Natural gas currently represents around a quarter of the EU’s overall energy consumption: about one third is used in power generation (including combined heat and power plants) and around 23 percent in industry; the rest is mostly used in the residential and other services sectors. The EU’s gas demand is around 485 billion cubic meters (bcm) and is expected to remain rather stable in the coming years. At the same time, the EU’s policies to achieve 2030 energy and climate targets (e.g. including energy efficiency and diversification, improvements in heating, etc.) are leading to an overall drop in gas consumption in Europe and the world.
Only about a quarter of European gas consumption is covered by domestic production; the reliance on import is still vital: main countries of import are Norway (28%) and Algeria (5%), though a major part is coming from a neighbor “rival” Russia (about 30 percent). Recently, however, some part of gas supply was covered by liquefied natural gas, LNG: import has measurably increased to about 25 percent in total energy imports in 2019, with most of that coming from Qatar (28%), followed by Russia (20%), the US (16%) and Nigeria (12%).
According to policy advisers, liquefied natural gas, LNG can be a temporary solution; LNG is a natural gas (generally, methane-type) converted to a liquid form for ease of storage or transport. The “liquefaction process” involves cooling the gas to around −162 °C and removing certain impurities, such as dust and carbon dioxide; being condensed, LNG takes up around 600 times less volume than gas at standard atmospheric pressure; this makes it possible to transport gas over long distances with specially designed ships or road tankers.
Therefore, the EU acknowledges that the member states need to provide for access to regional and global LNG markets as part of the Union’s long-term energy strategy; in this way, LNG can both give a boost to states’ diversity of gas supply and greatly improve energy security. Thus, the states which are already having access to LNG import are more resilient to possible supply interruptions than those that are dependent on a single gas supplier.
According to the European energy Commissioner Kadri Simson, the EU is the biggest importer of natural gas in the world; therefore, a diversification of supply sources is vital for energy supply, security and global competitiveness.
European “energy union’s” strategy
The European “energy union’s” strategy (which dates back to 2015) has been a key priority of the previous Commission’s team in 2014-2019, and aimed at building an energy union that gives EU consumers – households and businesses – secure, sustainable, competitive and affordable energy. Since its launch in 2015, the European Commission has published several packages of measures and regular progress reports, which monitor the implementation of this key priority, to ensure that the energy union strategy is achieved. Source: https://ec.europa.eu/energy/topics/energy-strategy/energy-union_en.
There are five closely related and mutually reinforcing dimensions in the EU-wide energy strategy: =Security, solidarity and trust – diversifying Europe’s sources of energy and ensuring energy security through solidarity and cooperation between EU countries; = A fully integrated internal energy market – enabling the free flow of energy through the EU through adequate infrastructure and without technical or regulatory barriers; = Energy efficiency – improved energy efficiency is to reduce dependence on energy imports, lower emissions, and drive jobs and growth; = Climate action, decarbonising the economy – the EU is committed to a quick ratification of the Paris Agreement and to retaining its leadership in the area of renewable energy; and = Research, innovation and competitiveness – supporting breakthroughs in low-carbon and clean energy technologies by prioritising research and innovation to drive the energy transition and improve competitiveness.
The latest EU-2020 energy union report (October 2020) reveals the energy union’s contribution to the European long-term climate goals and takes stock of the progress made in the mentioned five energy union dimensions. It also highlights how the NextGenerationEU recovery plan can support EU countries, through a number of EU funding programmes. The report is accompanied by a wide range of reports and annexes, including the individual assessments of the national climate and energy plans (NECPs), analysing the contribution each country is committed to make to the EU 2030 energy and climate targets.
Reflecting on the EU-2020 “State of the Energy Union” report, the Commission executive vice-president for the European Green Deal, F. Timmermans underlined that the European energy sector played an important role in cutting emissions and delivering the European Green Deal. Thus, the “State of the Energy Union Report-2020” showed the progress the states made as well as the challenges and opportunities ahead: e.g. approved investments and reforms during last years were aimed at driving the green recovery and put Europe on the right track for becoming climate-neutral by 2050. Besides, Commissioner for Energy, Kadri Simson, that the NECPs proved to be essential for the states’ governance work in planning energy policies and investments aimed for a green and climate transitions. “The years of 2020-21 are the time to turn these plans into reality and use them to lead the states out of the Covid-19 crisis with new jobs and a more competitive European energy union”, the Commissioned added.
