Clémentine d'Oultremont - Research Fellow, Egmont Institute; Aurélie Faure - Research Fellow, Ifri; Marco Giuli - Research Fellow, Madariaga - College of Europe Foundation
Conference reader, Brussels Think Tank Dialogue 2015
Despite years of normative advancements in EU energy policy, energy security is a relatively new concern in EU policymaking. It was mentioned for the first time in the Commission’s 2006 Green Paper as a result of a pricing dispute between Russia and Ukraine which caused disruptions in the gas supply to some of the eastern Member States. This “wake-up call”, reinforced by further disruptions in 2009, showed just how necessary a common European energy policy was. Since then, energy security has been presented as a by-product of internal market integration, and of the expansion of the internal energy market rules to third countries, notably suppliers and transit countries.
However, this approach has proved insufficient: not only because a number of third countries do not accept to play by the same rules, but also because a number of countries in the EU are still lagging behind in terms of implementation of the internal energy market acquis. A comprehensive European energy security policy has remained limited by the reluctance of Member States to alienate sovereignty on a policy area deemed critical for national interests. According to the Treaty, the EU energy policy’s objectives must be achieved in “a spirit of solidarity between member states”, but governments retain the right to determine the general structure of their energy supply, the choice of their energy mix and the conditions for exploiting their energy resources (Art. 194 TFEU). There is thus a strong tension between the declared need for closer cooperation and solidarity, and the respect of national prerogatives. However, the combination of recent political turmoil across the EU neighbourhood, along with the new institutions’ insistence on the need to create an Energy Union, has revived ambition for a more integrated approach to energy security, as demonstrated by the Communication of the European Commission on the European Energy Security Strategy released in May 2014. In the medium and long term, the strategy calls for comprehensive efforts to moderate demand, fully integrate the internal energy market, increase the production of domestic sources, further develop energy technologies,2 diversify the energy imports and improve coordination of national energy policies, while speaking with one voice in external energy policy.
By approaching the notion of energy security from different theoretical angles, the three following contributions intend to provide recommendations on how to reach these objectives, considering political constraints and the global and regional market conditions. In particular, the following points will be highlighted. On the domestic side, the first priority of the EU energy security should be to complete the internal energy market. However, not only is it far from being completed but also at serious risk of fragmentation. In order to avoid this, the European market design should encompass the following measures: 1) All national energy policies must be compliant with EU rules and guidelines; 2) Mature renewables should be integrated into the market and balancing prices should reflect full system costs; 3) Transmission infrastructure should be developed in a common manner; 4) Network codes should be adopted and implemented as soon as possible; 5) The demand-side should be empowered to participate as much as possible in all markets; 6) The key European energy actors should be further empowered. The implementation of all these measures will require strong cooperation between the Member States, the EU and all energy stakeholders. Moreover, the transition to a low-carbon energy system is adding a new internal security dimension, linked to the electricity system transformation (renewable integration, decentralised generation) to the traditional notion of energy security. This raises new policy challenges as the role of the energy system’s main actors (mostly infrastructure operators) is evolving. In this context, energy efficiency policies need to be considered as an integral part of the EU’s energy system security.
On the external side, energy security is currently being revisited with special focus on natural gas and imports from Russia. It remains to be seen how the new challenges for the security of gas supply will be addressed by an (Energy) Union and to what extent this will be coordinated through governance mechanisms at regional and Member State level to increase resilience and flexibility in the system. The EU has to adapt to the new situation in its neighbourhood. It has to do so by also reviewing its external energy governance and its particular tools. With respect to gas pricing, a transition towards contractual arrangements incorporating spot pricing is to be expected. Joint purchase schemes make thus sense in order to counterbalance the suppliers’ market power. However, this should be accompanied by a significant alienation of sovereignty especially if the choice is made for an energy mix, in order to avoid free riding.
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