EU Pipeline Operators Resist Supergrid Idea
Any plans to radically reform the European gas grid should only be considered when all the network codes have been fully implemented, argues the lobby group Gas Infrastructure Europe (GIE).
It was responding early June to the European Commission's Quo Vadis? [in English: Where are you going?] survey, which late last year invited industry experts to come up with ways to improve the regulation of the gas market for the benefit of consumers. Among the ideas that were published this year is the merger of all transmission systems into a single entry zone, with two exit tariffs depending on what sort of customer it was.
GIE said that, while the EU gas regulation and network codes are still under implementation in EU member states, "radical reforms would risk increasing complexity significantly for market participants and infrastructure operators without necessarily achieving any substantial welfare gains."
It said the consequences of disrupting existing contractual relations and potentially erasing the confidence of investors would have to be considered. Further, a single European market zone will require the alignment of different regulatory regimes in the member states, such as in relation to cost regulation.
"That is a highly complex task, which would also create a need for increased interference by regulators and surrender of power to a not yet existing pan-European regulator that will struggle to handle the diversity of market developments in Europe. GIE believes instead that the best way forward to better integration in EU energy markets will result from increasing hub to hub competition."
Market mergers should be encouraged where they provides sufficient benefits, but GIE argues it is not possible to evaluate these on EU-wide level. Instead GIE suggests that a regional approach to further market integration is considered, instead of a single market zone concept, respecting the different levels of market development. This could help bringing fragmented national markets into regional hubs, it said.
"Forced market mergers across the EU would significantly increase complexity for market players, operators of gas infrastructure and regulators alike. Without individual market specific analyses it will remain unclear to what extent market mergers will actually increase EU welfare."
EU disunity
As energy remains one of the areas where member states retain autonomy, the European Commission is not yet able to impose this recommendation on grid operators even if it thinks it is the best way forward. They still have to follow the laws of the land in which they function. The EC has not yet pronounced on the results of its survey however.
As with electricity, where countries follow their own political agenda even to the point where they build more capacity than is needed, so with gas. The Baltic states, for instance, all want an LNG terminal: calls for public funding in Estonia did not stop when Lithuania installed its floating storage and regasification unit at Klaipeda, even though Klaipeda is not used very much. And while Klaipeda gives Lithuanian consumers more choice about gas purchasing, it also pushes up gas prices for consumers as the terminal has to be paid for even if it is not used.
A former prime minister of Belgium and now member of the European Parliament Guy Verhofstadt, speaking at an Adam Smith/Burisma conference on energy security in Monaco June 2, contrasted the US and the EU forms of government, arguing for greater power for the EC to regulate energy instead of the patchwork of rules now in place. The EU is a confederation, not a union, he said, whereas the US acted as one entity where it made sense.
One bright spot on his horizon is the election of the reformist Emmanuel Macron as French president, for whom EU sovereignty is more important than French sovereignty, Verhofstadt said. Reform would create a state, which a currency needs if it is to function properly; and local differences would be swallowed up as members saw themselves as equals in a bigger entity. The salvation for Europe lay in a real union as the future lies not with nations but empires, he said, such as India and China.
Verhofstadt did not explain how this union would happen given political differences between the member states, but true unification along the US lines is not always easy, even when everyone speaks the same language. Despite their common causes, the 13 colonies in America also had rivalries and protective tariffs, only becoming unified in the face of war with England.
Verhofstadt, a committed unionist, will be leading Brexit negotiations for the EU parliament. However he is happy for states to leave in some circumstances: he lashed out at the right-wing Hungarian prime minister Viktor Orban in April, when the latter accused the EU of meddling in Hungarian affairs. Verhofstadt said he was free to leave if he did not like the rules but he would have to stop taking the EU money.
William Powell