EU Energy Markets Stabilize In 2023 With Record Renewable Integration And Reduced Russian Gas Imports, Says Report

The European Union’s gas and electricity markets demonstrated significant advancements in 2023, with notable strides in supply diversification, renewable energy incorporation, and price stabilization following the energy crisis of 2022, according to reports published for the fourth quarter of 2023.

The reports indicate a 7% reduction in overall gas consumption compared to 2022, and a substantial 20% decrease from 2021 levels. Concurrently, imports of Russian gas plummeted to 43 billion cubic meters (bcm), a stark contrast to 79 bcm in 2022 and 150 bcm in 2021. For the first time, renewable energy sources accounted for a larger share of electricity generation (44%) than fossil fuels (32%).

The gas market report highlights strengthened LNG imports, robust gas storage levels, and reduced consumption, leading to a decline in import demand and a return of wholesale prices to historic norms, with retail prices also moderating. Total gas imports fell to 290 bcm in 2023, a 13% drop from 2022. LNG imports constituted 41% of the total in the last quarter, with the U.S. emerging as a significant supplier, accounting for 50% of LNG imports in Q4.

EU gas storage levels reached record highs in 2023, with an average filling rate 30% higher than in 2022. Despite a 71% rise in gas consumption in Q4 due to winter demand, the EU maintained high storage levels. Domestic gas production, however, continued to decline, covering only 11% of the EU’s consumption in 2023.

Wholesale gas prices saw a 67% decrease compared to 2022, peaking at 55 €/MWh in mid-October before settling at 30 €/MWh by year-end. Retail gas prices experienced a slight 2% quarterly increase but were 31% lower than Q4 2022 figures.

The electricity market report confirms a continued improvement in market fundamentals, resulting in a 57% reduction in wholesale electricity prices from 2022. EU electricity consumption fell by 3% in 2023, with Q4 showing a 2% year-on-year increase. Renewables generated 44% of electricity, up from 38% in 2022, while fossil fuel generation dropped to 32%.

Solar and wind power saw a 15% increase in generation, with significant rises in onshore wind (14%) and solar (19%). Hydropower and offshore wind generation also improved, contributing to a record 14% increase in installed renewable capacity in 2023.

Fossil fuel generation declined by 24%, with coal and gas-fired generation falling by 28% and 20%, respectively. This reduction was driven by lower demand and robust renewable energy generation. Nuclear output increased by 2%.

Electric vehicle (EV) sales in the EU reached 2.3 million in 2023, a 16% increase, with Q4 sales contributing to a 25% market share, highlighting significant growth in the sector.

These developments underscore the EU’s resilience and commitment to its clean energy transition, despite the challenges posed by global competition and shifting energy dynamics.