EC to unveil new energy security proposals March 8

The European Commission is set to unveil new energy security proposals March 8 that seek to end Europe's dependency on Russian fossil fuels, EC President Ursula von der Leyen said at a news conference March 7.

The new proposals follow Russia's invasion of Ukraine, which has increased concern over Europe's energy supplies as well as the pressure to diversify its strategic sources before next winter.

"We have to get rid of the dependency on Russian gas, oil and coal. I know that the two of us agree on this," von der Leyen said in a joint statement with Italian Prime Minister Mario Draghi.

"The Commission will be coming forward with proposals tomorrow," she said.

The proposals will include three main pillars.

The first is diversification of supply away from Russia and toward "reliable partners," von der Leyen said, pointing to mainly LNG and pipeline gas. "Both have the advantage that the infrastructure is over time hydrogen-compatible."

"The second main element is to repower the European Union. Repower means massive investment in renewables, like solar, wind and hydrogen. We are looking for a focused acceleration of the European Green Deal," von der Leyen said.

Increased investment in renewables serves the EU's strategic interests and reduces negative climate impacts, von der Leyen said.

"This has got to be complemented by a third pillar and that is improved energy efficiency: from renovation of buildings to smart industrial processes, to artificial intelligence, for example, to effectively manage smart energy grids."

Von der Leyen also said the EC was discussing the protection of consumers amid an energy price crisis.

"We will discuss how to ensure that our electricity market remains efficient despite the high gas prices that have been amplified by [Russian President Vladimir] Putin's war."

The EC is seeking to shield the most vulnerable consumers and businesses from cost increases, but also to unleash a "massive investment" in renewables to address Europe's large share of gas, oil and coal in the energy mix, von der Leyen said.

That will change the structure of the energy market, making it necessary to assess market composition, von der Leyen said in the statement.

Gas storage obligations

Last week, EU energy commissioner Kadri Simson said the new proposals would also include "concrete measures" on gas storage obligations.

"If current trends continue, the level of storage in Europe in April will be much lower than in previous years," Simson said. "We need to start immediately to secure sufficient gas storage for next winter, so bringing it close to 90% [of capacity]."

European gas storage sites are 27.7% full, according to data from Gas Infrastructure Europe.

According to a leaked draft of the communication from late February, the EC is considering imposing minimum gas storage requirements on member states.

It was stated that the EC would propose a "legal requirement" for member states to ensure a minimum level of storage by Sept. 30 every year and that it could allow member states to provide incentives to suppliers.

Germany has already provided funds to the operator of the country's gas trading hub, Trading Hub Europe (THE), to procure LNG to help refill the country's gas storage sites.

The low level of stocks across Europe and the need to refill them over the coming summer has contributed to record high gas prices.

The front-month gas price on the benchmark Dutch TTF hub was priced at Eur195.03/MWh ($213/MWh) on March 4, an all-time high and 200% higher than the start of 2022, according to Platts price assessments by S&P Global Commodity Insights.

Prices soared further intraday March 7 to as high as Eur345/MWh.

The JKM front-month spot Asian LNG benchmark price also reached a record high on March 7 of $84.76/MMBtu on intensifying supply concerns.

Spain 'front-runner'

On March 5, von der Leyen pointed to Spain as a European energy "front-runner" given its focus on renewables and LNG import capacity.

Speaking at a joint news conference with Spanish Prime Minister Pedro Sanchez, von der Leyen said Europe had to diversify supply and "massively" invest in renewables.

"I am glad to say that Spain is a real front-runner with your impressive share of renewables and large LNG capacities."

Spain has six operational LNG import terminals with an import capacity of 44.1 million mt/year (61 Bcm/year).

That is more than enough to meet the country's annual gas demand, which totaled 36 Bcm in 2021, according to official data.

However, the Iberian Peninsula is poorly interconnected with the rest of Europe, with just limited interconnection with France.

"Spain can and will play an important role in supplying Europe," von der Leyen said.

"For that, we must work, indeed, on the interconnections between the Iberian Peninsula and the rest of the EU. And we have discussed that we will work hard on that. This is one of the major priorities," she said.