EU legislates to limit gas demand over winter

The regulation on coordinated demand-reduction measures for gas envisages voluntary efforts from EU countries to cut gas consumption this winter, but it also provides backstop powers to EU law makers to intervene if the risk to the EU’s energy security escalates. The measures reflect concerns that Russia will cut off gas supplies to Europe in retaliation for the way European countries have responded to Russia’s invasion of Ukraine.

“The recent escalation of disruption of gas supply from Russia points to a significant risk that a complete halt of Russian gas supplies may materialise in the near future, in an abrupt and unilateral way,” EU law makers said in recitals to the regulation. “The Union should therefore anticipate such a risk and prepare, in a spirit of solidarity, for the possibility of a full disruption of gas supply from Russia at any moment. Immediate proactive action is necessary to anticipate further disruptive action and strengthen the resilience of the Union to future shocks.”

“Coordinated action at Union level can avoid serious harm to the economy and to citizens resulting from a possible gas supply interruption,” they said.

Under the legislation, individual EU countries will use “best efforts” of their choosing to reduce their gas consumption over winter months by at least 15%. The target applies to the period from 1 August 2022 to 31 March 2023. Performance against the 15% target is to be measured against average gas consumption over the same period in the five previous years.

If voluntary measures are deemed insufficient, the regulation provides backstop powers for EU law makers to issue a ‘Union alert’ making gas demand reductions mandatory. These powers can be exercised where EU officials consider “there is a substantial risk of a severe gas supply shortage or where an exceptionally high demand for gas occurs”, or if five or more member states have declared an alert at national level and request EU-wide intervention.

Limited exemptions from the mandatory regime apply, including where EU countries’ electricity system “is synchronised only with the electricity system of a third country” or if countries are “not directly interconnected to a gas interconnected system of any other member state”.

In a statement, the Council of Ministers said: “When choosing demand reduction measures, member states agreed that they shall consider prioritising measures that do not affect protected customers such as households and essential services for the functioning of society like critical entities, healthcare and defence. Possible measures include reducing gas consumed in the electricity sector, measures to encourage fuel switch in industry, national awareness raising campaigns, targeted obligations to reduce heating and cooling and market-based measures such as auctioning between companies.”

“The difficulty would be to adequately distribute gas should it get scarce," said Alice Boldis, expert in energy projects at Pinsent Masons. "Germany, the largest European gas importer, would face particular difficulties rationing gas given the large industry demand, as this may result in a severe recession."

Government ministers from across EU member states reached agreement on the new regulation at a meeting on 26 July. It is due to take effect one day after it is published in the Official Journal of the EU.

Earlier this year EU officials reported that Russia provides more than 40% of the EU’s total gas consumption. A further 27% of oil imports and 46% of coal imports to the EU also arrive from Russia. In response to Russia’s invasion of Ukraine, EU officials have presented a package of measures – the REPower EU plan – that is designed to reduce reliance on Russian fossil fuels over the medium to long term, and support the EU’s energy transition at the same time.