No Longer the Bear's Market
A single European energy market would be good for consumers, the environment and security
Creating a single market has long proved tricky, partly because electricity and gas networks have been treated as natural monopolies. The Economist writes that liberalising measures being undertaken by the EU will lead to greater energy security if properly implemented.
These EU laws, not to mention investigations into anti-competitive practices, are bringing about a degree of “unbundling”. Energy companies must now either sell distribution networks (i.e., grids and pipelines) or run them as wholly separate businesses.
The EU gave notice that it is intent on breaking up gas monopolies as evidenced by its position in respect to the Yamal gas pipeline from Russia to Germany via Poland. The Commission made Poland renegotiate the terms of the contract to ensure that the Polish section is run by an independent operator and can be used by third parties.
A dispute between Russia and Ukraine over gas prices in January 2009 led to a two-week halt in gas deliveries to countries across central and eastern Europe, highlighting Europe’s dependence on Russia.
As a result, liberalization measures are being combined with steps to increase energy stability and security. These include the proposed development of the Nabucco pipeline to bring gas from the Caucasus, the Middle East and Central Asia, bypassing Russia, the building of interconnectors and reverse-flow pumping systems and the requirement that member countries stockpile gas which would be available as a pool in case of crisis.
The Economist states that Gazprom, Russia’s gas giant, dislikes all this liberalisation, arguing that losing control of pipelines will deter investment. Trying to rely on the spot market, it says, will rebound against Europe. Low prices could prompt Russia to hoard gas or sell it elsewhere; in any case the glut will not last forever.
The magazine says that Europeans should disregard such talk. Russia depends heavily on Europe to buy its gas. The true issue is that closed and fragmented markets leave European countries more vulnerable than they need to be.