By Jacques de Jong, Senior fellow Clingendael International Energy Programme
Winter 2012
A European approach to ensure gas supply security is frequently called for. Regional supply shortfalls have sparked media outcry. Europe is not only facing the inadequacy of its indigenous energy, but rising energy prices and increasing reliance on imports from third countries are reason for unsettling concern. According to many scenarios, by 2030 up to 80% of the EU's natural gas consumption would have to be imported.
Assessing security in the supply/demand balance requires a clear view on the EU’s market needs. Security of Demand is a prerequisite for security of supply and vice versa. The EU's developing gas demand is largely based on the role that the market sees for this fuel in the overall energy mix. This role is broadly based on the EU's energy policies.
The EU's major external supply source, Norway, Russia, the MENA-region and the Caspian Basin are the determinant factors on gas security chessboard. Despite the increase of LNG-imports, bringing gas to EU- markets will largely continue via pipelines from the North, the North-East, the East, the South-East and the South. Specific policy attention is focusing on the South Eastern Corridor bringing gas form the Caspian Basin and from Russia.
For the internal EU gas-infrastructures, ENTSO-G, the European group of TSOs for gas, has the leading role to play, with its coordinated network development planning. Financing and regulation are the key critical factors. This infrastructure will also be key to secure internal solidarity, managing unforeseen supply-interruptions.
THE NEW ARCHITECTURE
It would seem quite clear that securing supplies needs to be balanced with securing demand, and vice versa. Energy demand, including for gas, is basically a long term policy issue. As it is clear that the EU has agreed an energy policy framework for the period up to 2020, for the next period these policies are under consideration. A new Architecture should take these timeframes as a basis, with a distinction between the post 2020 period, and the one up to that year.
The long term vision should cover three chapters, the role of gas in the energy mix and the system, the external energy policy focus, and the internal gas market.
On the role of gas up to 2050 the choice is to make between gas as a "fuel of destination" (the fuel with the best cost-effective sustainable solution, as a "fuel of transition" (the primary fuel for the road towards a carbon-free economy), or as a "fuel of consequence" (the fall-back option when other options are failing). In all these visions the role of gas in the system and its relation with the power system requires a number of differences to be further articulated. Especially innovative concepts such as "gas-to-power" and "power-to-gas" are to be highlighted.
EU's external energy relations should be built upon the vision mentioned in the first chapter, with specific strategies for the EU's main suppliers, Norway, Russia, the Mediterranean region and on the Caspian Basin. For each appropriate and specific mechanisms for discussion, review and institutionalised approaches are to be (re) developed.
The internal market should be further (re)designed to continue its attractiveness for external suppliers.
The short term vision should equally cover three chapters, the Infrastructure Package, the 3rd Energy Market Package, and the Solidarity concept.
New investments in long-haul and cross-border pipelines for gas are critical components of any supply Architecture. The proposed Regulation for the Infrastructure Package, covering specific permitting, financing and regulating projects with a clear European common interests, calls for a timely implementation.
The 3rd package gives a solid basis for organising the EU gas market, with its TSO-industry set-up, its Network Codes and its supporting guidance, should be completed by 2014/2015.
The new Security of Supply Regulation for gas brings a solid base for organising and managing unforeseen supply interruptions on a short term basis. Past experiences and its concrete alignments would bring a refining and articulation of the procedures under the Regulation.