Is the EU able to secure its energy supplies?

Two MEPs discuss Europe’s energy supplies.

Jacek Saryusz-Wolski

The problem of energy supply security has a growing impact on the overall security of the European Union. As energy markets are increasingly global and much of the world’s gas and oil reserves are in unstable and often undemocratic parts of the world, energy policy progressively moves into the realm of foreign affairs.

When the European Parliament adopted by an overwhelming majority the report calling for a common foreign policy on energy security in September last year, it was clear that efforts taken at a national level had proved insufficient and inadequate and that they did not guarantee the long-term interests of the whole Union. Exclusive bilateral agreements constitute a sub-optimal solution for both exporting and importing countries. The Union should take intellectual leadership in advocating a multilateral approach to open energy markets. To serve as an example, the EU must speak with one voice when dealing with strategic energy matters and avoid bilateral deals with third parties that might create new divisions in Europe and further increase EU’s energy supply dependency.

The EU has to take concrete steps aimed at diversification of gas and oil sources and supply and lower its dependency on a limited number of suppliers. The EU needs a proactive energy policy strengthening the Union’s co-operation with a variety of global producer and transit countries based on the principle of reciprocity. For that the Union must be equipped with independent gas and oil corridors as quickly as possible to increase the number of partners. Most importantly, a common energy policy must be based on the principle of solidarity. In the energy context, solidarity would equal the obligation to assist all of those states which are endangered or in difficulty, including problems from supply shortages.

But if we want to realise our ambitions, we have to move beyond mere declarations. The Union should establish new sources for financing all of the undertakings aimed at increasing the EU’s energy security.

The member states should extend the EU joint action to the energy field as quickly as possible and take concrete steps aimed at implementation of this proactive energy policy, while taking into account the political and economic interests of all the member states and significantly reducing the EU’s dependence on fossil fuels from a few big suppliers.

Obviously the common foreign energy policy should benefit all the member states involved, while keeping their sovereignty as to their strategic choices concerning energy mix intact.

But an external energy policy largely depends on having a robust internal policy in the area. We therefore also need to take ambitious measures at home. The European Commission should speed up its efforts to complete the creation of a single gas market based on the principle of transparency and reciprocity as soon as possible while simultaneously taking all possible steps aimed at promoting transparency and improved governance in the energy sector through energy partnership with third countries, with the objective of creating mutually beneficial, open, transparent, non-discriminatory and stable legal conditions for energy investment and trade. We have to step up investments to make the transmission grid more efficient and secure and create functional inter-connectors between electricity grids and pipeline networks.

Simultaneously we should think about energy efficiency. In this context one has to welcome the Commission’s intention to put forward a proposal for a new international agreement towards promoting energy efficiency in order to develop common global efforts towards promoting energy efficiency.

Energy security becomes so important that it is high time we took the challenge seriously. We do not have time for half-measures. In the long term we should think about establishing a common external energy policy addressing properly environmental concerns which would constitute a milestone in the EU integration process, corresponding to its ambition and resulting in tangible benefits for all European citizens.

• Polish centre-right (EPP-ED) MEP Jacek Saryusz-Wolski is chairman of the European Parliament’s foreign affairs committee.

Atanas Paparizov

The place of gas in the European energy mix is crucial - from 23% of the European energy mix today, gas will amount to 28% in 2030; gas accounts for one-fifth of all electricity generated. The specific issue for gas is to ensure security of supply - domestic production is declining and gas is mainly purchased from a few powerful leading producers outside the EU, under long-term contracts (62% in 2006). Europe’s dependency on imports will increase to more than 80% in 2030.

In order to achieve gas security a significant amount of investment is needed. According to the International Energy Agency, Europe should invest $400 billion (€276bn) for the period 2005-30 so as to ensure security of supply, from which around $160bn (€110bn) in the transmission and distribution networks, $20bn in liquefied natural gas facilities and $220bn (€151bn) in upstream operations.

The provisions of the proposed gas regulation aim at introducing European tools to improve co-operation and to strengthen the functioning of the internal market via the co-ordination of the transmission system operators (TSOs) and the harmonisation of the rules for storage system operators. The aim of the proposal is also to increase transparency and long-term perspectives, so as to secure gas supply, investment planning and prevent from severe disruptions.

The proper functioning and optimisation of the EU gas transmission system - in terms of reliability, robustness, efficiency and costs - is clearly in the interest of all European citizens and industries. The prospect of a large EU market for electricity and gas with common rules is a strong incentive for new investment.

It is important that new entrants are able to invest in gas import capacity. In practice, EU companies are often unable to sell electricity and gas across the EU on equal terms as incumbent suppliers.

The new regulatory framework promotes and co-ordinates regional initiatives between transmission system operators and regulatory authorities, so as to ensure optimum management of the network and appropriate investment planning and delivery. But regional initiatives may become practically operational by strengthening the Commission’s proposals through the set-up, in the first place, of single-user interfaces (eg, one-stop shop), ensuring commercial functions in the name of several TSOs at the regional level. Areas should be more clearly identified in which TSOs are obliged to co-operate. The TSOs could consider setting up regional entities with defined responsibilities.

A direct link exists between network capacity and competition. We should make sure that ‘congestion revenues’ are not higher than expected profits from building new links. As today very often this is not the case, this hinders the entry of new producers and suppliers and is an obstacle to the integration of European markets through the development of cross-border interconnections.

In order to make sufficient transmission capacity available to meet demand and integrate national markets, network operators would need co-ordinated long-term planning of system development to plan network investments and monitor the developments of transmission network capacities. But it is necessary to reinforce the provisions of the regulation proposed in September’s energy package on the investment development plan, in particular, through specific mechanisms for the implementation of the investments and additional measures to involve at least the Agency for Co-operation of Energy Regulators in the preparation of the European ten-year investment plans.

Planning of investment will need to be driven by the viewpoints and needs of market users, at national level where TSOs plan their independent investment and also at European level. Those plans would have to be approved by national regulators - and not only submitted for advice to the agency - and strictly monitored if we want them to become effective; the co-ordination between national, regional and European plans should be clarified.

All in all, our approach must ensure that September’s third energy package enhances investments in networks in order to ‘keep the European lights on’.

• Bulgarian Socialist (PES) MEP Atanas Paparizov is a member of the Parliament’s industry, research and energy committee and is preparing its response to the proposed regulation on conditions for access to the natural gas transmission networks.

Two MEPs discuss Europe’s energy supplies.