European energy policy
The 2030 climate and energy framework includes the following EU-wide targets and policy objectives for the member states in the period up to 2030:
= Preventing all sorts of pollution: as part of the European Green Deal, the Commission proposed in September 2020 to raise the 2030 greenhouse emission reduction target, including emissions and removals, to at least 55% compared to 1990 (so-called “fit for 55” project). This policy reflects national actions across all sectors, including increased energy efficiency and extensive use of renewables with implementation of already existing legislative proposals to achieve ambitious goals. These actions would enable the EU to move towards a climate-neutral economy and implement its commitments under the Paris Agreement by updating nationally determined contributions.
= A dual energy-climate perspective: the EU-2030 climate and energy framework includes the following three ambitious targets: a) at least 40% cuts in greenhouse emissions (increased to 55% lately); b) at least 32% share for renewable energy; and c) at least 32.5% improvement in energy efficiency. The greenhouse reduction is implemented by the EU emission trading system, ETS; the so-called “effort sharing system” coped with the states’ emissions reduction targets, as well as the land use and forestry regulation. In this way, all sectors will contribute to the achievement of the reduction target by both reducing emissions and increasing removals. All three pieces of climate legislation are presently being updated with a proposed at least 55% net greenhouse emissions reduction target. The Commission will come forward with the proposals by July 2021.
= The governance system: under the Regulation on the “Governance of the Energy Union and Climate Action”, the EU has adopted integrated rules to ensure planning, monitoring and reporting of progress towards its 2030 climate and energy targets and its international commitments under the Paris Agreement.
On the Regulation see: https://ec.europa.eu/clima/policies/strategies/progress/governance_en.
Based on the EU’s better regulation principles, the governance process involves consultations with citizens and stakeholders. More in: https://ec.europa.eu/clima/policies/strategies/2030_en.
The EU Regulation on the governance of the energy union and climate action nr. 1999 (December 2018) is part of the Union’s clean energy package; it emphasises the importance of meeting the EU’s 2030 energy and climate targets and sets out how EU countries and the Commission should work together, and how individual countries should cooperate, to achieve the energy union’s goals. It takes into account the fact that different countries can contribute to the energy union in different ways; the ultimate goals of the regulation are:
- to implement strategies and measures which ensure that the objectives of the energy union, in particular the EU’s 2030 energy and climate targets, and the long-term EU greenhouse gas emissions commitments are consistent with the Paris agreement;
- to stimulate cooperation among the states to achieve objectives and targets of the energy union,
- to promote long-term certainty and predictability for investors across the EU and foster jobs, growth and social cohesion;
- to reduce administrative burdens, in line with the principle of better regulation through integrating and streamlining present energy-climate planning and reporting in the EU countries, as well as in the Commission’s monitoring obligations;
- to ensure consistent reporting by the EU and the member states under the UN Framework Convention on Climate Change and the Paris agreement, replacing the existing monitoring and reporting system from 2021 onwards.
The governance mechanism is based on integrated national energy and climate plans (NECPs) covering ten-year periods starting from 2021 to 2030, as well as the EU and national long-term energy strategies, including integrated reporting, monitoring, data publication and transparency of the governance mechanism, which is ensured by consulting wide public on the NECPs; the latter are covering all five EU’s energy policy’s priorities (see below). The EU states submitted their 2021-2030 draft plans by the end of 2018 and final plans by the end of 2019, followed by the Commission’s assessment.
National energy planning in political economy
The EU member states’ energy and climate plans (NECPs) were introduced in 2018 by the Regulation on the governance of the energy union and climate action (nr. 1999), which is an integral part of the “clean energy for all Europeans package” adopted in 2019.
