Europe Reacts to the New Energy Landscape

ქართულენოვანი ვერსია იხილეთ აქ.

Author: Mariam Kukava

On 29 June 2022, the European Parliament and the Council adopted a Regulation (EU) 2022/1032 amending Regulation (EU) 2017/1938 concerning measures to safeguard the security of gas supply and Regulation (EC) No 715/2009 on conditions for access to natural gas transmission networks (the Regulation)[1]. In response to the extraordinary situation deriving from the escalation of the Russian military aggression against Ukraine, the Union has adopted the rules and regulations aiming to ensure that storage capacities in the European Union are properly used and shared in a “spirit of solidarity”, in the context of the “dramatically changed geopolitical situation”. The nature of recent events has led to large-scale and Union-wide consequences. Therefore, energy savings and energy efficiency were defined as the key contributors to the objective of reinforcing the security of gas supply at the Union level.

Context: changes in the geopolitical situation and future uncertainties

Although short-term gas supply disruptions have occurred in the past, the situation in 2022 is different. The Russian invasion of Ukraine in February 2022 has triggered serious concerns about EU energy security, consequently, the increased geopolitical tensions further amplified uncertainties. The problem is particularly acute in the gas sector, where Russia is the leading third-country supplier, on which several Member States are heavily dependent.[2]

In the current geopolitical context, the risk of supply disruption is historically high. The impact of the Russian military aggression against Ukraine has demonstrated that the security of supply rules in force are not adapted to sudden intentional events and changes in the geopolitical situation. Therefore, gas storage, as one of the strong instruments mitigating the impact of the current energy crisis, has attracted attention. 

Faced with this unprecedented emergency and taking into consideration the uncertainties deriving from future changes in the geopolitical situation, under the Regulation Member States are encouraged to meet the filling targets for EU gas storage facilities as quickly as possible. Underground Gas Storages (UGS) play an important role in the security of supply and the flexibility of the European gas system, as they ensure the provision of additional gas supply in emergency situations, such as high demand or supply disruptions.  

The EU gas storage capacity amounts to 1,147 TWh across 18 Member states or an equivalent of approximately 27% of the EU’s yearly consumption. Gas in the storage on 1 November 2021 represented nearly 74% of the EU gas storage capacity and 20% of the EU annual consumption.[3] The situation strongly differs across the Member States regarding underground gas storages, some Member States have large storage sites (Germany, Italy, France, the Netherlands and Austria make up two-thirds of the EU’s total capacity),[4] others only small ones and there are some countries in Europe that do not host any storage facilities (Cyprus, Estonia, Finland, Greece, Ireland, Lithuania, Luxembourg, Malta and Slovenia). However, under the new EU Regulation, these countries will make solidarity arrangements with the other Member States in order to secure their gas reserves.[5] The regulation provides for a derogation to be granted to Cyprus, Malta and Ireland as long as they are not directly interconnected with the gas system of other Member States.[6]

The new rules on gas storages

The Russian war in Ukraine has led to an increase in energy prices and has impacted the energy supply in the EU. To reinforce Europe’s energy resilience, European Parliament and the Council have definitively adopted the Regulation aiming to ensure that gas storage capacities in the EU are filled before the winter season (as a preventive measure for the security of supply) and can be shared between member states in a spirit of solidarity.

The Regulation focuses on three major elements: minimum filling levels before winter; compulsory certification of storage system operators and 100% tariff discounts for gas storage facilities.

Setting a filling target for EU gas storage facilities is the cornerstone of the Regulation. It is fixed at a minimum of 80% of capacity by 1 November 2022 (before the winter of 2022/2023). The level of required storage shall rise to 90% for subsequent years (1 November 2023 onwards). Member States are free to set a higher filling target so that the Union could strive to reach collectively the filling of 85 % of the capacity of the underground gas storage facilities in the Union for 2022.

The filling targets are necessary to ensure that consumers in the Union are protected against feasible gas supply shortages. As gas storage capacities and national situations vary greatly, the Member States, subject to specific conditions, are granted the right to partially meet the filling target by counting stocks of liquefied natural gas (LNG) or alternative fuels.

As some of the Member States have significant underground storage capacity compared to their domestic gas consumption, they may be disproportionately affected by the obligation to meet the filling target for the underground gas storage facilities on their territory. Therefore, the filling obligation for underground stocks is limited to a volume corresponding to 35% of the average annual gas consumption of Member States over the last five years.

Given the various regulatory regimes already in place in many Member States to support the filling of gas storage facilities, no specific instrument to meet the filling target is imposed by the Regulation. Member States are entitled to choose the instrument which is most appropriate for their national systems. Nevertheless, the general principle that applies to each member State is the following - any measure taken by the Member States to ensure the filling of underground gas storage facilities shall be “necessary, clearly defined, transparent, proportionate, non-discriminatory and verifiable, and should not unduly distort competition or the proper functioning of the internal market in gas or endanger the security of gas supply of other Member States or of the Union”.[7] These requirements aim to avoid the strengthening of a dominant position or windfall gains for undertakings that control underground gas storage facilities or prevention of non-usage of booked storage capacity.

