumstances. Auctions foster competition and have proven very effective to reduce the costs of renewables over time. In the current context however, auctions designs need to reflect the recent upward cost pressures on renewables (due to higher commodity prices) as well as their increasing energy security benefits. For instance, France adjusted its auction rules so that developers can increase capacity after the auction. Germany has increased auction volumes for onshore wind and solar PV and increased remuneration for distributed solar PV. Countries may consider to increase the volume of already planned auctions and/or accelerate the calendar and announce additional auction rounds in the first half of 2023.

Monitor impacts of market interventions to avoid unintended effects

Shelter citizens from high costs but without hurting the business case for new renewable energy investments. There is a strong rationale behind market interventions to protect vulnerable customers from high energy prices, their impact needs also to be monitored and assessed in terms of the potential harm to renewable developers’ capacity to invest in new projects. Current and proposed market interventions in Europe could create uncertainties for renewable energy investments if they are not well designed or co-ordinated across countries. Moreover, the ongoing energy crisis has also sparked discussions in many parts of the European Union on possible changes to electricity market design. It is important that any proposals be carefully and transparently prepared, with clear visibility on timing and involving all relevant stakeholders, in order to avoid unintended uncertainty among investors.

The rapid deployment of renewables and distributed resources, such as heat pumps, will put a strong focus onto integration measures, both operational and in terms of grid reinforcements. The fast growth in renewable electricity generation can produce a shift in the patterns of power flows across Europe and further strain the transmission grid, while heat pumps will change loads at the distribution level.

Plan ahead for grids to ease rapid renewable deployment

Ensure sufficient grid capacity to allow renewable electricity to displace gas consumption. Accelerated permitting of new grid infrastructure, alongside measures to boost transparency on grid status at the distribution level will help to ensure that renewables are deployed in areas where the network is able to integrate additional distributed resources in a timely and effective manner. Some examples of efforts to improve transparency and visibility include Denmark’s data hubs or Piclo in the UK and Portugal. Grid infrastructure operates at different levels, from low voltage distribution all the way to international interconnectors. Expansions of this infrastructure can take a long time, although for low voltage levels this process can take less than a year and support uptake of new renewables ahead of the next winter.

Step up incentives for other forms of flexibility

Maximise flexibility to enable the power system to take advantage of additional renewables. This will minimise the need to draw on natural gas for system balancing. Deploying new storage assets, particularly batteries, and reducing congestion of the distribution system can improve the impact of new renewables. Around 1 GW of new battery storage capacity is expected to come online in the European Union in 2023; in a case where this capacity is used for energy shifting away from hours of high gas generation, this could potentially help displace up to 300 million cubic metres of natural gas. Price signals should incentivise assets to operate in a way that supports the power system. Assets that increase flexibility by acting on both demand and supply (such as battery storage and pumped storage hydro) should not be disadvantaged, for example by double taxation.

Monitor implications for security of electricity supply

Watch closely for signs of strain on electricity security. The fast growth in renewable electricity generation can produce a shift in the patterns of power flows across Europe and further strain the transmission and distribution grids. Although our analysis shows that the increased generation of variable renewables will not compromise security of supply of the transmission grids, swiftly building capabilities for monitoring the operation of the transmission and distribution networks are necessary to pre-empt possible issues at the local level.

One-third of the European Union’s gas demand is for heating in buildings: replacing gas-fired boilers with electric heating – notably heat pumps – offers a way to improve security, affordability and environmental performance. Heat pumps and other electric heating can also replace gas combustion in low and medium temperature processes in the industry sector. They provide a major improvement in efficiency: the heat pumps currently available on the market are three‑to‐five times more energy efficient than natural gas boilers.

Our expectation is that new heat pumps will save around 1 bcm of gas in the European Union in 2023 and additional actions could save a further 2 bcm. Achieving this would require the industry to address a number of constraints that contribute to long lead-times for installation, including addressing upfront cost barriers and expanding the number of trained installers.

