At an extraordinary meeting in Brussels on Tuesday, 26 July, the EU27 energy ministers adopted the EU Council’s proposal for a regulation to reduce their gas consumption in preparation for the winter in order to get the Union ready for a possible total suspension of Russian gas deliveries.
Member States have agreed to reduce their gas demand by 15% between 1 August 2022 and 31 March 2023, on a voluntary basis, compared to their average consumption in the same period over the previous five years.
As foreseen in the European Commission’s initial proposal presented on 20 July (see EUROPE 12997/2), this voluntary target could become mandatory, should the EU’s energy situation worsen, through the triggering of an ‘EU-wide alert’.
Strengthening the role of the EU Council
While Member States have retained the general approach suggested by the Commission, they have changed the procedure required to trigger the alert and thus make the target mandatory, while introducing a series of exemptions and derogation possibilities, should the target become mandatory.
The text adopted stipulates that the alert will no longer be activated by the Commission after consultation of the EU Council, but by an implementing decision of the EU Council on a proposal from the Commission, which needs a qualified majority.
The Commission will be required to present such a proposal in two cases: - in the event of a significant risk of a serious gas shortage or exceptionally high gas demand; - if five or more Member States that have declared an alert at national level request it (compared to three Member States in the Commission’s original proposal).
The institution will also have to consult the relevant risk groups and the ‘Gas Coordination Group’ in advance. This group includes representatives of the Member States and the Agency for the Cooperation of Energy Regulators (ACER).
In addition, “demand reductions achieved by Member States before the Union alert is declared will be reflected in the volume of the mandatory demand reduction”, the text states.
Derogations
Regarding the alert derogations, the EU Council agreed to exempt the island Member States (Ireland, Malta and Cyprus) from the obligation to reduce gas consumption, as these countries would not be in a position to release significant volumes of gas through pipelines to other Member States due to the lack of interconnections between their gas networks and those of other EU countries.
The ministers also agreed to include an exemption for the Baltic countries, as their electricity grids are synchronised with the Russian grid and not with the European electricity system. This exemption, which is not automatic, would apply in the event that these Member States were out of sync with the Russian system, in order to avoid the risk of an electricity supply crisis.
The text also provides for the possibility for Member States to apply for a derogation to limit their mandatory gas demand reduction rate by 8 percentage points if they have limited interconnections with other Member States in relation to their domestic gas consumption.
However, they will have to demonstrate that their gas export capacity through interconnectors has been effectively used at a level of at least 90% for at least one month prior to the request for derogation and that their national liquefied natural gas (LNG) infrastructure is already being used to redirect gas to other Member States to the greatest extent possible.
A derogation is also possible for Member States that exceed their target for filling underground gas reserves under the EU Gas Storage Regulation. Adopted on 27 June, this regulation obliges Member States to ensure that underground gas storage facilities on their territory are filled to at least 80% of their capacity by November, with interim filling targets in August, September and October (see EUROPE 12980/3).
The derogation thus allows Member States to apply to limit the mandatory gas demand reduction target to the amount of gas in storage on 1 August in excess of the storage target on that date.
Member States with a high dependence on gas as a feedstock for critical industries (e.g. fertilisers or the chemical industry) may furthermore request to exclude gas consumption by these industries when determining the volume of gas corresponding to their mandatory demand reduction target.
Finally, a Member State facing an electricity crisis will be able to temporarily limit the mandatory reduction if there are no economic alternatives to replace the gas needed for electricity generation.
In order to benefit from these different derogations, Member States will have to notify the Commission of their intention to activate them no later than two weeks after an EU-wide alert has been declared, providing evidence that they meet the conditions to make use of them.
If the Commission considers that this is not the case, it will have to adopt an opinion stating the reasons why the Member State should remove or modify the limitation on the mandatory reduction of its gas demand.
In addition to these derogation possibilities, the EU Council made a change whereby the reference period used for the calculation of the 15% will be from 1 August 2021 to 31 March 2022 (rather than the previous five years) for those Member States that have experienced an increase in gas demand of at least 8% during this period (e.g. switching from coal to gas).
A risk for the winter?
Anticipating fears that the derogations would jeopardise the EU’s ability to sufficiently reduce its gas demand ahead of winter, the Commissioner for Energy, Kadri Simson, said: “Even if all the exemptions were used in full, we would achieve a demand reduction that would help us safely through an average winter”.
She went on to say that “countries like Ireland, Malta and the Baltic States have strongly underlined their intention to reduce demand” even though they are exempt.
The Commission also recalled that the 15% target had been set on the basis of a worst-case scenario, i.e. a total interruption of Russian gas supplies on 1 July - which did not happen - and a cold winter, in order to save 45 billion cubic metres of gas (bcm).
In the case of an average winter, the institution estimates that gas savings of 30 bcm would be sufficient.
A time-limited regulation
In order to reflect the exceptional nature of the Regulation, Member States agreed to limit its application to one year (from its entry into force), as opposed to two years in the Commission’s original proposal. It may be extended, if necessary, following an evaluation by the Commission by May 2023.
In addition, Member States agreed that they should give priority to national gas demand reduction measures that do not affect protected customers such as households and services essential to the functioning of society, such as critical entities, healthcare and defence.
Showing unity against Russia
The agreement between the ministers comes a day after Russian gas giant Gazprom announced a reduction in its gas deliveries to the EU via the Nord Stream 1 pipeline to around 20% of its capacity from Wednesday (down from 40%).
Condemning the decision, the EU Council and the Commission stressed the need for unity.
“By acting together to reduce the demand for gas, taking into account all the relevant national specificities, the EU has secured the strong foundations for the indispensable solidarity between Member States in the face of Putin’s energy blackmail”, said the Commission President, Ursula von der Leyen.
It should be noted, however, that Hungary has expressed its opposition to the agreement reached by the ministers.
The text agreed by the EU Council will be formally adopted by written procedure in the coming days. (Original version in French by Damien Genicot)