How to survive the winter during an energy crisis?
Across the EU, there’s a new appreciation and awareness of just how much we need electricity and energy in our everyday lives. We need it to switch on lights and heat our homes, we need it to operate our computers and servers, we need it to power our personal vehicles.
Reducing personal energy consumption and saving money on sky-rocketing electricity bills are becoming frequent topics of conversation as EU nations and individuals adjust to the impacts of the energy crisis.
Expert opinion suggests that unless there is a sudden end to the Russia-Ukraine conflict, which is highly unlikely, Europe’s energy crisis will continue well beyond winter and throughout 2023. The option of resuming dependency on Russia for oil and natural gas is off the table for the foreseeable future.
To shore up supply for now, the continent is burning record amounts of coal and wood to generate electricity and paying sky-high prices for liquefied natural gas imports from the United States and other nations, both of which are not sustainable solutions.
As the winter months roll by, the crisis is expected to snowball unless some serious measures are put into place.
What will happen this winter when energy demands rise?
As of 1 December 2022, EU energy ministers put into place emergency regulations to secure the EU’s energy supplies. The coordinated and united response is seeing European nations adhering to three specific measures to address the 35% increase in consumer electricity prices.
The three measures are below, and aimed at supporting the most vulnerable people and companies across the EU:
Reducing electricity use to push down demand and eventually prices
Capping revenues of electricity producers with surplus revenues passed on to end consumers
Securing a solidarity contribution from fossil fuel businesses that will be distributed to families and companies by EU member states.
How can I prepare for the coming challenges and use less energy?
In order to help individuals, households and businesses to save money, reduce reliance on Russian energy, support Ukraine and help the planet, the International Energy Agency has developed nine simple suggestions that if followed by everyone in the EU, will make a significant impact.
The steps are easy-to-follow and unlikely to disrupt households and businesses, for example: using public transport over driving a private car, adjusting boilers, reducing use of heating and air conditioning, and working from home.
Working from home is a significant U-turn on many businesses pressuring employees to return to the office, however the energy crisis has brought that to a halt. Electricity and heating bills are pushing overheads higher and reducing profitability. Those returning to work in an office should dress accordingly: the German government, for example, has said office temperatures should be limited to 19 degrees Celsius.
How are different northern European and Baltic countries reacting to this?
To maintain a stable and secure supply of energy to the Baltic states, Latvia, Lithuania and Estonia are working together to reduce consumption of energy, and prepare for various risk scenarios.
The foundation of the Baltic energy systems was established when Latvia, Lithuania and Estonia were part of the Union of Soviet Socialist Republics (USSR). Since gaining independence in the early 1990s, the reliance on Russian and Belarussian energy sources has shifted, with electrical energy imported primarily from the EU.
Estonia, Latvia and Lithuania are now working on de-synchronising the Baltic power systems completely from Russia and Belarus by 2025, and aligning more closely with the continental European networks.
Other measures are being taken to ease the pressure on household consumers. In December 2022, the Lithuanian government approved electricity and natural gas price subsidies for the first half of the year. Late last year, the Latvian government approved a new support package to compensate for the energy price increases for households and businesses.
Concern is on the rise in the Nordics. The Finnish Energy Authority has warned that short power outages and black outs are a potential risk throughout the winter months. Businesses, public sector players and households are all voluntarily decreasing consumption to reduce the pressure on the power grid and save energy. The Finnish government is considering providing compensation or subsidisation of household electricity bills during the winter months, and the Swedish government is already issuing an elstöd, or ‘electricity support’ payment.
Sweden has assured its citizens that electricity supplies are stable, but has advised that power outages may be enforced if the situation becomes critical at any point. Reducing energy consumption in households and businesses, particularly during peak times, will assist the government in avoiding this measure.
Are there any energy-related investments I should make?
In all situations, there are winners and there are losers. As Europeans tough out the winter months and take individual actions to reduce demand for energy and contribute to the greater good, there are investment opportunities that will present themselves and make money for whoever gets in on the ground level.
This is an ideal time to reconsider use of power, as individuals, as business owners and employees, as nations and as citizens of the world. Switching to sustainable options in homes, businesses and offices, from solar to hydro and wind, remove the need to revert to burning wood and coal when unexpected geopolitical situations arise.
Currently, revenues of energy companies are capped. Supply chain businesses are ramping up to develop renewable infrastructure in Spain, Estonia and other EU member states, meaning more affordable and sustainable solutions are on the way. Putting a different lens on the situation – an investor’s lens – will produce opportunities for smart investments. While bills are difficult to meet now, investing in energy stocks and ETFs focused on infrastructure for renewables now is likely to plump up a portfolio over the year.