Good morning, ladies and gentlemen. First of all I am very grateful for this opportunity to share my views on energy sector’s resilience during these interesting but challenging times. I would like to focus on three dimensions: the importance of security of supply, benefits of the current EU energy security framework, and how we can go further with upcoming initiatives.
A resilient and secure supply of energy is a prerequisite for the successful clean energy transition and for EU strategic economy and autonomy. Energy is essential for our economy and the welfare of our citizens. Recent events like Texas’ blackout due to extreme weather conditions or the Continental pipeline cyberattack have clearly shown how an incident in the energy sector can have immediate devastating effects on the whole society. Energy prices spike in this autumn reminds us, that the resilience of the energy system is increasingly important. So, our goal is to make sure the EU energy system can provide – whatever happens – reliable supply, as it integrates more renewable energy, and reduces the dependence to external fossil fuels suppliers. For these reasons, energy security as one of the five dimensions of the EU Energy Union is a key element of the European Green Deal but also the EU Security Union Strategy.
Over the past few months, we are seeing a significant surge in energy prices. The wholesale electricity prices rose to record highs reaching around 260 EUR per megawatt hour in late November, and gas prices have risen more than 300% since the beginning of the year. This is not only electricity and gas that have seen the price rises but coal and oil too. This troubling situation can be explained by the strong global economic recovery, uncertainty of supplies from some major gas suppliers to the EU, and lower than usual level of our gas storage, and to the lesser extent, of weather conditions. The Commission is very concerned about the price rises and how they affect consumers and businesses, especially the most vulnerable ones. We remain vigilant and continue to closely follow developments in Member States.
On the 13th of October, the Commission adopted the toolbox setting out immediate measures that Member States can take to protect the most valuable consumers and businesses. The follow-up to this communication shows that Member States have been putting the toolbox to a good use. But we also need to look forward, and the toolbox also proposes measures to increase the Europe’s resilience to future shocks and this clearly demonstrates the need to increase our energy independence and accelerate the European Green Deal policies. But the energy prices remain a cause for concern as winter approaches and recent analyses confirm that energy supply is not at immediate risk, but we stay alert.
On the other hand, the ENTSO-E’s winter outlook for the electricity system highlights that despite the current situation may have an impact on electricity price, the surge of prices on the gas market does not pose additionally adequacy risk. The resilience of the electricity system to face gas disruption appears strong and operators do not see the risk for electricity this winter. In any case, the risks identified in the electricity system are limited, though definitely not to be ignored.
On the other hand, the ENTSO-G’s winter outlook for the gas system highlights that in case of a cold winter, the EU will need to import 5-10% more gas in a situation of a very low level of storage – and it is at 68% this week, which is 12 p.p. less than it was in a period of 2016 to 2018. There is no immediate security of gas supply risk, but particular attention and monitoring is required at EU level. We do this through an internal task force in direct liaison with ENSTO-G, and together with gas coordination group and the regional risk groups set up by the Commission on the 18th of November. We also need to have gas storage at an appropriate level throughout the winter and this is a clear call not to withdraw gas from storages at the beginning of the winter.
To handle these challenges, the EU already has a regulatory framework to ensure preparedness and coordination among operators and authorities in case of energy security incidents. The UE regulation covering the securing of natural gas supply presents the framework for EU emergency preparedness and resilience to gas disruptions. The regulation includes a solidarity mechanism that can be activated in case of an extreme gas crisis. The regulation on risk preparedness for the electricity sector aims to ensure that all Member States implement the right measures to prevent, prepare for, and mitigate electricity crisis, and that they do so in cooperation with each other in the spirit of solidarity and transparency. Following the full entry into force of this regulation, Member States are to submit the first risk preparedness plans in January 2022.
But we’ve got to indeed go further considering the profound transformation that the energy sector in the EU is undergoing. This is characterized by more decentralized markets with more players, a high proportion of energy from renewable sources, and more digitalized and interconnected systems. Moreover, climate change is contributing to more extreme and unpredictable weather conditions, malicious attacks including cyber, or hybrid threats that are increasingly widespread. In this context, new challenges and dependencies arise and for the energy sector comes the need for a renewed approach to manage risk and guarantee the security and resilience. For these reasons, one of the pillars of the EU Security Union Strategy is a future-proof security environment. Its starting point is to ensure critical infrastructure is both protected and resilient. Last year, the Commission proposed a directive on the resilience of critical entities. To accompany this directive, and document’s particular sensitiveness, and impact of energy on our society, the Commission will adopt a recommendation on critical energy infrastructure by the end of 2022.
