As gas prices in Europe soar following the Russian invasion of Ukraine, the European Commission unveiled, on Tuesday 8 March in Strasbourg, on the sidelines of a debate on the subject with MEPs, guidelines in the form of a communication, aimed at making the European Union independent of Russian fossil fuels well before 2030 and responding to rising energy prices.
“We need to act now to mitigate the impact of rising energy prices, diversify our gas supply for next winter and accelerate the clean energy transition”, said Commission President Ursula von der Leyen.
She added: “We simply cannot rely on a supplier who explicitly threatens us”.
The Commission therefore proposes to develop a plan, called REPowerEU, by the summer.
This plan would be based on two pillars: (1) diversification of EU gas supply, through increased imports (including liquefied natural gas, or LNG) from non-Russian suppliers, as well as larger volumes of biomethane and renewable hydrogen production and imports: (2) accelerating the shift away from fossil fuels by increasing energy efficiency and the use of renewable energy.
According to the Commission, the measures in the plan, combined with the full implementation of the EU’s ‘Fit for 55’ package, would enable the Union to reduce its use of fossil fuels by at least 155 billion cubic metres (bcm), or the amount imported from Russia in 2021.
It estimates that almost two thirds of this reduction can be achieved within one year.
Replacing Russian gas
In order to replace some of the gas imported from Russia, the Commission wants to stimulate the production of biomethane in the EU.
REPowerEU thus aims to produce 35 billion m³ of biomethane by 2030, double the current EU ambition, “using sustainable biomass sources such as agricultural waste and residues”.
The plan also foresees an acceleration of hydrogen, by developing integrated infrastructures, storage facilities and port capacities.
To this end, the Commission is committed to completing the evaluation of the first ‘Important Project of Common European Interest’ (IPCEI) on hydrogen within six weeks of the submission of a complete notification by the participating Member States. It also wants to work with industry to set up a ‘Global European Hydrogen Facility’ to increase Member States’ access to affordable renewable hydrogen.
The institution estimates that an additional 15 million tonnes of renewable hydrogen can replace 25 to 50 bcm of imported Russian gas annually by 2030 (10 million tonnes of renewable hydrogen imported from various sources and an additional 5 million tonnes of renewable hydrogen produced in Europe, on top of the 5 million tonnes already planned).
“Other forms of fossil-free hydrogen, notably nuclear based, also play a role in substituting natural gas”, the Communication further stresses.
Renewable energy and energy efficiency
REPowerEU also aims to strengthen EU action on renewable energy and energy efficiency.
The Commission proposes to deploy 10 million heat pumps over the next five years to help European families reduce their dependence on gas and cut their energy bills.
It also calls on Member States to maximise the speed of permitting for renewable energy projects by considering such projects as being in the overriding public interest and in the interest of public safety. It intends to issue a recommendation on this subject in May.
This will be followed by a specific communication on solar energy in June.
According to the Commission, the energy system measures in its plan would result in additional savings of more than 25 bn m³ per year.
Preparing for the next winter
In particular, the Communication states that the Commission will present, by April, a legislative proposal requiring that gas storage facilities in the EU be filled to at least 90% of their capacity by 1 October each year.
Currently, the storage facilities are filled to just under 30% of their capacity. This level, the Commission believes, " is sufficient to cover our needs until the end of this winter heating period, even in case of full disruption of supplies from Russia”.
In addition, the legislative proposal will establish a mechanism to ensure a fair distribution of security of supply costs, as not all Member States have storage capacity on their territory.
It will also identify gas storage as “critical infrastructure” and introduce provisions requiring Member States to ensure that ownership of gas infrastructure on their territory by one or more persons from a third country does not jeopardise security of supply.
Pending this new EU legislation, the Commission intends to urge Member States to act as if it were already in force, by taking measures to replenish stocks before the next winter, and to conclude solidarity agreements as foreseen in the current Regulation (2017/1938) on security of gas supply.
As suggested in a draft of the text (see EUROPE 12901/13), the Commission will propose to increase the level of reimbursement of transport tariffs to storage to 100% (from the current 50%) in order to make storage more attractive to market players and thus encourage them to fill up reserves.
“If new infrastructure is needed, it should be hydrogen compatible”, the communication further stresses.
At the same time, the Commission will continue its investigation into potential distortion of competition in the gas market, notably by the Russian gas giant Gazprom.
The company “displays unusual business behaviour”, says the Commission, pointing to the very low filling rate (16%) of EU reserves operated by Gazprom compared to reserves not managed by the Russian company (44%).
Mitigating price increases
The Communication is also intended to complement the Commission’s toolkit, presented on 13 October 2021 (see EUROPE 12811/1), to tackle rising energy prices.
It underlines that the institution will consult Member States on the need for and scope of a new “Temporary Crisis Framework for State Aid” to grant aid to companies affected by the crisis, in particular those facing high energy costs.
As foreseen in the draft text (see EUROPE 12901/13), the Communication states that “in the current crisis situation, Member States may exceptionally decide to take tax measures that seek to capture some of the returns that certain electricity generators gain”.
These tax measures could generate up to 200 billion euros in 2022 to partially offset rising energy bills, according to the International Energy Agency (IEA) (see EUROPE 12903/4).
They “should not be retroactive, but should be technology neutral and allow electricity producers to cover their costs and protect long-term market and carbon price signals”, the communication says.
No EU embargo on Russian fossil fuels
While the Communication mentions the possibility of a total halt to Russian gas supplies by Moscow, it does not address the possibility of an EU embargo on Russian gas and oil, despite the call from some Member States, in particular the Baltic States.
Less than three hours after the presentation of the communication, US President Joe Biden ordered an embargo on Russian oil and gas imports.
British Prime Minister Boris Johnson has announced that Britain will phase out imports of Russian oil and oil products by the end of 2022.
See the Commission communication: https://aeur.eu/f/n8 (Original version in French by Damien Genicot)