Boosting deployment of heat pumps to the enhanced level in 2023 would lead to less than 5 TWh of additional electricity demand in 2023. Nonetheless, the gas savings far outweigh increases in gas use in the power system. Carrying out energy efficiency retrofits in parallel help reduce the size of a heat pump, minimising strain on grids, as can installing demand response-enabled devices.

Enhance financial support for households to install heat pumps

Provide consumers with the means to overcome the relatively high upfront costs of heat pump purchase and installation. Incentives are currently available in over 30 countries, together representing 70% of global space heating demand (see the new IEA report on the Future of Heat Pumps for more information). Incentives available today in many countries bring the upfront cost borne by consumers for a new heat pump below that of a new gas boiler, as is the case in Denmark, France, Italy, Poland, and Sweden. Many schemes offer additional support for low-income households, as in France and Poland, or for high-efficiency models, e.g. in Germany and Denmark. Grants are the most commonly used policy tool, however other models, such as equipment rentals or heat-as-a-service models can similarly address upfront cost hurdles. Regulators should also remove other barriers, such as gas network disconnection charges.

Change tax measures that disadvantage electrification

Adjust the structure of energy taxation and electricity tariffs where they put heat pumps at an unfair disadvantage. In some countries, these considerations reduce the incentives for consumers and businesses to invest in the electrification of heat. Changes in this area are important to ensure that electricity prices align with energy transition and energy security goals, as was done in Finland. Some countries, including France and the United Kingdom, have reduced or completely removed VAT on alternatives to gas boilers.

Expand installation capacity

Increase training programmes for the heat pump workforce, particularly for installers. Certifications for heat pumps, like those in the European Union and the United Kingdom, can build on existing qualification schemes and be incorporated into the existing curriculum for electricians, plumbers, and other heating and refrigeration technicians, or in fire risk safety training. Manufacturers are also offering their own installation training programmes, which can be more targeted and shorter in duration, allowing companies to build up a workforce of certified installers more quickly.

Scale up support for industrial electrification

Deploy heat pumps in industry. Heat pumps have been used in industry for some time, mainly at low temperatures, typically in the industries with a high demand for process heating and drying. The paper, food and chemicals industries have the largest near-term opportunities, with nearly 30% of their combined heating needs able to be addressed by heat pumps. In Europe there is significant potential for the installation of industrial heat pumps in these three sectors, which have been hit hard by recent rises in natural gas prices. Incentives to cover initial costs can play a large roll in kick-starting wider deployment of industrial heat pumps, as was done in Germany.

Behaviour change can save energy quickly when people and businesses understand what to do and why. This was an important aspect of the IEA’s 10‑point plan to reduce the European Union’s reliance on Russian gas, with the recommendation to “encourage a temporary thermostat adjustment by consumers”.

Finding ways to encourage energy users to change their behaviour is not always easy, but it can be done. IEA analysis points to the importance of well targeted messages that will lead to sustained impacts. We estimate that actions by consumers may have saved 3-10 bcm in 2022: these include changes in energy use motivated by higher prices as well as by behaviour. We estimate that behaviour changes – driven by regulatory interventions, awareness campaigns and prices – could help to deliver an additional 5 bcm in gas savings in 2023.1

Link thermostat settings to affordability and gas security

Adjust heating controls in Europe’s gas-heated buildings to reduce strains on the gas balance. The average temperature for buildings’ heating across the European Union at present is around 22°C and there is scope to save gas by turning down the thermostat. Reducing buildings’ heating by 1°C reduces gas demand by 10 bcm a year, and also eases pressure on energy bills. Public education campaigns in the Netherlands, Belgium, Ireland and Denmark all encourage limiting space and water heating to reduce dependency on Russia while combatting climate change.

