Commission staff working document - Accompanying document to the Proposal for a Regulation of the European Parliament and of the Council concerning measures to safeguard security of gas supply and repealing Directive 2004/67/EC - Impact assessment {COM(2009) 363} {SEC(2009) 980}
Date: 2009-07-16
Institutions: European Commission
Subjects: energy industry, gas, gas supply, harmonisation of standards, natural gas, report, safety standard, security of supply

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 16.7.2009 
SEC(2009) 979 final 

COMMISSION STAFF WORKING DOCUMENT 

Accompanying document to the 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

concerning measures to safeguard security of gas supply  
and repealing Directive 2004/67/EC 

IMPACT ASSESSMENT 

{COM(2009) 363} 
{SEC(2009) 980} 

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This report commits only the Commission's services involved in its preparation and does not 
prejudge the final form of any decision to be taken by the Commission.  

Table of contents: 

Introduction 

Section 1: Procedural issues and consultation of interested parties  

Section 2: Problem definition  

Section 3: Objectives  

Section 4: Policy options  

Section 6: Comparing the options  

Section 7: Monitoring and evaluation  

Annexes 

Introduction 

The Commission set out in the 2nd Strategic Energy Review an EU approach to security of 
energy supply, including a five-point EU Energy Security and Solidarity Action Plan1. The 
approach  and  the  Action  Plan  have  been  solidly  endorsed  by  Council,  Parliament  and 
European Council2, and by stakeholders3. This impact assessment concerns one element in the 
Action  Plan  -  the  strengthening  of  provisions  for  crisis  prevention  and  response  in  the  gas 
field and in particular, the revision of Directive 2004/67 on measures concerning the security 
of gas supply.  

A concept of security of energy supply, from a policy perspective, was put forward by the 
Commission in the 2000 Green Paper "Towards a European strategy for the security of energy 
supply"4:  "The  European  Union's  long-term  strategy  for  energy  supply  security  must  be 
geared  to  ensuring,  for  the  well-being  of  its  citizens  and  the  proper  functioning  of  the 
economy, the uninterrupted physical availability of energy products on the market, at a price 
which is affordable for all consumers (private and industrial), while respecting environmental 
concerns and looking towards sustainable development".  

In the gas field, this general definition of the outcome sought could translate into an objective 
of  an  acceptable  level  of  risk  of  involuntary  interruption  of  supplies  to  consumers.  What 
would an acceptable level be? Gas, unlike electricity, is substitutable by other fuels in several 
of  its  main  uses,  so  some  risks  of  disruption  of  supplies  will  be  acceptable  to  many 
consumers.  Many  industrial  consumers  with  possibilities  for  fuel  switching  choose 
interruptible  contracts  offered  in  the  market.  Thus  the  2004  Directive  on  security  of  gas 

1 
2 

3 
4 

COM(2008)781, "2nd Strategic Energy Review: An EU Energy Security and Solidarity Action Plan" 
EP  Resolution  of  2  February  2009  on  the  2nd  Strategic  Energy  Review  (2008/2239(INI));  Energy 
Council  Conclusions,  19  February  2009  (6692/09);  Presidency  Conclusions,  European  Council,  19 
March 2009 
See report of public consultation, annex 4 
COM/2000/0769 

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supply  protects  only  household  and  some  other  customers  who  are  unlikely  to  have 
satisfactory fuel switching possibilities. It establishes security of supply standards in terms of 
the severe weather conditions and other disruptions during which it should still be possible to 
supply protected customers from the market, without emergency measures.  

The basic idea in the Directive, as in the earlier and subsequent internal gas market Directives, 
is  that  the  internal  gas  market  should  be  well-functioning  and  flexible  enough,  with 
sufficient  infrastructure,  to  mitigate  most  gas  supply  disruptions.  At  the  same  time,  for 
disruptions  which  turn  out  to  be  beyond  the  capacity  of  the  market  to  mitigate,  the  2004 
Directive  establishes  a  framework,  compatible  with  the  internal  market,  for  emergency 
measures  by  public  authorities  (e.g.  imposition  of  reduction  of  supplies  to  customers).  This 
joint  focus  on  the  functioning  of  the  market  and  emergency  measures  if  needed  is  a 
fundamental  structure  in  gas  security  of  supply  policy  in  Europe.  The  2004  Directive 
complements  the  internal  energy  market  Directives,  notably  by  establishing  standards  for 
security of supply which are implemented by market participants. It is self-standing as regards 
the  framework  which  it  establishes  for  emergency  actions,  although  compatibility  with  the 
internal market is a prime criterion.  

The  establishment  of  robust  relations  with  producer  and  transit  countries  is  clearly  an 
important part of EU gas security of supply policy. However, external relations actions are 
largely5 outside the scope of this impact assessment.  

In recent years, much has changed as regards Europe's security of gas supply. Dependence 
on  imports  is  increasing  and  at  the  same  time,  supply  and  transit  risks  are  growing  (see 
Section  2).  The  Russian-Ukrainian  gas  crisis  in  January  2009  (summarised  in  Section  2) 
brought  an  unprecedented  disruption  of  gas  supplies  to  Europe,  far  greater  than  any  earlier 
disruptions. 30% of Europe's imports were cut off for two weeks. This is now a realistic gas 
supply  disruption  scenario.  The  situation  within  Europe  has  also  been  changing.  With  the 
growing  importance  of  long-distance  network  flows  of  gas  and  the  development  of  the 
internal gas market, gas supply crises are quickly felt across large parts of Europe and by the 
same token, the internal gas market is offering an increasingly powerful means of mitigating 
gas supply disruptions.  

The increasingly important European dimension requires an adequate regulatory framework 
for security of supply at EU level. This should develop and use the potential of the internal 
gas  market  to  deal  with  supply  disruptions  and  address  today's  risks  of  disruptions.  If  an 
integrated  liquid  EU  gas  market  already  existed,  it  could  be  expected  that  most  supply 
disruptions  could  be  mitigated.  But  this  is  not  yet  the  case.  Infrastructure  and  market 
integration developments are still needed (see Section 2). In this context and after examining 
the implementation of Directive 2004/67, the Commission proposed in November 2008 that 
the Directive be revised. After the Russian-Ukrainian gas crisis in January 2009, the Council, 
Parliament  and  the  European  Council  all  called  for  the  revision  of  the  Directive  to  be 
accelerated.  

The Member States are in very different situations as regards reliance on gas in their energy 
mixes,  their  main  uses  of  gas  and  thus  substitution  possibilities,  indigenous  production, 
storage,  geographical  position  in  gas  networks  etc.  (See  Table  1.)  The  priority  attached  to 
security of gas supply varies among Member States. Very concretely, the risks and impacts of 

5 

A monitoring mission to Ukraine and Russia was part of the EU response to the January 2009 gas crisis 

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gas  supply  disruptions  are  different  in  different  Member  States,  as  are  their  means  of 
mitigating  disruptions,  although  the  internal  gas  market  is  an  increasingly  important  factor. 
The  flexibility  allowed  to  Member  States  in  the  2004  Directive  is  a  reflection  of  these 
differences. Nevertheless, given the external and internal developments noted above, the clear 
message  from  Council  and  Parliament  is  to  revise the Directive. This is an EU and internal 
energy market matter, as is reflected in the areas of importance in the revision of the Directive 
indicated by the Council and Parliament.  

They focused on an EU framework for emergency action as well as the importance of a well-
functioning internal gas market. The Energy Council "recognizes the need to improve, as an 
urgent  priority,  both  national  and  EU  level  instruments  for  ensuring  security  of  gas  supply, 
through  the  revision  of  the  Directive,  with  notably  a  better  definition  of  the  major  supply 
disruption indicator and a more effective crisis response mechanism (e.g. through predefined 
emergency plans at the appropriate levels)"6. For the European Council, the revision should 
include  "an  appropriate  crisis  mechanism  ensuring  the  preparedness  of  all  actors,  including 
the energy industry, transparency and prior information through the development of plans for 
security  of  supply;  solidarity  among  Member  States  through  the  development  of  regional 
plans; and improved assessment and coordination through the redefinition of the threshold for 
deciding actions at Community level"7. For the Parliament, key elements in the revision are 
"mandatory and effective national and EU emergency action plans, which among other things, 
define a common declaration of an emergency situation, allocation of available supplies and 
infrastructure  capacity  among  the  affected  countries,  coordinated  dispatching,  activation  of 
emergency  measures  in  unaffected  or  less  affected states  in order to increase the amount of 
gas  available  to  the  affected  markets  using  all  means  possible,  including,  among  others, 
interruptible  contracts,  fuel  switching,  storage  withdrawal,  supply  flexibilities  for  example; 
considers  that  it  is  essential  to  improve  the  functioning  of  the  market  through  transparency 
and increase the availability of gas in the market; calls on the EU and its Member States to 
develop gas storage with fast-release capacity"8. 

Table 1: Sectoral consumption of natural gas by Member State 2007 (mtoe) and gas as % of 
primary fuel mix 

Power 
generation 

House-
holds 

Industry 

Services  District 
heating 

Other 

Austria 
Belgium 
Bulgaria 
Czech 
Republic 
Denmark 
Estonia 
Finland 
France 
Germany 
Greece 

29% 
29% 
26% 
6% 

39% 
12% 
55% 
15% 
23% 
73% 

18% 
22% 
1% 
28% 

15% 
6% 
1% 
34% 
37% 
5% 

37% 
39% 
46% 
35% 

18% 
36% 
27% 
28% 
27% 
16% 

7% 
10% 
3% 
18% 

7% 
6% 
1% 
21% 
14% 
3% 

2% 
0% 
7% 
7% 

3% 
39% 
8% 
0% 
1% 
0% 

7% 
0% 
17% 
5% 

16% 
1% 
9% 
2% 
0% 
2% 

Gas as % of 
primary  fuel 
mix 
21 
26 
15 
15 

20 
13 
10 
14 
23 
10 

6 
7 
8 

Council Conclusions, 19 February 2009 (6692/09) 
Presidency Conclusions, European Council, 19 March 2009 
Par 67, EP Resolution of 2 February 2009 on the 2nd Strategic Energy Review (2008/2239(INI)) 

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32% 
Hungary 
64% 
Ireland 
40% 
Italy  
46% 
Latvia 
31% 
Lithuania 
Luxembourg  41% 
33% 
Netherlands 
8% 
Poland 
59% 
Portugal 
28% 
Romania 
9% 
Slovakia 
10% 
Slovenia 
44% 
Spain 
31% 
Sweden 
33% 
United 
Kingdom 
EU27 

31% 

Source: Eurostat 

30% 
14% 
23% 
8% 
5% 
26% 
20% 
26% 
6% 
16% 
22% 
9% 
12% 
4% 
33% 

15% 
15% 
24% 
21% 
49% 
34% 
23% 
40% 
27% 
32% 
26% 
74% 
30% 
40% 
14% 

16% 
8% 
10% 
10% 
4% 
0% 
19% 
13% 
5% 
9% 
19% 
1% 
9% 
13% 
9% 

4% 
0% 
0% 
15% 
10% 
0% 
1% 
2% 
0% 
4% 
9% 
5% 
0% 
1% 
2% 

26% 

25% 

12% 

1% 

3% 
-1% 
3% 
1% 
1% 
0% 
4% 
12% 
4% 
11% 
16% 
0% 
5% 
12% 
8% 

4% 

40 
27 
38 
29 
32 
26 
40 
13 
15 
32 
28 
12 
22 
2 
37 

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Section 1: Procedural issues and consultation of interested parties  

Identification: DG TREN, Agenda planning/WP reference: 2009/TREN/042 

Organisation  and timing  of the Impact Assessment:  The  impact  assessment  was  prepared  in 
house  in  DG  TREN,  drawing  from  consultations  and  expertise,  assessments  of  the  January 
2009  gas  crisis  and  relevant  studies.  DGs  COMP,  ECFIN,  EMPL,  ENTR,  ENV,  JLS,  JRC, 
RELEX, REGIO, as well as SG participated in the Impact Assessment Steering Group which 
met on 25 May 2009. LS had a separate discussion with DG TREN on 25 May. The Impact 
Assessment Board discussed the draft impact assessment on 10 June, provided a first opinion 
on 12 June and a second on 24 June on the resubmitted draft impact assessment of 18 June.  

The recommendations of the Board were followed up in the revisions of the draft, notably as 
follows: 
- 

A  definition  of  "security  of  gas  supply"  and  the  intended  scope  of  the  initiative, 
starting  from  the  concept  adopted  by  the  Commission  in  its  2000  Green  Paper;  this 
underlined the joint focus of security of gas supply policy on the functioning of the gas 
market and emergency measures.. 
Strengthening  of  the  section  on  analyses  of  the  January  gas  supply  disruption, 
including its economic impacts, drawing from academic research.  
Stronger  consideration  the  first  policy  option,  "No  new  EU  action"  (the  baseline 
scenario) including the 3rd internal energy market package and the European Economic 
Recovery Plan. Inclusion of EERP projects in a calculation of n-1. 
Consideration  of  the  application  of  n-1  at  regional  and  EU  as  well  as  Member  State 
level.  
Further  material  on  assessment  of  costs  of  additional  investments,  notably  from 
Transmission System Operators on reverse flow projects. Comparison with overall gas 
costs to consumers. 

- 

- 

- 

- 

Consultation of stakeholders on the substance of the impact assessment: 

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- 

Public  consultation  on  basis  of  Commission's  November  2008  evaluation  report9  on 
the implementation of the 2004 Directive on measures concerning the security of gas 
supply, November 2008-March 2009 (report in Annex 4).  
Gas  Coordination  Group10  discussions  (23  February,  2  April,  13  May),  responses  of 
members to questionnaires and issue papers. 

External expertise11: 

- 
- 

- 

Study on natural gas storage in the EU, Ramboll, October 2008 
Study on Interoperability of LNG Facilities and Interchangeability of Gas and Advice 
on the Opportunity to Set-up an Action Plan for the Promotion of LNG Chain 
Investments, MVV Consulting, May 2008 
Studies on the January 2009 gas crisis, notably from the International Energy Agency, 
the Regional Center for Energy Policy Research at Corvinus University of Budapest, 
Oxford Institute for Energy Studies, IEA report The Ukraine-Russia Gas Dispute 
(20.01.2009)12 

Main results of consultations, positions expressed, how taken into account or not: 

In the public consultation on the revision of the 2004 Directive, based on the Commission's 
evaluation report on its implementation, fifteen responses were received from Member States 
(4),  European  associations  of  energy  regulators  and  individual  regulators  (3),  infrastructure 
operators  (1),  suppliers  (4),  traders  (1)  and  users  (2).  The  consensus  was  that  a  well-
functioning internal gas market provides the best guarantee of security of supply. At the same 
time, there was general agreement on the need for specific efforts across Europe to mitigate 
future disruptions. Some Member States noted that only on the basis of shared responsibility 
for  security  of  supply  can  solidarity  actions  be  properly  developed.  Respondents  offered 
detailed views and proposals, as summarized at the end of this section.  

Thus,  there  is  a  consensus  amongst  EU  institutions  that  a  revision  of  Directive  2004/67  is 
necessary,  improving  the  capacity  and  organisation  of  the  EU,  Member  States  and  internal 
energy market participants to prevent and deal with gas supply crises. The public consultation 
demonstrated a readiness of the main stakeholders to engage in the development of detailed 
proposals  to  achieve  an  effective  revision.  The  various  proposals  of  the  institutions  and 
stakeholders are considered in this impact assessment. The Commission’s minimum standards 
for consultations have all been met.  

Summary of public consultation: 

(i) 

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10 

11 
12 

The  first  question  concerned  the  definition  of  security  of  supply  standards  which 
would  put  reasonable,  equal  burden  on  market  participants  while  respecting  the 
different  situations  of  Member  States.  The  2004  Directive  established  security  of 
supply  standards  in  terms  of  consumers  to  be  protected  and  extreme  weather 
conditions  and  supply  disruptions  during  which  it  should  be  still  possible  to  supply 
these customers. However, much flexibility was allowed, reflecting the very different 

COM(2008)0769; report on public consultation in Annex 4 
The Gas Coordination Group, established under the 2004 Directive, brings together Member States and 
the  gas  industry  and  consumers  through  their  European  associations  (Eurogas,  OGP,  GIE,  IFIEC, 
BEUC, Eurelectric) 
First two studies at http://ec.europa.eu/energy/gas_electricity/studies/gas_en.htm 
The IEA  Secretariat's  note  Overview  of  the  Russia  - Ukraine gas dispute  of  January 2009  (11  March 
2009) also provides a useful chronology of the crisis. 

