EU gas market rules successful and ACER-CEER recommend decarbonisation to be built on the current market design
Monitoring is an important task of energy regulators at national and EU level. Each year, CEER works closely with the EU Agency for the Cooperation of Energy Regulators (ACER) to produce the joint ACER-CEER Annual Report on the Results of Monitoring the Internal Electricity and Natural Gas Markets (known as the ACER-CEER Market Monitoring Report, MMR). This year-long exercise relies on significant resources from ACER and CEER, and a lot of (2019) data collected mainly from the national regulators. This year, it also contains some data from the Energy Community countries.
Just released is the first (of the three) volumes of the ACER-CEER MMR namely the Gas Wholesale volumes. The other two volumes, namely, electricity wholesale and retail and customer protection, will be released in October. CEER also publishes on its website during this same period the individual country reports, in the national language version and English (or an English-language summary).
What are regulators’ main findings about Europe’s wholesale gas markets?
The main messages are that Europe’s gas markets are working, and that decarbonisation should be built on the current market design.
EU gas market rules are working
The ACER-CEER gas market monitoring results show that the common rules governing access and operation of EU gas transportation systems – the Gas Network codes – have contributed to high levels of gas price integration between EU Member States, increased supply side competition and helped create liquid wholesale markets over the period of the last five years.
As a result, big gas companies have less market power and more EU gas consumers can benefit from increased competition and lower prices. To safeguard these developments, ACER-CEER recommend that the adaptation of Gas Network codes be made more dynamic, so that the market framework can be adjusted in response to evolving market conditions.
The MMR also shows that the presence of increasingly liquid hubs and the large EU regasification and storage capacities are attracting global liquefied natural gas (LNG) suppliers to Europe. In an oversupplied market, record LNG deliveries arriving from the Middle East, the US and Russia drove down the gas price to record lows in 2019, saving 29 billion Euros according to data from the European Commission. Maintaining competition between suppliers from outside of the EU will grow in importance in the coming years as domestic gas production in Member States continues to decrease while gas consumption has been growing in recent years.
Decarbonising together at EU level
New supply of carbon neutral gas could contribute decisively to the EU climate strategy, with the added benefit of further rebalancing the current market power asymmetry between European gas buyers and third-country suppliers. However, monitoring results show that today, carbon neutral gases account for a relatively minor share of EU gas consumption at around 4%, predominantly biogas, which is mostly not injected into the gas grid, and are far from being competitive at current prices.
Given the framework of the European Green Deal, particularly the increasing ambitions for reducing emissions by 2030 as well as the resources that have been earmarked for climate projects as part of the EU recovery plan, the low uptake of carbon neutral gases will need to accelerate. Therefore, ACER-CEER recommend that any upgrading of internal gas market rules aimed at decarbonising the sector be built on foundations of the current market design, so that the transition to carbon neutral gas does not lead to market fragmentation along national borders and keeps the significant benefits for consumers in place. The data underlying the Market Monitoring Report is available here.