FETSA has made a submission to the Reform of Energy Security Framework consultation, representing the interests of the bulk liquid storage sector.
FETSA supports the reasoning behind the reform of the EU energy security architecture and the IEA process to future proof the stockholding system using disruption scenarios and consumption-based country shares for monitoring whether emergency stocks remain sufficient throughout the transition to a net zero future. FETSA emphasises that the main driver of reform is the concept that in a contested world, with greater instabilities there is a need for the EU to increase its economic preparedness and resilience on the basis of a wider range of disruption scenarios. The EU can reinforce its global position through reduction of dependencies and mitigating geopolitical risks, including energy flows.
The full paper explains the need for strategic storage and stockpiling, and how storage can promote European competitiveness. Strategic storage of energy carriers and other products can create energy security for the products that are stored. Stockpiles act as a buffer to even out supply and demand in case of disruption. The mere existence of a strategic reserve may have a calming effect on prices during moments of disruption. One jurisdiction also uses reserves as a tool to stabilize prices, for example, the US Strategic Petroleum Reserve is used in this manner. This is a step too far. