A new EU gas security of supply architecture
As part of a four-party project (with FEEM, the Loyola de Palacio Chair in Florence and Wilton Park) on a new EU Gas security of Supply Architecture, a CIEP-workshop was held in July 2011. The "invitation-only" workshop discussed issues on the global gas market setting and its consequences for the EU gas supply perspectives, on the infrastructure challenges accommodating those (external) supplies, and on the market and regulatory designs that might be needed in that context.
Particular attention was given on the South Stream pipeline project, on the regulatory risks for new infrastructure investments and on the ongoing discussions for an EU Gas Target Model. The report of the workshop will be used as a further input into the final publication of the project, together with the outcomes of the workshops that were held in Milan and Florence and the forthcoming one at Wilton Park, which is scheduled for the spring of this year.
We need a European approach to ensure gas security of supply within the EU. Repeated regional supply shortfalls have sparked media outcry. Europe is not only facing the inadequacy of indigenous energy within the EU. High energy prices and the increasing reliance on imports from third countries is reason for unsettling concern. In fact, according to many scenarios it is anticipated that by 2030 up to 80% of the EU’s natural gas
consumption would have to be imported.
Notwithstanding such anticipation, the existing EU energy policy addressing gas security of supply is inadequate. Particular provisions concerning external relations were and remain few and far between. The rather weak EU energy policy in this area is in essence comprised of the persisting systematic prioritization of the internal market goal and, at this stage, of a vocal but inconsistent common security of supply policy. Bilateral energy deals with third countries prevail while undermining the ability of the EU to ‘speak with one voice’. The missing provision of detailed security of supply rules leads to the proliferation of national, uncoordinated and counterproductive approaches, as well as the perception of a lack of long]term strategy in order to address vulnerabilities. Key institutional problems of EU policy addressing gas security of supply result from the pervasive effects of 27 diverging predilections for market]based energy procurement, natural resource endowments, national champions interests, foreign policies and geographic neighborhood specificities, as well as the unwillingness of the Member States to give the rudder to a supranational body.
The Commission reacted with a rather fragmented 2nd Strategic Energy Review setting targets for 2020 and beyond (2050). Recently, several specific instruments have been introduced addressing primarily short]term security of supply crises, such as the infrastructure package or the new Regulation on security of supply. Moreover, the Commission will present a communication on the external dimension of energy policy in 2011, which will identify ways to reinforce the efficiency of EU policies with regard to the external relations in this area. The EU announced it will also sign energy framework agreements with key suppliers and transit countries, covering for instance market access issues like network development, the draft strategy states. Formulating the policy is one thing. Starting to work on implementing paths, developing the requisite policy and legal instruments aligned to deliver, is much more challenging. Are we on the right track to meet our stated objective – a true European supply security policy? Is the current architecture on which the EU gas security of supply policy is built able to deliver those responses needed in order to meet the growing risks and changing realities EU gas security faces? How should European institutions and regulation adapt and respond?
The Clingendael International Energy Programme, together with Fondazione Eni Enrico Mattei, the Loyola de Palacio chair of the European University Institute and Wilton Park have organized a series of brainstorming workshops in order to discuss a possible new architecture for EU gas security and in particular issues related to EU external relations and their relations to gas infrastructure.
The following report is based on the discussions that took place during the second Workshop organized in The Hague on July 7]8. The workshop analysed the issue of EU Infrastructure and Market Design in its relation to the EU external supply dimension. Three basic questions were discussed and analysed, i.e. the attractiveness of EU gas markets for external suppliers, with a special focus on the Southern Corridor, the broader infrastructure challenge and, as a third issue, the more general regulatory challenge. This report will be further used as input into the final publication about the project on a new EU Gas Security of Supply Architecture.
To read the full report, click here.