Wind Energy Rebound Expected to Ease European Gas Demand

Wind-powered electricity generation across Europe experienced a significant decline of over 7 percent in January compared to the same period in 2024, reducing a crucial source of clean energy at a time when heating demand was nearing its annual peak.

This shortfall in wind energy led to a surge in electricity generation from natural gas, reaching its highest level in three years. As a result, natural gas prices in Europe have risen by more than 15 percent since the beginning of the year. However, wind energy forecasts now indicate a rebound in production, which could boost overall electricity generation in Europe in the coming weeks and potentially lead to a reduction in gas consumption and prices.

Weak Winds

According to data from energy think tank Ember, total wind-powered electricity generation across Europe in January amounted to just over 67 terawatt hours (TWh), marking a roughly 7 percent decline from January 2024 and making it the lowest January total since 2022.

As wind farms represent the fifth-largest source of electricity in Europe—following gas, nuclear, hydro, and coal—the unexpected drop in wind energy production forced power companies to compensate by increasing output from alternative sources.

Natural gas was the primary substitute, resulting in a nearly 6 percent increase in gas-fired power production compared to the previous year. This marked the highest level of gas-fired electricity generation for January since 2022, just before Russia’s invasion of Ukraine disrupted regional gas supplies.

The increased reliance on gas contributed to a drawdown in Europe’s gas inventories, which in turn supported a bullish sentiment in the gas market and helped drive up prices.

Rebound Expected

The latest wind energy projections from LSEG indicate an improvement in wind-powered electricity production in key European markets in the coming weeks. This expected rebound could help ease the tight energy supply situation across the region.

In Germany, Europe’s largest wind energy producer, wind-powered electricity generation is forecasted to remain below the long-term average through February 20. However, after this period, production is expected to recover and remain above the long-term average through the end of March.

A similar trend is anticipated in the United Kingdom, which ranks as Europe’s second-largest wind energy producer and the leading generator of gas-fired electricity.

If these projections materialize as expected, energy producers in both Germany and the UK may be able to scale back their reliance on gas-fired power while maintaining steady electricity output. Additionally, both countries could reduce electricity imports as domestic wind production increases, thereby enhancing power supply stability across Europe.

This potential shift in energy generation may pave the way for a decline in regional benchmark Title Transfer Facility (TTF) gas prices, which have recently surged to their highest levels since early 2023, raising renewed concerns over energy-driven inflation in Europe. 

By fLEXI tEAM