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situations  of  Member  States  (reliance  on  gas  in  their  energy  mixes,  uses  and 
substitution  possibilities,  indigenous  production,  storage,  position  in  the  gas  network 
etc.), with the result that standards across Europe are very heterogeneous, more than 
seems justifiable13.  

The  Commission  had  raised  at  the  Gas  Coordination  Group,  during  the  public 
consultation, the idea of a disruption for which provision should be made - the failure 
of the largest supply infrastructure or source. This concept, already established in the 
electricity sector, is known as "n-1". The January gas crisis demonstrated that this is 
now  a  realistic  disruption  scenario.  The  Commission  had  also  raised  the  ideas  of 
requiring bi-directional flows on interconnectors, and a security of supply capacity 
margin. Respondents to the public consultation tended to accept the idea of adding "n-
1" to the disruption events specified in the Directive. However, they made clear that 
the  devil  is  in  the  details,  with  proposals  on  definitions  and  comments  on  the 
availability  of  data.  There  was  less  support  for  the  bidirectional  flows  and  capacity 
margin ideas, mainly on cost-benefit grounds.  

To  accommodate  the  differing  situations  of  Member  States,  several  respondents  put 
forward the idea that each Member State should do a risk assessment, referring to the 
agreed  disruptions  (e.g.  n-1,  weather),  and  reflecting  their  individual  situations  as 
regards the potential impact of disruptions and available ways of mitigating them. The 
risk assessments should be peer reviewed by other Member States. If investments or 
new measures are needed in order to deal with the disruptions, Member States should 
establish national action plans and implement them within a transition period.  

Some  respondents  noted  that  disruption  scenario  analyses  at  regional  and 
European levels would make it easier to assess the potential impacts of a crisis and 
could help in identifying critical investment needs. Coordination with the proposed 10-
year Network Development Plans14 would improve synergy. 

(ii) 

The  second  question  concerned  the  extension  beyond  households  of  mandatory 
protection  under  the  Directive.  This  could  concern  power  generators,  small  and 
medium  sized  enterprises  and  other  vulnerable  customers.  Views  were  split.  Some 
emphasized  the  importance  of  security  of  gas  supply  for  essential  service  providers 
(e.g. hospitals). Some noted that gas fired power plants and Combined Heat and Power 
units without adequate fuel switching possibilities could need protection as residential 
consumers  are  likely  to  switch  to  electricity  in  a  gas  crisis.  Other  respondents 
considered  that  overprotection  would  diminish  the  ability  of  the  market  to  handle 
shocks  and  would  remove  incentives  on  market  participants  to  increase  their  own 
security of supply.  

(iii)  The third question concerned the actions which should be defined in the Community 
mechanism, in EU emergency plans. There was consensus that the market should be 
allowed  to  function  as  long  as  possible  and  emergency  measures,  solidarity 
mechanisms and government  intervention should come as a  last resort. Some argued 
that  governments  should  guarantee  that  contractual  obligations  (e.g.  cross-border 
access to storage) could be fulfilled even in emergency situations. A European crisis 

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November 2008 evaluation report, op cit. 
In 3rd internal energy market package 

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management  mechanism  should  include  a  mechanism  for  declaring  an  emergency  at 
European  level.  The  idea  of  setting  up  a  network  of  emergency  contact  points  was 
proposed by a Member State. Many respondents considered that the Gas Coordination 
Group  should  have  a  stronger  role  in  coordination  and  information  exchange  in  the 
event  of  a  crisis.  Regulators  invited  the  Commission  to  ensure  that  authorities 
responsible for dealing with emergency response are the same in all Member States. 

There was broad agreement that national emergency plans should be communicated 
in  advance  to  the  Commission  and  other  Member  States,  as  well  as  to  market 
participants throughout Europe. Several respondents argued that they should be based 
on a harmonized European-level scheme.  

Cooperation at regional level was widely supported. However, views on the scope and 
field  of  cooperation  varied,  with  some  looking  for  regional  emergency  plans  and 
solidarity  mechanisms,  others  focusing  on  improving  regional  trading  platforms  and 
infrastructures. 

The  fourth  question  concerned  the  definition  of  regions  for  security  of  gas  supply 
purposes.  The  few  stakeholders  who  responded  focused  on  infrastructural  and 
technical  issues,  such  as  existing  and  planned  interconnections,  predominant  gas 
flows, location  of  storage and import facilities. Some added that existing bilateral or 
multilateral agreements for emergency situations should be taken into account. All saw 
ERGEG15's  Gas  Regional  Initiatives  as  a  good  starting  point.  Purely  administrative 
groupings should be avoided.  

The  fifth  question  addressed  the  economic  compensation  of  solidarity.  The  few 
replies suggested that solidarity is seen as a marginal option. Some noted that it should 
preferably not be used. If it is used, it should be based on pre-agreements between the 
operators  with  market-based  compensation  (concerning  for  example,  reservation  of 
capacity rights or purchase of gas for solidarity reasons).  

The final question concerned how security of gas supply can be strengthened at lowest 
cost. Most respondents considered that a transparent, well-integrated, fully functional, 
open and competitive market with supply and demand flexibilities is a basic guarantee 
in  preventing  and  mitigating  supply  disruptions.  Better  transparency  of  data  would 
help  better  capacity  allocation  and  congestion  management.  Exposing  market 
participants  to  the  full  costs  of  disruptions  may  serve  as  an  incentive  to  provide 
flexible  answers  to  risks,  based  on  knowledge  of  willingness  to  pay.  Promotion  and 
transparent  operation  of  commercial  storages,  diverse  supply  interconnections,  rapid 
demand  reduction  through  interruptible  contracts  can  also  help.  Solidarity  and 
government intervention may be applied as a last resort only if the market is unable to 
cope  with  the  problems  arisen.  National  security  of  supply  measures  should  be 
reviewed to ensure that they do not hinder the internal market excessively. 

(iv) 

(v) 

(vi) 

Section 2: Problem definition  

What is the issue or problem that may require action? What are the underlying drivers of the 
problem? 

15 

European energy regulators, www.energy-regulators.eu 

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The  fundamental  issue  is  the  EU  relies  heavily  on  gas  and  will  do  so  for  the  foreseeable 
future. 24% of Europe's primary energy consumption is gas. It is used directly by households 
and industry and in power and heat generation. As demonstrated in the scenario analyses in 
Table  2  below,  the  achievement  of  the  EU's  2020  targets  for  renewables,  efficiency  and 
greenhouse  gas  emissions  reductions  should  diminish  EU  demand  for  gas,  the  net  effect  of 
energy efficiency gains, new energy sources (renewables) and the impacts of a carbon price. 
However, shrinking domestic production will mean that the EU's dependence on gas imports 
is unlikely to drop below today's levels in terms of volumes, and may well increase. Imports 
account  for  a  large  (60%)  and  growing  part  (71-77%  in  2020,  depending  on  scenarios)  of 
Europe's gas consumption. 

Security of gas supply is directly  important for households, many industries (e.g. chemicals, 
fertilizers)  and  for  power  generation.  At  the  level  of  the  energy  system  as  a  whole,  gas  is 
expected  to  play  an  important  role  in  Europe's  transition  to  a  high-efficiency,  low-carbon 
energy system, notably in the period before renewables are competitive. Loss of confidence in 
the security of gas supply could undermine the contribution of gas to this transition, as well as 
creating  major  problems  for  current  users.  With  insecure  gas  supplies,  the  issue  of  back-up 
fuels comes to the fore. In power generation for example, 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,  insecurity  of  gas  supply  could  mean 
more investment in coal-fired generation and the lock-in of high CO2 emissions technologies.  

Why is security of gas supply in doubt now? Medium-term trends for global gas consumption 
point to a sustained increase in demand, particularly from developing countries. At the same 
time,  remaining  reserves  and  spare  production  capacities  are  becoming  increasingly 
concentrated in a few hands. For the EU in particular, surrounded by several gas producers, 
today's questions focus more on transit risks and the adequacy of investments in new supplies 
in  producer  countries.  There  are  growing  doubts16  about  the  adequacy  of  investments  in 
upstream resources, notably in Russia, the EU's main source of gas imports. Uncertainty about 
future  gas  demand,  notably  in  the  EU,  is  certainly  making  it  more  difficult  to  plan  and 
undertake investments. The situation as regards transit is worrying, particularly in the case of 
Ukraine. The January 2009 dispute between Naftogaz (Ukraine) and Gazprom (Russia) could 
be  repeated  at  any  stage,  the  fundamentals  have  not  changed  substantially.  In  this  situation, 
alongside  external  action,  the  EU  needs  to  diminish  its  vulnerability  to  gas  supply 
disruptions.  

Table 2 – Scenarios for EU-27 in 2020 
This Table shows the results of four scenario analyses: (i) baseline scenario (i.e. without the 
Energy Policy for Europe17), with oil prices at 61$/bbl; (ii) baseline scenario with oil prices 
at $100/bbl; (iii) a  scenario  with the  Energy Policy for Europe and the moderate oil price; 
(iv) a scenario with the Energy Policy for Europe and the higher oil price. 

EU-27  

Mtoe 

2005  Baseline 

projection, oil 
price 61$/bbl 

Baseline 
projection, oil 
price $100/bbl 

New Energy 
Policy 
projection, 

New Energy 
Policy 
projection, 

16 
17 

See reports by the International Energy Agency 
20-20-20  by  2020,  as  proposed  in  the  January  2007  Strategic  Energy  Review  and  followed  up  in 
legislation: Reduction in greenhouse gas emissions to 20% below 1990 levels, 30% in the context of a 
global agreement on climate; 20% contribution of renewables to final energy consumption; reduction in 
primary energy use to 20% below the baseline projection for 2020. The baseline scenario includes only 
policies implemented by end-2006  

EN 

9 

   EN 

 
 
                                                 
Primary  energy 
demand 

1811 

1968 

1903 

oil price 
$61/bbl 

1712 

oil price 
$100/bbl  

1672 

Oil  

Gas  

Solids 

Renewables 
Nuclear18 

666 

702 

445  

505  

320 

123 

257 

342 

197 

221 

EU energy 
production  

896 

725 

Oil 

Gas  

Solids 

Renewables 

Nuclear 

Net imports  

Oil  

Gas Mtoe (bcm) 

133 

188  

196 

122 

257 

975  

590  

257 
(298) 

53 

115  

142 

193 

221 

1301 

707 

648 

443 

340 

221 

249 

774 

53 

113 

146 

213 

249 

608 

399 

216 

270 

218 

733 

53 

107 

108 

247 

218 

1184 

651 

1033 

610 

567 

345 

253 

274 

233 

763 

52 

100 

129 

250 

233 

962 

569 

390 (452) 

330 (383) 

291 (337) 

245 (284) 

Solids 

127  

200 

194 

108 

124 

238  

Final  electricity 
demand  
Sources: Eurostat and analyses based on PRIMES model; see Commission Services Working Paper, "Europe's 
current and future energy position: demand – resources – investment".  

303 

302 

257 

260 

Based  on  the  outline  of  the  situation  in  the  Introduction,  there  are  two  main  issues  in  the 
reduction of the EU's vulnerability to gas supply disruptions. One is whether flexibility in the 
internal gas market is developing sufficiently to mitigate gas supply disruptions such as that 
of  January  2009.  Are  updated  standards  or  some  other  incentive  needed?  The  second  is  the 
effectiveness of emergency arrangements as currently implemented at national, regional and 
EU levels, their impact on capacity of the internal gas market to mitigate disruptions and on 
solidarity. Is a better organization needed?  

The  January  2009  gas  supply  disruption  provided  an  opportunity  to  examine  Europe's 
resilience and preparedness for supply disruptions19: 

18 

Assumes nuclear  phase-outs decided by Member States as at end-2006  

EN 

10 

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Brief resume of the crisis: 
The crisis resulted from an unresolved commercial dispute between Naftogaz (Ukraine) and 
Gazprom  (Russia).  Gazprom  stopped  supplying  gas  for  Ukrainian  consumption  (111 
mcm/day)  on  1  January  2009.  Gas  for  transit  through  Ukraine  for  European  consumption 
(about 300 mcm/day) continued to be delivered to Ukraine. From 2 January, gas deliveries to 
several  European  Member  States  were  affected,  notably  Poland,  Slovakia,  Hungary,  and 
above all Bulgaria and Romania. Gas deliveries gradually shrank on the Western Balkan route 
and  at  Western  Ukraine  entry  points.  During  the  night  of  6-7  January,  all  supplies  through 
Ukraine to the EU were cut. There were no Russian supplies to Europe from 7 January to 20 
January.  

In response, the EU, led by the Czech Presidency and the Commission, mediated between the 
partners at company and government levels. This led to the signing of a monitoring agreement 
between Ukraine, Russia and the EU on 9 January, which provided for independent monitors 
from  government  and  industry  in  all  parties  to  establish  clearly  what  was  happening  as 
regards  the  transit  of  gas.  On  17  January,  EU  mediation  was  intensified,  with  a  high  level 
summit between the parties in Moscow. This resulted in an agreement on 18 January between 
the  Russian  and  Ukrainian  Prime  Ministers.  On  19  January,  within  the  political  agreement, 
Gazprom and Naftogaz signed a new 10-year agreement on the purchase of gas by Ukraine 
and the transit of gas to the EU via Ukraine. On 20 January, normal gas transit towards the 
EU resumed.  

- 

As regards the impact of the supply disruption, on the ground in Europe:  
Most Member States were affected, directly or indirectly.  
- 
There  were  considerable  economic  and  social  impacts  in  some  Member  States. 
- 
Estimates,  related  mainly  to  involuntary  restrictions  of  gas  supplies  to  industry,  are 
1000m€ in Slovakia, 255m€ in Bulgaria, 70m€ in Hungary20.  
The  impact  of  the  disruption  in  Member  States  depended  on  a  range  of  domestic 
factors,  alongside  importance  of  Russian  gas  in  the  energy  mix.  Analyses21  suggest 
that  Member  States  on  which  the  supply  disruption  had  a  low  impact  (A,  CZ,  SLO, 
RO)  had  the  benefit  of  some  import  diversification,  some  achievements  in  closer 
market  integration  (SLO-A,  CZ-D),  and  relatively  plentiful  local  production  and 
storage.  In  middle  impact  Member  States  (HU,  SK),  local  production  and  massive 
storage  compensated  for  a  low  level  of  diversification.  In  high  impact  countries, 
notably BG, key problems were inadequate storage and limited domestic production, 
limited  import  diversification,  dependence  on  uni-directional  single  lines,  distance 
from  liquid  markets  (D)  and  low  levels  of  preparedness  for  emergencies  (e.g.  low 
levels of oil reserves for heating). 
The  internal  gas  market  responded  to  the  disruption.  Almost  immediately,  flows 
changed  direction  on  the  UK-Belgium  Interconnector  and  were  reduced  on  the  UK-
Netherlands  BBL  Interconnector,  increasing  the  supplies  available  on  the  Continent. 
Within a few days, additional spot LNG cargoes arrived in Greece and Turkey, flows 
increased from Germany to Croatia, from Hungary to Serbia and Bosnia, and Croatia 

- 

19 

20 

21 

See separate report on January 2009 gas supply disruption. See also See International Energy Agency 
analysis, based on information from EU Member States; also Stern, OIES, February 2009; Kovacevic, 
OIES, March 2009 
Peter  Kaderjak,  Regional  Center  for  Energy  Policy  Research,  Corvinus  University  of  Budapest; 
presentation of 3 April 2009  
This list from Kaderjak, op cit 

EN 

11 

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- 

- 

- 

- 
- 

increased  its  production  share  off-take  from  the  Croatian-Italian  gas  field  in  the 
Adriatic. By ten days or so into the crisis, reverse flows had been organised from the 
Czech Republic to Slovakia and, on the last day of the crisis, from Greece to Bulgaria.  
It  was  mainly  inadequacies  in  gas  transport  which  constrained  flows  (capacities, 
reverse  flow  capabilities,  unusual  routes,  insufficient  integration  of  gas  networks  in 
Central  and  South  Eastern  Europe),  not  lack  of  gas.  The  supply  shortfall  to  the  EU 
through  the  Ukraine  amounted  to  300  million  cubic  meters  per  day  (mcm/d), 
compared  to  daily  consumption  of  the  EU  of  some  2000  mcm/d.  Available  storage 
withdrawal capacities in the EU were around 800 mcm/d. Gas imports from Norway 
increased.  
The  crisis  tested  the  gas  emergency  arrangements  in  those  Member  States  which 
used them. Some reconsideration of supplies curtailment procedures is underway22. 
Slovakia  introduced  an  emergency  regulation  prohibiting  exports  from  storage 
facilities  in  Slovakia.  Italy  introduced  an  emergency  regulation  optimizing  use  of 
import pipelines. Such regulations may have prevented some gas flows which would 
have been useful.  
There were no solidarity actions between Member State governments.  
Information  exchange  in  the  Gas  Coordination  Group  was  widely  considered  useful. 
However,  the  data  available  to  governments  and  market  participants  on  gas  flows, 
stocks and available capacities was inadequate, making market decisions and decisions 
on emergencies more difficult.  

