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Can a new energy Governance fill the gaps of the EU gas market?

Written by Ilaria Conti

With the Clean Energy Package released last November, the EU Commission proposed a new Regulation on the Governance for the Energy Union, specifically concerning the achievement of the “ambitious climate policy” targets.

The aim is to consolidate ‘the existing patchwork’ of national planning/reporting and EU legislation across energy, climate and replace the various existing sectorial plans with one comprehensive integrated plan and report: “These objectives can only be achieved through a set of coherent and coordinated actions – legislative and non-legislative – at EU and national level […which] requires the Energy Union to establish robust Governance.”

But what is energy Governance?

Its meaning evolves with time and circumstances. In the 80s, for instance, it strictly concerned global geopolitics, balance of powers and nuclear weapons; in the 1990s-early 2000s the focus shifted towards enlargement, whereas today it mainly relates to the Energy Union’s policy pillars.

At all times, however, the concept of Governance embraces at least three dimensions: the decision-making process, relations between actors and rules implementation.

In the energy world, physical interconnections make the debate on governance inevitable. This is particularly true if applied to the gas world, where infrastructures cross different markets, regimes, jurisdictions while keeping a strong link to the national territory. Let’s think about the fights on Third Party Access to gas pipelines, Inter-Governmental Agreements and, more generally, the complex theme of External Energy Security, which FSR analysed via a Conference and an online debate last year.

Why an Energy Governance debate now?

Is there a need to open a chapter about Governance of the Energy Union? And if so, why now? In my view, there are at least three topics to be addressed:

  • The role of the new actors: the consumers
  • Regionalisation of governance
  • The management of energy security, particularly the concept of solidarity in emergency situations

Regarding the first point, in recent years the “renewable energy revolution” has profoundly changed the market structure, causing a shift in the traditional roles of producers and consumers and creating new actors such as “prosumers” and aggregators. The EU debate on governance should enquire on which powers and rights these new entities might have and what their participation should be in the decision-making process on rules and future investments. What’s the minimum level of aggregation? Could/should every single prosumer participate in the political and regulatory decisions affecting his future and, if so, via which instruments?

While these questions currently concern the electricity sector more than the gas one, the shift from a national to a more regional or even local perspective is something that the gas sector too, albeit in smaller proportion, is also experiencing. I’m thinking about the “new” ways of utilising gas –from biogas to district heating, but also the possible utilisation of gas as fuel for local transport (cars, vehicles etc.). While in the past the EU gas market used to have an undiscussed national – if not global – dimension, today there are already those who think about a “mirroring” exercise with the EU electricity sector to make the two markets (artificially) more alike.

The debate on solidarity originates, instead, from the gas sector. While solidarity is included as a principle in the EU Treaties, it’s only in the Review of the Security of Supply Regulation (2015) that solidarity is for the first time, in a detailed manner, provided for.

FSR looked into the “economic principles” which should trigger solidarity between EU member states in case of emergencies such as gas supply disruptions.

But, of course, solidarity between EU Member States doesn’t arise naturally just because of economic incentives: we have also seen this on other occasions, such as the Greek economic crisis or the recent Refugees emergency. For these reasons, an attentive review of which governance should apply in case of security of supply emergencies is absolutely necessary at this point. Which rules: internal needs first and the neighbours’ ones later – or a pre-established plan? Until which point should the market be left free to compensate these needs? And who should intervene?

All these questions deserve a serious governance debate that we as FSR will follow with full interest and commitment. Meanwhile, listen to our new podcast on the theme of energy governance with the EU Commission’s Honorary Director Jean-Arnold Vinois.