Written on 3 February 2020 by Alice Stollmeyer
On Wednesday 10 February the European Commission will present the so-called Energy Union ‘Winter Package’. The package will consist of five elements:
- Revised Security of Gas Supply Regulation
- Proposal for a revised decision on Intergovernmental agreements in the field of energy
- Strategy for Liquefied Natural Gas & Storage
- Strategy for heating and cooling
- Decision to establish the expert group on electricity interconnector target
A draft of the LNG and Gas Storage Strategy was leaked to me on Friday 22 January. Full title: ‘Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on an EU strategy for liquefied natural gas and gas storage’. The draft document has 11 pages (plus cover page). Its structure:
1. Introduction (p1)
2. Exploiting the full potential of LNG and storage in the internal market:
- Completing missing infrastructure (p3):
- Storage infrastructure
- Connecting LNG and storage to markets
- Completing the internal gas market: commercial, legal and regulatory aspects (p6):
- How to make the EU an attractive market place for LNG
- Gas storage in the internal market
- Optimising the role of storage for security of gas supply
- The EU as a player on international LNG markets (p9)
3. Conclusions (p 11)
- For the gas industry, EU energy security is no longer about securing supply but about securing demand. (For recent examples see here and here.) The EU Commission seems to just repeat gas industry’s messages by saying that gas will continue to play ‘a major role for the foreseeable future’… but they never explain what ‘major’ is or how long ‘the foreseeable future’ will last. But while the EU gas lobby wants to sell more gas, EU’s ‘Energy Union with a forward-looking climate policy’ is about the transition to a fossil-free economy: it should therefore have an exit strategy for all fossil fuels, including gas.
- The EU Commission risks overestimating gas demand yet again. Both VP Sefcovic and Commissioner Canete are talking about 380-450 bcm in 2030, but EU Commission’s own data are expecting gas demand in 2030 to be below 350 bcm just with a 27% energy efficiency target (p. 13 of the LNG consultation). This bad habit has even attracted the attention of the EU Court of Auditors (p. 37 of this report).
- The draft document does not mention that already Europe’s gas demand is falling. Depending on EU’s energy efficiency target for 2030, EU gas demand will fall even further: up to minus 42% by 2030 (EU Commission data). But the only efficiency mentioned in this draft LNG & gas storage strategy is… the efficient use of terminals — not the impact of energy efficiency and the growing competitiveness of renewables. After the Paris Agreement on ‘pursuing efforts to limit global warming to 1.5 degrees’an upward review of EU’s energy efficiency and renewables targets is simply indispensable.
- In light of EU’s strategy to further decrease gas demand it is odd that, unlike the State of the Energy Union, the draft does not mention the need to ‘avoid stranded assets’. EU’s decarbonisation of the heating and the power sector will result in lower demand for gas. The risk of building stranded assets is very real. The Commission’s promise in the draft LNG strategy to provide public funds to support the viability of e.g. new LNG terminals is not a wise use of scarce public resources.
- The EU Commission is already supporting projects (€5 billion for 195 projects of common interest), many of which are condemned to become stranded assets in a close future, considering the already declining gas demand in Europe. This decline will only accelerate with more energy efficiency and renewables.
- ‘Instead of doing everything to reduce gas supplies from key suppliers like Russia, gas supply security could more effectively be safeguarded by ensuring that unused alternatives are maintained. They could then be tapped into for an indefinite period in the case of supply disruption from a key supplier.’ (See here for more.)
- Only one month after Paris’ agreement, the EU Commission is already coming up with strategies to support and extend the fossil fuel era, without giving any consideration for the climate impact of LNG, and for the origin of the gas that would be imported in the future. More LNG would mean more fracked gas to come from the US and Australia, with a risk of intensification if an EU-US trade agreement (TTIP) enters in the equation (it’s probably not a coincidence that the US Congress reached deal to lift their 40-year ban on oil and gas exports last month).
The Energy Union ‘Winter Package’ is the first big proposal after the Paris’ climate agreement. To be credible in the follow-up to Paris EU Commission has to emphasise the vital importance of efficiency and renewables. Whatever the gas lobby may imply, gas is a fossil fuel. Any diversification of gas supplies has to done in the explicitly recognised context of EU’s transition to a fossil-free economy and a shrinking gas market.
Looking forward to see a new LNG strategy that does contribute to building a future-proof EU Energy Union that is in line with EU’s climate commitments and fossil-free future.