The January 2009 gas crisis provided a practical demonstration of the European dimension of 
today's gas supply disruptions and of the response. By the time Russian supplies via Ukraine 
reached Europe again, action within Europe had largely compensated for the supply gaps. At 
the same time, the crisis demonstrated that investments in infrastructures across Europe to 
prevent  disruptions  becoming  crises  are  still  needed  (e.g.  storage,  reverse  flows,  some  new 
interconnectors) and that further market integration would improve security of supply. The 
question  of  the  compatibility  with  the  internal  market  of  emergency  measures  of  Member 
States has arisen.  

To what extent can the undesired effects of the January gas supply disruption be attributed to 
poor  implementation  of  existing  regulations,  including  the  Directive  on  gas  security  of 
supply?  

In  Member  States  which  were  most  hit,  the  factors  were  poor  diversity  of  imports, 
dependence on uni-directional single lines, distance from  liquid markets, inadequate storage 
and limited domestic production, as well as low levels of preparedness for emergencies (e.g. 
low levels of oil reserves for substitute heating fuel). Several of these countries are operating 
with  energy  systems  developed  in  a  different  context,  still  relatively  poorly  geared  to 
benefiting from the developing internal energy market. Investments are needed, as reflected in 
the list of eligible projects in the European Economic Recovery Plan and expenditures under 
the Structural Funds. Those Member States which were able to accommodate the January 
supply  disruption  had  the  benefit  of  some  import  diversification  and  some  achievements  in 
closer market integration.  
Good implementation of the 2004 Directive would not have directly affected import diversity 
nor  import  infrastructures.  It  would  not  have  increased  domestic  production  but  could  have 
encouraged  further  investment  in  commercial  storage.  It  would  have  ensured  better 
preparedness  for  emergencies.  What  are  the  underlying  drivers  for  poor  implementation, 

22 

HU, according to Kaderjak op.cit. 

EN 

12 

   EN 

 
 
                                                 
notably on storage and emergency planning? The lack of clear standards in the 2004 Directive 
and  the  consequent  practical  limitations  on  enforcement  must  come  into  the  picture.  As 
regards emergency planning, the January crisis was unprecedented and, for many, unexpected.  

The January crisis demonstrated the potential already developed in the internal gas market 
to  mitigate  quite  substantial  gas  supply  disruptions.  The  crisis  has  encouraged  the 
identification  by  Member  States  and  Transmission  System  Operatorss  of  necessary 
infrastructure  investments,  so  future  disruptions  should  be  accommodated  at  least  as 
effectively. Thus, although there is still progress to be made in the development of the internal 
energy market, the indications from the January crisis were positive.  

The  introduction  of  emergency  regulations  by  some  Member  States  may  have  prevented 
some  gas  flows  which  would  have  been  useful.  However,  this  does  not  seem  to  have  had  a 
major impact this time. Nevertheless, market participants in particular want clarity on what is 
allowed.  

In general, the analyses if the crisis support the two issues identified at the start of this section 
–  Is  flexibility  in  the  internal  gas  market  developing  sufficiently?  Are  emergency 
arrangements  effective,  what  is  their  impact  on  the  mitigation  of  disruptions  by  the  internal 
gas market and on solidarity?  

What are the drivers of these two issues? 

The January crisis suggested that inadequate flexibility on the internal gas market is currently 
mainly  a  matter  of  inadequate  infrastructures.  A  number  of  missing  links  and  inadequate 
capacities  were  evident  in  the  January  crisis  (eg  reverse  flow  on  Greece-Bulgaria  pipeline). 
Many  were  included  as  eligible  projects  in  the  European  Economic  Recovery  Plan,  agreed 
shortly after the January crisis (see Annex 3).  

More  generally,  there  is  arguably  a  risk  of  underinvestment  in  infrastructures  which  are 
intended to be available for mitigating disruptions, preventing crises. Individual elements of 
infrastructure  which  would  not  be  used  much  in  normal  circumstances  (e.g.  provision  for 
reverse  flows  on  routes  normally  used  one  way)  are  unlikely  to  be  profitable  and  attract 
financing  unless  without  their  wider  benefit  to  the  network  being  recognized.  In  Europe's 
unbundled internal gas market after the 3rd internal energy market package, it will be for 
energy  regulators  to  work  this  out  among  themselves  and  with  Transmission  System 
Operators.  The  rolling  10-year  Network  Development  Plans,  at  Member  State,  regional  and 
EU levels, agreed in the 3rd internal energy market package, should provide a good vehicle for 
this.  However,  the  current  situation  is  worrying.  As  demonstrated  in  the  Winter  Outlook 
prepared  by  Gas  Infrastructure  Europe23,  a  significant  part  of  Europe's  gas  transmission 
capacities is totally or nearly totally saturated during the cold winter temperatures. There is no 
spare  capacity  to  increase  gas  flow  if  something  happens.  Spare  capacities,  more 
interconnections and reverse flow capacities must be built in order to have a buffer capacity in 
transmission  and  distribution  of  gas.  With  the  prospect  of  further  gas  supply  disruptions, 
urgent action on infrastructures is needed. 

23 

See Annex1 or www.gie.eu 

EN 

13 

   EN 

 
 
 
  
 
 
                                                 
There may be a risk of underinvestment in gas supplies for security of supply. Costs of gas 
supply  insecurity  are  visible  to  suppliers  and  consumers  (e.g.  back-up  supplies,  uncertainty 
about investments) and incentives to diminish insecurity correspondingly clear. However, in 
many  of  the  actions  to  reduce  insecurity,  benefits  are  widely  shared,  which  normally 
encourages free-riding. The classic example is oil prices. If some consumers act (e.g. stocks, 
demand reduction) to reduce pressure on the supply/demand balance, the resultant price drop 
is felt by all. Hence international cooperation among consumers on oil stocks. Less research 
work  has  been  done  on  gas  but  the  same  factors  should  operate24.  An  example  would  be 
power generators making provisions for fuel switching, thereby leaving more gas for others in 
a crisis.  

Under  the  2004  Directive,  security  of  supply  standards  are  already  in  place.  They  specify 
severe  weather  conditions  and  other  disruptions  during  which  it  should  still  be  possible  to 
supply protected customers from the market, without emergency measures. For the moment, 
there  does  not  seem  to  be  a  problem  about  quantities  of  gas  in  Europe.  However,  with 
growing import dependence, the situation should be kept under review.  

The flexibility of the internal gas market to mitigate supply disruptions depends not only on 
investments  in  infrastructures  and  gas  but  also  on  its  functioning.  There  is  currently 
insufficient  physical  network  integration,  inadequate  transparency  in  network  utilisation  as 
well  as  inflexibility  in  capacity  reallocation  and  congestion  management.  Technical 
difficulties  in  transporting  gas  over  non-standard  routes  were  evident  in  the  January  crisis. 
There  is  insufficient  market  integration,  price-response  mechanisms  are  inadequate.  All  of 
these  can  undermine  a  market  response  to  a  gas  supply  disruption.  Thus  the  coming  into 
operation of the 3rd internal energy market package will enhance the internal gas market's 
ability to deal with supply interruptions, through measures such as transparency (obligations 
to  publish  data  on  forecast  and  actual  gas  flows,  amount  of  gas  in  storage  and  available 
pipeline and storage capacities), harmonisation of access rules through codes as well as clear 
roles  for  Transmission  System  Operators  and  regulators,  the  creation  of  ACER  for 
cooperation  of  regulators  and  ENTSOG  for  cooperation  of  TSOs  and  for  coordination  of 
investment plans through the 10-year Network Development Plan25.  

The  main  driver  for  the  issue  of  the  effectiveness  of  emergency  arrangements  and  their 
impact  on  the  mitigation  of  disruptions  by  the  internal  gas  market  and  on  solidarity  is  the 
evidence  of  unilateral  and  uncoordinated  action  by  some  Member  States  in  gas  supply 
emergencies. There are several problems with this. By creating doubt on when emergencies 
will  be  declared  in  parts  of  the  internal  gas  market,  when  non-market  actions  will  be 
introduced, confusion is created around the basic agreement on having the internal gas market 
mitigate supply disruptions for as long as possible. Once an emergency is declared, clarity is 
needed on what this implies. Gas market players from several Member States have raised the 
issue  of  uncertainty  about  continued  access  to  storage  in  neighbouring  countries  in  a  crisis, 
despite  commercial  contracts,  for  example.  These  concerns  about  getting  the  functioning  of 
emergency systems right are influenced by the general sense that there could be further severe 
gas supply disruptions in the future  and the reality that as the internal gas market develops, 
clarity is needed by all participants on when non-market measures might be applied.  

24 

25 

CEPS  Policy  Brief:  "National  and  EU-level  Estimates  of  External  Supply  Externalities",  Arnold  and 
Hunt, April 2009 
Agency for Cooperation of Energy Regulators, European Network of Transmission System Operators - 
Gas 

EN 

14 

   EN 

 
 
 
                                                 
A  driver  of  both  issues  –  adequacy  of  investments  and  organization  of  emergency 
arrangements  –  is  the  objective  of  solidarity  in  the  EU.  In  the  energy  field,  reflecting 
interdependence of Member States, the ideas of responsibility and solidarity have been linked. 
Thus there may be greater readiness to agree in advance on solidarity measures which would 
come  into  play  in  an  emergency  when  there  is  trust  that  all  Member  States  have  acted  to 
reduce  the  risks  of  an  unmanageable  gas  supply  disruption  spilling  over  into  other  Member 
States. Several Member States repeated this in the public consultation on the revision of the 
2004 Directive. 

Who is affected, in what ways, and to what extent? 

The ultimate sufferers from inadequate and inefficient gas security of supply arrangements in 
Europe are European citizens (dependent on gas for cooking and heat, directly or via district 
heating; many dependent on gas-fired electricity generation) and industry (e.g. power sector, 
chemicals, fertilizers). Gas supply disruptions are a serious issue for electricity generation in 
several  Member  States,  hence  the  likelihood  that  a  gas  crisis  can  become  a  much  more 
disruptive energy crisis26. 

Costs  of  supply  disruptions  can  be  considerable,  as  demonstrated  in  the  January  crisis  (see 
earlier  in  this  Section),  directly  affecting  industry  (e.g.  temporary  closure  of  plant; 
requirement  on  power  plants  to  switch  fuels,  provision  of  back-up  fuels  or  insurance-type 
contracts),  then  households.  Significant  economic  damage  was  felt  in  the  Member  States 
most affected in the January crisis.  

Supply disruptions will have impacts on jobs. Some 25% of gas consumption in the EU is in 
industry  (fertilizers,  other  chemicals  etc).  Interruption  of  supplies  to  such  continuously 
running enterprises is a negative factor, potentially putting jobs at risk.  

How would the problem evolve, all things being equal?  
As noted earlier in this Section, risks of gas supply disruptions to Europe are growing, with 
growing  gas  demand  from  developing  countries,  doubts  about  adequacy  of  investments  in 
new supplies, and uncertain relations between producer and transit countries, notably Russia 
and  Ukraine.  Imports  are  projected  to  grow  for  the  foreseeable  future  and  the  EU  is  highly 
dependent  on  a  small  number  of  gas  suppliers  and  routes.  Crises  comparable  to  that  of 
January 2009 could easily be repeated, leaving European customers without gas.  
If  underinvestment  and  inefficient  investment  in  the  capacity  of  the  market  to  mitigate 
disruptions continues while risks of disruptions grow, the impact and costs of disruptions will 
increase. The 3rd internal energy market package and the European Economic Recovery Plan 
will certainly bring relevant improvements although it will be some time before the integrated 
liquid internal gas market which could best deal with supply disruptions will be achieved . 

Emergency  measures  and  plans  of  Member  States  need  to  be  coordinated,  lest  the 
untransparent  and  difficult  situation  in  January  2009  be  repeated  in  the  next  crisis, 
undermining  the  effectiveness  of  the  internal  market  in  mitigating  the  disruption.  More 
broadly, the development of solidarity between Member States in dealing with emergencies is 
likely to be held back by any sense of lack of responsibility of other Member States in making 
the necessary provisions to prevent and mitigate gas supply crises.  

26  

During the January 2009 gas crisis, problems emerged in electricity (Slovakia) and oil products supply 
(Bulgaria, Moldova and Serbia). 

EN 

15 

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As noted earlier, doubt about security of supply could undermine the contribution expected of 
gas  in  the  transition  to  a  high-efficiency,  low-carbon  energy  system,  notably  in  the  period 
before renewables are competitive.  

Does  the  EU  have  the  right  to  act  and  is  EU  added-value  evident  –  Treaty  base,  ‘necessity 
test’ (subsidiarity) and fundamental rights limits?  

On  security  of  energy  supply,  its  inclusion  in  the  Lisbon  Treaty  energy  article  and  the 
endorsement  of  the  2nd  Strategic  Energy  Review  point  to  an  EU  role,  consistent  with  the 
growing reality of the internal energy market.  

The 2004 Directive is based on Art 100, EC Treaty, which applies to situations in which 
"severe difficulties arise in the supply of certain products" 27. Decisions under this Article are 
taken by the Council acting on a proposal from the Commission. This is consistent with short-
term and emergency situations, not with longer-term, preventive action in the internal energy 
market. The Commission's original proposal for the 2004 Directive was based on Art 95 
which deals with "the approximation of provisions laid down by law, regulation or 
administrative action in Member States which have as their object the establishment and 
functioning of the internal market." The justification was that the Directive related to 
provisions, consistent with the internal market, to be made by Member States to address 
disruptions which could arise in the market (standards for market participants, publication of 
planned measures for use in an emergency, transparency etc). This justification for using Art 
95 has become stronger as the internal energy market has developed28. In addition, the clear 
purpose of its revision is to achieve advance planning and provisions by Member States and 
market participants, not to frame ad hoc responses to crises.  

The adoption of the 3rd internal energy market package will strengthen the market. In a 
situation in which national markets are becoming increasingly integrated, it will not be 
possible to consider security of supply primarily as a national concern. This is already partly 
the case. Consequently the legal basis of the related EU legislation should arguably no longer 
be disconnected from the internal market rules of the EU Treaty. Any proposal should – 
consistently with the legal basis for the internal energy market of which it is arguably an 
extension – be based on Article 95. This is the legal basis of a similar instrument adopted in 
2005 in the field of electricity (Directive 2005/89/EC). 

Subsidiarity, proportionality: 
No single Member State, acting on its own, can assure a sufficient regulatory framework and 
investments  in  the  internal  market  for  security  of  gas  supply.  Only  EU-wide  action  can  do 
this.  No  single  Member  State,  acting  on  its  own,  can  ensure  that  all  Member  States  have 
effective  provisions  in  place,  consistent  with  the  internal  market,  to  handle  gas  supply 
emergencies. Moreover, individual non-coordinated actions by MS are increasingly likely to 

27  

28  

Article  100:  1.  Without  prejudice  to  any  other  procedures  provided  for  in  this  Treaty,  the  Council, 
acting  by  a  qualified  majority  on  a  proposal  from  the  Commission,  may  decide  upon  the  measures 
appropriate  to  the  economic  situation,  in  particular  if  severe  difficulties  arise  in  the  supply  of  certain 
products. 2. Where a Member State is in difficulties or is seriously threatened with severe difficulties 
caused  by  natural  disasters  or  exceptional  occurrences  beyond  its  control,  the  Council,  acting  by  a 
qualified  majority  on  a  proposal  from  the  Commission,  may  grant,  under  certain  conditions, 
Community financial assistance to the Member State co concerned. The President of the Council shall 
inform the European Parliament of the decision taken. 
The 2005 Directive on security of supply of electricity is based on Art 95.  

