GTE president: EU must ensure market demand to boost gas network

EU legislation on gas supply security has yet to set the right market obligations to ensure new infrastructure is built where it is needed, Jacques Laurelut, president of Gas Transmission Europe (GTE), told EURACTIV in an interview.

Jacques Laurelut is president of Gas Transmission Europe (GTE).

He was speaking to Susanna Ala-Kurikka.

To read a shortened version of this interview, please click here.

What is your view on how Europe will be able to prevent another gas crisis this winter?

After the Russia-Ukraine gas crisis in January, we were asked by the [European] Commission what proposals we would make. 

It was clear that in some countries there were almost no consequences and in others there were many, and it all depended on how well the country was prepared for the crisis.

The first thing we said to the Commission was that you have to imagine the crisis you might face. Then you have to see if your network flows are able to face it.

The second point was that the risk was not defined the same way in each European country, so what was a crisis for one was not a crisis for another. In our opinion, it was necessary to make it more clear what a risk is.

Another point was that responsibilities between different stakeholders were unclear. At the time, we didn’t know who was responsible for what between the countries’ administration, regulators, shippers and the TSO [transmission system operator]. It was unclear.

We said that a 10-year network development plan would be a way to see what will happen in the gas network in the next 10 years. It would help to predict whether the network is able to face any given supply disruption.

We told the Commission that we were ready to work with them with the tools to try to identify where we could have congestion in the network. For the short term, we said that the best solution is to see how we can reverse the flow in the pipe.

When you look at the network, we have very large-diameter pipes in Slovakia, for example, because all the gas coming from Russia to the West, South-West of Europe, France, Germany and Italy goes through Slovakia. So the pipes are very large.

It was obvious that it would have been possible to bring gas to Slovakia on a reverse-flow basis with such a pipe.

Of course, it couldn’t be very expensive to do that so we proposed to carry out a study on this issue.

Something that we said later is that it seems that for security of supply reasons, we should reinforce the network in some areas but there is no market demand. And the question is: why?

I think it’s important because even if we find pipes that need to be built, if nobody is ready to pay for them, it will be a problem. And that has to be solved.

So that comment we have made to the Commission at the end of February.

What is the purpose of the 10-year network development plan?

The 10-year development plan is something that we will deliver at the end of the year. The idea is to identify the demand in Europe, the capacity of the network and then the supply, and to see if all that works correctly for the next ten years.

Of course, for the next ten years there are a lot of unknowns: pipes that are not decided yet but might be built, or plants that could be built but in the end are not. So we have to make some assumptions, but it’s a good tool to have communication with the market.

We would like to do something like the Ten Year Statement of National Grid [UK] and GRTgaz [France]. The idea is to explain how the network will work, where there will be congestion and to explain to the market that it should ask to remove the congestion.

The market in such a case could be a company that intends to build a gasification plant somewhere. It has to know if there is a need for gas.

So our first 10-year Network Development Plans will be delivered at the end of the year.

It’s a GTE project, but it’s done in the context of the third package, which means that next year it will be an ENTSO-G task.

Do you think that the Commission took note of your proposals?

In the proposed regulation, some of our ideas have been adopted.

The only problem, I think, is that when there is no market demand, how do you decide on an investment that nobody wants to pay?

It’s a little bit of a theoretical question, because it’s difficult to imagine that somebody would say that the market is wrong and build anyway. Who is this guy that knows better than the market?

This case could happen because the obligations on the TSO and on the shippers are not the same.

The obligation for the TSO is to be able to face a seven-day peak period without the largest infrastructure and the obligation for the shippers is to face any 60-day period without the largest infrastructure.

If things stay as they are now, we could imagine that we’d have to build pipes that nobody in the market is ready to pay for. We don’t know the solution for that.

Could you give an example of such a situation?

Imagine that to supply Austria during a Russian crisis, you need a pipe from north to south from Germany. Who will build and pay for this pipe: the Germans or the Austrians? Shippers or the TSO?

Normally, as a TSO, when we build the pipe, we organise an open season – that means that we sell the capacity of the pipe before building the pipe. If there is no demand from the market for the pipe, nobody will pay for it and we have no reason to build it.

For the moment, we have different answers.

The old answer is the answer for the market. When you look at how the gas market was organised in the past, incumbents have built capacity, foreseen crises and built capacity to face them. In fact, the market decided all this capacity.

Now, the question is: how do we ask shippers to ask TSOs to build the same capacity or envisage the same crisis?

There are two answers. The market-based answer is that you have to impose on the market the kind of constraints that it will demand that the TSO builds the capacity. 

The second solution is to say that there is somebody who knows and who will decide, like regulators. It’s more or less the idea of central planning. This somebody will decide that the TSO in one country will pay for capacity in another country.

How would you put in place these market constraints?

Maybe it’s difficult, but at least if we tried to require the market to fulfil the same obligation as a TSO, then at the end of the process, we should not find something different.

That can be achieved through the Security of Supply Regulation. At the moment it has different constraints for TSOs and shippers and suppliers. They could be adjusted so that we would not be such a large difference.

If you look at the reverse flow study, nobody in Slovakia probably was forced to face a Russian crisis. Otherwise it should have asked the TSO to do what was necessary to bring gas to Slovakia in case of a Russian crisis. It wouldn’t have been very expensive.

But a TSO is waiting for the market to organise an open season and build what the market needs. If there is no demand, it doesn’t build. That’s the logic.

So you would like to see the regulation having the same obligation for TSOs and suppliers?

I don’t know if the same obligation is possible. But in the end it should have the same consequences.

If we manage to ensure that the market demands what the TSO has to do, then it will be easy. What will be difficult is the difference between the two.

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