The national plans outline the EU-wide for the member states in the energy sector and have to address the following issues: energy efficiency, renewables, greenhouse gas emissions reductions, energy’s interconnections, as well as research and innovation in the energy sector. This approach requires a coordination of purpose across all national governments’ departments and provides a certain element of planning that will ease public and private investment.
By providing concrete timeline, steps and measures in the NECPs to phasing out fossil fuel, the EU-27 member states can get European subsidies, which amount totally to €50 billion annually. More work is needed to fully integrate the EU-wide internal market for electricity and gas. As to clean energy competitiveness: the main focus in NECPs shall be on six key clean energy technologies in the member states to meet the EU 2030 and 2050 objectives, such as solar photovoltaics, offshore wind, ocean energy, renewable hydrogen, car batteries and smart grids.
Energy prices and cost trends in Europe and internationally, highlighted that the households’ energy expenditure shares have been falling for all income levels since 2012. The share of renewable energy in the EU-27 energy mix reached already about 20 percent and the member states are expected to exceed their renewable energy targets.
See the latest “Renewable Energy Progress Report-2020” in: https://ec.europa.eu/energy/sites/ener/files/renewable_energy_progress_report_com_2020_952.pdf.
Gas situation in the EU
By the end of 2020, the EU’s gas production reached approximately 13.7 bcm, which is 15%, or about 2.4 bcm less than in 2019. During 2020, gas output was below 2015-2019 range, reflecting the dwindling trend of gas production in the EU; over last seven years, total EU gas production in 2020 was the second lowest*).
In the biggest EU-27natural gas producer (Netherlands) the output in 2020 decreased by 17% or by 1.3 bcm amounting to 6.2 bcm; the Dutch government announced that in 2021 the gas production could be halved. In Romania, the second largest gas producer in EU, production went down by 4% (0.1 bcm), falling to 2.4 bcm in 2020. Gas production decreased slightly (3%, 0.04 bcm) in Poland in 2020 and amounted to 1.5 bcm. In Germany, Italy and Ireland, where production respectively amounted to 1.1 bcm, 0.9 bcm and 0.5 bcm in 2020, figures reflect a decrease between 17% and 25% on a year-on-year basis. Whereas gas output in Denmark showed a strong decrease (by 27%, 0.1 bcm) due to redevelopment of the Tyra field in the Danish North Sea’s sector; the country produced 0.3 bcm of gas in 2020.
Generally, in 2020, gas production in the EU amounted to 54.4 bcm, down from 70 bcm in 2019. The Netherlands produced 24 bcm gas (compared to 33.7 bcm a year before), followed by 9 bcm in Romania (10 bcm in 2019) and by Germany (4.9 bcm compared to 5.7 bcm a year before).
The share of LNG fell to 17.6% in the total EU gas imports, which was the lowest since 2018 and 6 percent lower than in 2019; decreasing LNG imports was due to increasing level of consumption (and price’s hikes) in the Asian-Pacific markets resulted in redirection of LNG export towards Asia.
Decreasing share of LNG in 2019-2020 was mainly compensated by an increasing supply from Russia, Norway and South Africa; however, in 2020, the EU’s gas import fell by 5-9 percent. The share of Russia’s pipeline gas import reached 49 percent of the total extra-EU gas imports, and the LNG share of Russian gas rose to 53 percent in 2020. All sources and references above are to the mentioned 2020-Report (pp. 8-10) in: https://ec.europa.eu/energy/sites/default/files/quarterly_report_on_european_gas_markets_q4_2020_final.pdf
The EU’s overall LNG import covers about 45 percent of total current gas demand. However, in European south-east, in central-eastern and the Baltic states many countries do not have access to LNG and are heavily dependent on a single gas supplier, and would therefore be hardest hit in a supply crisis. It is important, argued the EU, to make sure that such countries have access to a regional gas hub with a diverse range of supply sources, including LNG.
