17.04.2023 | Swiss companies can only participate in new platform as sellers

Joint gas purchasing: hope for the EU - but without Switzerland?

Eberhard Röhm-Malcotti

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The European Commission has been pursuing the concept of joint natural gas purchasing at the EU level for some time: It assumes that the bundled purchasing power will lead to better prices for industry, electricity producers and households through an improved negotiating position. The legal basis for the EU Energy Platform entered into force at the end of 2022. The first demand aggregation is scheduled to start at the end of April 2023; the first delivery date would be July 2023. Swiss companies can participate in the platform - but only as sellers.

At the end of 2022, the EU Regulation 2022/2576 enhancing solidarity through better coordination of gas purchases, reliable price benchmarks and exchanges of gas across borders entered into force. This EU Regulation, adopted by emergency legislation, creates the legal basis for the operation of the EU Energy Platform, with which the EU aims at diversifying gas procurement and supply countries and ensuring the filling of gas storage in view of the upcoming winter 2023/24. The platform is complemented by memoranda of understanding with international supplier countries. In the future, the platform might also be used to procure hydrogen.

According to the EU Regulation, EU member states are obliged to aggregate natural gas demand to an extent that corresponds to at least 15% of their respective storage filling obligations under EU law. The obligation also applies to EU member states that do not have natural gas storage facilities. However, there is no obligation to contract, i.e. the respective EU companies are not obliged to conclude corresponding gas supply contracts after aggregation. Acquired natural gas does not necessarily have to be stored either, but can be used elsewhere.

For the operational implementation, the European online platform for trading in gas capacity rights Prisma European Capacity Platform GmbH (PRISMA), based in Leipzig, was commissioned by the European Commission to set up the AggregateEU platform at the beginning of 2023. AggregateEU, or the algorithm behind it, matches the bundled demand with natural gas offers. Participating companies may then conclude gas purchase contracts with the gas suppliers, either individually or jointly. The costs of PRISMA are borne by the EU taxpayer.

AggregateEU is open to companies based in the EU or in Energy Community countries; they can act both as buyers and sellers, but not in the same tender. Non-EU companies can only participate as sellers; Russian companies are excluded.

According to the European Commission's idea, market access should be facilitated, in particular for smaller companies and companies from landlocked countries without access to LNG infrastructure. The European Union offers two cooperation models to companies that do not reach the required minimum purchase volume, do not have the necessary know-how to handle the logistics for gas procurement or do not have sufficient creditworthiness to conclude contracts with gas suppliers themselves:

  • Agent-on-behalf: Buyers contract another company to provide services, such as making capacity bookings at LNG terminals or organising gas transport.
  • Central-buyer: The buyers commission another company to carry out the purchase on their own behalf. The central-buyer must pass on the purchasing conditions 1:1 to the companies for which it acts and may only invoice for the other services provided.

In both cases, the requirements of EU competition law must be complied with.

For the European Commission, the EU Energy Platform is a prestige project and the expectations towards the natural gas industry and its participation in the platform are high. In practice, however, many operational questions are still unresolved. It is open whether, in the event that the desired contracts are not concluded, and the supply situation should worsen again, a contracting obligation could follow.

In connection with the interruptions of natural gas supplies via Ukraine at the beginning of the 2000s and against the background of natural gas consumption of more than 400 billion m2 of natural gas per year (Eurostat, 2020), the European Commission had already tried in the past to introduce joint natural gas purchasing at EU level. Besides the expected advantages of a purchasing monopoly and the desire to use the EU’s aggregated gas demand as a foreign policy tool, this was also driven by the frustration of Central European EU member states, which have worse purchasing conditions than their western neighbours. At the time, the initiative failed, among other things, due to the resistance of the gas industry and EU member states as well as concerns over EU competition law.

 

Schematic representation of the EU Energy Platform:

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