Is Europe tangled in an Energy Dilemma?
-- a _kt75 | reprint
On May 28 the European Commission published its energy security strategy. In the midst of sanctions and strong rhetoric on the need to reduce dependence on Russian gas, this was to be the first salvo in a long term plan to reduce dependence on Russian natural gas. Unsurprisingly, this will not happen any time soon.
The ongoing crisis in Ukraine has confirmed two things: Europe continues to be divided on energy security issues, and the importance of energy related matters is modest compared to concern about the right and left wing drift of European politics. That last point only puts energy issues in perspective, which is probably good for many scholars and observers working on the topic, including this author.
Energy Security in Europe
Reaching European consensus on energy security was rarely successful, despite attempts to develop an overall supranational energy policy ever since the Declaration of Messina in 1955. With the entrance of 10 new, predominantly eastern European member states to the EU in 2004 however, achieving consensus has de facto become impossible, unless policy makers step over their own shadows and move beyond narrow parochial national interests. Over the last decade, the world has witnessed increased divergence between eastern and western European matters related to external suppliers of energy resources, the fuel mix and ambitions over renewable energy.
Both sides have a reasonable story to tell. In the western part of Europe, trade relations with Russia are by and large stable, and prices for natural gas competitive from a global perspective. Historically, natural gas markets have been reasonably well developed, and in recent years successful efforts have been made to integrate markets, increase storage facilities, build interconnectors, reverse gas pipeline flow options, construct liquefied natural gas (LNG) regasification terminals and become attractive for diverse suppliers, making this part of Europe resilient to the risks of supply shocks. In addition, countries like Germany, Denmark and the United Kingdom are at the forefront of a push to a low-carbon economy, which is crucial considering global warming, but also makes sense from an energy security perspective.
In Eastern Europe, with the exception of Romania, natural gas historically has played an insignificant role. This is because the resource was not available in this part of the continent, and thus economies were built on widely available coal and to a lesser extent oil. As a result, natural gas markets are small in terms of total consumed volumes, not well developed in terms of available infrastructure and network integration and market models are outdated, with prices still often regulated. It thus makes sense that the modest amount of natural gas that is supplied here often comes exclusively from Russia. Because of the lack of competition, arbitrary pricing is more the rule than the exception. Add to this the historical backdrop of political subjugation and the outcries for diversification away from Russia sound reasonable.
These outcries sound even more reasonable considering that during the accession talks of these member states, prior to them joining the EU, decreasing the usage of coal, which does not mesh well with Europe’s renewable and climate ambitions, was actively discussed. Alternatively, natural gas markets had to be developed, and EU funding was to be available to cover a share of the costs. However, once these countries joined the EU, it became apparent that European institutions, in fact, have very limited capacity (in 2004 they had none, both legally and financially) to help develop infrastructure. Thus, these countries felt that they were left in the cold. Read on...