Provide real-time digital feedback to consumers

Deploy smart meters to provide consumers with real-time feedback on energy use. These can often be via connected digital devices, to alert consumers to their consumption patterns or, in cases where they are subject to time-of-use rates, to be alerted to variations in energy prices. Home energy reports are an example of a feedback mechanism which can help reduce residential electricity consumption by 2.2% and natural gas consumption by up to 1.6%. Japan worked with major utilities to send customised energy use reports to 300 000 households, resulting in a 2% sustained decrease in energy consumption. The European Commission is looking to develop a standardised application to be launched in 2023 that will help consumers reduce energy use.

Help consumers take action through utility providers

Utilities can promote energy saving behaviours and help deploy solutions. The Energy Efficiency Obligation Schemes can mandate utility companies to realise energy efficiency savings across their customer base (examples include Croatia, Greece and Slovenia). Such programmes can be tailored to reduce demand at peak demand hours, when gas-fired power is most likely to be used. Utilities can also use competitions and games to engage with their customers and promote efficient choices. These can prompt users to set goals for reducing their own energy consumption in exchange for small rewards (for example Australia and Canada).

Enable efficient choices with smart default settings

Redesign policies, programmes or products so that the default usage option or setting is also the cleanest and most efficient one. An example of a smart default programme is India’s regulation for air conditioners, which requires manufacturers to set the default temperature of a new device to 24°C. This means that when someone buys an air conditioner, it will cool to 24°C by default, rather than say 22 or 20°C. Annual maintenance checks of gas boilers can be used to ensure hot water boilers in homes are set at a temperature that optimises efficiency, no higher than 60 °C. A large-scale field study of electricity subscriptions in Switzerland found that setting a ‘green’ electricity package as a standard subscription increased the share of customers using exclusively renewable electricity from less than 5% to over 80%.

The public sector should lead by example

The public sector has the ability to showcase energy saving policy in action: both achieving energy saving goals and inspiring others to do the same. In the current crises, cities have often been at the forefront of energy crisis response and are leading by example. in Germany, for instance, Hanover committed to cutting city's energy consumption by 15%, switching heating off from and April until September and turning off night-time lights illuminating city hall and museums. Paris switched off the lights off the Eiffel Tower an hour early, thus sending a strong message to residents and visitors alike. Switching off hot water in public building restrooms and reducing the water temperatures of public pools by 1^oC is something governments can undertake all over Europe, following France's example.

Crisis measures can open up longer-term savings

Well-structured emergency measures can embed behavioural changes. In 2022 over ten EU countries launched energy saving campaigns asking citizens to take voluntary actions ranging from taking shorter showers, line-drying clothes, turning down thermostats in the winter and more. Austria's Mission 11, Ireland's Reduce Your Use, Finland's “A degree lower − saving energy towards winter”, Estonia's "Together we can handle the energy crisis” and others appeal to solidarity in the face of the crisis by offering citizens a variety of actions and support in the form of grants, subsidies, and resources. Approaching campaign design as a business decision may improve the results. The Netherlands, for instance, looked at the return-on-investment (ROI) of their recent Flip the Switch Campaign by conducting a citizen survey, in this case demonstrating that 95% of the respondents have undertaken at least one of the recommended energy saving measures.

The scope for near-term large-scale additions to global gas supply is relatively small compared with the possibilities on the demand side. New gas supply developments typically have long lead times, so decisions to develop new resources today take several years to result in additional supply. Our baseline assumptions for global gas supply in 2023 are detailed in the annex, but there is some potential upside.

There is around 170 bcm of non-Russian gas that is currently being produced that are not used productively, because it is leaked to the atmosphere or is flared; some of this could be brought to market relatively quickly. There are also near-term opportunities to scale up low-emissions gas supply, notably biogases. Joint purchasing of gas by European importers may offer a route to mobilise some of these additional resources, and potentially to reduce the price paid. Overall, we estimate that additional actions in these areas could bring a further 4.5 bcm to market in 2023.

