ISSN 2330-717X

Benefits Of Competition In Europe’s Gas Infrastructure Investments Underexploited

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The European gas market is in transition. In the upcoming period, there is a serious need for significant investment in gas infrastructure, such as pipelines, gas storage facilities and LNG terminals. In order to ensure that this can be achieved effectively, this kind of investment needs less regulation from Europe and greater room for competition. This is the claim made by Jeroen de Joode, who was awarded his PhD for his thesis on the subject at TU Delft on Thursday 28 June. Part of his research was conducted at the Energy Research Centre of the Netherlands (ECN).

Deregulation

An increasing reliance on imported gas, the growing importance of renewable energy sources and further integration of the European gas markets all call for investments in the gas infrastructure. In this, European regulations should ensure a careful weighing up of the various interests, for example between price and security of supply.

Jeroen de Joode focused his research on the regulation of investments in the gas infrastructure in the European Union. De Joode: ‘When the European gas sector was deregulated, much of the gas infrastructure (such as pipelines, gas storage and LNG terminals) remained subject to regulation. This was in order to create a level playing field for the wholesale market and restrict potential abuse of power by the managers of the infrastructure.’

Insufficient competition

De Joode examined this situation and is calling for changes: increased room for competition in investments in the gas infrastructure. ‘The existing regulations mean the benefits of competition are not sufficiently realised, leading to unnecessary costs for the regulatory authority. In order to boost investments in new gas infrastructure, Europe has however instigated a model to provide exemptions to regulations: this has enabled gas infrastructure projects to be realised by means of competition in exceptional cases. Nevertheless, this model takes insufficient account of the differences between types of gas infrastructure.’

Distinguishing between types of infrastructure

A second key recommendation made by De Joode is that regulation should distinguish better between different types of gas infrastructure. It makes a big difference if it concerns a pipeline or an LNG terminal.

This means that existing regulation could be improved by allowing competition to play a greater role in the different types of gas infrastructure. ‘In terms of natural gas transport pipelines, more flexibility could be achieved by allowing private parties to invest in specific pipelines and by organising competitive tenders. For gas storage and LNG import terminals, De Joode recommends that the current principle that prioritises regulation be replaced by a similar focus on competition instead.

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