EN 

16 

   EN 

 
 
 
 
 
                                                 
hamper further development of the internal market, lead to discriminatory treatment and put 
security of supply in other Member States at risk. 

As noted earlier, the Member States are in very different situations. The risks and impacts of 
gas  supply  disruptions  are  different  in  different  Member  States,  as  are  their  means  of 
mitigating  disruptions.  The  flexibility  allowed  to  Member  States  in  the  2004  Directive  is  a 
reflection of this. Nevertheless, given the external and internal developments noted above, the 
clear message from Council and Parliament is to revise the Directive. This is an EU matter.  

Section 3: Objectives  

What are the general policy objectives?  

The  general  policy  objective  is  to  secure  an  adequate  level  of  preparedness  in  Europe  for 
gas supply disruptions, developing and using the potential of the internal gas market to deal 
with  supply  disruptions  and  address  today's  risks  of  disruptions.  The  weaknesses  made 
evident in the January 2009 gas crisis must be tackled quickly, before any further crisis.  

Consistency of these objectives with other EU policies:  

In the changing global gas market, supply and transit disruptions must be expected. Despite 
much  effort  on  developing  international  cooperation  and  partnership,  there  are  continuing 
questions  about  matching  supply  side  investments  and  demand,  and  political  dimensions  of 
supply  and  transit  risks.  As  set  out  in  the  2nd  Strategic  Energy  Review,  internal  action  to 
reduce  vulnerability  to  gas  supply  disruptions  supports  a  strong  EU  line  and  action  with 
external partners.  

Terrorism and other criminal activities, natural hazards and other causes of accidents are not 
constrained  by  borders  within  or  outside29  the  EU.  The  directive  on  the  identification  and 
designation  of  European  Critical  Infrastructures30  lists  the  energy  sector  as  one  of  its 
priorities.  This 
infrastructure  assets  gas  production,  storage, 
transmission by pipelines, as well as LNG terminals. A strengthened regulatory framework on 
gas  security  of  supply  and  EU  policy  on  critical  infrastructures  could  be  mutually 
supportive.  

includes  as  particular 

Inadequate  European  responses  to  gas  supply  disruptions  would  have  impacts  on  other  EU 
policies,  notably  internal  energy  market  development  (undermining  of  efficient  market 
response,  unclear  investment  signals),  environment  and  climate  (avoidable  switching  to 
fuels  with  greater  greenhouse  gas  emissions  e.g.  coal,  fuel  oil),  economic  development 
(insecure  supplies,  involuntary  closure  of  plant,  loss  of  competitiveness  and  jobs),  poverty 
alleviation  (relatively  great  impact  of  disruptions  on  vulnerable  customers),  external 
relations (suppliers not helped by unclear European market rules).  

What are the more specific/operational objectives?  

Reflecting the two issues identified earlier and the discussion of the drivers of the problems, 
the specific/operational objectives for the revision of the 2004 Directive are: 

29  

30  

The Commission has recently started a dialogue with the Member States about an external dimension of 
the  EU  policy  on  critical  infrastructure  protection.  This  strand  of  work  would  address  the  issue  of 
critical infrastructures located in third countries, which if disrupted or destroyed would have an adverse 
effect on a certain number of Member States or the EU as a whole. 
Council Directive 2008/114/EC of 8 December 2008 

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(i) 

(ii) 

Achievement  of  sufficient  flexibility  in  the  internal  gas  market  to  mitigate  most  gas 
supply  disruptions,  by  establishing  the  necessary  incentives  for  investments  in 
infrastructures and gas and the well-functioning of the market.  

Effective  cooperation  in  dealing  with  gas  supply  emergencies  in  Europe,  with  pre-
defined  emergency  plans  involving  all  players,  at  Member  State,  regional  and  EU 
levels,  minimizing  any  undermining  of  the  internal  gas  market  response  to  the 
disruption  and  geared  to  supply  disruptions  of  the  size  and  scope  experienced  in 
January 2009.  

On flexibility in the internal energy market to enable it to mitigate most supply disruptions, 
the main focus today, bearing in mind the January gas crisis, is on infrastructures. As noted in 
the  previous  Section,  existing  incentives  for  gas  supplies  seems  to  be  adequate.  The  3rd 
internal energy market package will improve market functioning and the conditions in which 
investments  can  be  made.  A  missing  element  may  be  a  standard  relating  clearly  to 
infrastructures. This is neither in the current Directive on security of gas supply (which only 
specifies "a partial disruption of supplies") nor in the 3rd internal energy market package. A 
security of supply standard focused on infrastructures could complement the 3rd internal 
energy  market  package.  The  package  has  created  a  new  situation  in  which  infrastructure 
investments  will  be  made  in  future.  With  clear  roles  and  cooperation  among  Transmission 
System  Operators  and  regulators  in  Europe,  a  10-year  Network  Development  Plan  will  be 
developed,  at  Member  State,  regional  and  EU  level.  A  clear  security  of  supply  standard  for 
gas infrastructure could support the development of such network development plans.  

The  Commission  put  forward  for  discussion  in  the  Gas  Coordination  Group  the  idea  of  a 
disruption for which provision should be made - the failure of the largest supply infrastructure 
or source. This concept, already established in the electricity sector, is known as "n-1". The 
January gas crisis demonstrated that a disruption scenario of this scope, previously considered 
unlikely,  is  now  realistic.  The  Commission  also  raised  the  ideas  of  requiring  bi-directional 
flows on interconnectors, and a security of supply capacity margin.  

The  differences  between  Member  States  as  regards  risks  and  impacts  of  gas  supply 
disruptions would clearly be a factor to be borne in mind in requiring an infrastructure-based 
security of supply standard. An approach based on n-1 would allow a response tailored to the 
specific  situation  of  each  Member  State,  while ensuring the  development  of a network with 
the capacity  to deal with crises as well as normal circumstances.  
Thus, to summarize why a security of supply standard for infrastructure may now make 
sense as a specific/operational objective for the revision of the 2004 Directive, it is because 
large-scale  failures  of  supply  and  the  need  to  replace  supplies  from  other  infrastructures  is 
now  a  realistic  disruption  scenario;  gas  flows  across  Europe  are  increasing  and  the  internal 
gas market is developing; and the 3rd internal energy market package will provide new means 
of implementing such a standard.  

The n-1 concept as a basis for a security of supply standard for infrastructure was accepted by 
many respondents to the public consultation. However, respondents made clear that the devil 
is  in  the  details,  with  proposals  on  definitions  and  comments  on  the  availability  of  data. 
Compared  to  the  capacity  margin  concept  which  would  be  applied  to  all  existing 
infrastructures,  the  n-1  concept  would  enable  a  focus  on  missing  infrastructures.  Many 
respondents rejected the capacity margin concept, mainly on cost-benefit grounds.  The idea 

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of requiring bidirectional flows on all interconnectors could be assessed on its own merits, 
it would not conflict with the n-1 concept, indeed it could be accommodated within it.  

In principle, the n-1 concept could be applied at any level – Member State, regional or EU. 
The choice as to which level would be best would be influenced by very concrete 
considerations of existing interconnections, existing cross-border arrangements (e.g. access to 
storage), existing cooperation frameworks. A pragmatic approach is justified. The responses 
from the public consultation support a pragmatic approach, at least as regards regional 
cooperation.  

It would clearly be necessary also to have disruption scenario analyses at EU level, to 
support analyses and risk assessments at regional and Member State levels. These analyses at 
EU level should be consistent with and contribute to the planned 10-year Network 
Development Plan, to be developed by ENTSOG. The maps in Annex 2, for example, 
produced using the Joint Research Centre's MC-Genercis model, give an EU-level view of gas 
flows. They show gas flows in Europe on a normal day and on the first day of the January 
2009 gas crisis. Transmission System Operators in GTE+ are already working on gas 
disruption scenarios in an EU perspective.  

Section 4: Policy options  

What are the possible options for meeting the objectives and tackling the problem?  

4.1 

No new EU action – the baseline scenario  

Can  achievement  of  the  objectives  set  out  above  be  expected  from  the  existing  EU  policy 
framework and from incentives already in place?  

(i) 

Achievement  of  sufficient  flexibility  in  the  internal  gas  market  to  mitigate  most  gas 
supply  disruptions,  by  establishing  the  necessary  incentives  for  investments  in 
infrastructures and gas and the well-functioning of the market.  

As noted in Section 2, the January crisis suggested that flexibility in the internal gas market to 
handle gas supply disruptions is most immediately a matter of inadequate infrastructures. In 
Europe's unbundled internal gas market, when the 3rd internal energy market provisions are 
operational,  it  will  be  for  energy  regulators  to  work  out  among  themselves  and  with 
Transmission  System  Operators  the  costs  and  benefits  of  additional  investments,  including 
those  to    strengthen  the  capacity  of  the  market  to  mitigate  disruptions.  The  rolling  10-year 
Network  Development  plans,  at  Member  State,  regional  and  EU  levels,  agreed  in  the  3rd 
internal  energy  market  package,  should  provide  a  good  vehicle  for  this,  when  they  are 
developed. Security of supply is one of the factors which TSOs and regulators will consider in 
their infrastructure development plans.  
In  general,  strengthened  cooperation  on  security  of  supply  should  be  possible,  through  the 
clearer roles, responsibilities and cooperation obligations established in the 3rd internal energy 
market package, within Member States and at regional and EU levels.  

It  will  take  some  time  before  all  the  elements  in  the  3rd  internal  energy market  package  are 
operational and before their impacts are felt in an integrated, well-functioning liquid internal 
gas market.. If the 3rd package is to address imminent gas supply disruption, there will have to 
be early implementation of its provisions by the relevant players. In response to the January 

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gas crisis, Council encouraged the early formation of ENTSOG and the start of its work on 
the  10-year  Network  Development  Plan.  TSOs  in  GTE+  have  started  working  on  EU-level 
gas  supply  disruption  scenarios.  Thus,  even  before  full  implementation  of  the  3rd  internal 
energy market package, some work towards proper reflection of security of supply in network 
developments in Europe can be expected.  

This is a strong argument for early agreement on a clear security of supply standard for 
infrastructure,  providing  guidance  and  support  at  EU  level  to  enable  regulators  and 
Transmission System Operators to address the need for additional investments. The issue of 
financing  investments which  are primarily designed to ensure  security of supply is not easy 
and experience, particularly in an unbundled internal energy market environment, still needs 
to be built up.  

Agreement on the disruptions which each Member State should be able to compensate could 
simplify the lives of regulators and facilitate a fair burden-sharing. Under the 2004 Directive, 
the  definition  of  such  a  disruption  goes  no  further  than  "a  partial  disruption"  of  supplies, 
during  a  period  to  be  determined  by  Member  States,  taking  into  account  national 
circumstances.  This  gives  no  guidance.  Incentives  for  investment  in  infrastructures  to 
strengthen the capacity of the market to mitigate disruptions are not clear enough at this stage. 
A significant part of Europe's gas transmission capacities are totally or nearly totally saturated 
during  the  cold  winter  temperatures.  There  is  no  spare  capacity  to  increase  gas  flow  should 
something  happen.  With  the  prospect  of  further  gas  supply  disruptions  in  the  near  future, 
urgent improvements in infrastructures are needed.  

The  European  Economic  Recovery  Plan  includes  a  list  of  eligible  gas  infrastructure 
projects, to be started in 2009-2010 (Annex 3), many of which would strengthen the capacity 
of  the  market  to  mitigate  disruptions.  This  will  certainly  help,  as  will  the  continued 
implementation of the TEN-E programme. The impact of the Recovery Plan projects on the 
meeting of an n-1 standard (details in Annex 1) can be calculated. The following Table 3 does 
not  include  the  Recovery  Plan  projects  concerning  reverse  flow  capacities  as  it  is  not  yet 
possible to attribute the support.  

 Table 3: Preliminary calculation of n-1 for Member States:  

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300%

250%

200%

N-1

150%

100%

50%

0%

DK GR DE BE SK AT PL NL LV CZ EE ES IT HU FR UK RO SE LU PT BG SI

LT IE FI EU

Normal

EERP

If all projects in the Recovery Plan are implemented, it would certainly take several Member 
States  nearer  to  meeting  an  n-1  standard  for  security  of  supply.  However,  the  projects 
included  in  the  Recovery  Plan  are  eligible  projects,  construction  cannot  be  guaranteed.  The 
planned revision of Council Regulation EC N° 736/96 on notification of investment projects 
in  the  gas,  electricity  and  petroleum  sector  will  help  to  establish  greater  transparency 
regarding the development of energy infrastructure and better understanding of the reasons for 
project delays or withdrawals.   

The  guidelines  for  the  TEN-E  programme  will  be  revised  in  2010.  One  of  the  ideas  put 
forward  by  the  Commission  for  the  public  consultation  is  to  tailor  the  programme  more 
closely to energy security needs. This may involve greater financing.  

Against  this  background  of  the  3rd  internal  energy  market  package  and  its  early 
implementation, the European Economic Recovery Plan and the TEN-E programme, is there 
need for a security of supply standard relating to infrastructure? What added value would 
it provide? Firstly, the 3rd internal energy market package does not provide such a standard, 
only  much  improved  means  for  reflecting  one  in  decisions  on  investments  and  in  network 
development plans. The existing 2004 gas security of supply Directive does not provide one 
either.  The  Recovery  Plan  will  at  best  only  partially  deal  with  the  problem  of  inadequate 
infrastructures. Agreement on a standard would provide guidance and support at EU level 
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, how 
should costs be allocated. In timing terms, it would support early advance work by ENTSOG, 
ACER, the TSOs and regulators.  

Other  factors  influencing  flexibility  in  the  internal  gas  market  to  mitigate  most  gas  supply 
disruptions  should  also  improve  somewhat  in  the  next  years.  On  the  functioning  of  the 

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market, after the 3rd internal energy market package, the Commission proposes to strengthen 
gas  network  transparency  through  detailed  rules  through  comitology  by  a  proposal  to 
amend  the  Annex  of  the  current  Gas  Regulation  1775/2005.  On  availability  of  substitute 
fuels,  the  recently-agreed  revision  of  the  oil  stocks  Directive,  for  example,  will  provide  a 
more clear assurance of supplies.  

 (ii) 

Effective  cooperation  in  dealing  with  gas  supply  emergencies  in  Europe,  with  pre-
defined  emergency  plans  involving  all  players,  at  Member  State  and  EU  levels, 
minimizing any undermining of the internal gas market response to disruptions. 

The  January  2009  gas  crisis  has  certainly  stimulated  greater  awareness  of  the  need  for 
effective cooperation on crises, at Member State, regional and EU level and in relations with 
supplier and transit partners. As noted in the problem definition section, confusion on timing 
and  content  of  emergency  plans  of  Member  States  can  undermine  the  effectiveness  of  the 
internal  energy  market  in  mitigating  supply  disruptions.  The  Gas  Coordination  Group  has 
already started working on emergency plans as well as security of supply standards.   

Work underway on strengthening international energy cooperation could diminish the risk 
of gas supply disruptions (EU-Russia Energy Dialogue, Energy Charter Treaty, Energy 
Community, EU-Russia New Agreement etc).  

Thus,  the  baseline  scenario  may  well  partially  deliver  the  objectives  over  the  next  years, 
through the 3rd internal energy market package, the European Economic Recovery Plan, the 
revision  of  Council  Regulation  EC  N°  736/96  on  notification  of  investment  projects  in  the 
gas, electricity and petroleum sector, the TEN-E programme, the existing 2004 gas security of 
supply  Directive  and  cooperation  on  emergency  planning  following  the  January  gas  crisis. 
Nevertheless,  given  that  the  internal  gas  market  is  far  from  the  integrated,  liquid,  well-
functioning market which could best deal with supply disruptions, an EU framework is still 
needed  to  ensure  that  actions  of  Member  States  for  security  of  gas  supply,  notably  during 
crises, do not undermine the growing capacity of the market to deal with disruptions and that 
the standards for security of supply which market participants should meet are clear to 
all. Such standards have not been provided in the 3rd internal energy market package nor in 
the  2004  gas  security  of  supply  Directive.  More  positively,  an  EU  framework  is  needed  to 
ensure  that  the  potential  of  the  internal  gas  market  to  deal  with  supply  disruptions  is 
developed and used. The 2004 Directive does not provide sufficient concrete provisions to do 
this. The 3rd internal energy market will radically improve the framework for investments in 
the internal energy market but a clear indication of what is needed for security of supply has 
not been provided.    

