Five years ago, in 2011, I anticipated gas market problems in the EU in a keynote speech for Cambridge University’s Energy Policy Research Group. I noted that huge gas and pipeline entry barriers, low investment, high cost, and an explosion of invasive and unproductive agency work would all serve to impede progress in the EU gas market. Moreover, I detailed why the “Third Energy Package” and resulting Gas Target Model (GTM) were more effective at promoting industry cartelization than fostering competition for gas as a low-carbon fuel, and that Europe’s gas consumers would soon enough look for a “Fourth Energy Package.”
Five years later? I was correct. The GTM has virtually paralyzed Europe’s gas industry:
• Europe’s gas industry has declined in a world of growing gas use.
• Europeans pay oil-linked prices—a veritable monopolistic ceiling—rather than the much lower cost that new gas production technology has made possible.
• High-carbon coal displaces high-cost gas for EU power generation.
• Europe still builds new access pipelines slower than any other region on earth.
• 80% of LNG import capacity sits idle while EU countries remain captive to Russia.
• Despite apparently abundant natural resources, Europe develops little of its own gas.
• The €50 billion excess uncompetitive gas cost has grown to €500 billion.
All of the problems of perspective and performance that I documented in 2011 still exist to deter competitive entry and to harm Europe’s beleaguered consumers. Please revisit my keynote address—which NERA is redistributing without change—to compare my predictions with the current state of affairs.
New problems face the EU and its consumers, including Brexit and rising nationalism generally. Work toward a “Fourth Energy Package” is the vehicle to take stock and chart a different course for Europe’s gas industry.
Please click here for the 2011 keynote speech.