Challenges Lie Ahead for EU Energy Policy as Spain Takes Over Presidency

The beginning of the new year marked a number of changes in the leadership of the European Union (EU) that are likely to have significant implications for the energy policies of the bloc. Among these was the transfer of the European presidency to Spain, which will now have the chance to direct the policies of the bloc, including those in the energy realm, over the next sixth months. Looking at the long-term prospects of energy in the EU, the confirmation hearings of the commissioner-designee for the energy portfolio was even more important, as it allowed the candidate, Günther Oettinger, to outline his vision for the mandate of the next European Commission (EC). Unlike some of the other designees for the new EC, Oettinger left a fairly positive impression on the European Parliament and his approval of his eventual appointment appears very likely. Thus, the views and initiatives outlined by the prospective commissioner could very well represent the policies that the European energy sector will see implemented over the next several years.

The Spanish Presidency and the Path Towards Further Gas Sector Integration

Upon taking up the European Presidency at the beginning of the year Spain outlined a short but exhaustive set of priorities that will guide its leadership when it comes to the energy sector: the diversification of Europe’s energy supplies, the further integration of the European gas grid through the construction of more gas interconnectors, and the promotion of renewable energy sources in Europe’s energy portfolio. The first and the last of these priorities are very much related, as increasing the share of renewable energy sources is seen as one of the best ways for Europe to relieve itself of its growing dependence on one dominant gas supplier, namely Russia. Furthermore, given Spain’s proactive stance towards renewable energy—more than 25% of power generation in the country comes from renewable energy sources and this share is expected to rise to almost 45% by the end of the decade—it would be little surprise if the Spanish presidency began a new push in favour of renewable energy sources.

The second priority outlined by Spain, the development of more gas interconnectors across Europe, is an area that offers significant potential for improvement and which has been the focus of Spanish energy policy makers for quite some time. While the gas markets in certain parts of Europe, most notably in the western part of the continent, are very well integrated, others, such as the countries in Eastern and Central Europe, as well as the Iberian Peninsula, remain largely isolated from the rest of the EU. The reliance on a single, or a limited number of pipeline interconnectors in these parts of Europe has left the bloc as a whole very vulnerable to supply shocks similar to that which occurred in January 2009. Strong emphasis was placed on the development of more interconnectors between individual members states, which would in turn increase the flexibility of the European gas network and would allow it to respond with greater efficiency to regional gas shortages by transferring spare gas volumes from one part of the EU to another. A number of interconnector projects have already been planned, but it could be argued that not much has been achieved in terms of their practical implementation. Spain in particular has a point to make in this respect. With six LNG regasification plants and an additional gas link with Algeria (the Medgaz pipeline) expected to come online this year, it is estimated that Spain could re-export some 13.5 bcm/y of gas into Europe, equivalent to 3–5% of the bloc’s total gas consumption, per year, which could provide a valuable alternative in case of future disruptions to Russian gas deliveries.

New Energy Commissioner, New Approach?

Just as the outline of the Spanish presidency was useful in terms of predicting EU priorities over the next six months, the hearing of the commissioner-designate for the energy portfolio, the ex-prime minister of the German state of Baden Württemberg, Günther Oettinger, was useful in identifying the likely policies of the EU over the longer term. The views presented by Mr. Oettinger struck a general consensus among the parliamentarians and touched upon all major issues that had surfaced in the energy sector recently. Oettinger expressed his strong support for the promotion of renewable energy as a way of stripping Europe of its energy dependence on foreign suppliers and of enhancing the EU’s energy security. To this end, he also stressed the importance of the development of new gas supply routes, such as the Nabucco pipeline, which would counterbalance the Russian influence within the EU as it is expected to increase even further with the impending development of the Nord Stream project.

Another point raised by Mr. Oettinger was his positive view of the implementation of binding energy efficiency targets, which, however, should be considered only if the EU’s current voluntary approach fails to deliver the desired results. Oettinger elaborated that binding action may be taken within 2 years and he promised to present data and facts about the EU's energy efficiency action plan in the spring and bring out a new detailed plan by the beginning of next year at the latest. The commissioner-designate also presented a strong stance on the role that nuclear energy should play within the EU, by supporting the position that the decision about the use of nuclear energy, as long as they comply with EU safety regulations, should remain within the realm of national governments.

The most notable of Mr. Oettinger’s points, however, and the most successful in terms of rallying approval, was his ambition to promote the principle of solidarity when formulating the energy policy of the bloc. Oettinger advocated building consensus among member-states and pledged to put an end to the practice of forming bilateral energy supply deals with outside suppliers, especially in the case of gas contracts. He emphasised his hope that in the future treaties negotiated by the EU would replace government contracts struck with third parties. In order to achieve this ambitious goal Mr. Oettinger noted that he would rely on the enhanced executive powers granted to the Commission by the Lisbon Treaty, but confessed that further legal measures may be necessary.

Outlook and Implications

The policies of solidarity proposed by Oettinger certainly struck a positive accord with the countries most worried about the appointment of a German national as the energy portfolio chief, namely Poland and the Baltic states. Germany’s bilateral agreement with Russia for the construction of Nord Stream, and the subsequent support that countries such as the Netherlands, the U.K., and France gave to the project, which is bitterly opposed by the states mentioned above, revealed the schisms between different member states when it comes to energy policy, and most specifically in the EU’s position versus Russia. Oettinger’s determination to pursue a unified energy policy for the bloc certainly eased a lot of fears. However, the limited powers at his disposal, which he himself acknowledged, raises the question of whether his promise is feasible. It is also worth noting that Oettinger is stating his goal after what is considered to be the most divisive project, Nord Stream, is already considered a closed case.