4.2 

Better enforcement and implementation of the 2004 Directive  

(i) 

Achievement  of  sufficient  flexibility  in  the  internal  gas  market  to  mitigate  most  gas 
supply  disruptions,  by  establishing  the  necessary  incentives  for  investments  in 
infrastructures and gas and the well-functioning of the market.   

The  Commission's  evaluation  report  on  the  implementation  of  Directive  2004/6731 
demonstrated  heterogeneity  of  standards  among  Member  States  for  mitigating  gas  supply 

31 November 2008 evaluation report on implementation of Directive 2004/67 

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crises. Member States are required to establish security of supply standards based on certain 
criteria  (customers  to  be  protected,  their  demand  to  be  met  during  specified  weather 
conditions and partial disruptions of supplies). In their transposition of the Directive, Member 
States  have  adopted  heterogeneous  security  of  supply  standards  and  in  several  cases32,  they 
have  not  adopted  any  standard  at  all.  Eight  Member  States  have  extended  the  scope  of  the 
protection beyond households. The national definitions of partial disruption vary from around 
10%  (in  Slovenia)  to  around  30%  (Slovakia)  of  average  gas  consumption  with  durations 
ranging from 48 hours (Bulgaria) up to 6 months (France). Most Member States use 1-in-20 
or 1-in-50 rules for weather but details such as peak duration vary. Thus, even though some 
flexibility was intended in the 2004 Directive, the result in practice does not seem to follow 
any pattern.  The uneven implementation across the EU is not surprising. With such imprecise 
standards, strict enforcement is impossible.  

(ii) 

Effective  cooperation  in  dealing  with  gas  supply  emergencies  in  Europe,  with  pre-
defined  emergency  plans  involving  all  players,  at  Member  State  and  EU  levels, 
minimizing any undermining of the internal gas market response to disruptions. 

For  effective  cooperation  between  governments  on  crises  which  are  beyond  the  capacity  of 
the market to handle, Member States must have real emergency plans, they must be shared in 
advance and cooperation arrangements must already be in place. The Directive only requires 
national  emergency  measures  to  be  defined  in  advance  of  any  crisis,  published  and 
communicated to the Commission. Eighteen Member States have done so. Ten of these have 
developed  their  national  emergency  measures  in  a  systematic  way,  creating  national 
emergency plans. Others stay at the level of measures.  It became  clear in the January crisis 
that those Member States which had emergency plans in place and tested, were better able to 
mitigate the disruption than other Member States. 

The  emergency  plans  are  rather  different  between  Member  States.  For  example,  there  are 
substantial differences between Member States in the roles and responsibilities for security of 
gas supply. In some cases it is the Ministry, in others the regulator, in others the Transmission 
System Operator. The net effect is not conducive to easy cooperation at European level in a 
crisis.  There  are  few  instances  of  cooperation  or  solidarity  arrangements  in  place  between 
governments in advance of any crisis.   

The  Community  mechanism  set  out  in  the  Directive  is  poorly  defined,  weak  and  slow. 
Member  States  may  indicate  to  the  Commission  events  beyond  their  capacity  to  manage 
nationally. In such a case, or in a major supply disruption, the Commission convenes the Gas 
Coordination  Group  and  if  necessary,  the  Commission  submits  a  proposal  to  the  Council 
concerning further measures. In practice, the Commission has not chosen to use this relatively 
lengthy, heavy procedure and has preferred to use the Gas Coordination Group set up under 
the Directive. The information exchanges, discussions of best practice etc. in this group which 
brings  together  Member  States  and  the  gas  industry  and  consumers  representatives  through 
their  European  associations  (Eurogas,  OGP  GIE,  IFIEC,  BEUC,  Eurelectric),  have  proven 
useful  and  suggest  that  a  process  based  on  review  of  plans  by  Member  States  would  be 
feasible, effective and flexible to adapt to sudden crises if necessary.  

32 Bulgaria, Greece, Ireland, Luxemburg. 

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As  noted  earlier,  agreement  on  timing  of  introduction  of  emergency  action  is  important, 
particularly if it allows the use of non-market measures. Confusion on timing can undermine 
the effectiveness of the internal gas market in mitigating supply disruptions.  

In  the  January  2009  gas  crisis,  many  considered  the  current  degree  of  transparency  in  gas 
flows to be inadequate for decisions by market participants and governments during the crisis. 
A  good  understanding  of  the  situation,  Europe-wide,  in  the  market  and  particularly  during 
crises,  is  needed.  The  reporting  required  in  the  2004  Directive  is  clearly  insufficient  for 
dealing with crises. In addition, implementation is poor, some Member States do not collect 
the  relevant  data.  Regulators  have  proposed  developing  a  harmonised  minimum  level  of 
information  to  be  made  available  to  the  market,  especially  in  crisis  situations  when  quick 
decisions have to be made.  

All of these issues constitute weaknesses now, far more than they were in the past, in today's 
situation in which a gas supply crisis quickly spreads to several Member States and when a 
crisis such as occurred in January 2009 cannot be excluded. 

The Policy Option "Better enforcement and implementation of the 2004 Directive" is not 
analysed further, essentially because the requirements are so weakly established in the 2004 
Directive that stronger enforcement is not possible.  

4.3 

Voluntary approach by industry (self or co-regulation)  

(i) 

Achievement  of  sufficient  flexibility  in  the  internal  gas  market  to  mitigate  most  gas 
supply  disruptions,  by  establishing  the  necessary  incentives  for  investments  in 
infrastructures and gas and the well-functioning of the market.   

There is a strong consensus in Europe that  a transparent, well- functioning  market with 
supply and demand flexibilities and adequate infrastructures is the best way to mitigate gas 
supply disruptions. Exposing market participants to the full costs of disruptions will serve as 
an incentive to provide flexible answers to risks, on both supply and demand sides. Thus 
voluntary approaches by some stakeholders to some aspects of security of supply 
inadequately covered by the Directive are underway and could be imagined. For example, 

- 

- 

- 

- 

improvement of the information and analysis base: Gas Transmission Europe +33 is 
already working on gas supply disruption scenarios at EU level and on investments in 
reverse flows. 
coordinated commitments by infrastructure operators (transmission, storage, LNG, 
interconnections), supported by regulators, to invest in spare capacity for security of 
supply purposes could be envisaged. This could be related to the 10-year Network 
Development Plan which should now be prepared at Member State, regional and EU 
level by Transmission System Operators.  
information pooling to achieve improved transparency on gas stocks and flows. 
Regulators have already started working on this.  
commitments by shippers or suppliers to have back-up contracts or some equivalent 
insurance or flexibility for a certain proportion of their supplies could be envisaged. 

33 GTE+, the association of gas TSOs in Europe  

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The issue of what contracts (fixed, flexible or back-up) need to be in place, in a cost-
effective security of supply system, is being discussed by the industry34. 

ii) 

Effective  cooperation  in  dealing  with  gas  supply  emergencies  in  Europe,  with  pre-
defined  emergency  plans  involving  all  players,  at  Member  State  and  EU  levels,  
minimizing any undermining of the internal gas market response to disruptions.  
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. 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, the Policy Option "Voluntary approach by industry" 
will not reach the objectives sought and is not analysed further.  

4.4 

Revision of the 2004 Directive  

(i) 

Achievement  of  sufficient  flexibility  in  the  internal  gas  market  to  mitigate  most  gas 
supply  disruptions,  by  establishing  the  necessary  incentives  for  investments  in 
infrastructures and gas and the well-functioning of the market.   

The 2004 Directive established security of supply standards in terms of the severe weather 
conditions  and  other disruptions  during which it should still be possible to supply protected 
customers from the market, without emergency measures. In principle, these standards should 
provide clear incentives for investments in infrastructures and gas.  

The  Directive  left  flexibility  for  Member  States  to  adapt  the  prescribed  security  of  supply 
standards to their own specificities and choose their own measures to enable their standards to 
be  met.  This  reflected  the  very  different  situations  of  Member  States  as  regards  reliance  on 
gas,  nature  of  demand,  substitution  possibilities,  availability  of  indigenous  production, 
geographic  position,  geological  potential  for  storage  facilities,  varying  levels  of  existing 
interconnections etc. Concretely, as demonstrated in Table 1, the reliance of Member States 
on  gas  in  their  primary  energy  mixes  varies  from  2%  (Sweden)  to  40%  (Netherlands, 
Hungary). Member States differ also in the sectoral distribution of gas use. In Estonia, almost 
40%  of  the  gas  is  used  in  district  heating.  In  Ireland,  64%  is  used  in  power  generation.  In 
Slovenia, 74% is used in industry. These figures imply different needs for seasonal flexibility 
(greater  for  heating),  different  short-term  peak  demand  requirements,  different  possibilities 
for  interruptible  contracts  and  fuel  substitution  and  fundamentally,  different  degrees  of 
importance  attached  to  security  of  gas  supply.  Alongside  this,  crisis  mitigation  possibilities 
differ  substantially  between  Member  States.  Some  Member  States  are  well-supplied  in 
storage, some are well-interconnected, some have flexible demand.  

The  idea  of  flexibility  in  the  choice  of  measures  to  deal  with  gas  supply  disruptions  is 
therefore  still  valid.  The  idea  of  flexibility  to  set  different  standards  for  the  type  of  crisis 
which  should  be  prevented  and  mitigated  is  less  valid.  Gas  supply  disruptions  now  spread 
easily throughout the internal market, so it is reasonable to require all Member States to make 
provisions  to  deal  with  a  standard  set  of  supply  disruption  events.  There  is  little 
justification for the set of disruption events to be different. The growing reality of the internal 
market, the prospect of further major gas supply crises, and the consensus that solidarity must 

34 Eg: Private Initiative for Security of Supply, under auspices of German Federal Minister for Economics and 
Technology. 

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be  underpinned  by  responsibility,  all  argue  for  clear,  common  security  of  supply 
standards,  with  maximum  flexibility  in  the  measures  used  to  meet  them.    The  supply 
disruption  events  in  the  2004  Directive  need  to  be  precise  and  they  must  relate  to  today's 
supply disruptions.   

In the 2004 Directive, the security of supply standards relate to (i) customers to be protected, 
(ii) weather conditions during which their demand should be met and (iii) partial disruptions 
of supplies.   

Regarding  customers  to  be  protected,  the  2004  Directive  specifies  households  and  allows 
Member  States  to  extend  protection  to  small  and  medium-sized  enterprises  and  other 
customers without fuel switching possibilities. The security of the electricity system can also 
be a criterion. It is arguable whether the scope of customers to be protected should be fixed as 
a  common  standard  or  left  to  Member  States.  The  importance  of  protecting  gas  supplies  to 
particular  customer  groups  (e.g.  gas-fired  electricity  generation)  varies  between  Member 
States,  which  suggests  that  only  a  common  minimum  scope  of  protected  customers  (e.g. 
households) should be fixed. In addition, extension of protection would diminish the ability of 
the market to handle shocks and would remove incentives on market participants to increase 
own  security  of  supply  (as  was  pointed  out  by  a  number  of  respondents  in  the  public 
consultation).  Given  internal  energy  market  developments  and  the  objective  of  increasing 
flexibility  in  the  market,  an  extension  of  the  scope  of  protected  customers  does  not  seem 
justified.  

Regarding  weather  conditions,  for  the  peak  weather  standard,  the  1-in-20  rule  is  currently 
specified  but  not  the  peak  duration.  There  is  no  clear  justification  for  the  heterogeneity  of 
durations among Member States which has resulted. Thus duration should be specified (e.g. 
extremely  cold  or  hot  temperatures  during  a  7-day  peak  period  occurring  statistically  once 
every 20 years). Similarly, an extreme winter or summer should be specified (e.g. any period 
of 60 days of exceptionally high gas demand during the coldest or the hottest weather periods 
statistically occurring every 20 years).  

For partial disruptions of supplies, the concept needs to be updated as well as better specified. 
The  failure  of  the  largest  single  infrastructure  or  supply  source  is  a  realistic  scenario 
today, as was demonstrated by the January 2009 crisis.  

The  Commission  raised  for  discussion  in  the  Gas  Coordination  Group  the  "n-1"  concept 
commonly used in electricity network planning and operations. It refers to the failure of the 
largest  single  infrastructure  (entry  point,  production  field,  LNG  terminal,  storage  etc).  In 
principle  it  could  also  refer  to  the  largest  single  supply  source.  The  remaining  capacities 
should be capable of meeting domestic demand for a specified time period (e.g. 60 days).  

The  idea  of  using  this  concept  in  the  EU  framework  for  gas  security  of  supply  has  been 
cautiously  welcomed  by  most  stakeholders,  many  offering  proposals  on  the  details  of  its 
implementation35.  It  could  be  applied  at  Member  State,  regional  and  at  EU  level.  Its 
calculation would demonstrate how far from the standard the infrastructure provisions in that 
Member State, region or the EU are. If n-1 is below 100% (see explanations of calculation in 

35 Some Member States (e.g. France, Spain) already use the n-1 concept already in their planning for security of 
gas  supply.  Spain's    disruption  scenario,  for  example,  encompasses  the  failure  of  a  major  LNG  terminal 
(Barcelona) 

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Annex 1), it suggests that the Member State, region or EU risks not being able to deal with a 
gas supply crisis which removes from service the main supply infrastructure The gas situation 
in  the  Member  State,  region  or  the  EU  may  be  such  that  despite  the  indicator  being  below 
100%,  the  risk  of  an  unmanageable  supply  disruption  is  low.  This  could  be  the  case  in  a 
Member State with low reliance on gas and strong provisions for fuel switching, for example. 
The important issue is whether the risk of a supply disruption which the market cannot handle 
is sufficiently low. This is what is of interest to Member States and market participants in the 
increasingly integrated internal energy market. Thus, n-1 could be a benchmark, a reference 
scenario against which each Member State, region or the EU would do a risk assessment for 
its own situation, and if necessary develop a Preventive Action Plan to diminish the risk of an 
unmanageable disruption. These risk assessments and the Preventive Action Plans would be 
shared among Member States. The Commission would organise a review of risk assessments 
and Preventive Action Plans, involving the Gas Coordination Group, with attention not only 
to  the  adequacy  of  the  current  and  planned  provisions  for  security  of  supply  but  also  for 
compatibility  with  other  Member  States'  and  regions'  risk  assessments,  coherence  of 
provisions  in  the  internal  market,  possibilities  for  cooperation  on  crisis  prevention  and 
mitigation and best practice. The Commission would issue recommendations to the relevant 
Member States or require changes..  

N-1  is  a  relatively  flexible  concept  although  availability  of  data  is  an  important 
consideration.    A  calculation  is  shown  for  illustrative  purposes  only  in  Annex  1.  This 
calculation has been kept simple. Security of supply measures, notably on the demand side, 
are  not  included  in  the  calculation.  They  could  be  brought  into  the  risk  assessments.  Thus, 
interruptible contracts and provisions for fuel switching, if not included in the calculation of 
n-1, could come into the risk assessment as security of supply measures. 

N-1    could  in  principle  apply  to  supplies  as  well  as  infrastructure.  In  that  case,  the 
Commission  would  propose  a  definition  of  what  would  constitute  the  "same  source  of 
supply", reflecting physical and commercial realities.  

In  practice,  reducing  the  risk  of  unmanageable  gas  supply  disruptions  may  depend  on 
neighbouring  states  so  a  regional  approach  could  make  sense  and  indeed  be  necessary. 
Given the current state of development of the internal gas market, the choice as to whether to 
apply n-1 at Member State or regional level should be pragmatic, based on the realities in the 
regional  market  and  infrastructures.  For  many  Member  States,  it  could  make  sense  in  cost-
effectiveness  terms.  The  regions  would  not  necessarily  coincide  with  the  regions  defined  in 
ERGEG36's gas regional initiatives. For a given Member State, the regional approach should 
include all interconnected and planned-to-be-interconnected neighbouring Member States.  

The application of n-1 would also be envisaged at EU level, with use of EU-wide models such 
as  MC-Genercis37  (see  Annex  2).    Supply  disruption  scenario  analyses  at  regional  and 
European levels would support the assessment of potential impacts at Member State level of a 
disruption  and  could  help  in  identifying  critical  investment  needs.  Coordination  with  the 
proposed 10-year Network Development Plans38 would improve synergy.  Risk assessments 
at Member State level could feed into and be reviewed against the background of analyses of 

36 ERGEG – association of European renergy regulators 
37  MC-Genercis,  being  developed  by  the  Joint  Research  Centre,  currently  enables  the  impact  of  a  supply 
disruption in an import pipeline on pipelines and other infrastructure throughout the EU to be modelled 
38 In 3rd internal energy market package 

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gas supply disruption scenarios at regional and EU level. GTE+, the association of TSOs, has 
already started working on EU supply disruption scenarios. In the public consultation, there 
was support for the preparation of a yearly European winter outlook report. There is also 
readiness in the Gas Coordination Group to periodically discuss supply disruption scenarios 
and levels of preparedness.  

