The future of gas regulation
You will be speaking in the Understanding and Implementing European Gas Regulation Forum at Flame Conference 2016. Why do you think it is important for the gas community to discuss regulation in this way?
Gas markets are facing big changes: commitment to a low-carbon future, increasing renewable penetration into our energy systems, revolution on the global gas market driven notably by US shale gas and LNG, new technologies emerging, etc. Markets, market players need to be able to adapt to these changes and the regulatory framework needs to be such as to facilitate this adaptation. In order to know what this means in practice requires a close dialogue between market players, regulators and policymakers and this forum is a good place to have such discussions.
What do you think has been the biggest impact of regulation on the gas industry in recent years?
A number of important pieces of legislation have seen the light these last few years, including the Third Energy Package with its associated network codes, the Regulation on trans-European energy infrastructure or the gas security of supply Regulation a revision of which is currently under negotiation with the European Parliament and the Council. All these address different angles or specific areas of energy policy and they contribute together in their entirety to the achievement of Energy Union with its five dimensions and the three objectives of the EU's energy policy: competitiveness, sustainability and security of supply.
How close is Europe to having a single market in the energy sector?
The EU is on the right track in completing its internal energy market and a lot has already been achieved: in Central Western Europe - that covers about 70% of the EU's gas demand - the internal market is functioning well, markets are liquid with a high number of suppliers competing on price and with gas coming from several sources. However, there are still markets where competition is limited with low levels of diversification, markets that are isolated and which are vulnerable to supply disruptions. Therefore we still need to make further progress to ensure that these markets will be fully linked to the rest of the EU. Projects identified as projects of common interest (PCIs), when implemented, will help us lay the physical foundation of a single market and the full implementation of the Third Energy Package will provide the 'software' to reduce remaining regulatory barriers for such a market to function efficiently.
Is there enough infrastructure in place to meet future gas demand? What more needs to be done?
Our current projections show a steady decrease in gas demand in the coming decades if we are to achieve our 2030 targets on climate, renewables and energy efficiency and our long-term commitment to a low-carbon energy system. That being said, in view of declining domestic production, our gas imports are likely to stay stable or even slightly increase, so we will still need to construct some missing infrastructure to complete the internal market, connect isolated or insufficiently connected markets and to enable diversification in parts of Europe where that is not yet the case. Still missing infrastructure is concentrated in specific regions of the EU, notably South-East Europe and the Baltic region.
What would be your key piece of advice to the gas industry on how to meet future demand?
I don't think the gas industry needs our advice; but what many experts say is that the gas industry will also have to adapt to the energy system of the future which will be less predictable, will require more flexibility and will have to be cleaner.
What effect do you think new technologies and innovation will have on the gas industry in the next 10 years?
In the up-stream, with the current low price environment, companies in particular in the LNG chain face the challenge of how to decrease their costs further and increase flexibility. The technology to produce shale gas, notably hydraulic fracturing, and all involved processes, as well as small scale liquefaction technology are all evolving rapidly and spreading to all parts of the world and can potentially address these needs as well as improve environmental sustainability.
In the down-stream, with the changes we can expect in the energy system: more cross-commodity integration, distributed generation and final consumers taking the management of their energy balance into their own hands could be a growing niche on the market for innovative companies providing attractive technologies and new services for consumers/prosumers. This will challenge the well-established environment where incumbents and geopolitics play a huge role.
What are you most looking forward to at Flame Conference 2016?
The topic that mostly intrigues us these days how prices develop, on hubs, in contracts, pricing trends, whether or when a global LNG price will emerge. The conference provides ample opportunities to listen in to what experts have to say about it.
Contributors: Monika Zsigri, Dinko Raytchev, Arne Eriksson (European Commission, DG Energy)