How the EU aims to avert an energy crisis
The geopolitical tension of recent months intensified the focus on gas and electricity infrastructure in Europe. In the face of Russia's invasion of Ukraine, interest in alternatives to Russian gas has intensified. The European Union currently depends on Russia for 40% of its gas consumption.
European Energy Commissioner Kadri Simson said on Sunday that the EU would work to synchronize Ukraine's electrical grid with the bloc's. At the same time, German Chancellor Olaf Scholz announced a series of energy investments, including the construction of two terminals for Liquefied Natural Gas (LNG).
Urgency in Brussels
On Monday, EU energy ministers were discussing other measures to ease the energy crisis.
The European Union has already built or updated several projects in recent months. Algeria's national state-owned energy company Sonatrach should soon finish works to increase the transmission capacity of the Medgaz submarine gas pipeline from Algeria to Spain.
Two other projects currently being supported by the European Union — the update of existing gas infrastructure in Bulgaria to connect Romania and Serbia, and the Poland-Denmark gas interconnection — should be commissioned by the end of 2022. The Bulgarian government is also pushing for prompt completion of the gas pipeline connecting Greece and Bulgaria (IGB).
A spokesperson for ICGB — the company responsible for the Greece-Bulgaria interconnector — told DW that the IGB interconnector could export natural gas to countries in southeastern Europe, as well as Ukraine. "The current escalation of the Ukrainian crisis makes IGB's future role even more significant on a larger scale," he said, adding that the parties involved in the project intend to complete it in July 2022.
Spanish interest in Midcat — the gas pipeline from Catalonia to southern France — is increasing, too. The interconnection would eventually enable LNG capacity on the Iberian Peninsula to be used in other European regions.
Interconnections are indeed central pieces of the geopolitical puzzle. They will shape tomorrow's energy systems, they will define future trade patterns in this highly geopolitical sector, and, together with new renewable projects, will limit the consequences of the inevitable energy crisis in Europe.
Will it be enough to ease energy security and energy affordability concerns in the European Union for the next winter, especially if Russia completely stops gas deliveries gas to the EU?
"Unfortunately there are not many infrastructure projects currently under development that could help smooth the situation in the short term," Carlos Torres Diaz, head of power markets research at Rystad Energy, told DW.
The consultancy added that one of the few short-term options for increasing energy affordability is to use the existing nuclear capacity at its maximum and increase the use of coal power generation. Coal, gas, oil and nuclear are not perfect substitutes, but there is some overlapping demand, especially in electricity generation, Torres thinks.
"These were the two sources that provided the most flexibility when electricity demand increased last year and are expected to remain strong in 2022," he said.
The Trans-Adriatic Pipeline (TAP), the last leg of the Southern Gas Corridor, which brings gas from Azerbaijan to the European Union via Turkey, is designed to double its current capacity.
"The 2021 TAP Market test is currently in progress. The timeline for the launch of the binding phase of the market test, which potentially could lead to an expansion, will become clearer following the end of the public consultation [March 18]," the TAP operator told DW.
If there is enough interest, TAP will be able to sign gas transportation agreements in October. "Additional long-term capacity booked in the binding phase could be onstream within 45 to 60 months of signature of gas transportation agreements," the operator said.
This means no help in the short term, leaving the update of Medgaz and the construction of IGB the only two options to solve issues on a regional, yet not EU-wide, level.
Liquefied Natural Gas?
Not even LNG will be a solution in the short term. If there were more LNG import terminals, the gas would create more certainties in the energy markets. But investments in new LNG terminals would take more than a year to materialize while existing terminals have limited spare capacity.
"Western Europe terminals had been used at an average rate of around 50% before 2021, but utilization has increased close to 100% during the last months. This means that the existing capacity will not be able to take a large number of additional cargoes," Rystad's Torres Diaz said, adding that the recent increase in LNG imports has to do with EU efforts.
Meanwhile, a spokesperson for the European Commission told DW that talks are underway with LNG suppliers about increasing their supplies toward the EU. The EU executive asked major LNG buyers to swap contracts and have their supplies diverted to the EU in case of need. Earlier this month, the spokesman said, the EU spoke, for instance, several times with Norway and Qatar, but also with Japan.
National governments will most likely have to bear the ultimate responsibility of immediate interventions, including speeding up investment approvals.
"There may be measures at a national level that can be undertaken to help with energy security in the short term, such as accelerated connection of projects already at an advanced stage of development or installation of emergency backup resources," Andrew Keane, director of the Energy Institute at the University College Dublin, told DW.
While working on national policies, member states are also called to allow the EU political process to fast-track investments in new energy infrastructure. A first test will be the so-called Projects of Common Interest (PCIs) which includes projects that the European Commission has identified as a key priority for interconnecting the EU's energy system infrastructure. These projects are eligible to receive public funds. The PCI list is reviewed every two years.
"The latest (5th) PCI list adopted by the Commission in November 2021 is subject to a period of scrutiny by MEPs and the Member States and is expected to enter into force in April if no objections are raised," the Commission spokesman told DW.
So far, more than 110 projects have been completed under this policy framework.
Keane said the track that the European Union is on appeared to be the correct one. "But timely implementation will be extremely important as we progress. This will require technological and political ambition," he said.
Edited by: Uwe Hessler