​​Brussels to announce EU-wide gas reserve to calm volatile prices

The European Commission is set to propose the creation of an EU-wide voluntary strategic reserve for natural gas that would enable stable supplies of the fuel for the whole bloc amid soaring energy prices.

Citing a document shared with EU countries ahead of a summit on Thursday, Reuters reported that the proposed system would be part of the update to the EU gas market rules, which the Commission is due to publish on Wednesday. The bloc would mandate member states to jointly and voluntarily buy natural gas in order to create the strategic reserve.

Brussels confirmed in October, that they were exploring the creation of the EU-wide strategic reserve that would guarantee predictable prices and supplies for the whole bloc. The idea was initially floated by a small group of EU countries, including France and Spain, as a potential solution to the ongoing energy crunch.

Although gas represents over a quarter of the EU's overall energy consumption, storage facilities are only available in half of the member states. According to S&P Global Platts, levels of gas storage are down across Europe – storage sites are 72 percent full, compared with inventory levels of 94 percent at the same time in 2020 across the 28-member group of nations.

The European Commission said it believes a more "integrated European approach" could lower costs and cushion the impact of price volatility. The collective scheme would be voluntary and aligned with EU competition law.

“The proposals will include an enabling framework for the joint procurement of gas strategic stocks by regulated entities on a voluntary basis,” the Commission said in a document circulated to countries ahead of the EU leaders summit on Thursday, and seen by Reuters. The system will "contribute to EU coordinated measures in case of Union wide emergency,” it said.

The document did not confirm how the system of joint procurement would work in practice, but said it was part of a push from Brussels to strengthen EU gas storage systems. “Member States, through joint cooperation at regional level, should be able to rely on storage in other countries in case of needs,” Reuters cited the document.

European governments are scrambling for solutions to protect households from higher energy bills, as gas and electricity costs hit record highs across the continent ahead of the winter heating season. Benchmark wholesale European gas prices have rocketed by more than 500 percent this year as tight gas supplies have collided with strong demand in economies recovering from the Covid-19 pandemic.

EU Energy Commissioner Kadri Simson said in September that renewables “offer the alternative to our dependence on imports of fossil fuels” in response to the tight gas market member states now face. Simson's remarks came after the International Energy Agency implored Russia to increase supplies into the world's third-largest combined economy, without mentioning inventories, or reserves.

According to the news agency, the Commission is clear in its belief that the idea of a strategic reserve does not provide immediate relief for the present energy crisis and, should it be eventually established, it would serve to palliate the next energy crunch.

In the meantime, Brussels suggests EU countries to introduce short term measures to help counter the hikes in electricity bills, including income support for vulnerable households, subsidies for struggling companies and tax reductions. All these solutions, the Commission noted, must be temporary, tailored and targeted, taking into consideration the social and economic features of each country.