Source: https://ec.europa.eu/energy/topics/oil-gas-and-coal/liquefied-natural-gas-lng_en; see more on the EU-US gas cooperation in LNG, which accelerated almost five times in 2019 only, in: https://ec.europa.eu/energy/sites/default/files/eu-us_lng_trade_folder.pdf
The 11th annual “Global LNG Report” (April 2020) demonstrated another strong year of growth for this vital segment of the natural gas sector; LNG continues to enhance global energy security and increases the flexibility of access to abundant global gas supplies. The report provides the following examples: a) in its sixth consecutive year of growth, the LNG trade increased by 13% to a total of 354.7 MT; b) of the 37 existing LNG import markets (February 2020), 19 imported LNG and six had onshore terminals; c) export growth came from the USA, Russia and Australia, as well as Algeria and Egypt; the US is becoming the third-largest LNG exporter, behind Qatar and Australia, with Russia in the fourth spot; d) Asian and Pacific regions remain the key centers of demand – together they accounted for almost 70% of global LNG imports in 2018; e) 2019 was another record year of low prices, driven by increasing natural gas production, the commissioning of new export infrastructures and limited demand in some parts of the world; however, increased demand in 2020-21 in Asian-Pacific markets dramatically changed situation leading to description in supply and increasing prices.
The EU framework for security of gas supply
Regulation 2017/1938 on measures to safeguard the security of gas supply (it repealed a previous regulation from 2010), lays down the framework for emergency preparedness and resilience to possible gas delivery disruptions. Its provisions are based on improved information exchange, regional cooperation and solidarity, and cover the following issues:
- cooperation between EU countries in regional groups to assess common supply risks (Common Risk Assessments) and to develop joint preventive and emergency measures;
- notification of major long-term supply contracts that may be relevant to security of supply by natural gas companies to their national authorities;
- facilitation of permanent bi-directional capacity on all cross-border interconnections between EU countries by transmission service operators (unless some exemptions are granted); and
- preparation of EU-wide simulations of gas supply and infrastructure disruption schemes, carried out by European Network for Transmission System Operators for Gas (ENTSOG), which would provide for an overview of major gas supply sources for the EU. More in:
The EU-wide gas security’s supply coordination measures (in line with Regulation 1938/2017) is performed by an advisory group, which assists the Commission in monitoring the “adequacy and appropriateness of measures” and serves as a platform for the exchange of information on security of gas supply among the EU member states. More in the group website on: http://ec.europa.eu/energy/security/gas/gas_coordination_group_en.htm
The advisory group includes national authorities, the Agency for the Cooperation of Energy Regulators (ACER), the European Network of Transmission System Operators for Gas (ENTSOG), as well as representatives of industry, consumer associations and the energy community.
Additionally on energy security: https://ec.europa.eu/energy/topics/energy-security_en
Examples: gas’ perspectives in “green transition”
Several EU states (as well as some other countries in the world) initiated “green transition” in their national policies to stop using fossil fuels in the near future. Thus, the Danish Parliament, for example, announced at the end of 2020 a decision to cancel all future licensing procedures for new oil and gas exploration and production permits in the Danish part of the North Sea, to end existing oil/gas production by 2050. As a major oil-producing country in the EU, Denmark’s announcement has been a landmark decision towards expected phase-out of fossil fuels. Additionally, the political agreement allocates money to secure a just transition for impacted workers. In this way, the country claimed its role as a “green frontrunner” in the world to inspire other states to end dependence on fossil fuels as dangerous for the global climate balance. “It is regarded as a huge victory for the climate movement and all the people who have pushed for many years to make it happen”, argued Helene Hagel, head of climate and environmental policy at Greenpeace Denmark.
Note. On the Danish continental shelf in the North Sea, there are presently 55 platforms scattered across 20 oil and gas fields. French oil major Total is responsible for production in 15 of these fields, while UK based INEOS operates in 3 of them, American Hess and German Wintershall in 1 each. In 2019, Denmark produced 103,000 barrels of oil per day, making Denmark the first in Europe and largest producer of that kind of fossil fuel. Besides, Denmark produced about 3.2 billion cubic meters (bcm) of fossil gas, according to BP’s Statistical Review of World Energy 2020. Danish oil and gas production is projected to increase over the coming years before peaking in 2028 and 2026 respectively and will start declining hereafter.
