While much attention has focused on the European Union’s climate goals for 2030, Europe has quietly made considerable progress in strengthening its energy security, write Douglas Hengel.
A European Commission progress report last month documents the achievements made over the past few years in enhancing the resiliency of European power and gas grids, and improving the functioning of markets that are necessary for true energy security.
The European Commission’s report provides measurable evidence of this evolution, highlighting how increased gas storage, the building of new gas and electricity interconnectors, and the addition of gas reverse flow capability could allow the EU to handle a complete cut-off of Russian gas for six months, albeit with some difficulty. The inauguration of a Lithuanian liquefied national gas terminal on October 27 is a major contribution in this regard for the vulnerable Baltic nations and testifies to the strong political will and inspired leadership of the Lithuanian government. Furthermore, price convergence for natural gas across Europe is a positive trend that shows that a flexible and well-functioning market is developing.
Looking ahead, the allocation of €647 million under the EU’s Connecting Europe Facility to projects of common interest — in particular, to realize the energy integration of the Baltic States — is another major step forward. The emphasis on Europe’s remaining critical needs, such as the North-South corridor, is also welcome.
Yet while infrastructure linkages are essential to reducing dependency on single providers and monopolies, authorities also need to concentrate on the regulatory side of the equation in order to complete the integration of the European energy market. The elimination of regulatory barriers and anti-competitive business practices does not always lend itself to nice photo-ops like cutting the ribbon on a shiny new pipeline. But the conformity of national measures with the EU’s Third Energy Package — which was adopted in 2009 — is of equal importance to all the steel and cement. Simple harmonized rules for gas and electricity trading would be of major benefit and further develop gas trading hubs.
Decreasing the EU’s dependency on current gas suppliers is not a short-term or maybe even a medium-term proposition. Gas imports could well rise as domestic EU production declines. Liquified natural gas (LNG) from the United States and elsewhere could help fill that gap, but current suppliers to Europe could well lower prices to discourage LNG imports. In the end, market shares may not change much, but that should not be a major cause for concern if energy markets are fully integrated and well-functioning. The EU is far more dependent on oil imports than it is on gas imports, but gas does not yet flow as freely around Europe as oil. As former Energy Commissioner Günther Oettinger has said: “If energy markets are well connected and common rules are in place, there is not much room left to use energy supplies as a political instrument….All this translates into secure energy supplies all over Europe and lower bills for consumers.”
Recent European Commission reports lay out fairly clearly, if diplomatically, where the problems lie in energy market integration and linkages: a lack of vision in certain countries, a desire to protect narrow national interests or sweetheart deals, and in some cases bad investment climates. In his hearing before the European Parliament on October 25, incoming Vice-President for the Energy Union Maros Šefčovič prioritized the need for member countries to “avoid market distortions due to agreements with third countries not respecting EU rules.” Let’s hope the promised assessment of national measures to implement the Third Energy Package is conducted speedily, and that those not in conformity with the rules are forced to modify their laws and regulations with utmost haste. The prior European Commission deserves kudos for what it has achieved on the energy security front. The new Commission should now move expeditiously to finish the task.
Douglas Hengel is a Senior Resident Fellow with The German Marshall Fund of the United States based in Washington, DC, and is a career U.S. Foreign Service Officer. The GNFUS first published this article as part of its Trans-Atlantic Takes series.
