Analysis: Energy security and unbundling

BERLIN, Sept. 21 (UPI) -- Will the European Commission's energy market reform plans improve or threaten energy security in Europe? The controversial legislation to open up the continent’s gas and electricity market divides experts.

The commission would say the new strategy, unveiled this week, improves continental energy security and also ensures fair competition and prices. It includes the plan to unbundle the energy market, meaning that it won’t allow companies to own the distribution networks they also supply.

European Union Competition Commissioner Neelie Kroes has been the main driving force behind the planned breakup of these monopolies. She is convinced that the unbundling will restrict the influence of big utility companies and favor competition, as it allows smaller firms to use the grid as well.

The biggest energy security aspect of the new draft would be what experts have called the "Gazprom Clause," which bans non-European countries from buying into the continental grid unless an agreement is struck between that company’s government and Brussels. And the EU would surely not clear Gazprom, a company that enjoys a government-controlled monopoly at home.

This is the first time Europe has spoken with a unified voice to Russia, a country that accounts for roughly one-quarter of Europe’s energy needs but in the past has come under scrutiny for using its oil and gas assets as a political pressure tool.

Obviously Moscow doesn’t like the new strategy set forth by the European Commission:

"Such limits are against the free market spirit of the European Union and amount to state protectionism," the Moscow Times quoted Alexander Shokhin, head of the Russian Union of Industrialists and Entrepreneurs, as saying.

Russian officials calling for an open market -- that banks on absurdity: Russia prohibits any company other than Gazprom (foreign or Russian) from owning gas pipelines in Russia, and Transneft, the state petroleum pipeline operator, enjoys the same protection in the oil sector.

However, as for imports -- and the Commission knows this just as well -- there is no short-term alternative for Russia, as other powers will compete on the LNG market, and alternative suppliers in North Africa don’t have the reserves Russia has.

Moreover, leading European nations have already voiced opposition to the new legislation. France and Germany would like to prevent the unbundling because it would affect their large energy players, Gaz de France (which is about to merge with Suez), Eon and RWE.

Joachim Pfeiffer, an energy expert for Chancellor Angela Merkel’s Christian Democratic Union, said the uncoupling was "a completely wrong path" that would not necessarily ensure more competition.

Sweden-based Vattenfall plays the odd exception by backing the unbundling, calling to hand over the networks to an independent body.

That’s also the Commission’s compromise proposal, as it knows that the forced, radical unbundling may not find a majority with the 27 EU government heads. The compromise proposal would allow the company to retain ownership of the network, which would be run by an independent system operator. The EU would control these operators to make sure they guarantee easy access and pave the way for much-needed investments in the European grid.

"Unbundling is no cure-all," Claudia Kemfert, energy expert at the German Institute for Economic Affairs, a Berlin-based think tank, told United Press International in an interview. "We need a European regulating agency that creates the incentives or directives that the companies invest in the grids, and then it doesn’t matter who owns the networks."

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