The European Commission is examining the possibility of proposing a legal obligation for EU Member States to ensure a minimum level of gas storage by 30 September each year, says a draft of its energy communication due on 2 March.
Previously announced (see EUROPE 12883/13), this communication aims to present additional measures to ensure affordable energy and sufficient storage to help Member States cope with rising energy prices.
It follows on from the Commission’s ‘toolkit’, adopted on 13 October 2021 (see EUROPE 12811/1), which was deemed insufficient by some countries.
Reinforcing gas stocks
While this rise in energy prices is largely due to high global gas demand as a result of the economic recovery (amplified by rising geopolitical tensions), low EU gas stocks also have an influence.
“These low levels increase the volatility of the prices, and raise the prospect of continued high prices over the summer”, the draft communication states.
According to the text, EU gas stocks are currently at historically low levels (37% at the beginning of February, around 10% lower than in previous years) and could reach levels of around 10-20% in the spring of 2022, depending on weather conditions.
Gas and electricity prices, on the other hand, “will remain high and volatile at least until 2023”, says the Commission.
The institution therefore wants to present a “Gas for Winter Plan” to “support security of supply with incentives and obligations for strategic storage”, the document says.
In addition to the above-mentioned legal storage obligation (the details of which are not yet established), the institution plans to invite Member States to set inventory levels for entities with storage facilities in the EU. “Member States can provide aid to incentivise suppliers to ensure sufficient stocks of gas”, the draft text stresses, while specifying that such aid may be granted without a tendering procedure, provided that safeguards are put in place.
The Commission also intends to publish a working document (potentially in July 2022) giving a comprehensive overview of energy storage in the EU and detailed guidance (by summer 2022) on targeted regional storage levels, on financing of storage systems and on fair and efficient cost allocation.
In addition, it intends to launch a “pilot project” to help Member States and operators make joint purchases of gas to replenish stocks in 2022 to the required strategic minimum level.
LNG as an alternative
The draft text also underlines the Commission’s intention to continue these energy diplomacy efforts in order, in particular, to ensure sufficient supplies of liquefied natural gas (LNG) to the EU.
Indeed, the Commission has recently intensified its contacts with the main suppliers on the LNG market to ensure deliveries to the EU in case of emergency (see EUROPE 12887/11) and thus address the low supply of Russian gas and the risk of a total suspension that could result from a conflict between Russia and Ukraine.
In line with this, the Commission intends to set up a direct coordination platform between Member States and LNG operators and will examine how the transparency of the LNG market could be improved, the draft says.
Speeding up licensing
In addition, the draft calls on Member States to develop renewable energies and increase energy efficiency, but also to accelerate the deployment of renewable and low-carbon gas production to replace natural gas.
The Commission plans to establish a European Hydrogen Exchange to stimulate the use of hydrogen in the EU and to set a European target of 35 billion m3 of biogas production by 2030.
On renewable energy, the institution intends to adopt a recommendation on the licensing of renewable energy projects in June to remove remaining obstacles in the overly complex administrative procedures.
The recommendation will also “explore opportunities to accelerate permit-granting procedures in the implementation of EU environmental law” and “address issues such as clarifying responsibilities between permitting authorities, setting clear milestones for the permitting process, effective one-stop shopping, digitalisation of permitting process and capacity of permitting authorities”, the draft says.
In addition, the Commission believes that Member States should set time limits for the various stages of the environmental impact assessment (EIA) procedure.
In order to discuss the concerns that Member States face in practice, the institution intends to organise a joint meeting between Member State experts working on environmental assessments and experts working on renewable energy (the draft does not specify the date).
Improving the transparency of ETS
The paper also addresses the issue of the EU Emissions Trading System (ETS), although the increase in the price of carbon allowances has less influence on the increase in energy prices.
According to the Commission, the carbon price would thus represent 15% of the retail price of electricity in the EU in 2021.
Nevertheless, the Commission “sees merits in enhancing the transparency of the carbon market”, the draft says.
Therefore, it will assess, on the basis of the final report of the European Securities and Markets Authority (ESMA), “whether certain trading behaviours would require further regulatory actions”.
It also intends to organise a high-level meeting on carbon market monitoring bringing together experts from different segments of the carbon market, including Member State competent authorities, ETS compliance entities, financial firms, trade organisations, non-governmental bodies and academic institutions. This event would serve as a forum to provide advice and comments on ESMA’s final report due in March 2022.
Reviewing the functioning of the energy market?
While several Member States want to review certain aspects of the European energy market, the draft stresses that the Commission is continuing to investigate the gas market in response to concerns about possible distortions of competition, notably from the Russian gas supplier Gazprom.
According to the paper, legislative changes “could, in the longer term, allow adjustments to the wholesale pricing method so as to reduce the influence of gas on the market price while maintaining incentives to invest in renewable energy generation”.
“This will require careful assessment and preparation”, the draft text says.
See the draft communication on energy: https://aeur.eu/f/ej (Original version in French by Damien Genicot)