Considerations on COM(2023)174 - Amendment of Regulation (EU) 2022/1369 as regards prolonging the demand reduction period for reduction measures for gas and reinforcing the reporting and monitoring of their implementation - Main contents
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| dossier | COM(2023)174 - Amendment of Regulation (EU) 2022/1369 as regards prolonging the demand reduction period for reduction measures for gas and ... |
|---|---|
| document | COM(2023)174 |
| date | March 30, 2023 |
(2) Pursuant to Article 3 of Regulation (EU) 2022/1369, Member States were to use their best efforts to reduce their gas consumption by 15% from August 2022 to March 2023. In case the voluntary demand reduction measures should prove to be insufficient to address the risk of a serious supply shortage, the Council, on a proposal from the Commission, was empowered to declare a Union alert pursuant to Article 4 of Regulation (EU) 2022/1369, which would trigger a mandatory demand reduction obligation. In recent months, Member States have worked diligently and have adopted measures aiming to reduce their respective gas demand by 15%, in a spirit of solidarity. That has already resulted in effective gas demand reductions across the Union of more than 15%, from August 2022 to January 2023.
(3) However, severe difficulties persist for the security of energy supply. The global situation on the gas market has not improved since February 2022 and the Union continues to rely on certain volumes of Russian gas to meet its overall gas demand, in spite of the demand reduction achieved under Regulation (EU) 2022/1369. Energy demand curtailment to citizens of the Union has been avoided over the past year thanks to effective measures regarding storage refilling and demand reduction. However, 11 Member States are still declaring an early warning and one an alert level in accordance with Regulation (EU) 2017/1938. Therefore, since the gas prices are still exceptionally high and the global supply has not improved since August 2022 when the Regulation (EU) 2022/1369 was adopted, there is an urgency to prolong the measures that helped containing the crisis, especially continuing demand reduction. A halt of the demand reduction measures would introduce changes to the fragile stable situation the EU has achieved so far and would deteriorate the resilience to likely future developments such as a complete halt of Russian imports. It is therefore urgent to prevent the exposure of the Union to gas shortage and high price volatility.
(4) Due to the significant decrease in Russian pipeline gas imports over the past year, the capacity of the Union to refill storage is currently considerably reduced, also compared to the situation in the summer of 2022. While the energy crisis started already last year, during 2022 the Union was able to import approximately 60 bcm of gas from Russia to fill storages, including transit via the NordStream 1 pipeline; however, over the summer of 2022 Russia interrupted and eventually completely halted gas supplies through that pipeline, which in September 2022 was damaged by acts of sabotage to such a degree that it currently cannot transport any gas and will not be able to do so in the foreseeable future. With the current pipeline gas import levels, the Union will only receive a maximum of 20 bcm of Russian pipeline imports, if these unreliable imports are not disrupted altogether. Therefore, there is a serious risk that gas shortages occur in the Union during the forthcoming winter 2023 to 2024.
(5) These severe difficulties are exacerbated by a number of additional risks and new elements, including (i) a rebound in Asian LNG demand reducing the availability of gas on the global gas market, (ii) weather conditions which have recently further deteriorated, thus affecting the hydropower storage and nuclear production due to low water levels, (iii) new technical developments which increase the uncertainties risks as to the availability of existing nuclear production, and require higher recourse to gas-fired power generation, and (iv) further possible gas supply disruptions, including a complete halt of gas imports from Russia.
(6) These persisting and new severe difficulties affect meeting the Union’s gas demand, in particular the filling of underground storage facilities in a timely and efficient manner for the winter 2023-2024, as well as the adequacy between supply and demand during this next winter.
(7) In accordance with Article 9 of Regulation (EU) 2022/1369, the Commission carried out a review of that Regulation, the results of which are summarised in the report from the Commission to the Council. The report analyses different scenarios, with and without an extension of demand-reduction efforts under the Regulation, including a 7-month extension from April to October 2023, an 8-month extension from August 2023 to March 2024, and a 1-year extension from April 2023 to March 2024. The report concludes that without continued demand reduction, storage levels would only reach 69 bcm by the end of October 2023, significantly below the 90% (89.4 bcm) target for 1 November of Regulation (EU) 2017/1938 as amended by Regulation (EU) 2022/1032 and that storage levels would be fully depleted by February 2024.
(8) Regarding the different scenarios assessed in the report, in case of a 7-month extension from April to October 2023, storages would be sufficiently filled by the end of the summer 2023 (95 bcm by the end of October 2023, reaching the 90% target). However, because the gas demand, even in a normal winter, is twice as high as in summer, storages would be almost fully depleted by the end of next winter (9 bcm by the end of March 2024). This implies extremely serious security of supply concerns and makes it very difficult to fill storages sufficiently for the following winter. In case of an 8-month extension from August 2023 to March 2024, storages would be filled too slowly, reaching only 80 bcm by the end of October 2023, significantly below the target, and storage levels would drop to below 30% by the end of the coming winter (below 28 bcm), causing serious security of supply concerns and making it difficult to fill storages sufficiently for the following winter. Only in case of a 1-year extension with a continued 15% demand reduction from April 2023 to March 2024, storage levels could meet the 1 November 90% storage target and reach 89.4 bcm by 1 November 2023 and Member States could be on track for their respective 1 May target with 43 bcm stored at EU level by the end of March 2024.
