On Thursday 24 November, the energy ministers of the European Union’s Member States reached informal agreements on two proposals for temporary EU Council regulations aimed at alleviating the energy crisis by improving gas solidarity and accelerating the permit-granting procedures for renewable energy projects.
A framework for joint gas purchasing
The first draft regulation establishes, among other things, a framework for the joint purchase of gas in order to strengthen the EU’s bargaining power on global gas markets and to avoid Member States outbidding each other.
According to the informal agreement, the European Commission will contract a service provider to calculate the aggregated gas demand on the basis of the requirements reported by gas companies and companies that consume gas in the EU and the Energy Community countries.
Participation in the demand aggregation will be essentially voluntary. However, Member States will have to ensure that companies under their jurisdiction participate in the demand aggregation for a quantity of gas equivalent to at least 15% of the total volume needed to reach the storage filling target set for next year (i.e. a 90% storage fill rate by winter 2023/2024 - see EUROPE 12980/3). This represents about 13.5 billion m3 of gas for the whole of the EU.
The service provider will then seek bids on global markets to meet the demand.
In a second phase, companies will be able to choose to buy gas through the platform, either individually or as part of a consortium.
These joint purchases will not include Russian gas.
Amending the Commission’s original proposal presented on 18 October (see EUROPE 13045/1), Member States have clarified that the service provider will have to take into account a proportional allocation of gas volumes between small and large companies participating in a joint purchase.
Solidarity rules to avoid shortages
Another part of the regulation concerns establishing new solidarity rules in case of real gas supply shortages.
In particular, these rules will allow Member States to reduce non-essential gas consumption by protected customers (such as outdoor heating or the heating of residential swimming pools in households) in order to supply gas to essential industries and services.
According to the informal agreement between the ministers, Member States will be free to define what constitutes non-essential gas consumption.
The new rules also allow EU countries to request solidarity from other Member States, if they are unable to guarantee the critical volumes of gas needed for their electricity grids.
However, countries obliged to provide solidarity will have the right to deduct certain gas volumes from the solidarity offer, such as essential gas supply volumes to protected customers and volumes needed for the security of electricity supply.
In addition to these exceptions provided for by the Commission, the informal agreement adds gas supplies linked to the electricity needed for the production and transport of gas, as well as volumes of gas needed for the operation of certain critical infrastructure and facilities essential for the functioning of the armed forces, national security and humanitarian aid.
Ministers also agreed to extend the solidarity measures to Member States with liquefied natural gas (LNG) facilities.
The regulation provides for a number of default rules for gas sharing in the event of a regional or EU-wide gas supply emergency. These rules will only apply if Member States have not concluded bilateral solidarity agreements (only 6 of the 40 potential solidarity agreements have been concluded so far).
As regards the price of gas supplied under the solidarity scheme, the informal agreement states that the Member States benefiting from solidarity will be obliged to cover not only the market price of the gas, but also potential litigation or arbitration costs and other indirect costs, as long as they do not exceed 100% of the price of gas. If not, Member States may ask the Commission to decide whether higher compensation is considered appropriate.
A benchmark for LNG
Furthermore, the ministers approved the provision in the regulation to mandate the Agency for the Cooperation of Energy Regulators (ACER) to develop a benchmark for LNG transaction prices. This alternative index to the Dutch TTF - the main benchmark in the EU for defining gas prices - will have to be available by 31 March 2023 at the latest.
They also gave the green light to the capping of intraday price peaks in the energy derivatives market.
Renewable energy projects of overriding public interest
The second draft regulation aims to stimulate the deployment of renewable energies by facilitating and accelerating the procedures for granting the necessary permits for their installation.
Under the informal agreement between ministers, renewable energy projects will be presumed to be in the overriding public interest, allowing them to benefit from a simplified assessment for a number of environmental obligations contained in specific EU directives.
While Member States have retained this principle, they have added the possibility of limiting the application of these provisions to certain parts of their territory, certain types of technologies or certain projects.
The compromise also clarifies that the regulation does not only concern the permit-granting procedures for future projects. This will allow Member States to shorten ongoing procedures, i.e. those that have not yet resulted in a final decision at the time the regulation enters into force.
Very short timelines for some technologies
Member States have agreed that the permit-granting process should not exceed 3 months for solar energy equipment (compared to 1 month in the European Commission’s proposal - see EUROPE 13060/7, 13059/17).
For solar equipment with a capacity of 50 kW or less, the Commission had proposed to consider the permit as granted in the absence of a response from the competent authorities or entities within 1 month of the submission of the application. Although Member States have retained this approach, the text now allows them to apply a lower threshold, provided that it remains above 10.8 kW.
For heat pumps, the agreement sets the maximum time limit for the permit-granting process for heat pumps with a capacity of less than 50 MW at 1 month (compared to 3 months in the Commission proposal), and 3 months for ground source heat pumps.
EU countries have also agreed to limit the permit-granting process for the ‘repowering’ of renewable energy installations, including all applicable environmental impact assessments, to 6 months. Where the repowering results in an increase in the capacity of the plant of up to 15%, connections to the electricity transmission or distribution grid would be authorised within 3 months of the application to the competent entity. The Commission had proposed a period of 1 month.
Another change compared to the Commission’s initial proposal is the extension of the period of application of the regulation from 12 to 18 months.
Adoption on 13 December?
In order for the two regulations to enter into force, ministers will have to confirm their informal agreements at their next extraordinary meeting, which is likely to be held on 13 December (date to be confirmed).
On Thursday, ministers were unable to adopt the texts despite stabilising them due to divisions over the legislative proposal for a gas price cap (‘market correction mechanism’ - see EUROPE 13070/1).
See the texts adopted by the ministers: https://aeur.eu/f/4as ; https://aeur.eu/f/4ar (Original version in French by Damien Genicot)