By the mid-2000s, European gas demand flattened after over three decades of extraordinary growth that saw demand peak reach 543 billion cubic meters (
These dynamics transformed Europe’s gas market landscape. Furthermore, due to stricter international market rules to promote more ambitious decarbonization targets, Europe’s upgraded policy framework put enormous pressure on the trajectory of natural gas growth.
Europe’s decarbonization policy is pivotal to impacting changes to its gas market. The concept of a low carbon future is manifesting through the EU’s ambitious targets set with its 20-20-20 goals. In addition, the 2030 and 2050 Energy Strategy and Roadmap promise to have a profound effect on shaping the patterns of energy consumption within the EU. These policy measures and incentives, in support of renewable energy and energy efficiency within EU borders, aimed at reducing the share of fossil fuels in the energy mix including natural gas.
Spearheaded by three bold instruments: supportive regulatory measures, generous subsidy policies, and very competitively priced installations, renewable energy has become a new reality in Europe.
According to Eurostat data in 2017, from the period between 2006 and 2011, renewable energy produced in the EU increased by as much as 66.6 percent, while the gross final energy consumption of renewable energy within EU-28 increased from 8.5 percent to 17 percent over the same period. Additionally, in 2016, while hydro energy was one of the most important supply sources, followed by wind and solar power, approximately 30 percent of electricity generated in the EU came from renewable sources. The average share of renewable energy used for transportation, heating and cooling have shown great progress between 2004 and 2016, increasing from 1.4 percent in 2004 to just over 7 percent by 2016 for transportation, and from 10 percent to almost 20 percent for heating and cooling.
However, this changing renewables environment does not necessarily mean an end to natural gas usage in the short to medium term. Nonetheless, it will certainly uproot natural gas in reigning supreme over other alternative energy sources, leaving its previously alleged invincibility to the annals of history.
Many institutions concur that among the various policy scenarios forecast for Europe’s future gas demand, the strong growth pattern seen over the last three decades will no longer continue.
The International Energy Agency (IEA) estimates that natural gas consumption will drop in the industrial sector and for household heating but will see growth only in the power sector. In the IEA’s annual gas outlook in 2017, they say European gas demand will remain modest into the 2030’s and will be flat through the 2040’s. Eurogas has also forecast that gas demand and consumption will remain modest with a volume ranging between 430 billion cubic meters (
Europe’s anticipated flat demand and its modest increase in gas consumption for the 2030’s and 2040’s is in correlation with anticipated major domestic gas production cuts. In their ten-year development plan published in 2017, the European Network of Transmission System Operators for Gas states they expect a domestic gas production contraction by as much as 70 percent by 2035. The IEA forecasts that European domestic gas production will drop by approximately 90
A number of reasons specific to a country’s particular circumstances contribute to the decline in domestic gas production in Europe. While the Netherlands put a cap on production, Norway’s domestic production is expected to reach its peak in the 2020’s and thereafter, gradual contract to volumes as low as 80
Despite the robust energy efficiency and decarbonization measures, which are set to transform Europe’s energy consumption patterns, Europe’s gas demand gap from less domestic output will need to be closed through gas imports. The predictions made for Europe’s gas trajectory reveal major shifts in this market with the downgrading of natural gas as a major energy supply source.
These forecasts’ underlying assumptions vary but nonetheless; there are no projections that suggest that natural gas will continue to be a dominant supply source in the foreseeable future. This is not to suggest that natural gas consumption will soon end but rather renewables, supported by substantial energy efficiency and decarbonization measures, will gradually displace natural gas to the extent that it will lose its supremacy in the energy mix.
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