Capture gas flared and vented in exporting countries

Incentivise reductions in flaring, venting and methane leaks to bring additional gas to market. New analysis from the World Bank and the Payne Institute’s Earth Observation Group suggests that nearly 13 bcm of gas was flared in the first three quarters of 2022 in African countries that could have delivered this gas to the European Union with spare existing export capacity (Algeria, Angola, Egypt, and Nigeria). We estimate that a further 7 bcm of methane was released to the atmosphere from oil and gas operations in these countries over this period. This occurred despite the very high level of natural gas prices in 2022.

New policy efforts are needed to deliver capture projects. The Netherlands halved methane emissions from its offshore oil and gas industry in two years through an emissions reduction programme. Canada has introduced regulations that could save more than 0.5 bcm by 2025 (a near 40% reduction), and Angola reduced flaring volumes by more than 50% between 2016 to 2021 following its endorsement of the World Bank’s Zero Routine Flaring by 2030 initiative. Nigeria has also announced regulations to reduce methane emissions from its oil and gas sector, establishing leak detection and repair requirements, a ban on cold venting, and equipment standards.

Commitments from the European Union to the “you collect, we buy” approach can accelerate the pace of change.  From a satellite-based assessment of the flared volumes in 2021 and IEA work on methane leak reductions, we estimate that around 4 bcm of additional natural gas could be made available to the European Union over the next 12 months with concerted efforts by African exporting countries, and incentives from buyers. This includes fast-tracking efforts to implement methane leak detection and repair (LDAR) programs, and targeting those flares that are large, occur on a continuous basis, and lie within 20 kilometres of a gas pipeline, and so could be brought to market relatively quickly. Most of the identified potential that could be exploited in the near-term to bring additional gas to Europe lies in Algeria and Egypt.

Bring new biogases into the mix

Step up support for new biomethane projects and ease their access to the grid. Biomethane production is set to grow by just under 1 bcm in 2022, with France, Italy and Denmark accounting for the bulk of the growth. Alongside existing support schemes, France has issued calls for tender for new biomethane projects and has policies that facilitate access to the grid; Italy has introduced contracts for difference to support biomethane production through its Recovery and Resilience Facility. Several countries are also establishing certification schemes to encourage gas off takers to source a share of their gas requirements as biomethane.

New biomethane projects that start construction in the first quarter of 2023 could be operational before the start of winter. Based on an assessment of plans by large biomethane producers and gas transmission system operators, we estimate that around 0.6-1 bcm of biomethane production capacity is set to come online over the course of 2023, with the potential to displace around 0.6 bcm of natural gas. With faster permitting of projects currently in the pipeline, for example through the designation of “go-to areas” for development, we estimate that a further 0.6 bcm biomethane could be produced in 2023.

Accelerate support for low-emissions hydrogen

Fast-tracking hydrogen projects will have a limited impact in 2023, but can prepare the ground for larger gains later in the decade. It is unlikely that projects currently in the feasibility phase can be fast-tracked to become operational before the end of 2023. However, around 150 MW of electrolyser capacity is under construction and 650 MW has taken final investment decision and could start production in the coming months. These projects could displace around 75-100 million cubic metres (mcm) of natural gas by the end of 2023. The largest savings are in ammonia production, followed by refining, methanol production and other industrial applications. An additional 15 mcm could also displaced through blending hydrogen into gas grids.

Joint purchasing of gas can relieve price pressures

Joint procurement of gas can increase the bargaining power of EU companies and could help bring low-emissions or wasted gas to market. It can enable more sophisticated risk-sharing mechanisms in a highly volatile price environment, and share best-practices related to gas/LNG trading and support gas/LNG contracting by companies with more limited financial capabilities. This could have particular value in Central and East European markets, which historically relied heavily on Russian gas imports, which have more limited experience in LNG procurement/trading. Joint gas procurement can help to facilitate refilling underground gas storages and can also be linked with flaring avoidance projects as well as providing sufficient anchor demand for investments in hydrogen supply infrastructure.