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ENERGY

Why next week could be crucial for Danish heating this winter

Energy analysts in Denmark say a potential closure of the Nord Stream 1 gas pipe from next week could have a decisive effect on whether Denmark has enough gas this winter – and how much it will cost.

Why next week could be crucial for Danish heating this winter
A radiator in a Danish home. Energy analysts are concerned about the potential impact on prices of a longer-term closure of Russia's Nord Stream 1 gas pipeline. File photo: Henning Bagger/Ritzau Scanpix

The Nord Stream 1 gas pipe, which supplies Russian natural gas to Denmark via Germany, is to be closed for three days for maintenance work next week, Russian authorities have said.

But doubts in the EU over whether the Russians will reopen the connection have caused a spike in already-high gas prices and concerns that stocks might not last the winter in Denmark.

Around 400,000 people in Denmark heat their homes using individual gas heater (gasfyr in Danish). Additionally, many district heating areas are reliant on power stations which are partially gas-fuelled.

Monday’s record gas price of 277 euros per megawatt hour for gas is five times more than the price just two months ago in June, and ten times higher than the stable prices of gas seen throughout the last decade, broadcaster TV2 writes.

Those prices would cost a family with two children 30,000 kroner more to heat their house with an individual gas heater during the winter months alone, according to calculations by Danske Bank reported by TV2.

Extreme gas prices are also having a knock-on effect on electricity prices, which were record-high for the third consecutive day on Wednesday.

Whether these prices persist through coming months, or fall back towards the already-high levels seen during the rest of the summer, may depend on events related to the Nord Stream 1 pipe in the coming week.

“The next week will be drastically important for what we can expect of prices this winter,” head of strategy for raw materials with Saxo Bank, Ole Sloth Hansen, said in comments to TV2.

The spike in gas prices this week are primarily due to the Russian announcement that Nord Stream 1 will be closed for maintenance works for three days next week.

The pipeline normally sends enough natural gas from Russia to Europe to heat around 26 million homes, but this supply has been significantly reduced since Moscow invaded Ukraine in late February. The EU has placed massive sanctions against Russia, while Moscow has in some cases cut off gas supplies to countries that refused to pay in roubles.

“The market is afraid that this gas is not coming back. That the taps simply won’t be turned back on after the three days are over,” Hansen said.

The problem is exacerbated by hot weather this summer drying up waterways like the Rhein in Germany, which are used to transport diesel and coal.

“Power plants and industrial businesses located there have had to buy gas instead. That has put further pressure on gas prices,” Hansen said to TV2.

According to recent reports, Denmark, which uses the summer months to build a stockpile of gas, has around 93 percent of full storage.

This is not enough on its own to see the country through the winter, however. Recent calculations by the Danish Energy Agency (Energistyrelsen) show that existing stocks are enough to keep Denmark and Sweden heated for around four months if gas supplies from Russia via Germany were switched off.

That time period could be further reduced as the weather gets colder.

Another senior analyst, Anders Christian Overvad of the think tank Tænketanken Europa, told TV2 that “in a situation where Nord Stream 1 doesn’t reopen, there’s such a long time to get through the winter that there’s not enough gas in storage.”

Although there are some levers Denmark can pull – like activating emergency measures and reducing gas supplies to large businesses – it may find itself competing with other countries for scarce supplies, sending prices even higher.

Germany’s energy sector and industry are larger and more gas-dependent than those in Denmark, meaning gas is more likely to go to the bigger country.

“If the price is high in one place, we risk it being equally high in Denmark,” Hansen told TV2.

Should the Nord Stream supply remain closed, it could increase even further to as much as a daunting 400 euros per kilowatt hour, he speculated.

There remains hope that the situation will not deteriorate to this extent.

“If there’s a resolution on some of these things – if water levels increase and if the Russians turn the gas back on next Friday – we’ll see a fall in price from these extreme levels,” Hansen said.

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ENERGY

Danish Energy Agency advises homes with gas heating to conserve

The Danish Energy Agency (Energistyrelsen) has issued guidelines to households heated by individual gas heaters in a bid to help them avoid very high bills.

Danish Energy Agency advises homes with gas heating to conserve

Around 240,000 households in Denmark will receive advice from the agency by physical or digital post, the agency said in a statement on Friday.

Gas prices in Denmark are currently rising as temperatures drop and energy production from wind turbines falls due to weather conditions.

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“The Danish Energy Agency views it as an important task to help people like those with individual gas heaters [Danish: gasfyr] through good advice about how they best can reduce their heating consumption and take the worst off their gas bill,” head of office Vincent Rudnicki said in the statement.

The information letters are part of a national energy saving campaign which seeks to cut energy consumption during a period when prices can go through large variations.

When gas prices reached their 2022 peak in August, one megawatt hour of gas cost over 300 euros according to the Dutch exchange TTF.

At the beginning of December, the price has increased to 131 euros per megawatt hour after going through a period with lower prices during the autumn.

Although the price remains low compared to August, it is higher than it was two years ago, according to comments previously given to news wire Ritzau by Sydbank’s senior economist Søren Kristensen.

Kristensen said that the cost of heating a housing in Denmark is now 10,000 kroner per year higher on average than it was in the years prior to the energy crisis.

He also said that the winter is likely to push prices up from their current level.

“That will unfortunately mean that it will in no way be a cheap winter in relation to heating up the house or using electricity,” he said.

The Danish Energy Agency information letter will be sent to persons who own single-family houses which are heated by natural gas heaters, according to information stored on the national register BBR (Bygnings- og Boligregistret).

“At this time we have particular focus on those who live in villas or semi-detached houses because they have seen the largest of all the gas bill increases,” Rudnicki said.

In some cases, persons who no longer have gas heating will receive the letter if the BBR registry has not been updated, he noted.

Advice included in the information packs includes reducing temperature, using less hot water and having gas boilers services.

The saving tips may also be relevant for people who live in other types of housing, such as apartments, rental houses or terraced houses, according to the Energy Agency.

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