Tade Oyewunmi
Doctoral Researcher, Center for Climate Change, Energy and Environmental Law, University of Eastern Finland
Visiting Scholar, University of Houston Law Center, Houston Texas, USA
+358466341712, +1 (832) 815 4357, oyetade.oyewunmi@uef.fi; ooyewunm@central.uh.edu
The introduction of liberalisation and concepts such as third-party access (TPA), network ownership unbundling and competition in the EU’s internal energy market (‘IEM’) following the first, second and third sets of EU legislative packages and directives had the effect of requiring Member States to significantly modify the regulatory and organisational structures of their energy markets, including traditional ways of promoting energy security.
Consequently, state-owned or controlled vertically-integrated operators now have to meet the demands of open access and competition. There is also a gradual shift away from traditional long-term gas supply contracts with mechanisms such as take-or-pay clauses and cost-plus pricing formulas, towards more short-term spot-markets and gas trading hubs. Although, long-term supply arrangements could be seen as a means of achieving security of supply, it can also become an instrument which ‘locks-in’ ex ante investments in commercial arrangements with supplier(s) whose broader geopolitical and economic interests may be incompatible with the peculiar interests of the consuming
State(s) or purchaser undertaking(s).
Concerns over energy security in the EU has been heightened following recent degeneration in the lingering EU-
Russia-Ukraine disputes and conflicts on one hand, and developments in the international oil and gas markets as it affects the competitiveness of gas utilisation in the IEM on the other. The EU gas market is still closely interconnected with investments and growth of its electricity market. Natural gas accounts for about 23.9% of EU’s total primary energy supply, while oil accounts for 32% of same. Power generation constitutes about 30% of total demand largely due to the increased investments in gas-fired power generation over the years and its perceived comparative advantages to other hydrocarbons. Furthermore, about 66% of gas in the EU’s energy mix is based on imports through pipelines or liquefied natural gas regasification plants with gas mostly supplied from Russia,
Norway and North Africa as the case may be. Consequently, any significant disruptions, delays or cancellations of upstream and midstream gas investments automatically raise concerns about the energy security and reliability of the overall energy portfolio in the IEM. This paper aims to examine some of the key regulatory and policy issues relating to the security of gas supply in the evolving EU IEM. It focuses on the dynamics of securing the availability and reliability of gas for electricity generation from a legal and regulatory perspective.
An analytical and qualitative approach will be adopted in examining the energy security implications of gas supply regulation in the evolving EU’s internal energy market. The applicable policy, legal and regulatory instruments bordering on security of supply and the regulation of the IEM will be considered
The findings and conclusions reached will form an essential part of my ongoing doctoral research on the topic: ‘legal and regulatory framework for natural gas utilization and electricity markets in Nigeria and the European Union’ .
As the transition into a fully liberalised, integrated, competitive and sustainable IEM progresses in the EU, the objective of maintaining secure and reliable energy supply remains essential. An integrated and effectively regulated gas and electricity market where investments are adequately supported remains critical to these objectives.
Furthermore, the development of gas supply infrastructure (interconnectors, reverse flows and storage) are necessary for enhancing the IEM network’s resilience, even though short-term supply disruptions (due to weather or geopolitics) or potential diversion of supplies, international competition and energy market arrangements may still continue to impact the reliability and security of gas supplies in varying degrees.

Over-dependence on imports by Member States also poses a great challenge and heightens the risks to the security of energy supply. Thus, institutions and mechanisms which augment trust and efficient communication lines with external suppliers should be established to forestall any misalignment of objectives and interests. In this regard, a more responsive and pragmatic approach to regulation and policy implementation is required, whilst elements of over-regulation or over-formalism should be reduced or eliminated. It was also noted that the EU gas market has benefited from gas infrastructure investments, the creation of gas trading hubs and a more integrated cross-border trade in Western Europe, while the gas network in Central Europe has become more flexible to receive supplies from the West. Although, there are currently some limitations in regional capacity to effectively respond to a supply crisis, notably in the Central East and South East Europe, the Iberian Peninsula and the Baltic region.
In relation to crisis preventive action plans required by EU regulation, most Member States seem to rely more on market-based supply-side measures; while non-market-based initiatives make up just over 10% (demand-side measures is reported to be about 14%). Increased storage capacity is noted to be the most commonly adopted riskreducing measure, followed by the increase of import flexibility either through pipeline interconnectors or LNG terminals. Domestic upgrades to the transmission systems and revised contractual arrangements are also frequently used. Also, regulatory measures such as ensuring proper monitoring and accurate forecasting of demand or implementing bilateral agreements to guarantee stand-by capacity/flows in contingency situations can be adopted in supply crisis scenarios.
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