Another example is that of Holland: the government decided in February 2021 that gas production at the Netherlands’ Groningen natural gas field can be cut to 3.9 billion cubic meters (bcm) per year from October 2021; is set to be the final year of regular extraction. A main supply of gas for Europe for decades, discovered in 1959, the Groningen field is run by Royal Dutch Shell and ExxonMobil joint venture, Groningen’s output hit a peak of 88 bcm in 1976 but a series of tremors caused by work there have damaged local buildings and prompted plans to end production. The Netherland announced already in 2019 to end output at Groningen by mid-2022 to limit seismic risks in the region, with gas only to be extracted thereafter in the event of extreme need and a few sites will remain on stand-by; hence, production is expected to fall to 8.1 bcm/year, though a final decision on production will be taken during 2021-22.
Some other EU energy issues: towards “clean energy transition”
= Eastern Partnership. The energy work programme for 2018-2019 involves finding ways to stimulate the construction of missing infrastructure links, bring partner countries’ energy-related rules more in line with EU rules, promote energy efficiency and renewable energy as well as nuclear safety and work on conventional and unconventional oil and gas resources in the safest and most efficient way. More in:
= Clean energy transition. Production and use of energy account for more than 75% of the EU’s greenhouse gas emissions; therefore, decarbonising the member states’ energy system is therefore critical to reach 2030 climate objectives and the EU’s long-term strategy of achieving carbon neutrality by 2050. For example, the European Green Deal focuses on 3 key principles for the clean energy transition, which will help reduce greenhouse gas emissions and enhance the quality of life of our citizens: a) ensuring secure and affordable energy supply, b) developing a fully integrated, interconnected and digitalised EU energy market; and c) prioritising energy efficiency, improving energy performance/consumption in buildings and developing a power sector based largely on renewable sources.
In order to achieve “clean energy transition”, the Commission revealed the following objectives:
- creating interconnected energy systems with integrated grids to support renewable energy sources;
- promote innovative technologies and modern energy infrastructures;
- boost energy efficiency and eco-design of energy products and services;
- decarbonise national gas sector and promote smart integration across economy sectors;
- empower consumers and help the member states to tackle energy poverty;
- promote EU energy standards and technologies at global level, and
- develop the full potential of Europe’s offshore wind energy sector.
= National energy and climate plans. To meet the EU’s energy and climate targets for 2030, the member states have to establish 10-year integrated national energy and climate plans (NECPs) for the period from 2021 to 2030. The national plans have to outline the optimal ways in addressing five priority areas: energy efficiency, renewables, greenhouse emissions reductions, energy interconnections, as well as energy research and innovation. Source: https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal/energy-and-green-deal_en.
The European and global community demands that fossil fuel companies and corporate polluters stop accelerating climate change with reckless, profit-hungry drilling and burning of coal, oil, and gas. It is clear that fossil-fuel driven climate change is contributing to an increase in the frequency and intensity of heat waves as well as driving the conditions for bigger and faster growing wildfires. Fossil fuel companies have put profits over people and the planet and will continue to do so while masquerading as friends of the environment; meanwhile, those least responsible for the climate crisis around the world have disproportionately experienced the most severe climate impacts and danger to health. More in the Greenpeace web-page: https://www.greenpeace.org/international/story/48654/heatwaves-climate-change-fossil-fuels-must-go/.
Recent spikes in gas and electricity prices have shown unstable national and regional (e.g. in EU and other regions) energy policies, coped with the SDGs requirements. As debates over energy policy accelerated, European politicians made some feasible suggestions: a) the EU should jointly purchase energy for common gas and oil stores that would be used to guard against price spikes, and b) the EU should build “strategic gas reserves” (such “energy storages” would address fluctuations and facilitate renewable production). In this way, the European states’ “green transition” would not present a huge problem, but rather reveal existing feasible efforts to resolve climate change issues and energy solutions.
Besides, exploring national “cleantech’s” innovative approaches to support energy sector’s further decarbonisation, shall put energy policy at the head of national political economy in line with the generally global set of sustainability goals; particularly in Europe, which is striving to become the first carbon-neutral continent.