Energy Union: Benefitting the Most Vulnerable
In his address at Romania Oil & Gas in Bucharest, Romania, Mr. Adam Janczak, Deputy Director EU Economic Department, Ministry of Foreign Affairs, Poland, offered his country's argument for the concept of an energy union.
EU decision makers, he noted, had recently intensified their work towards implementing one, with the European Council agreeing there was an urgent need to challenge the issue of energy dependency. He explained, “The Ukraine crisis has caused intensified talks on the EU security of energy supplies – gas in particular.
“Therefore,” he continued, “in the Polish proposal from April, now officially called an 'energy union' in the strategic agenda of (European Commission President) Jean-Claude Juncker's program, we focus predominantly on natural gas.”
The gas sector, explained Mr. Janczak, is where the greatest threat of the crisis lies. The EU gas market, he said, is the area which needs most substantial redevelopment for the time being. “Therefore, our policy proposal to set up the energy union is based on three main fundamentals: solidarity, transparency and, last but not least, a unified, single EU voice.
“As regards solidarity, we think that the stress test exercise showed clearly that, in the case of gas supply disruption from the East, negative effects could be affectively mitigated by cross-border EU-wide cooperation, while in case of lack of cooperation there is a risk of a sequence of natural gas system shut-downs.”
Cooperation, he said, will bring benefits to not only the most vulnerable countries of Central & Eastern Europe, but to the EU as a whole.
He offered, “At the regional level, exploration of potential efficiency gains, which can be made by identifying cross-border synergies based on a common regional security of supply strategy, is a non-regret option for most member states sharing similar supply and emergency patterns.”
Proposed legal instruments in the field, he said, may include pan European risk assessment, together with preventive emergency plans with comprehensive guidelines on market- and non market-based security of gas supply measures with the potential to include a voluntary demand aggregation mechanism and common virtual storage capacity as a regional or EU-wide measure to safeguard stability of the EU gas system by supplying crisis-supply assistance to the member states experiencing significant supply disruptions.
Regarding transparency, Mr. Janczak said, “In any case a well-functioning internal energy market should be a key mechanism to be put in place in order to ensure the sufficient, equal level of diversification of sources and provide necessary instruments to create and promote liquidity in and between all the member states in the European Union.”
However, he noted that in more competitive and accessible western markets like Denmark or Germany, relatively little space has been left for political influence on price and volume.
He remarked: “Markets in Central and South-eastern Europe are still tied to long-term supplies, which considerably impairs their development in line with the priorities of EU energy policy with the consequent decrease of the role of intergovernmental agreements in shaping commercial relations between energy market participants; more transparency shall be brought into the long-term contracts.”
Particular consideration, he said, will be given to the concept of increased reporting obligation for all long-term contracts, which would include long-term price and price formula data collection, that could serve as an aggregation of price data and a price benchmark in the most vulnerable regions.
The third element being promoted int Polish energy union concept, according to Mr. Janczak, is the external dimension of the energy union with a special focus on the Energy Community. “Ukraine is an example of an Energy Community country where EU involvement cannot be limited to one of financial support to cover gas sector debts but it needs to be conditioned by deep structural reform via, for example, swift adoption of the Third Package compliant gas law in Ukraine.”
This, he explained, requires active EU support on both the political and expert level to formidable Energy Community members such as Ukraine, “To immunize its every member against attempts to use energy as a means of political pressure.
“We should be both ambitious and daring in the discussion of the future of the Energy Community,” he said, adding that the Ukrainian crisis and the energy union are tests of what the EU is really all about, offering momentum for decision makers.
Recent difficult discussions on the 2030 Climate and Energy Framework, he contended, had proven that the “Visegrad 4 plus formula,” where Poland and others had spoken in one voice to partners in Brussels, showed the effectiveness of the approach. “This is why we think that we should follow the same strategy in any course of discussion on how to enhance energy security and individual elements of the energy union concept,” said Adam Janczak of Poland's Ministry of Foreign Affairs.
-Drew Leifheit