EU to Ease Gas Storage Requirements to Avoid Price Spikes

(Bloomberg) -- The European Union is easing requirements for filling gas storage this year, allowing countries some wiggle room on meeting the region’s Nov. 1 target.

The European Commission issued a set of recommendations for this year, prompted by market speculation driving the cost of refilling this summer. The EU said it will consider allowing flexibility for gas storage if “specific market conditions” mean that targets aren’t met. Markets have been buffeted by high prices and volatility in recent months.

Member States should still aim to have storage 90% full by Nov. 1 but allowances can be made like pushing the deadline to Dec. 1 if countries can explain why the target hasn’t been met, according to documents published Wednesday.

“Providing Member States with sufficient flexibility to fill storage facilities throughout the summer season at optimal purchase conditions, will reduce system stress and avoid market distortions,” the commission said in the recommendations.

Since the energy crisis, the European Union has required its member states to fill fuel storage sites by at least 90%, a measure that’s designed to ensure countries have enough gas to get through the heating season. Recently, however, market participants have worried that replenishing reserves will be difficult after stronger-than-expected withdrawals, and after the region lost some of its previous sources of supply. 

“European countries cannot afford to ignite a dash for gas ending up with high prices for all just because of intermediate storage refilling targets,” said Simone Tagliapietra, a senior researcher at the Bruegel think tank. 

LNG facilities could count toward the Nov. 1 goal, according to the recommendations. Floating terminals can be used to store fuel. The commission also urged member states review the temporary measures they have in place to make sure storage filling targets are met.

The move comes after pressure from a group of countries including Germany and France calling for more leeway on the storage targets. They’ve raised concerns that traders are speculating on a rush to replenish the facilities before winter to meet the target. The commission has previously stressed that a number of existing flexibilities are already in place and can be used this year.

“It’s not just about trying to reach the target as soon as possible,” said Maximo Miccinilli, head of energy and climate at the consulting firm FleishmanHillard EU. 

The recommendations came alongside a proposal to extend gas-storage targets until 2027, confirming an earlier report by Bloomberg. The 90% target for Nov. 1 will remain in place, but interim targets during the summer filling season are “indicative,” according to the proposals. 

The proposal will now be sent to member states in the EU Council and the European Parliament, who have the right to suggest changes. It will qualify as an emergency measure and will need approval from member states only, with negotiations potentially wrapping up by the end of June. 

Maintaining sizable fuel inventories has become crucial for Europe’s energy security since it lost most Russian pipeline flows, as it provides a cushion against demand spikes during the heating season.

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