We all stand together

January 21, 2013 | 00:00

We all stand together

The struggle for European energy market integration is an uphill one - certainly when you want to connect North Africa to Europe as well. Here are two dispatches from the integration front.

Today we have two original articles for you that are very different in subject and scope and yet have a fundamental theme in common. One is about the North West European gas market(s), the other about the Mediterranean and North African electricity market(s). Yet both deal with the same crucial topic: the process of market integration across national boundaries. That's right, the "(s)" in "market(s)" isn't there by coincidence! 

Santiago Katz and Catrinus Jepma of the Energy Delta Institute in Groningen dig into a question that is crucial to policymakers and regulators in the gas market, namely what the "relevant market" is for gas spot trade in North West Europe. This may sound a bit abstract, but this subject has been a source of intense debate at national and European regulatory levels. Clearly, if markets are national in scope, they ought to be regulated on a national basis - including for example by the competition authorities. If, however, they are regionally integrated, national regulation will have adverse effects on market functioning. 

In an earlier article for EER, in which they analysed market functioning in North West Europe, Katz and Jepma had discovered a strange anomaly: they found that the most liquid markets - in particular the Dutch and Belgian hubs TTF and Zeebrugge - were less competitive than less liquid markets, e.g. in Austria and Italy. In this new article, they explain the reason for this. It is, they write, because the most liquid markets are in fact also the most integrated ones. When you at look at their competitiveness across national boundaries, you discover that these markets are, as one would expect, indeed highly competitive. 

How the two researchers came by this result, and what it implies for the way in which gas markets in Europe should be regulated, you can read in their regulatory detective story here.

In the Mediterranean region and North Africa market integration is, as one might imagine, a rather different kettle of fish than in North West Europe. Political stability in this region is still some way away, as the current crisis in Algeria tragically shows. 

Yet here too there are forces at work that are tirelessly promoting regional integration and stable regulatory frameworks. One such force is MEDREG, the association of Mediterranean Energy Regulators, in which the 23 national regulators of all countries on the Mediterranean Sea cooperate on a voluntary basis. As Benjamin Gallèpe, the French Director of the Milan-based Secretariat of MEDREG, modestly describes his work in an interview with EER's Italian correspondent Heather O'Brian: "We try to demonstrate and promote the fact that it is more efficient to look at energy at a regional level than having energy policies going in different directions from country to country." 

One "flagship initative" to promote regional integration is the Mediterranean Solar Plan, launched in 2008 by the EU and the Union for the Mediterranean, with the aim of building 20 GW of solar power capacity in North Africa and developing electricity grid connections to bring at least part of this electricity to Europe. Indeed, like Desertec, but Desertec is a private initiative, the Mediterranean Solar Plan a public one. 

The realization of this plan would be a great boost to the local economies of North Africa, as well as to the share of renewable energy used in Europe, not to mention the political and economic integration of the two regions. But Gallèpe is realistic enough to acknowledge that the Mediterranean Solar Plan has so far been mostly a "diplomatic exercise" with few concrete results. 

He points out that much still needs to be done to create a stable, international regulatory framework in the Mediterranean region before international financial institutions can be persuaded to put their money into renewable energy projects here. He calls on both the North and the South to develop "sustainable models" that will make the development and transport of renewable energy possible. 

With parts of North Africa going up in flames, this may seem a distant prospect at the moment, but it is surely a future worth fighting for. Who knows, one day we may have a single gas and electricity market from the shores of the Baltic Sea to the sands of the Sahara. 

(Respond? karel.beckman@europeanenergyreview.eu)

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