EC executive - Summary of the impact assessment - Main contents

Please note

This page contains a limited version of this dossier in the EU Monitor.

dossier	SEC(2009)980 - Accompanying document to the Proposal for a Regulation of the European Parliament and of the Council concerning measures to ...
document	SEC(2009)980
date	July 16, 2009

agreement on a security of supply standard for infrastructures could provide, to enable regulators and Transmission System Operators to tackle, at Member State, regional and EU level, the difficult questions of which additional investments make most sense, who should pay for them.. The current security of supply standards in the 2004 Directive are too imprecise.

As regards option 2, the Commission's report on the implementation of the 2004 Directive demonstrated very heterogeneous results and uneven implementation. With such imprecise standards and unclear obligations, strict enforcement is impossible, which is why the option 2 "Better enforcement of 2004 Directive" has not been analysed further.

A voluntary approach by some stakeholders involved to some aspects of security of supply inadequately covered by the Directive could be imagined and some initiatives have already been taken. A disadvantage of a voluntary approach is that reliance on market forces to deliver security of gas supply has limits. Provisions for emergencies cannot be left to the market. A further disadvantage is that participation of all participants cannot be guaranteed. Many aspects of security of supply rely on a collective effort. Any work of industry on developing standards would need to be followed through into a binding instrument. On these grounds, option 3 has not been analysed further.

The two policy options (4 and 5) will introduce new elements: clear standards for security of supply and confidence that they will be met; clear definition of emergency plans at Member State and EU level. These two policy options as well as "No new EU action" have been assessed in details in sections 5 and 6.

5. Assessment of impacts: What are the main economic, environmental and social impacts of each option particularly in terms of (quantified/monetised) benefits and costs (including estimates on administrative burden), other compliance costs and implementation costs for public administrations)?

The economic impacts of both short listed Policy Options would be dominated by the investment costs and the resultant benefits of the implementation of the n-1 standard and subsequent Preventive Action Plans. The preliminary calculations of n-1 can give an appreciation of the improvements in infrastructures and supplies which may be necessary across Europe to reduce the risk of unmanageable gas supply disruptions. Eligible projects under the European Economic Recovery Plan, except reverse flow projects (for data reasons), have been included in the following chart:

Preliminary calculation of n-1 for Member States:

The major infrastructure – "1" in "n-1" - is the main import pipeline in most Member States. For UK, Netherlands and Denmark it is the main production facility. For Spain and Portugal it is the main LNG terminal. In many of the importing countries, storage is important but the usually the main import pipeline has a higher capacity than the main storage facility.

Based on this preliminary calculation, nine Member States do not meet the proposed n-1 standard. These Member States are in a variety of situations, and can bring a variety of security of supply measures to bear. A good idea of necessary infrastructure developments can be developed. Many if not most of the necessary infrastructure projects are in the list of eligible projects in the European Economic Recovery Plan. The total European Economic Recovery Plan support for gas infrastructure projects is 1440 m € over 2 years, a maximum of 50% of the eligible project costs. Thus, as an order of magnitude, the n-1 standard applied Europe wide, could imply an investment cost of a few b €. However, if the projects are already launched under the European Economic Recovery Plan, the extra investment costs from the application of the n-1 standard Europe-wide would be smaller.

There would be a positive interaction with the internal market through strengthening incentives for investment, creating a level playing field in terms of security of supply obligations, and clearly delimiting emergency situations in which non-market instruments could be brought into play. The infrastructure improvements, such as more flexible interconnections, should improve trade possibilities, liquidity and price formation in the internal market as well as security of supply.

The administrative costs for businesses and for public authorities of both short-listed Policy Options would be marginal compared to investment and other costs.

As regards jobs, the substantial use of gas in industry suggests that job losses are possible as a direct result of any lack of confidence in supplies. Some 25% of gas consumption in the EU is in industry (fertilizers, other chemicals etc.).

As regards the environment, inadequate provisions for security of gas supply will encourage ad hoc recourse to substitute fuels. In power generation, in the period before renewables are competitive and the necessary grid developments have been put into place, and before Carbon Capture and Sequestration is commercially available, this could mean more investment in coal-fired generation and the lock-in of high CO₂ emissions technologies.

6. Comparison of options: What is the preferred option on the basis of which criteria/ justification?

The impacts of the baseline option and two short-listed Policy Options can be compared as follows:

Policy Option	Effectiveness in achieving objectives	Efficiency	Coherence
No new EU policy	May partially deliver, through the 3^rd IEM package, the European Economic Recovery Plan, TEN-E, awareness of the need for effective cooperation on crises. However, timing issue, as 3^rd package not be fully operational until 2011. Also, absence of clear security of supply standard for infrastructure could make work of TSOs and regulators on network development more difficult.	Implementation of 3^rd package likely to need support, notably assessments of potential gas supply disruptions at EU level and practical guidance to regulators; current security of supply standards in the 2004 Directive too imprecise.	Not relevant
Revision of Directive	Yes	Would imply well-focused, limited investment costs; also provisions by market participants, similarly well-focused and on a level playing field; would diminish disincentives to investment in security of supply by market participants, thus relieving the burden on the public and public authorities; would imply administrative burden on public authorities as regards emergency provisions	Would have a positive effect on the development and functioning of the internal energy market; positive effect on the environment, notably by reducing unplanned recourse to higher-emissions substitute fuels; positive effect on competitiveness and jobs in gas-using industry, and on households.
New Regulation	Yes	Compared to a revision of the Directive, would have the advantage of being operational more quickly; a major gas supply disruption could happen anytime; also a more direct impact on provisions and investments by market participants; would be more effective in achieving clear arrangements for cooperation around emergencies with clear obligation to cooperate; comparable administrative burden on public authorities as regards emergency provisions;	If it can be achieved, it would constitute a more direct engagement of public authorities and market participants in security of gas supply in an EU perspective, with systems in place earlier. The costs would not be very different from those implied in the revision of the Directive

Both short-listed Policy Options would have similar economic, social and environmental impacts compared to the no new EU policy option. The major difference between them concerns the speed and effectiveness of their implementation. Arguably the Regulation option is more likely to be effective (clearly attributing responsibilities to market participants), fair (a level playing field in terms of security of supply obligations) and could be in place and in effect more quickly.

7. 7. Monitoring and evaluation: What are the arrangements to establish the actual costs and benefits and the achievement of the desired effects?

A reporting and monitoring system is in place for the internal energy market. In addition, the role of the Gas Coordination Group could be expanded to include regular monitoring and assessment, drawing from the envisaged reviews of risk assessments by Member States. EU-level analyses should support evaluations of security of supply risks.

1COM(2008) 781, "2^nd Strategic Energy Review: An EU Energy Security and Solidarity Action Plan".

2EP Resolution of 2 February 2009 on the 2^nd Strategic Energy Review (2008/2239(INI)); Energy Council Conclusions, 19 February 2009 (6692/09); Presidency Conclusions, European Council, 19 March 2009.

3See report of public consultation, Annex 5.

4November 2008 evaluation report on the implementation of Directive 2004/67/EC.

EN EN