In discussions about the EU’s energy policy, there are persistent questions about gas – its role and share in the energy mix. The previous European Commission, as part of the implemented strategy of the Energy Union, acknowledged the security of energy supply (security, solidarity & trust), including natural gas supplies, as one of the essential pillars and at the same time the starting points of its energy policy.
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As part of a broader and more comprehensive strategy – the European Green Deal – the current European Commission is focusing on climate protection and sustainable development, but questions about gas pop up. What is and will be the role of this raw material in the transforming European energy sector and decarbonising economy?
Will gas-based generation provide back-up for renewable energy sources, or will the more durable role of the raw material be maintained? Will natural gas remain in the EU mix and how fast will the importance of green gases grow? We can expect at least some of the answers in the so-called gas decarbonisation package of the European Commission. We can already see some hints regarding the role of natural gas, among others, in the assessment of the effects of the EU’s climate ambitions increased in mid-September 2020, EU hydrogen strategies and sector coupling, or in the revision – ongoing and scheduled to be completed before the end of this year – of the guidelines for trans- European energy infrastructure (TEN-E). According to the latest EU forecasts, natural gas is to remain an important source of energy in the EU, but in all scenarios presented by the European Commission, its role in the energy mix is expected to decrease as early as 2030, and very clearly until 2050. The Commission also forecasts a decline in its consumption and imports
QUESTIONS ABOUT DEMAND
The question of the role of gas in Europe is therefore, in a way, also a question about the demand for gas. EU demand, after a temporary decline, has been growing since 2014 to the level of around 500 billion m3 between 2017 and 2019, but the near future is not obvious. Record warm winter weather, full gas storage facilities in anticipation of the would-be Russian-Ukrainian gas crisis, and finally a decline in demand related to the COVID-19 pandemic – all of this translated into a decrease in gas demand in the first half of 2020 by approx. 8% compared to the same period of last year. It is not obvious whether and to what extent the demand for raw materials in the EU will recover before the end of the year and how it will develop in the coming years – whether, for example, the lower demand for hydrocarbons will not contribute to faster implementation of measures to decarbonise economies. Additionally, there are differences between the EU countries in the approach to natural gas. There are countries where the demand for this raw material is growing due to the implemented energy policy and it has not been slowed down by the pandemic – both Poland.
There are also countries where gas consumption has fallen sharply (e.g. Italy or France) and/or where the raw material is more and more commonly perceived as dirty fuel that must be eliminated as soon as possible (e.g. in Scandinavia). Such an approach is in line with the current EU climate policy and translates into its goals and regulations.
An example is moving away from subsidizing gas in the EU, e.g. by the European Investment Banks and, most likely, as part of Community financial instruments. This raises controversy and protests from countries that perceive gas as a transition fuel in phasing out coal, including those from Central and South-Eastern Europe.
SECURITY OF GAS SUPPLY IN THE EU AND THE POST-PANDEMIC LANDSCAPE
The issue of security of supply also returns like a boomerang in the discussion about the future role of gas. A decreasing internal production of the raw material contributes to the situation. An example is the rapid decline in production in the Netherlands. As a result, the EU’s import dependency is growing, and questions about the role of Russian gas in the import basket and the European energy mix as well as about the possibility of diversification keep coming back. Russian gas divides EU countries – there are alternative visions regarding energy cooperation with Russia in Europe, which is best illustrated by the deep divisions concerning the Nord Stream 2 gas pipeline. Nord Stream 2, but also the European discussion about American LNG, also remind us of the fact that the debate about natural gas and its sources is closely related to politics.
The continuing controversy and different priorities are encouraging doubts as to whether and what common EU gas policy is possible. The ongoing coronavirus pandemic is an undoubted challenge, but also a test for European economies, the gas sector and finally for shaping a common policy. It will undoubtedly accelerate changes, but its effects are not known yet. What we know little about is whether: - the more difficult conditions will verify the ambitious political goals, for example regarding diversification, or if they will strengthen the efforts of the countries to achieve them; - the crisis and the pandemic will contribute to the integration and depoliticization of the gas issue in Europe, or, on the contrary, the fight for the market and the recipient will exacerbate the actions of suppliers (Russia, USA) and the mood in the EU; - the current challenges will finally help to make the European gas policy coherent and, for example, concentrate it around the goal of green transition, with the role of gas in it, or if economic problems will hinder the achievement of ambitious goals and lead to greater divisions in the EU.
Author: AGATA LOSKOT-STRACHOTA