Europe

EU says energy supply not at immediate risk but seeks supply boost

3 minute read

European Union flags flutter outside the EU Commission headquarters in Brussels, Belgium, July 14, 2021. REUTERS/Yves Herman

  • Commission working with other gas producing countries
  • ENTSOG says cold winter would need 5-10% rise in gas imports
  • Commission asks ACER to look into wholesale market model

LONDON/BRUSSELS, Oct 13 (Reuters) - European energy supply is not at immediate risk despite low gas storage levels ahead of the winter, but the European Commission is working with other gas producing countries to increase supply, the EU's executive said on Wednesday.

European gas and power prices have surged this year as demand has shot up all over the world for energy amid economic recovery from the coronavirus pandemic.

The region has had to compete with Asia for liquefied natural gas where demand is also high, amid low storage levels, infrastructure outages and lower than usual supply from Russia.

The European Commission outlined measures the EU could use to combat surging energy prices, and said it would explore the possible benefits of joint gas purchasing among countries as a way to cushion price spikes. read more

"While energy price fluctuations have occurred in the past, the current situation is exceptional as European households and companies face the prospect of higher energy bills at a time when many have been hit by loss of income due to the pandemic," the Commission said in a communication on energy prices.

The current level of gas storage in Europe is less than usual, at slightly above 75% full compared with a 90% average at this time in the last 10 years, the Commission said.

This would be adequate in a winter similar to the previous one but the weather will be a variable to watch, it added.

The Commission said it is working with the European Network of Transmission System Operators for Gas (ENTSOG) to monitor security of supply.

The latest ENTSOG Winter Supply outlook found that Europe's gas infrastructure of storages and distribution systems offers sufficient flexibility to deal with high demand during an extremely cold winter.

However, a cold winter would require an increase of gas imports from pipelines or liquefied natural gas (LNG) by about 5% to 10% compared to maximum levels seen previously, ENTSOG said.

The Commission said it is working to find additional supply.

"We're reaching out to trade partners to discuss if it's possible to increase their deliveries in the market," EU energy commissioner Kadri Simson said.

Wholesale gas prices are likely to remain high over the winter months and fall from April 2022 onwards, albeit to levels still higher than the average of past years, the Commission said.

Some EU members have questioned whether the wholesale market model is still appropriate. As price spikes are driven by global conditions, the Commission found it unlikely that alternative market models would produce a better outcome.

However, it has asked the agency of European energy regulators (ACER) to look into the benefits and drawbacks of the current market model, and its implementation by member states.

The Commission wants ACER to propose recommendations by April next year.

Reporting by Nina Chestney in London, Nora Buli in Oslo and Kate Abnett in Brussels; writing by Nina Chestney; editing by Elaine Hardcastle

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