Two years ago, European households went into the winter not knowing whether they would be able to heat their homes properly during the harshest months. In 2021, Russia accounted for 44% of the European Union’s natural gas imports. Russia’s invasion of Ukraine has forced the EU to scramble to find new ways of securing supplies by diversifying supply, while rapidly reducing demand.

Energy price inflation reached a record high in March 2022. Households and businesses alike have come under considerable pressure across Europe. This situation has also highlighted the risks inherent in Europe’s dependence on other countries, as Mario Draghi, former Italian prime minister and ex-president of the European Central Bank, recently lamented in his report entitled “The Future of EU Competitiveness.”

The advent of liquefied natural gas (LNG)

Until the energy crisis of 2022, most of the gas consumed by European countries was transported by pipeline from Russia. Faced with the need to diversify supplies, liquefied natural gas (LNG), via maritime transport, has become a crucial element in Europe’s energy security, replacing a large proportion of Russian imports. In 2022, the United States became Europe’s main supplier of LNG. Norway, meanwhile, has overtaken Russia as the main supplier of gas.

According to the European Parliament, at the height of the energy crisis, more than 41m Europeans were unable to heat their homes sufficiently. The EU stepped in to help individuals and businesses unable to pay their energy bills, but it also had to tackle one of the main causes of rising prices: demand. EU countries and citizens were urged to reduce their gas consumption, which, according to the European Council, fell by 18% in the bloc between August 2022 and May 2024 compared to the previous five years.

Changes in behaviour have helped to reduce demand

By 2024, households had still not returned to their pre-crisis consumption levels and, although their willingness to change their habits (either voluntarily or under financial pressure) was essential in reducing demand, other factors also played a role. A series of relatively mild winters led to a reduction in the energy used to heat buildings. In addition, the installation of 3m heat pumps by 2022 has helped to reduce demand for gas. The authorities hope that changing consumer habits and the focus on energy efficiency in buildings will ensure that the downward trend in gas consumption continues over the next few years.

When gas prices soared, Europe’s energy-intensive industries had to put the brakes on. Although prices have returned to more acceptable levels, industrial demand has still not returned to pre-crisis levels. The decline in production in industry (chemicals and metal products, for example) echoes this situation.

The fall in energy consumption since the crisis is due not only to changes in consumer habits, but also to the downturn in economic activity. An upturn in industrial activity could alter the recent trend in energy demand.

Changes in the European energy market

This year, the target of building up the EU’s gas reserves to 90%, the threshold set to ensure a match between energy supply and demand, was reached ten weeks before the November deadline.

By August 2024, the share of Russian gas imports in total gas imports to the EU had fallen to 16%. The twelve new LNG terminals ordered between 2022 and 2024 undoubtedly contributed to this decline. Although overall demand for gas has slowed significantly, with a 20% decline for LNG in the first half of the year in Europe, investment in LNG infrastructure remains essential to spare Europe from future supply shocks. It will also prevent energy-intensive companies from relocating their production elsewhere because of unstable supplies. The Federation of German Industries (BDI, Bundesverband der Deutschen Industrie) claims that around 20% of industrial value creation in Germany is under threat, citing high energy prices as one of the main reasons.

The EU has also shifted up a gear in its use of renewable energy sources, producing more electricity from wind and solar power than from fossil fuels, to a greater extent than ever before. According to the European Commission, 46% of the electricity generated in the EU came from renewables, 29% from fossil fuels and 25% from nuclear power at the start of this year.

By turning away from gas, European households have fuelled demand for electricity to heat their homes. As we said, the heat pump market surged in 2022. However, this trend weakened with the fall in gas prices in 2023 and the rise in the cost of living, making it less attractive financially to switch to an electric heat pump.

Although electricity prices are set to fall in 2024, they are still subject to considerable volatility, particularly in southern Europe. Referring to the Russian attacks on Ukrainian infrastructure, a Greek government official said: “We have the impression that there is a mini energy crisis that nobody is talking about.” As supply dynamics change in Europe, the need for EU capacity to share supply between its member countries was highlighted.

What’s next?

The energy crisis of 2022 was an eye-opener for Europe. Significant progress has been made in replacing Russian gas flows, stabilising energy prices and increasing the use of renewable energy sources. The transition to renewable energies and cross-border sharing of supply within the EU will be essential to ensure the security of Europe’s energy supply in the coming years. It will also be crucial to continue efforts to improve the energy efficiency of Europe’s buildings so that demand for gas remains low in the long term. In the longer term, the advent of artificial intelligence and smart homes capable of regulating their own heating systems could one day be part of the solution. It should be noted, however, that AI is likely to increase energy use considerably. The International Energy Agency estimates that global electricity consumption from data centres, AI and cryptocurrencies could double by 2026 compared to 2022, increasing electricity demand by a volume equivalent to Germany’s consumption.

There is still much to be done, despite the significant progress made, and although energy prices have fallen significantly, EU businesses still have to contend with costs for electricity and natural gas that are well above those in the United States. In his report, Mario Draghi highlights the opportunity for Europe “to play a leading role in new clean technologies and circularity solutions, but also to steer electricity production towards safe and low-cost clean energy sources,” of which the EU is naturally abundant. This could hurt in the short term, but pay off in the long run. It remains to be seen whether Europe will fully adopt the proposals put forward.

This article was originally published in .