Analytics, Energy, Energy Market, EU – Baltic States, Gas
International Internet Magazine. Baltic States news & analytics
Saturday, 27.04.2024, 02:26
Energy supply to Europe: Gaining affordibility, security and climate-friendly sources
Next day, Danish daily Politiken also reported that the EU
offered to negotiate with Russia on behalf of the EU Members States regarding
the NS – 2. The outcome of such a negotiation would be application some of the
principles of the EU energy law and the Energy Union to the offshore part of
the project.
What is the Energy Union and why is it so dear to the heart of the European
Commission?
The Energy Union is an ‘umbrella strategy’ launched two years ago was initially
aimed at insuring Europe’s smooth transition to the low-carbon/non-carbon
future. The plan was to ensure that European citizens have unrestricted access
to secure, affordable and climate-friendly energy sources. The Energy Union is
– at least officially – standing on the three key pillars: secure and reliable
energy supplies, competitive sources of energy and affordability/sustainability
of Europe’s energy supplies. Unofficially, the Energy Union – as a pan-European
umbrella strategy – becomes an important tool in a bureaucratic struggle between
Brussels and the national capitals for influence on the energy regulation
processes in Europe. Currently, a number of important aspects of the national
energy policies –such as the choice of the energy mix – still belong to the
Member States. In this context, the importance of Commission’s attempt to
obtain a mandate from the Council to negotiate an agreement with Russia on Nord
Stream-2 goes beyond this project and will have implications on the future
direction of the European energy policy. For example, the Energy Union is
clearly becoming a tool to asses various energy infrastructure projects. One
should however remember that this ‘umbrella strategy’ is not a compliance
checklist, especially taking into account the fact that it is not - unlike the
3rd Energy Package - a legally binding document and as such is not yet a part
of the acquis communautaire.
Europe has already all necessary instruments to implement the key goals of the
Energy Union. For instance, completion of a single energy market will make the
criteria of reliability, competitiveness and security of supply – mentioned as
the key priorities of the Energy Union - less relevant if not outdated even
with present energy regulations. Single gas market will increase competition
and provide European citizens with a vast choice of affordable energy supplies.
The European Commission confirmed that by 2017 22 out of 28 EU Member States
already had full access to alternative energy supplies.
Consumers in Europe currently have a vast of choice of alternative supplies –
both in the form of LNG and pipeline gas and they appear to feel comfortable
with this choice. By the end of 2016, total regasification capacity in the EU
and Turkey (23 terminals in the EU-28 and 2 in Turkey) stood at 216 bcm,
amounting to 40% of EU demand and 55-60% of EU gas imports. This capacity
allows (in theory) to fully replace pipeline imports from either Norway or
Algeria.
A dense net of interconnectors also contributed to a free flow of energy across
borders and a secure supply in virtually every EU country. In 2015 Central and
Eastern Europe (CEE) reverse flow capacity stood at about 147 bcm/year, while a
further 42 bcm/year of new interconnection capacity added within Eastern Europe
and between Central and Western Europe in 2010 -2015.
Interconnectors had already changed gas flows dynamics with
gas flows shifting directions from “east-west to “west-east”. For
example, gas flows from Germany to Czech Republic went up from 8.7 bcm in 2011
to 35.6 bcm in 2015, while gas flows from the Czech Republic to Slovakia
increased from 2.7 bcm in 2011 to 10.9 bcm in 2015. The increased
interconnectivity has led to price alignment almost everywhere in Europe thus
increasing the affordability of natural gas for the European consumers.
This connectivity also helped to spread the sense of
confidence that exists in the mature markets in Western Europe to the new
Member States. Gas is therefore becoming an ‘ordinary’ source of energy which
can be sourced almost everywhere and its’ source of origin will be no longer a
matter of concern for the energy importing countries. In 2016 the usage
of LNG re-gasification terminals went down due to the arrival of cheaper
pipeline gas supplies, mostly from Russia. According to the Gas Infrastructure Europe
(GIE) data in January – April 2016, average usage of Europe’s re-gasification
reached only 17 per cent, while most of the increase in Europe’s gas imports
(around 30 bcm in 2016) was covered by Russia (some 20 bcm). These figures show
is that EU utilities were not afraid of Gazprom and are eager to buy cheap
energy from Russia as they felt confident to have a backup supply option.
New market dynamics also forced non-European supplies to accept the new energy
realities of a stagnating European gas market. The non-EU companies realized
they are running the risk to rapidly losing their market share if they can’t
effectively adapt to the new market realities. For example, Gazprom accused by
the European Commission of breaking EU antitrust rules, accepted to amend its’
market strategy and submitted relevant commitments to the Commission. DG
COMP positively assessed these commitments. "We believe that Gazprom's
commitments will enable the free flow of gas in Central and Eastern Europe at
competitive prices. They address our competition concerns and provide a forward
looking solution in line with EU rules. In fact, they help to better integrate
gas markets in the region,” - said Margrethe
Vestager, EU Commissioner for Competition.
Consequently, the European gas market is finally becoming depoliticized and
natural gas is turning into an ‘ordinary’ commodity – like oil with import
dependency becoming a secondary issue. The case of Sweden might offer a good
example of what will happen with the European gas market. The share of Russian
crude in Sweden’s oil consumption went up from 10% in 2000 to 44
percent in 2015 and these figures are not generally perceived as a critical
dependence or a security threat. Alternative oil supplies are readily available
and a short transport leg makes Russian crude attractive to Swedish consumers.
The trend towards depoliticization is still fragile, but might gain a momentum
if both suppliers and consumers are ready to invest in this relationship,
respect mutually accepted “rules of the game” and each other’s interests.
Policymakers for their part need to keep away from unduly influencing markets
and determining the behaviour of energy companies. As we see, EU regulations
and single market are fully sufficient to regulate supplies from the third
countries and address all relevant consumers’ concerns. Does Europe really need
to invent new regulations?
Markets and consumers could and should decide which project
is more suitable and no energy project should not be discriminated if they
respect market rules and is financed by private investors.