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Concept of Supply Security

Security of Supply – EU Perspective and Legal Framework First EU-Russia Energy Law Conference,30 and May 2013 Martha Roggenkamp. Concept of Supply Security.

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Concept of Supply Security

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  1. Security of Supply – EU Perspective and Legal FrameworkFirst EU-Russia Energy Law Conference,30 and May 2013Martha Roggenkamp

  2. Concept of Supply Security • Definition: “Condition in which a nation [..] has access to sufficient energy resources at reasonable prices at the foreseeable future free from serious risk of major disruption of service” • It distinguishes between ‘access’ to resources (level of production capacity/availability of sufficient (primary) energy sources), and ‘access’ to supply systems (reliability of networks) necessary for supplying consumers

  3. Supply Security in Europe • In 1950s limited focus on security of energy supply • No specific reference in Treaties although the ECSC recognised the role of cheap energy for economic development • The oil crisis in the 1970s led to several Community actions: • Obligation to maintain minimum stocks • Energy efficiency targets (labelling), etc.

  4. The market dominates • EU Law is based on principles of free movementandcompetition • The ‘Internal Energy Market’ alsoaims at the opening up of the electricityand gas market and the belief that the ‘market would take care of security of supply’ • Supply security is, however, a possibleexemption on freedomprinciples (Campus Oil Case)

  5. Treaty on the Functioning of the European Union • Art. 194 TFEU: ‘In the context of the development of an internal market, and with regard the need to preserve/improve the environment, EU energy policy shall ensure (i) the functioning of the internal market, (ii) security of energy supply and (iii) promote renewable forms of energy • EU energy policy is shared competence but also depends on cooperation with non-EU countries (f.ex. Energy Community Treaty)

  6. Internal Market Directives • The Electricity and Gas Directives increasingly focus on Supply Security • 1990s Directives include the option of ‘public service obligations relating to security of supply’ and ‘the need for sufficient grid capacity to meet energy demand’ • The 2003 Directives include monitoring and reporting obligations, tendering of capacity if insufficient energy production and network safety and security • 2009 Directives more focus on network investments and regional cooperation

  7. Security of Supply Directives • Security of Electricity and Gas Supply Directives (2006/2008) aim at safeguarding supply and network operations • Directives illustrate the difference between electricity and gas sector as electricity generation is more ‘national’ in scope and networks operations require precise balancing • The 2009 Ukraine-Russia gas supply dispute showed that EU market model does not provide long term security (investments)

  8. Regulation on Security of Gas Supply • The 2009 Gas Security of Supply Regulationaims at more market (integration) and more investmentsinfrastructure • It is based on principle of solidarityandresponsibilitybetween Member States • In case of supplyinteruptioneffectiveadvanced action needstobe taken by MS and market playersbefore Community intervention • Commission is advisedby Gas Coordination Group

  9. Identifying risks • All MS need to appoint a Competent Authority responsible for • monitoring gas supply developments, • assessing supply risks, • establishing preventive action plans to mitigate risks • establishing emergency plans which need to take into account three crisis levels: early warning level, alert level and emergency level

  10. Common standards • MS must ensure gas supply to ‘protected customers’ during extreme weather and emergency situation(disruption) • MS must ensure that infrastructure can satisfy gas demand: • Emphasis on improving infrastructure (take into account N-1 standard and 10 year development plans of ENTSO-G • Investments in cross-border interconnections • TSOs responsible for bi-directional gas flows

  11. Emergency response • Community emergency response if CA/MS has declared an emergency or at the request of CA or if Community loses more than 10% daily gas import from third countries • Emergency response depends on the crisis levels and are based on emergency plans • Distinction is made between market-based and non-market based measures • Increase production, interruptable contracts • Emergency gas stocks, enforced fuel switch  

  12. Conclusion • Supply security depends on access to/availability of recources and access to supply networks • Supply security in EU is primarily based on market mechanisms (oil, gas and electricity) • State/Community intervention only if really necessary • Regulatory provisions/requirements are increasing

  13. Thank you for your attention

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