Taking into consideration the fact that several Member States do not have their own gas storage capacity, the Regulation provides that such countries shall store 15% of their annual domestic gas consumption in stocks located in other the Member States and thus, have access to gas reserves stored in the other Member States. Moreover, by way of derogation, a Member State without underground gas storage facilities may develop a „burden-sharing mechanism” with one or more Member States with underground gas storage facilities, based on risk assessments identifying their needs.

The regulation provides for compulsory certification of all underground gas storage site operators by the competent authorities of the Member States concerned. The certification procedure aims to avoid the potential risks of external influence on critical storage infrastructures.

To incentivize refilling, the new Regulation proposes a discount of up to 100 % to entry and exit tariffs for transmission and distribution capacity to and from storage, to both underground gas storage facilities and LNG facilities, thus, making storage more attractive for market participants. 

Due to the exceptional nature of the current circumstances, storage capacity filling obligations will come to an end on 31 December 2025.  Certification obligations for stock operators will continue to apply beyond the said date.

Effect of the Regulation in Energy Community Contracting Parties

The Regulation shall, as a matter of urgency, become part of the Energy Community acquis in accordance with the Energy Community Treaty, signed in Athens on 25 October 2005 and entered into force on 1 July 2006.[8]

By signing the Protocol concerning the accession of Georgia to the Treaty establishing the Energy Community in 2016, Georgia became the Contracting Party to Energy Community. Having a common understanding of the implementation of several provisions of Energy Community acquis, Parties taking into account the fact that Georgia is not directly interconnected to the energy network of any Contracting Party or Member State of the European Union agreed that the provisions included in the acquis communautaire concerning energy cross-border exchanges with a Contracting Party or a Member State of the European Union shall start applying whenever it is physically interconnected to the energy network of any Contracting Party or Member State of the European Union.[9]

Article 24 of the Energy Community Treaty allows for adaptations when incorporating new acquis communautaire. These adaptations take into account the institutional framework of the Treaty (for example, changing references from the Member States to the Contracting Parties) and the specific situation of the Contracting Parties. Therefore, the decision of the Ministerial Council of the Energy Community on implementing and adapting the Regulation shall be based on the fact that Georgia for as long as it is not directly interconnected to the gas interconnected system of any other Contracting Parties, shall be exempted from the effect of this Regulation.

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[1] Regulation (EU) 2022/1032 of the European Parliament and of the Council of 29 June 2022 amending Regulations (EU) 2017/1938 and (EC) No 715/2009 with regard to gas storage, available - https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32022R1032&from=EN;

[2] For more information on the European countries which are most dependent on Russian gas, visit - https://thehill.com/policy/equilibrium-sustainability/3260553-these-european-countries-are-the-most-dependent-on-russian-gas/;

[3] ACER and CEER views on the proposal for a regulation amending Regulations (EU)2017/1938 and (EC) 715/2009 relating to the access to gas storage facilities, 29 April 2022 available - https://www.acer.europa.eu/sites/default/files/documents/Position%20Papers/Regulators%20feedback%20EC%20storage%20regulation%20proposal_final_formatted.pdf;

[4] The information is available - https://www.consilium.europa.eu/en/infographics/gas-storage-capacity/#:~:text=The%20majority%20of%20the%20EU,with%20the%20lowest%20filling%20levels;

[5] For more information on Gas storage capacity and filling level in the EU member states, visit - https://www.consilium.europa.eu/en/infographics/gas-storage-capacity/#:~:text=The%20majority%20of%20the%20EU,with%20the%20lowest%20filling%20levels;

[6] Regulation (EU) 2022/1032 of the European Parliament and of the Council of 29 June 2022 amending Regulations (EU) 2017/1938 and (EC) No 715/2009 with regard to gas storage, available here - https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32022R1032&from=EN;

[7] Regulation (EU) 2022/1032 of the European Parliament and of the Council of 29 June 2022 amending Regulations (EU) 2017/1938 and (EC) No 715/2009 with regard to gas storage, available here - https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32022R1032&from=EN;

[8] Regulation (EU) 2022/1032 of the European Parliament and of the Council of 29 June 2022 amending Regulations (EU) 2017/1938 and (EC) No 715/2009 with regard to gas storage, available - https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32022R1032&from=EN;

[9] Protocol concerning the accession of Georgia to the Treaty establishing the Energy Community, available - https://policy.asiapacificenergy.org/sites/default/files/Protocol%20Concerning%20the%20Accession%20of%20Georgia%20to%20the%20Treaty%20Establishing%20the%20Energy%20Community%20%28EN%29.pdf.