An advantage of using n-1 is that attention is focused on infrastructures and possibly supplies 
which are particularly risky in the EU supply system and internal market. A second is that in 
the  subsequent  risk  assessment  and  Preventive  Action  Plan,  Member  States  would  have 
flexibility to bring into play to the whole range of security of supply measures on both supply 
and  demand  sides  which  are  open  to  them  in  their  particular  situations.  A  third  is  that  a 
region-level  application  is  reasonable  and  could  be  chosen  by  Member  States.    These  three 
advantages are far less true of two other options for supply and infrastructure standards put 
by the Commission to the Gas Coordination Group.  

The option of a security of supply margin to be maintained in all interconnectors and import 
infrastructures as a percentage (e.g. 5%) of the total interconnector capacity was raised in the 
Gas Coordination Group. The definition of this margin for security of supply would have to 
be  precise,  to  distinguish  it  from  other  provisions  for  flexibility.  It  would  normally  be 
bookable only on a short term basis, so as to retain flexibility for use in managing a crisis. In 
the  public  consultation,  a  number  of  respondents  pointed  out  that  this  security  of  supply 
measure would be expensive. Relative to the n-1 approach, it would be less focused on risky 
or missing infrastructures and supplies in the EU system. Thus in an EU, regional or Member 
State perspective, it is likely to be poor in cost-benefit terms.   

The  option  of  a  requirement  for  bidirectional  gas  flows  at  all  borders  with  other  Member 
States was also raised. A variant is that the reverse flows should be at least enough to enable 
supply of all household consumers, if this supply can be distinguished from supply of other 
customers.  The  same  arguments  of  limitation  of  flexibility  and  relatively  poor  focus  on 
particularly  risky  infrastructures  would  apply  as  in  the  security  of  supply  margin  idea. 
However,  in  cost-benefit  terms,  given  the  relatively  low  costs  of  reverse  flow  provisions,  it 
could  make  sense.  GTE+,  the  association  of  TSOs,  is  well-advanced  on  a  study  of  reverse 
flow projects. Provision has been made in the European Economic Recovery Plan for funding 
a number of such projects. 

To conclude, a security of supply standard for infrastructure, based on the n-1 concept, could 
be  defined.  It  could  allow  flexibility  in  its  implementation,  including  the  possibility  of 
application at regional level. An EU-level application, with supply disruption scenarios, could 
support its application at regional and Member State level and facilitate consistency with the 
rolling  10-year  network  development  plan.  Such  a  standard,  and  the  accompanying  risk 
assessments and preventive action plans, would require a revision of the 2004 Directive.   

It is true that most Member States already meet an n-1 standard (see Table 3). The focus in 
terms of necessary infrastructure developments is on a number of missing elements, not in all 
Member  States.  However,  agreement  on  a  standard  would  provide  the  starting  point  of  a 
framework  of  regular  risk  assessments.  In  the  developing  internal  energy  market,  these  risk 
assessments are of mutual interest.    

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 (ii) 

Effective  cooperation  in  dealing  with  gas  supply  emergencies  in  Europe,  with  pre-
defined  emergency  plans  involving  all  players,  at  Member  State  and  EU  levels, 
minimizing any undermining of the internal gas market response to disruptions. 

Member  States  are  already  obliged  under  the  2004  Directive  to  publish  security  of  supply 
measures. These need not be emergency plans in the sense of a comprehensive, systematic set 
of  measures,  with  a  clear  trigger.  The  January  2009  gas  crisis  underlines  the  need  for  real 
emergency  plans  to  be  established  in  all  Member  States,  well  in  advance  of  any  crisis.  An 
emergency plan also needs to be defined in advance at European level and could also make 
sense at regional level. Currently, only a procedure is defined at EU level39. The idea in the 
2004 Directive is that supply crises would be addressed first by the market, then at Member 
State  level  if  necessary  and  finally  at  EU  level  if  necessary.  Yet  in  practice,  the  EU  role  is 
important from the earliest stages, supporting the management of the crisis in the market. In 
the  January  gas  crisis,  the  Gas  Coordination  Group  met  regularly,  exchanging  the  latest 
information,  and  common  external  action  was  developed  in  an  EU  process  led  by  the 
Presidency  and  supported  by  the  Commission.  In  practice,  EU  and  Member  State  action 
should be mutually-supportive, while the market is working and when an emergency has to be 
declared and non-market measures launched.  

To facilitate cooperation at regional and EU level in dealing with emergencies, it would make 
sense to agree a common structure and minimum content for the plans of Member States. 
The  Preventive  Action  Plans  as  set  out  in  the  previous  section,  and  the  risk  assessments 
underpinning them would be fundamental in developing emergency plans. It should be clearly 
specified  when  an  emergency  would  be  declared40.  Particularly  for  emergencies,  the  roles, 
powers  and  responsibilities  of  market  participants  and  public  authorities  should  be  defined, 
and procedures and measures must be established in advance. There must be an obligation on 
market  participants  to  cooperate.  The  identification  of  a  crisis  manager  could  enable  rapid 
cooperation at EU level, inter alia. There should be an obligation to test out emergency plans.  

Non-market  based  instruments  can  be  justified  only  for  the  emergency  level  and  measures 
that  could  impede  flows  in  the  internal  market  should  be  specifically  authorised  by  the 
Commission.  

In  general,  security  of  supply  policies  must  be  non-discriminatory  and  compatible  with  the 
internal  energy  market.  In  the  January  crisis,  several  Member  States  brought  into  operation 
regulations concerning imports of gas or alternative fuels41. In some instances, the effect was 
to undermine the functioning of the market and impede some useful gas flows. Such security 
of  supply  measures  must  be  proportionate,  should  disrupt  the  internal  market  as  little  as 
possible and there should be prior information. Some stakeholders argue that assurances are 
needed  from  all  Member  States  that  contractual  commitments  (e.g.  to  give  access  to  stored 

39  If  measures  taken  in  the  market  and  then  by  Member  States  are  not  sufficient  to  deal  with  the  supply 
disruption,  the  Commission  convenes  the  Gas  Coordination  Group  on  its  own  initiative  or  at  the  request  of  a 
Member  State.  The  Group  can  assist  in  the  coordination  of  national  measures.  The  Commission  can  provide 
guidance to Member States on further measures to assist Member States particularly affected by the disruption. 
Finally, the Commission can submit a proposal to the Council regarding further necessary measures. 
40 For example, a) normal operational conditions; b) exceptional disruption, but the market is still able to handle 
it;  c)  Emergency  –  conditions  or  sudden  crisis  in  the  energy  market,  where  the  physical  safety  or  security  of 
persons, apparatus or installations or system integrity is threatened. 
41 See OIES, March 09 

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gas),  particularly  cross-border  commitments,  would  not  be  impeded,  even  in  emergency 
situations.  

The  triggering  of  a  European  emergency  has  been  much  discussed.  In  today's  internal 
energy market, it is likely that a major disruption in any Member State will have an impact, 
direct or indirect, across much of Europe. European action could arguably be triggered when 
triggered in one or more Member States.  

The  crisis  managers  identified  in  the  national  emergency  plans  should  work  together  in  a 
European network, with a clear statement of powers, organisation and actions. The day-to-
day  management  of  the  emergency  response  should  be  managed  by  the  European 
Commission in cooperation with national competent authorities. The Gas Coordination Group 
should  continue  in  its  advisory  functions.  The  composition  of  the  Gas  Coordination  Group 
would  need  to  be  updated  to  encompass  ACER42,  ENTSO-G43  and  the  network  of  crisis 
managers.   

In  the  November  2008  evaluation  report,  the  Commission  listed  for  comment  a  number  of 
actions which could possibly be included in an EU emergency plan: a common declaration 
of an emergency situation, allocation of available supplies and infrastructure capacity among 
the  affected  countries,  coordinated  dispatching,  activation  of  emergency  measures  in 
unaffected  or  less  affected  states  in  order  to  increase  the  amount  of  gas  available  to  the 
affected  markets..  At  EU  level,  an  EU  process  could  be  envisaged  to  temporarily  relax 
security  of  supply  obligations  in  all  Member  States,  affected  or  not,  for  the  purpose  of 
increasing the amount of gas available to the affected markets. Similarly, transmission system 
operators  could  be  requested  to  ensure  available  capacity  in  their  transmission  systems.   
Some of these ideas for EU emergency actions arguably make more sense at regional level.   

No  such  measures  were  formally  taken  in  the  January  crisis,  as  part  of  an  emergency 
response. The market response brought additional supplies to the affected areas. 

Developing  further  the  experience  of  the  January  crisis,  the  deployment  of  a  monitoring 
mission within or outside the European Union could be envisaged.  

Where they make sense in terms of practical cooperation, regional emergency plans could be 
established and tested. However, it is likely that most major disruptions at Member State level 
will be taken up at European level. In practice, it is difficult to define the appropriate regions, 
several  factors  enter  into  play.  A  pragmatic  "immediate  neighbourhood"  approach,  focusing 
on  instances  in  which  a  regional  approach  makes  sense  (e.g.  Baltic  Energy  Market 
Interconnection Plan) would make more sense that an artificial layer of cooperation.  

In  general,  transparency  and  exchange  of  information  between  Commission,  governments, 
regulators,  TSOs  and  other  market  parties,  both  under  normal  market  operations  to  monitor 
the risk of an emergency, and in case of an emergency need to be improved. Regulators are 
working  on  a  harmonised  minimum  level  of  information  to  be  made  available  to  the 
market,  especially  in  crisis  situations.  However,  this  improved  transparency  should  be 
achievable  on  the  basis  of  the  third  internal  energy  market  package,  once  adopted,  and  the 

42 (future) Agency for the Cooperation of European Regulators  
43 Organisation for the cooperation of European TSOs dealing with gas 

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planned revision of Council Regulation EC N° 736/96 on notification of investment projects 
in the gas, electricity and petroleum sector.  

To conclude, the January crisis provided ample demonstration of the need to emergency plans 
to be established in advance of any crisis, at Member State and EU level and at regional level 
when this makes sense. Given the likely EU dimension of any disruption and response, there 
must be an obligation to cooperate. These would require substantial amendments to the 2004 
Directive.  

Thus, amendments to the 2004 Directive, notably on security of supply standards,  related risk 
assessments,  regional  cooperation,  an  EU  process  to  ensure  mutual  consistency  of  plans, 
supported  by  EU-level  analyses,    obligations  concerning  emergency  plans,  would  achieve  a 
framework  ensuring  better  preparedness  of  the  EU  for  possible  gas  supply  disruptions  and 
more  effective  response,  primarily  in  the  internal  gas  market..  The  various  possible 
amendments  have  been  much  discussed  by  stakeholders  in  the  public  consultation  and 
elsewhere. This is the first short-listed Policy Option.  

4.5 

A Regulation on gas security of supply 

(i) 

(ii) 

Achievement  of  sufficient  flexibility  in  the  internal  gas  market  to  mitigate  most  gas 
supply  disruptions,  by  establishing  the  necessary  incentives  for  investments  in 
infrastructures and gas and the well-functioning of the market.   
Effective  cooperation  in  dealing  with  gas  supply  emergencies  in  Europe,  with  pre-
defined  emergency  plans  involving  all  players,  at  Member  State  and  EU  levels, 
minimizing any undermining of the internal gas market response to disruptions. 
The  main  issue  here  is  whether  a  Regulation  would  be  a  better  and  feasible  vehicle  for  the 
substantial amendments to the 2004 Directive outlined in the Policy Option "Revision of the 
2004 Directive". 

Timing is one factor. A Regulation could be operational well before a Directive. There is a 
real  risk  of  repetition  of  gas  supply  disruptions  such  as  in  January  2009  in  the  short  and 
medium term, so the sooner a clear EU framework is in place, the better.  

Clarity is a second factor. In a Regulation, common standards for security of supply could be 
directly  applicable  to  the  market  participants,  notably  the  Transmission  System  Operators 
and  the  gas  suppliers.  The  current  situation  in  the  Directive  of  having  Member  States  set 
standards  to  be  implemented  subsequently  by  market  participants,  may  well  be  a  weakness, 
having  the  effect  of  distancing  participants  from  their  responsibilities.  As  the  internal  gas 
market develops, the need for a level playing field in terms of obligations on market players 
for security of supply increases in the competitive part of the market.  

As noted earlier, Member States are in very different situations as regards reliance on gas and 
possibilities  of  mitigating  supply  disruptions.  The  n-1  approach  envisaged  for  an 
infrastructure standard focuses on weaknesses in infrastructures. Those Member States which 
are already well provided with infrastructures would have no extra burden in meeting such a 
standard. The implementation of an n-1 approach could also allow a certain flexibility, with 
the possibility of regional approaches, for example.   

The  arguments  for  direct  application  are  even  stronger  as  regards  emergency  plans.  There 
must  be  a  clear  obligation  to  cooperate.  There  must  also  be  clarity  on  who  is  doing  what, 

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when,  coming  up  to  and  during  an  emergency.  A  wide  range  of  participants  across  Europe 
will be involved. Clear definition of roles and procedures and a clear obligation to cooperate 
in  this  collective  effort  is  essential.  A  Regulation  could  establish  this  more  effectively  and 
quickly than a Directive.  

Thus,  a  "Regulation  on  gas  security  of  supply"  would  enable  the  achievement  of  the 
objectives, should be feasible, could offer advantages over a Directive in terms of timing and 
clear,  direct  application,  and  is  the  second  short-listed  Policy  Option.  There  has  been  some 
support in the public consultation for this option. 

Section 5: Analysis of impacts  

5.1. Economic impacts 

Investment costs 
The  economic  impacts  of  both  short  listed  Policy  Options  would  be  dominated  by  the 
investment  costs  and  the  resultant  benefits  of  the  implementation  of  n-1  and  subsequent 
Preventive Action Plans. Reverse flow capacities could be included in the calculation of n-1 
or in the Preventive Action Plans. Costs could be spread over a number of years. 

A  very  preliminary  calculation  of  n-1  for  Member  States  has  been  done,  for  illustrative  
purposes only in  this Impact Assessment.  

Table 4: Preliminary calculation of n-1 for Member States:  
See Annex 1 for explanation of the calculation 

Production 
withdrawal 
capacity 
12,16 
0,00 
0,30 
0,00 
0,30 
45,00 
29,90 
0,00 
0,00 
0,00 
2,40 
0,00 
9,00 
1,00 
24,00 
0,00 
0,00 
0,00 
0,00 
440,00 
6,48 
0,00 
34,30 

Maximal 
Consumption* 
49,41 
139,20 
15,60 
0,00 
67,60 
400,00 
25,70 
4,30 
160,20 
1,00 
370,00 
14,00 
92,50 
20,30 
425,00 
16,00 
5,98 
9,00 
0,00 
235,00 
59,71 
19,30 
75,00 

Mcm/day 
AT 
BE 
BG 
CY 
CZ 
DE 
DK 
EE 
ES 
FI 
FR 
GR 
HU 
IE 
IT 
LT 
LU 
LV 
MT 
NL 
PL 
PT 
RO 

EN 

Storage 
Withdrawal 
capacity 
48,00 
22,80 
4,20 
0,00 
55,01 
463,32 
18,80 
0,00 
10,54 
0,00 
231,00 
0,00 
47,50 
2,60 
295,85 
0,00 
0,00 
14,69 
0,00 
153,02 
34,20 
7,00 
25,80 

32 

LNG 
send-
out 
capacity
0,00 
24,70 
0,00 
0,00 
0,00 
0,00 
0,00 
0,00 
160,90 
0,00 
42,44 
13,69 
0,00 
0,00 
35,00 
0,00 
0,00 
0,00 
0,00 
0,00 
0,00 
14,20 
0,00 

Incoming 
Pipeline 
Capacity 
137,52 
321,61 
72,00 
0,00 
185,98 
579,44 
0,00 
22,99 
67,01 
20,68 
156,28 
38,36 
58,04 
30,00 
284,80 
39,11 
11,30 
24,64 
0,00 
95,62 
147,56 
13,21 
113,00 

Single 
Largest 
Infrastructure 
125,94 
94,43 
72,00 
0,00 
141,94 
105,96 
29,90 
16,80 
39,70 
20,68 
50,00 
19,20 
39,80 
30,00 
114,60 
30,00 
4,93 
24,64 
0,00 
300,00 
108,00 
14,20 
102,00 

N-1 
145% 
197% 
29% 
- 
147% 
245% 
73% 
144% 
124% 
0% 
103% 
235% 
81% 
18% 
124% 
57% 
107% 
163% 
- 
165% 
134% 
105% 
95% 

   EN 

 
 
 
 
 
 
 
 
  
SE 
SI 
SK 
UK 

0,00 
0,00 
0,30 
231,00 

6,00 
5,80 
29,90 
536,00 

0,60 
0,00 
34,87 
126,57 

0,00 
0,00 
0,00 
84,56 

8,49 
14,53 
301,00 
241,34 

8,49 
10,13 
301,00 
73,70 

10% 
76% 
118% 
114% 

*(1-in-20 winter case) 
Sources: IHS, Gas Coordination Group 

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 
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 n-1 standard (see 
also Table 3). These Member States are in a variety of situations, and can bring a variety of 
security of supply measures to bear and could develop regional cooperation. Sweden, Finland, 
Denmark, Lithuania and Ireland, for example, are relatively poorly connected to the network. 
However, Sweden relies very little on gas in its energy mix (2%). Finland's gas users, mainly 
in industry, have made substantial fuel switching provisions. Denmark, Lithuania and Ireland 
are  focusing  on  the  construction  of  new  interconnectors  and  other  infrastructures.  Bulgaria 
and Hungary are far from meeting the standard, Romania and Slovenia somewhat less so. The 
impact of these infrastructure inadequacies was evident in the January gas crisis.  On the basis 
of  such  calculations,  and  subsequent  risk  assessments  and  Preventive  Action  Plans  by 
Member States, a good idea of necessary infrastructure developments can be developed.  

