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Common rules and infrastructure needed to complete EU energy market

Published by , Editor - Hydrocarbon Engineering
Oilfield Technology,

An integrated EU energy market is the most cost-effective way to ensure secure and affordable supplies to EU citizens and mitigate climate change, according to the European Commission. In February 2011 the EU Heads of State declared the need to complete the internal energy market by 2014, underlining that no EU member state should remain isolated from the European gas and electricity networks after 2015. A completed internal energy market could bring net economic benefits between €16 and €40 billion each year. Substantial progress has been achieved to date but in order to reap full benefits more investment is needed in strategic cross-border infrastructure, and developing smart grids for electricity. Common and transparent rules on how the energy grids are used need to be put in place.

Günther H. Oettinger, Vice-President of the EU Commission responsible for energy, said: "If energy markets are well connected and common rules are in place there's not much room left to use energy supplies as a political instrument. With proper price signals and sufficient infrastructure, energy is produced where it's cheapest and sent to where it is needed. All this translates into secure energy supplies all over Europe and lower bills for consumers."

What has been achieved to date

The integration of the EU's energy markets is delivering tangible results mainly on the wholesale markets:

  • Between 2008 and 2012 wholesale electricity prices declined by one-third and wholesale gas prices remained stable.
  • Consumers have more choice among energy suppliers competing through lower prices and better services than ever.
  • Many missing links between countries have been completed or are under construction.
  • Cross-border trade between most European countries has increased. For gas, cross-border pipelines are being used more efficiently thanks to common rules on the use of gas networks.
  • The legal framework makes sure that energy companies cannot exclude competitors from access to pipelines or withhold the construction of important infrastructure. Other rules help guarantee that trading on wholesale markets is fair and prices cannot be manipulated.

What still needs to be done

Further steps are required to enable the proper functioning of the internal market, which allows companies to compete on an equal footing, facilitates the integration of intermittent renewable energy and through correct price signals ensures that energy is produced where it is cheapest and that the most cost-effective investment decisions are taken. For this, it is crucial that:

  • More investments in infrastructure, including in smart grids, are made. In gas, investments should focus on ending the isolation of the Baltic States and the diversification of supply in many Central-Eastern and southeastern member states. In electricity, linking the grids of the Iberian Peninsula, the Baltic region, Ireland and the United Kingdom better with the EU should be tackled as a priority. By 2020 three-quarters of the EU's Projects of Common Interest should be completed.
  • Electricity infrastructure is used more efficiently and its operation is based on the same set of simple, harmonized rules across Europe. The Commission is preparing to adopt these rules in the coming months.
  • Governments intervene only when secure energy flows cannot be guaranteed by the market. Otherwise they may undermine investments in infrastructure and energy efficiency and have a negative effect on consumer bills. The Commission has addressed this issue with its guidelines from November 2013.
  • The regional approach is strengthened, which will be essential for completing the internal market as it can bring results faster and is better suited to address local issues.
  • Consumers become active players in the energy markets. Furthermore, retail and wholesale markets need to be better linked to allow the benefits to become visible also on retail level.

Adapted from press release by Rosalie Starling

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