EC Addressing Gas Market Issues and Challenges: 80% Minimum Gas Storage Obligation by 1 November 2022
On March 23, the European Commission proposed a new legal obligation to fill underground storage to 80% of its capacity by 1 November 2022, rising to 90% for following years.
Following up rapidly on the REPowerEU Communication and the Versailles Declaration, the European Commission (EC) has set out ideas for collective European action to address the root causes of the problem in the gas market and ensure security of supply at reasonable prices for next winter and beyond.
“Global and European energy markets are going through turbulent times, particularly since the Russian invasion of Ukraine. Europe needs to take swift action to ensure our energy supply for next winter, and to alleviate the pressure of high energy bills on our citizens and businesses. Today’s proposals are another step forward in our intensive work on this front,” Commissioner for Energy, Kadri Simson, said.
To address concerns about continued high energy prices, the Commission has also adopted a Communication setting out the options for market intervention at European and national level and assessing the pros and cons of each option.
EU partnerships with third countries to collectively purchase gas and hydrogen can improve resilience and bring down prices. The Commission stands ready to create a Task Force on common gas purchases at EU level. By pooling demand, the Task Force would facilitate and strengthen the EU’s international outreach to suppliers to help secure well-priced imports ahead of next winter. The Task Force would be supported by Member States representatives in a Steering Board. A joint negotiation team led by the Commission would hold talks with gas suppliers and would also prepare the ground for future energy partnerships with key suppliers, looking beyond LNG and gas. It would be inspired by the experience from the COVID-19 pandemic, where EU wide action was crucial to guarantee sufficient supplies of vaccines for all.
A legislative proposal for securing winter gas storage
The Commission has accelerated its work since the Versailles Summit and presented a legislative proposal requiring Member States to ensure that their underground gas storage is filled up to at least 80% of capacity by 1 November 2022, rising to 90% for the following years, with intermediary targets from February to October. Operators of storage sites should report the filling levels to national authorities. Member States should monitor the filling levels on a monthly basis and report to the Commission.
Gas storage facilities are critical infrastructure to ensure security of supply. A new mandatory certification of all storage system operators will avoid potential risks resulting from outside influence over critical storage infrastructure, meaning that non-certified operators will have to give up ownership or control of EU gas storage facilities. In addition, for a gas storage facility to close down its operations it would need to have an authorisation from the national regulator. To incentivise the refilling of EU gas storage facilities, the Commission is proposing a 100% discount on capacity-based transmission tariffs at entry and exit points of storage facilities.
Emergency measures on energy prices and gas storage
The Commission has been taking action since last Summer to mitigate the impact of high energy prices on households and businesses. President Ursula von der Leyen committed to present concrete exceptional short-term options by the end of the month to tackle the contagion of gas prices on the electricity market.
Several options for emergency measures to limit the impact of high electricity prices have been put forward by Member States. However, all options on the table carry costs and drawbacks.
As the Communication notes, there is no single easy answer to tackle high electricity prices, given the diversity of situations among Member States in terms of their energy mix, market design, and interconnection levels. The Commission is laying out the pros and cons of different approaches for the further consideration of European Leaders and is ready to take forward its work as appropriate. While many of the options above address the symptoms, it is important to tackle the root causes of the current high electricity prices, with collective European action on the gas market.
The Commission will table its detailed REPowerEU plan and assess options to optimise the electricity market design in May, and stands ready to propose an EU energy savings plan. The Commission is also considering providing guidance to Member States on how to make best use of targeted country-specific derogations under the Energy Taxation Directive.
Background
The Commission’s ‘Energy Prices Toolbox’ from last October has helped Member States to mitigate the impact of high prices on vulnerable consumers and it remains an important framework for national measures. On 8 March, the Commission presented additional guidance to Member States, confirming the possibility to regulate prices for end consumers in exceptional circumstances, and setting out how Member States can redistribute revenue from high energy sector profits and emissions trading to consumers. A new State Aid Temporary Crisis Framework was adopted on 23 March, enabling support for undertakings directly or indirectly affected by the economic impacts of the war in Ukraine, in the form of limited direct grants, liquidity support and aid for increased gas and electricity costs.
In Versailles on 10-11 March 2022, EU leaders agreed to phase out the EU dependency on Russian gas, oil, and coal imports as soon as possible and invited the Commission to put forward a plan to ensure security of supply and affordable energy prices during the next winter season by end of March. In parallel, the EU leaders committed to urgently address and consider concrete options, building on the Communication of 8 March 2022, for dealing with the impact of increased energy prices on their citizens and business, especially the vulnerable citizens and SMEs.