(9) In view of this, the report concludes that a continued demand reduction of 15% over a 12-month period until the end of March 2024 is necessary in order to ensure that Member States can comply with the storage target of 90% set out in Regulation (EU) 2017/1938 as amended by Regulation (EU) 2022/1032, which is imperative for security of gas supply, and to prevent any supply gap next winter.
(10) While Member States can decide which measures are more appropriate to ensure meeting the storage targets, this cannot be achieved without demand reduction measures. Indeed, the report concludes that there would be insufficient gas volumes in the market to meet the obligation in all Member States. This means that not all Member States are physically able to fill storages to adequate levels, resulting in severe difficulties for security of supply at the end of winter 2023-2024.
(11) The report also indicates that a reduction in gas consumption proportionate to the one provided for in Regulation (EU) 2022/1369 is needed during the period from 1 April 2023 to 31 March 2024. The prolonged reduction needed would correspond to a reduction of 15% for the period from 1 April 2023 to March 2024 compared to a reference period from 1 April 2017 to 31 March 2022. The prolongation of the demand reduction measures and the extension of the reduction period would also provide flexibility to the market to contain the gas price volatility and prevent price spikes like those observed in 2022.
(12) Given the current tight supply and demand balance, even a moderate disruption can have a dramatic impact on the gas market. The gas storage filling obligation applies unless a Union or regional emergency is declared in accordance with Regulation (EU) 2017/1938. Therefore, a sudden disruption of 10% of the gas pipeline imports to the Union would either impose drastic isolated measures by Member States to comply with their filling storage obligation or lead to declare a Union or regional emergency, unless the voluntary coordinated reduction of demand continues. Such prolonged coordinated demand reduction by all Member States in a spirit of solidarity is essential to the refilling of storage capacities, in an efficient way with minimum market disturbances, which remains imperative for security of gas supply ahead of the winter 2023-2024.
(13) The extension constitutes an emergency measure in response to persisting and new severe difficulties in the supply of energy which entail a risk of imminent crisis and require to adapt the gas demand reduction period both in order to prolong the voluntary gas demand reduction, and in order to ensure the possibility to declare a Union alert and trigger the corresponding mandatory gas demand reduction after March 2023.
(14) This current crisis is exposing the entire Union to risks of energy shortage and high energy prices. Since the Union is a single market, a gas shortage in one Member State would have severe consequences in all the other Member States through physical supply shortage of gas, volatility of prices or disruption of industrial chains resulting from possible curtailments of specific industries in a Member State. Moreover, in a spirit of solidarity, all Member States can contribute to continue reducing the risks of energy shortage and contain the gas price volatility by all reducing their demand. The potential positive impact of this spirit of solidarity has even considerably increased over the past year with the development of new interconnection capacities towards the East and additional LNG import capacities which better connect Member States with LNG regasification facilities, physically or virtually.
(15) The need to act is urgent as the season to fill storage starts in April 2023. Given the persisting and new severe difficulties described above, not prolonging the coordinated reduction of demand on time before the filling of storage would have immediate effects on the trajectories to fill storage and/or the market conditions impacting security of supply and the volatility of prices.
(16) Article 122(1) TFEU enables the Council to decide, on a proposal from the Commission and in a spirit of solidarity between Member States, upon the measures appropriate to the economic situation, in particular if severe difficulties arise in the supply of certain products, notably in the area of energy. In view of the above considerations, the current crisis in the supply of gas, an energy product, constitutes such a situation. Therefore, a temporary extension of, as well as targeted amendments to the measures taken under Regulation (EU) 2022/1369 are necessary to respond to the on-going situation in a spirit of solidarity between Member States. It is therefore justified to base the proposed instrument on Article 122(1) TFEU.
(17) Pursuant to Article 8 of Regulation (EU) 2022/1369, Member States are to report on the demand reduction achieved to the Commission every two months, no later than by the 15th day of the following month, via Eurostat. However, experience has shown that a two-month reporting period is insufficient to provide up to date figures in order to take an effective decision on proposing to declare a Union alert. Therefore, Member States should report their gas consumption to assess the demand reduction achieved every month. In order to better target the measures to reduce demand, the monitoring of gas consumption at Member States and Union level and the implementation of this Regulation should rely on a reporting which includes a breakdown of gas consumption for electricity and heat generation, households and services according to the definitions and conventions established in Regulation (EC) 1099/2008 on energy statistics.
(18) In accordance with Article 9 of Regulation (EU) 2022/1369, the Commission is to carry out a review on the basis of the findings of which, the Commission is entitled to propose to prolong the period of application of this Regulation. To account for the now proposed prolongation of the application of Regulation (EU) 2022/1369, a new review date should be set for 1 March 2024.
(19) The extended and modified demand reduction measures should be temporary and remain into force until the end of the next winter season. On the basis of the new review to be carried out by 1 March 2024, the Commission should, if appropriate, be able to propose to prolong their period of application.
(20) Regulation (EU) 2022/1369 should therefore apply until 31 March 2024. The amendments brought about to Regulation EU) 2022/1369 should take effect by 1 April 2023 as this is necessary in order to ensure a continued demand reduction of 15% over a 12-month period from April 2023 until the end of March 2024 and to enable economic operators, Member States and the Commission to take the necessary measures to achieve that objective.
(21) Regulation (EU) 2022/1369 should therefore be amended accordingly.