And here, I would like to pay tribute to Central and Eastern European countries that worked hard to build up the resilience of their energy system over the past decade. This is a truly European success story and one that is paying off considering these challenging times for the energy system.
Another important aspect, to pay attention to, is the digitalization of the energy sector which bridges the objectives of the European Green Deal and digital age, bringing new business opportunities, strengthening our technological leadership and strategic autonomy. However, digitalization also brings new challenges for the energy sector in particular in terms of cyber security. So, as I already mentioned, recent cyber-attacks such as the one on the Colonial pipeline in the USA have reminded us that cyber incidents in energy can have a dramatic impact on the security of the energy supply with cascading effects on the economy and other sectors of society. Cybersecurity is not only important in the electricity sector but also for our oil and gas critical infrastructure. So, the EU has started energy-specific activities to improve cyber security also to reinforce the resilience of our critical energy network to possible cyber-attacks and mitigate the impacts on security of supply.
In 2019, the Commission issued the recommendations on cyber security in the energy sector. Furthermore, the Commission is preparing a digitalization of energy action plan foreseen for June next year, and it aims to help achieve the European Green Deal by ensuring that cyber security but also respect for privacy is guaranteed. In addition, the Commission has started to prepare sector-specific rules, a so-called network code, to address the cyber security aspects of cross-border electricity flows. It includes rules on common minimum requirements, planning, monitoring, reporting, and crisis management.
The future electricity system will require more flexible energy sources such as energy storage and demand response and this in turn can help to integrate renewables and electrification by ensuring the security of the energy system. In this regard, as highlighted in the Communication on energy prices, the Commission will identify key EU actions to support the developments of future-proof energy storage as a key flexibility tool. This will include both short to medium-term, and long-term storage options.
EU leaders and ministries have discussed the problem of high energy prices at the last European Council and on already two Energy Councils – last one took place yesterday – and Energy ministers also focused more closely on gas security supply and gas storage, also in the geopolitical context. One of the medium-term measures to improve resilience is reflected in the package of proposals that the Commission plans to adopt on hydrogen and the decarbonization of gas on 14th of December. So, after two weeks. The package will be a holistic approach towards gas decarbonisation and security. The package aims to improve the market uptake of hydrogen and renewable gas which can be produced in the EU and hence reduce our dependence on external suppliers of fossil fuels.
The package will include a targeted revision of the Regulation on gas security of supply. It extends the existing framework for renewable and low-carbon gases and emergency cybersecurity risk in the gas sector. It also aims to increase solidarity between Member States, so that in case of a gas shortage, no household is left in the cold. We want to have Member States put in place the necessary bilateral arrangements, 40 of which should have been in place by December 2018, and since yesterday we have only two. So, lots of work is ahead of us. The revision of regulation will therefore introduce a common template and rules for fair compensation. I would like to call on the Member States to use this template without delay to ensure solidarity in case of crisis.
Drawing the lessons, from the current low level of storage, the revision will introduce a more integrated cross-border approach at regional level to better use gas storage. It will also enable voluntary joint procurement for strategic stocks by transmission system operators. The aim here is not a one-size-fits-all approach but to make sure that available capacity is used better across borders when needed for the security of supply. Let us not forget in winter 30 to 40% of the gas we consume is drawn from storage.
Above this, we should bear in mind that the EU is only responsible for around 8% of global GHG emissions. Decarbonisation needs to be well-coordinated around the world and there is hard evidence that the EU needs to reduce its dependence on imported fossil fuels, that means the transformation of the EU’s energy system that will trigger changes to our external energy policies. Whilst the EU and other regions in our world will ramp up renewable energy production and increase energy efficiency, new dependencies will reshape the energy geopolitics of the future. This process will need to be properly managed, in particular for critical raw materials and supply chains for clean technologies. Even with our own energy transition way underway, energy diplomacy will remain as important as ever to ensure that EU sovereignty is there in energy affairs. Together with the European External Action Service, the Commission is currently preparing a new European strategy on international energy engagement, foreseen to be presented in spring next year. This aims to respond to the global geopolitical changes and lead on climate change and sustainable economic recovery at the same time. So, our message is clear: the EU is leading by example and the European Green Deal is going global. The EU will not be distracted from its ambitious path towards a green and just transition in Europe and with partners worldwide. A greener Europe has a geopolitical role to play, and it is prepared for our responsibilities.
With that I will conclude, thank you for your attention.