FORTNIGHTLY OVERVIEW
The European Commission is looking at what can be done to make the gas market function more efficiently , with its so-called ‘ Quo Vadis ’ examination of the current state of affairs , following its examination of the electricity market design .
But it might have gone as far as it can with its present powers . The tariff network code leaves swathes of details down to national transmission system operators to set as they see fit , rather than trying to impose a uniform approach to tariffs across the region as the regulator-in-chief , Acer , would normally insist on .
The UK government under Margaret Thatcher privatised British Gas first and allowed the regulator to go for unbundling and third party access later , so that the financial successes or failures of the gas transmission system was of no concern to Whitehall ; and the regulator took a hatchet to its regulated asset value . This led to much lower transport costs , to the benefit of consumers .
But other pipeline operators are still agents of national government , and so they obstruct efforts to cut tariffs in order to balance books elsewhere . Some will argue that assets have still not paid their way , even though they are scores of years old . On the other hand , as NGW 6 reported , the UK-Belgium gas interconnector was built on 20-year contracts , now a few years away from ending and so will soon be amortised .
The new owners might find it not worth while keeping it running with low revenues , and whatever the perception of the value of security of supply , the UK government tells NGW that there is already more than enough UK entry capacity for it hardly to make any difference if it does close .
It ’ s always about the price ; and how it is set is possibly a function more of the needs of the owner of the grid than about what should be the price of capacity in order to make the most efficient use of the system . In this regard , perhaps the most ambitious of the Quo Vadis submissions was the idea of a single transmission system covering the whole of Europe : one entry fee , which would be set low to attract as many suppliers as possible ; and dual exit fees depending on their priority . one
This should not be a radical idea : a single market – the goal of policy-makers – is best achieved by a sole operator , able to build or – in a crucial addition to the usual cocktail – decommission pipeline capacity for which there is no longer any need .
It would collect or refund costs as appropriate in the process , rather than creating what will be the stranded assets of the future , and inflating everyone ’ s bills at a time when efficiency and low costs are a key part of gas ’ long-term survival . As with other aspects of the European dream though , it needs member states to act as one , for the common good to be realised .
But it will not be until 2020 onwards that more capacity is released to the market with the expiry of many other long-term contracts . Not all of them : Gazprom has made sure its ship or pay contract with the Slovak operator Eustream runs for more than another decade , even though the aim of Nord Stream 2 is to make the Ukrainian – and hence the Slovak – systems redundant as major transit corridors .
Closing down the 80 + bn m ³/ yr Eustream system – and its associated 550 MW of compressor stations – would be a dramatic but possibly necessary step towards the lowercost and cleaner energy system that gas needs , if Gazprom follows through with its commitment to turn down the flow of gas transmitted through Ukraine to a trickle , if / once the more efficient Nord Stream 2 line is built under the Baltic Sea .
With regard to new import infrastructure , there are cases where what might seem rational from a European perspective seems a costly expenditure to consumers , and the energy regulator , in the country where the infrastructure is planned .
From a EU perspective , there may be grounds for developing more infrastructure to enable more gas to flow south-north from Algeria into northwest Europe -- for instance to offset the EU ’ s increasing reliance on Russian gas . But when it comes down to specifics , the French regulator sees the MidCat proposal as not cost-effective at all , as the extra entry capacity from Spain that it might provide for France could be bottlenecked whenever the Fos LNG terminals are busily sending out gas ( see pp16-17 ).
From the French regulator CRE ’ s perspective , planning now for a slump in Dutch gas imports is a more pressing priority for its consumers - even though the crunch could be a decade from now . Working out a way to manage Groningen is also seen as a priority for some German transmission operators , like Thyssengas , who are keen to work out new ways for gas to reach their industrialised German heartlands from Russia or even nonproducer France - to replace Dutch gas towards the end of the coming decade .
Thyssengas for one seems keener to secure access for Russian gas for its network , than the niceties of whether fresh life can be brought to a historic Ukrainian transit system , or whatever view Acer might take on such issues .
NGW