While the detailed risk assessments would still need to be done by Member States, it is clear 
that  many  of  the  necessary  infrastructure  projects  are  in  the  list  of  eligible  projects  in  the 
European Economic Recovery Plan (Annex 3 for details). N-1 goes above 100% for several 
Member  States  if  eligible  projects  are  included  (see  Table  3).  The  assumption  that  these 
projects will all be constructed has been made in the Table. Provisions in the Recovery Plan 
for reverse flow projects (80m€) have not been allocated in it.  

As  the    total  European  Economic  Recovery  Plan  support  for  gas  infrastructure  projects  is 
1440m€ over two years, a maximum of 50% of the eligible project costs during that time, then 
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.  

Gas Transmission Europe has prepared a preliminary overview of reverse flow projects which 
would  improve  security  of  supply  in  Europe.  Over  forty  projects  have  been  identified  for  a 
total investment cost of about 1.5b€.  

All  of  these  investment  costs  would  normally  be  reflected  in  regulated  gas  transport  tariffs, 
through  an  allowable  rate  of  return.  Thus  the  costs  would  normally  be  spread  over  all  gas 
consumers.  A  very  rough  estimate  of  what  this  could  mean  for  households  could  go  as 
follows:  natural  gas  prices  for  households  in  EU-27  including  excise  taxes  were  18.01€/GJ 
(GCV)44;  final  gas  consumption  by  households  and  services  is  some  8,000,000  TJ(GCV)45; 

44 Eurostat, 2007 prices 
45 Eurostat, 2005 consumption 

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thus  some  144b€  is  spent  by  households  and  services  on  final  gas  consumption  each  year. 
Thus,  additional  costs  amounting  to  as  few  b€  over  several  years  for  investments  in 
infrastructures  for security of supply would be relatively small compared  to  total  household 
gas bills and smaller still compared to total gas bills in Europe. It is evident, however, that this 
is the roughest of calculations. Gas prices still vary substantially across Europe and between 
households  and  industrial  customers.  Investments  are  needed  more  in  some  Member  States 
than in others. Thus the impact on household customers and industry in some Member States 
could be significant. 

The January gas crisis gave some idea of the benefits of avoided gas supply disruptions at the 
level  of  consumers.  Estimates,  related  mainly  to  involuntary  restrictions  of  gas  supplies  to 
industry, are 1000m€ in Slovakia, 255m€ in Bulgaria, 70m€ in Hungary46. Thus 1-2b€, which 
is still small compared to the total paid for gas in Europe, but concentrated in a small number 
of Member States.  

A  regional  approach  to  n-1  could  in  principle  be  more  cost-effective.  However,  it  must  be 
justifiable by market integration in the region and existing infrastructure links. 

Impact on the internal market and other economic impacts: 

Security  of  supply  has  a  cost.  One  way  or  another,  there  needs  to  be  some  flexibility  and 
redundancy in the system if gas supply disruptions are to be managed. The main benefit of the 
n-1 standard and related risk assessments and Preventive Action Plans would be in focusing 
efforts on the remaining weak infrastructures and supplies in Europe, requiring improvements 
where they are actually needed.  

Both  Policy  Options  would  build  confidence  in  provisions  for  security of  gas  supply  across 
Europe.  They  would  also  create  the  conditions  for  effective  cooperation  and  solidarity  in 
dealing  with  emergencies,  allowing  the  internal  market  to  work  as  long  as  possible.  Thus 
there  would  be  a  positive  interaction  with  the  internal  market  through  strengthening 
incentives for investment, assessing investments in a regional and EU process, 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.    

A  Regulation,  through  the  direct  application  of  standards  to  market  participants,  could 
arguably encourage investment and ensure internal market benefits more directly.  

The spillover from gas security of supply into security of electricity supply raises the stakes, 
given increasing reliance of the European economy on electricity. For example, in late-2008, 
reserves in the Spanish hydroelectrical system were very low. As evidenced in the Quarterly 
Report  on  European  Electricity  Markets47,  the  stored  energy  that  could  have  been  retrieved 
from  the  hydro  system  during  a  given  week  in the fourth  quarter  was some  1,4 TWh lower 
than the 10-year average. Spain uses 44% of its gas for power generation. About a third of its 

46 Peter Kaderjak, Regional Center for Energy Policy Research, Corvinus University of Budapest; presentation of 
3 April 2009  
47 "Quarterly Report on European Electricity Markets", Market Observatory for Energy, Vol 1, Issue 3, Oct-Dec 
2008 

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power generation is gas-fired. Thus a gas supply failure during this time would have been felt 
throughout  the  electricity  system.  The  reverse  situation  in  South  East  Europe  during  the 
January 2009 gas crisis (see 5.2 below) was simply fortuitous.  

Administrative burden 
The  administrative  costs  for  businesses  of  both  short-listed  Policy  Options  are  marginal. 
There are no new reporting obligations. This is why the EU Standard Cost Model has not been 
used in this Impact Assessment.  

There  could  be  an  increase  in  administrative  costs  for  public  authorities  compared  to  the 
current  situation.  These  would  be  related  to  the  calculation  of  n-1  and  development  of 
emergency plans. The administrative costs would be lower for a Regulation which is directly 
applicable  and  would  require  no  transposition  to  national  legislation.  The  costs  would  be 
marginal compared to investment and other costs. This is why the EU Standard Cost Model 
has not been used in this Impact Assessment. 

5.2 

Social impacts 

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).  Industry  has  a  particularly  high  share  of 
consumption  in  Finland  (91%),  Bulgaria  (89%),  Slovenia  (81%).  Interruption  of  supplies  to 
factor,  undermining 
running, 
such  enterprises,  often  continuously 
competitiveness. Provisions for fuel switching at customer level are normally quite costly. In 
addition to the cost of set-aside resources, there would often be a CO2 emissions cost related 
to relatively higher emissions from back-up and substitute fuels (see below).  

is  a  negative 

Some 26%  of  gas  in Europe is used directly by households, others rely on gas-fired district 
heating.  Gas  supply  crises  will  have  a  direct  impact  on  these  consumers,  often  vulnerable. 
There is a limit to how easily households can resort to electricity for heating or cooling. A gas 
crisis  in  Europe  will  normally  put  electricity  prices  up.  The  January  crisis  could  have  been 
much more difficult for people in South East Europe but for the coincidence that heavy rain 
facilitated very large hydropower production, averting an electricity crisis48.  

While provisions for security of supply will certainly be felt in the prices paid by customers 
for  gas,  a  Directive  or  Regulation  enabling  a  focus  on  the  necessary  provisions  would 
minimise the additional costs and limit tariff increases. 

5.3   Environmental impacts 

The continuation of inefficient gas security of supply arrangements in Europe could have an 
impact on the environment, climate and sustainable development.  

The question of whether Europe should be investing further in infrastructures for fossil fuels, 
given  prospects  of  depletion,  uncertainty  about  future  energy  and  gas  demand  and  the 
growing  contribution  of  alternative  fuels  has  been  raised.  However,  as  demonstrated  by 
alternative scenario analyses49, Europe will continue to depend on imports of gas until at least 

48 "The impact of the Russia-Ukraine gas crisis in South Eastern Europe", Kovacevic, OIES, March 2009  
49 See scenarios in 2nd Strategic Energy Review 

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2020  and  on  to  2030.  Gas  has  an  important  role  as  a  transition  fuel  in  the  move  towards  a 
high-efficiency, low-carbon energy system.  

Like  any  other  infrastructure  development,  new  investments  in  gas  infrastructures  will  have 
environmental impacts (e.g. biodiversity). The fact that many gas pipelines are underground 
should  help. Planning  of  additional  infrastructures  to  identify  those  which  would  have  most 
impact  on  security  of  supply,  using  the  flexibilities  offered  by  the  internal  energy  market, 
should  minimise  the  total  environmental  impacts.  The  minimisation  of  necessary  provisions 
for back-up fuels should also help, particularly in the period when low-carbon fuels  are  not 
sufficiently developed or available.   

Section 6: Comparing the options  

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

Efficiency 

Coherence 

Not relevant 

Implementation of 3rd 
package likely to need 
support, notably 
assessments of 
potential gas supply 
disruptions at EU 
level and practical 
guidance to TSOs and 
regulators; current 
security of supply 
standards in the 2004 
Directive too 
imprecise. 

Policy 
Option 
No new 
EU policy 

Effectiveness in 
achieving objectives 
May partially deliver, 
through the 3rd IEM 
package, the European 
Economic Recovery 
Plan, TEN-E, the 
existing 2004 gas 
security of supply 
Directive and 
cooperation on 
emergency planning 
following the January 
gas crisis. 
Nevertheless, an EU 
framework is still 
needed to ensure that 
actions of Member 
States for security of 
gas supply, notably 
during crises, do not 
undermine the growing 
capacity of the market 
to deal with 
disruptions, that the 
standards for security 
of supply which 
market participants 
should meet are clear 
to all, and that the 
potential of the 
internal gas market to 
deal with supply 
disruptions is 

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developed and used.  

Yes 

Revision 
of 
Directive  

New 
Regulation  

Yes 

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.  

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  

Would imply well-
focused, limited 
investment costs; 
would ensure that the 
potential of the 
internal gas market to 
deal with supply 
disruptions is 
developed and used. 
would imply 
administrative burden 
on public authorities 
as regards calculation 
of n-1 standard and 
emergency provisions   
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;  

Both  short-listed  Policy  Options  would  have  similar  economic,  social  and  environmental 
impacts  compared  to  the  option  of  no  new  EU  policy.  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, clear 

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obligation to cooperate around emergencies), fair (a level playing field in terms of security of 
supply obligations) and could be in place and in effect more quickly.  

The  importance  of  getting  the  necessary  improvements  in  the  EU  regulatory  framework  in 
place  quickly  needs  to  be  appreciated.  Decisions  taken  now  in  the  energy  system  (e.g.  on 
coal-fired  power  generation)  will  lock  in  technologies  for  decades  to  come.  Investment 
decisions not taken now will lead to energy supply and transport constraints and high prices in 
due course, when economic growth restarts. As demonstrated in the preliminary calculation of 
n-1, the projects in the European Economic Recovery Plan are crucial in meeting reasonable 
security of supply standards. In the current economic and  financial climate,  clear incentives 
for  investment  are  of  fundamental  importance.  The  Skanled  gas  pipeline,  for  example,  an 
eligible project in the Recovery Plan, has been suspended by its promoters. In this context, it 
is all the more important to have a clear, relevant regulatory framework for security of supply 
quickly in place. 

Section 7: Monitoring and evaluation  

A reporting and monitoring system is in place for the internal energy market. This system 
yields data which is relevant for security of supply purposes. Council Regulation EC 736/96 
on notification of investment projects in the gas, electricity and petroleum sectors will be 
revised. With input from these, monitoring and evaluation mechanisms specifically focused 
on security of supply can be strengthened.  

The role of the Gas Coordination Group could be expanded to include regular monitoring and 
assessment, drawing inter alia from the envisaged review of risk assessments by Member 
States.  

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ANNEX 1: Possible calculation of the n-1 standard 

Please  note  that  the  proposal  for  a  Regulation  includes  a  more  precise  calculation  of  n-1. 
This  simplified  calculation  is  for  illustrative  purposes  only  in  this  Impact  Assessment. 
Nevertheless, the results in terms of the n-1 indicator are unlikely to be very different.    

Technical  capacity50  (contracted  capacity51  plus  available  capacity52)  of  all  gas  supply 
infrastructure in the event of disruption of the single largest infrastructure should be greater 
than  demand  for  deliveries  in  a  60  days  period  of  high  demand,  after  taking  into  account 
interruptible contracts and demonstrated fuel switch possibilities.  

The N-1 indicator, calculated as below, should be higher than 100%.  

……………………….IPm+Pm+Sm+LNGm – Im  

N-1[%] = --------------------------------------------- * 100, N-1 > 100%  

……………………………………….Dmax  

Definitions required for the calculation of the N-1 indicator: 

IPm – Maximum technical capacity of import pipelines (mcm/d) to the calculated region. It 
includes reverse flow possibilities, transit inflow and outflow capacity.  

Pm  –  Maximum  production  capacity  (mcm/d)  in  calculated  area  for  at  least  the  60  days 
period. 

Sm – Crisis deliverability (mcm/d) – the sum of maximum rates at which storage facility users 
in  the  calculated  area  can  withdraw  gas  from  the  storage  facility  over  at  least  the  60  days 
period. 

LNGm – Maximum LNG facility capacity (mcm/d), taking into account critical elements like 
maximum  ships  and  storage  capacities  availability  and  technical  send-out  capacity  to  the 
system, providing gas over the 60 days period to the calculated area.  

Im – Single largest gas infrastructure (mcm/d) suppling the calculated area with gas.  

Dmax  –  Gas  demand  in  mcm/d,  related  to  the  lowest  temperature  in  last  20  years

50 Draft Regulation (EC) No …/… of the European Parliament and of the Council on conditions for access to the natural gas transmission networks and repealing Regulation 

(EC) No 1775/2005 Art.2 (18) "technical capacity" means the maximum firm capacity that the transmission system operator can offer to the network users, taking account of 

system integrity and the operational requirements of the transmission network; 

51 Art.2 (19) "contracted capacity" means capacity that the transmission system operator has allocated to a network user by means of a transportation contract; 

52 Art.2 (20) "available capacity" means the part of the technical capacity that is not allocated and is still available to the system at that moment; 

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Annex 2: MC-GENERCIS model 

The Joint Research Centre has developed a model of the European gas network which helps in 
understanding  the  distribution  of  flows  in  any  given  situation.  Starting  from  a  particular 
situation in a given region, the model distributes the eventual surplus of gas using the Monte-
Carlo approach53. A situation is only defined by the following set of variables: 

1.  Production withdrawal capacity 
2.  Consumption 
3.  Storage withdrawal capacity 
4.  LNG send-out capacity 
5.  Incoming pipeline capacity, including possible reverse flows. 

The model can handle any modification of the set of variables, for example, the January gas 
crisis  or  any  kind  of  technical  problem  affecting  the  above  mentioned  capacities.  MC-
GENERCIS  calculates  for  the  gas  system  of  each  region  the  likelihood  of  disruption,  the 
mean  value  of  imbalances  (supply/demand),  as  well  as  the  pipeline  utilisation  rate.  The 
following  maps  compare  the  situation  of  the  European  gas  network  during  a  normal  winter 
day with the first day following the outbreak of the January Ukraine-Russian crisis. 

Even though MC-GENERCIS is already producing promising results, it still has potential for 
improvement. The current version is time-independent and the spatial resolution is limited to 
country  level.  In  addition,  the  iteration  process  could  be  improved  to  eliminate  unrealistic 
dispatching strategies. 

MC-GENERCIS  has  clear  connections  to  the  N-1  approach.  Both  try  to  evaluate  the 
vulnerability of the gas system. The N-1 approach looks at the vulnerability of each country in 
absolute  terms,  and  provides  a  benchmark;  MC-GENERCIS  estimates  the  likelihood  of 
disruption  deriving  from  a  concrete  situation,  in  each  and  every  region  of  the  gas  network. 
Taking  the  recent  January  crisis  as  an  example,  we  can  compare  the  average  value  of 
imbalance  calculated  by  MC-GENERCIS  with  the  N-1  results,  for  each  Member  State. 
Similarly, we can compare the normal winter day case from GENERCIS to N situation, with 
the supply-demand balance of the system using the N-1 approach and not taking into account 
the removal of the single largest infrastructure.  

53 As it is impossible for to predict the behaviour of TSOs in real time during a disruption, the 
model evaluates the possible set of “dispatching strategies” the system offers, applying a large 
number of iterations.  

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EN 

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EN 

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ANNEX 3: Extract from European Economic Recovery Plan - Eligible projects 

A. 

1. 

INTERCONNECTORS 

Gas interconnectors 

Project 

Southern Gas Corridor 
Nabucco 

ITGI – Poseidon 
Baltic interconnection 
Skanled 
LNG network 
Liquefied Natural Gas terminal at Polish coast at 
port of Świnoujście  
Central and South East Europe 
Slovakia-Hungary Interconnector 
(Velky Krtis – Vecsés) 
Gas transmission system in Slovenia between the 
Austrian  Border  to  Ljubljana  (excluding  the 
section Rogatec-Kidričevo)  
Interconnection Bulgaria-Greece 
(Stara Zagora - Dimitrovgrad-Komotini) 
Romania-Hungary gas interconnector 
Expansion of Gas Storage Capacity in the Czech 
hub 
Infrastructure  and  equipment  to  permit  reverse 
gas  flow  in  the  event  of  short  term  supply 
disruption 

Slovakia-Poland interconnection 
Hungary-Croatia interconnection 
Bulgaria-Romania interconnection 
Mediterranean 
Reinforcement of FR gas network on the Africa-
Spain-France axis 

Location 
supported 

of 

projects 

Envisaged 
Community 
contribution 
(€ million) 

Austria, Hungary, 
Bulgaria, Germany, 
Romania 
Italy, Greece  

Poland, Denmark, Sweden 

Poland 

Slovakia, Hungary 

Slovenia 

Bulgaria, Greece 

Romania, Hungary 
Czech Republic 

Austria, Bulgaria, Czech 
Republic, Estonia, Greece, 
Hungary, Latvia, 
Lithuania, Poland, 
Portugal, Romania, 
Slovakia 
Slovakia, Poland 
Hungary 
Bulgaria, Romania 

France 

200

100

150

80

30

40

45

30
35

80 

20
20
10

200

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GALSI (Gazoduc Algérie-Italie)  
Gas Interconnection Western Axis Larrau Branch 

Italy 
Spain 

North Sea area 
Germany-Belgium-United Kingdom pipeline 
France-Belgium connection 

Belgium 
France, Belgium 

TOTAL 

    120
45

35
200
1440

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Annex 4: Main findings of the public consultation on the revision of the 2004/67 
Directive concerning measures to safeguard security of natural gas supply 

General remarks 

As  a  follow-up  of  the  publication  of  the  Second  Strategic  Energy  Review  package,  a 
public  consultation  was  open  between  November  2008  and  March  2009,  in  order  to  seek 
views  and  proposals  on  the  revision  of  the  2004/67  Directive  concerning  measures  to 
safeguard  security  of  natural  gas  supply.  The  Commission  received  22  feedbacks  from 
Member  States  (5),  Regulators  (1  individual  and  2  umbrella  organizations),  infrastructure 
operators (1), one member of the electricity industry (1) and members of the gas industry (12). 
Apart  from  the  individual  companies,  the  main  associations  of  gas  supplier,  trader  and 
infrastructure undertakings also expressed their views. 

Questions 

1.  How  to  define  comparable  security  of  supply  standards  that  put  equal,  reasonable 
burden  on  market  participants  while  respecting  the  differences  between  Member 
States? 

Seven respondents – two Member States, infrastructure operators, and members of the gas 
industry emphasized that differences among Member States (in supply diversity, demand side 
flexibility,  storage  position,  public  sector  obligations,  risks  to  supply,  fuel  mix  etc.)  are 
significant,  therefore  an  individual  approach  respecting  these  differences  is  needed.  At  the 
same  time  it  was  considered  essential  by  these  respondents  that  a  common  and  comparable 
level of security – which is defined by the EU – is reached so shortages or supply disruptions 
can be managed successfully on European level. Creation of a “toolbox” of security of supply 
measures was considered, to reach the afore-mentioned level of security. 

The comparable security of supply standards and level of preparedness is a precondition to 
prevent "free-riding" when solidarity actions are implemented. Standards could also reduce ad 
hoc political intervention in case of a crisis. Those Member States bearing more risks should 
consequently  take  additional  measures  (e.g.  demand  side  responses,  greater  storage  levels 
etc.) to provide the adequate level of security. 

Two  Member  States  and  a  company  suggested  that  the  Commission  should  organize  a 

workshop on preparedness in cooperation with IEA. 

Members  of  industry,  a  Member  State  and  a  regulator  organization  [CEER]  emphasized 
that Member States should have autonomy in setting these standards. A Member State and a 
company fully rejected the idea of having EU-wide standards for security of supply. 

The following ideas were submitted for the proposals of security of supply standards: 

• 

In  case  of  the  N-1  rule  the  general  idea  was  supported  but  short-term  feasibility  was 
questioned – as data is difficult to collect – and a transition time for its introduction was 
recommended.  Other  contributions  asked  for  further  information  and  more  detailed 
definition on the application of the rule. 

Member States submitted proposals to this rule such as:  

- not only the infrastructure but availability of gas should be taken into account  

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- demand side measures (fuel switch, interruptible contracts) and supply flexibility should 
also be considered  

-  only  the  infrastructure  supplying  the  domestic  market  should  be  taken  into  account 
(excluding transit and stocks to other markets)  

- “N-1” should be the only standard, no need for separate bi-directional-flow or security of 
supply margin standards  

While for some respondents "N-1" could constitute a robust and single security of supply 
standard, others doubt that it should be introduced as an EU-wide standard. 

•  Bi-directional flows were seen as a useful tool for enhancing security of supply. In their 
case the definition of an exact percentage of bi-directional capacity, the question regarding 
tariffs, covering of costs (the beneficiary is sometimes different than the investor) and gas 
quality harmonisation are to be further examined. 

•  The concept of security of supply margin was challenged. It is yet to be decided upon 
who would cover the costs and how could unused capacity be utilized at locations where it 
may not be needed under normal market conditions. One way to solve this problem was 
proposed  in  the  form  of  using  the  extra  capacity  in  the  form  of  interruptible  contracts. 
Another proposal was to define the margin on country or on regional but not single entry-
point level. Some views supported security of supply margin to be introduced based on its 
practice in the electricity sector. 

One MS proposed new standards: 

•  "Expected  energy  unserved"  -  measuring  the  likelihood  of  different  gas  supply 
shortfalls  in  one  probability/weighted  measure.  Its  drawback  however  is  that  it  is 
complicated to calculate and depends on many input assumptions. 

•  "Supply/demand margin" - 3 types: 

1.  capacity  margin  measuring  the  "spare"  capacity  -  domestic  production,  import 
infrastructure, storage vs. peak day demand in a cold winter 

2.  de/rated  capacity  margin  estimating  not  only  the  capacity  but  also  the  likelihood  - 
applying less than 100% probability to each piece of infrastructure based on models 

3.  duration-based  capacity  margin  calculating  margin  over  all  180  days  in  the  winter 
assuming storage withdrawal and no re-fill 

•  Standards  measuring  two  or  three  key  risks  that  a  Member  State  could  face  and 

calculate the likelihood of those events and gas shortfall. 

•  Supply diversity indicator showing the rate of diversity for both source and route in the 

supply portfolio. 

Four  members  of  the  gas  and  electricity  industry,  infrastructure  operators  and  two 
Member  States  recommended  conducting  risk  assessments  based  on  a  harmonized 
methodology  for  each  Member  State  about  national  gas  markets,  fuel  switch  opportunities, 
range  of  protected  customers,  bottlenecks,  congestion  points,  demand  in  extreme  situations 
and other vulnerabilities. Such assessments could provide a solid base for emergency response 
plans. 

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Scenarios and disruption models – preferably coordinated and developed on regional level 
– would make it easier to assess the impacts  of a crisis  and  may  help  in  identifying  critical 
points  of  investment.  Coordination  with  the  proposed  10-year  Network  Development  Plans 
would improve synergy in this aspect. 

The possible need for transition periods was mentioned by two members of the industry. 
A Member State suggested that compliance with the standards on the medium term could be 
an objective for all European countries. 

2.  Should  the  Directive  extend  mandatory  protection  beyond  households  to  power 
generators, small and medium sized enterprises or other vulnerable customers? 

Views on the extension of mandatory protection were split. On one hand according to two 
respondents,  the  importance  of  security  of  essential  service  providers  (e.g.  hospitals)  was 
emphasized  and  it  was  noted  that  certain  gas  fired  power  plants  and  CHP  units  may  be 
considered eligible for protection (residential consumers are likely to switch to electricity in 
time  of  a  gas  crisis,  which  results  in  increased  demand  in  power  generation).  However, 
obligatory  protection  of  certain  customers  (e.g.  power  plants)  may  prove  unnecessary  in 
certain Member States with low share of gas in the fuel mix, representing additional burdens. 
Market-detrimental  effects  could  be  minimized  by  setting  a  time  limit  for  the  period  of 
protection. 

According  to  the  approach  of  six  other  respondents,  market  should  face  the  risks  and 
market  participants  should  look  after  their  own  security  as  alternative  means  are  available 
even  in  case  of  a  high  level  of  dependency.  Broadening  the  scope  would  put  supply  of 
households to a risk and "overprotection" would decrease the ability of the market to handle 
shocks and remove incentives to increase own security of supply. 

There were also more flexible responses stating that it should be Member States' privilege 
to define the range of protected consumers, and that mandatory protection should be extended 
only to those consumers that have no real alternative to using gas. Consumers with dual-firing 
capabilities, interruptible contracts or storage capabilities should not be protected. 

3.  What  should  be  the  precise  actions  defined  in  the  Community  mechanism,  in  the 
regional and EU emergency plans? 

Contributions  were  clear  and  unambiguous  that  in  case  of  an  emergency,  market 
mechanisms  should  be  used  as  long  as  possible  and  emergency  measures,  solidarity 
mechanisms and government intervention should be a last resort.  

Respondents  also  emphasized  that  transparency  of  data  is  essential  for  the  market  to  be 

able to deliver. 

Both  these  topics  are  covered  in  the  upcoming  Third  Package,  therefore  they  are  not 

further discussed in the public consultation. 

Several  respondents  highlighted  the  need  for  harmonized  roles  and  responsibilities  of 
regulators  and  market  participants.  As  these  are  also  described  in  the  Third  Package,  any 
further  legislation  is  required  only  for  those  cases,  when  these  roles  and  responsibilities  are 
changed or expanded. 

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Respondents agreed that national emergency plans are needed, to provide mechanisms to 
manage  a  supply  crisis.  These  plans  should  be  transparent,  regularly  updated  and 
communicated  in  advance  to  market  participants  and  also  to  other  Member  States  (peer 
review).  They  should  preferably  be  based  on  a  harmonized  European-level  scheme  and 
planned on regional level so measures of a Member State do not have any unexpected adverse 
effects on another country.54 Regional coordination would in itself contribute to a higher level 
of security of supply. 

Regulators  invited  the  Commission  to  ensure  that  authorities  responsible  for  defining 
security  of  supply  schemes  are  the  same  in  all  Member  States  and  adequate  methods  are 
developed  to  harmonize  national  emergency  plans.  The  idea  of  setting  up  a  network  of 
emergency contact points was proposed by two Member States.  

Cooperation on regional  level was supported  by both Member States, regulators  and the 
industry.  However,  views  on  the  scope  and  field  of  cooperation  varied.  The  following 
proposals were put forward:  

regional trading platforms  
regional emergency plans ,  
regional solidarity mechanisms,  

• 
• 
• 
•  Member States to establish regional emergency response communication networks  
•  declaring emergency and applying measures should be decided and coordinated on 

regional or EU level. 

The  question  of  emergency  levels  was  also  reflected  upon.  At  present,  Member  States 
define different levels of emergency with different measures. In many cases one or more "pre-
emergency" levels exist that reflect a deviation from normal situation but which can still be 
managed  efficiently  and  effectively  by  open  market  mechanisms.  In  order  to  ensure 
comparability  and  compatibility,  it  must  be  discussed  to  what  extent  the  levels  (concerning 
their  scaling  and  basic  characteristics)  should  and  could  be  alike  on  the  regional  or  on  a 
Community  level.  The  different  structure  of  gas  markets,  consumption  patterns  and  public 
service obligations of market participants in the Member States require careful examination to 
see if such compatibility and comparability may still be reached. 

The Gas Coordination Group was proposed to receive a more serious role of monitoring 

and coordination and information exchange in the event of a crisis.  

There was no clear view on solidarity mechanisms. IE proposed that each Member State 
should  be  required  to  provide  assistance  to  neighbouring  countries  to  ensure  that  supply  of 
households is provided. 

4. How should the regions for security of gas supply be best defined? 

The  regional  approach  was  supported  by  respondents.  When  defining  the  regions, 
technical  issues,  such  as  existing  and  planned  interconnections,  predominant  gas  flows, 
location  of  storage  and  import  facilities  and  existing  bi-  or  multilateral  agreements  for 

54 Regulators [CEER] expressed that Member States should have autonomy in defining the measures to to ensure 
security of supply. 

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emergency situations should be taken into account. ERGEG's Gas Regional Initiatives could 
be a good starting point. Purely administrative grouping should be avoided. 

5. How can solidarity be economically compensated? 

The answers to this question reflect that solidarity is considered a marginal option, which 
preferably  should  not  be  used.  However,  if  it  is,  then  it  should  be  based  on  pre-agreements 
between  the  operators  and  it  should  be  compensated  by  market  terms  (extra  tariffs  etc.). 
Reservation of capacity rights or purchase of gas for solidarity reasons is to be compensated 
also  in  non-emergency  situations.  In  order  to  enhance  solidarity  through  market-based 
measures, regulators consider it should be guaranteed on governmental level that contractual 
obligations are fulfilled also in emergency situations. 

Possible solidarity measures should be known to market participants and conditions must 

be examined how the extra costs of a solidarity action would be covered. 

6. How can security of gas supply be strengthened at lowest cost? 

It is of common understanding among the respondents  that a transparent, well-integrated, 
fully functional, open and competitive market with supply and demand flexibilities is a first 
step  and  a  basic  guarantee  to  prevent  and  mitigate  supply  disruptions.  (Existing  legislation 
and the proposals of the Third Package should be correctly implemented.) In case of a failure, 
market  mechanisms  should  be  the  first  set  of  tools  to  be  used.  Solidarity  and  government 
intervention  may  be  applied  as  a  last  resort  only  if  the  market  is  unable  to  cope  with  the 
problems arisen. (National security of supply measures should be reviewed to ensure that they 
do not hinder competition in an excessive way.) 

In an open, fully liberalized gas market, where effective gas-to-gas competition exists and 
market  participants  can  access  transmission  and  storage  infrastructure,  both  producers  and 
consumers  can  flexibly  respond  to  changing  market  circumstances.  Transparency  of 
information should help better capacity allocation and congestion management. 

At the same time, exposing market participants to the full costs of disruptions, may serve 
as  an  incentive  to  take  precautionary  measures  and  provide  flexible  answers  to  risks. 
Promotion and transparent operation of commercial storages, diverse supply interconnections, 
rapid demand reduction through interruptible contracts are also suitable tools to tackle supply 
problems. 

The  idea  of  setting  up  ACER  (Agency  for  Cooperation  of  Energy  Regulators)  and 
enhancing  the  power  of  regulators  is  considered  as  a  step  towards  greater  predictability  of 
European energy regulation. 

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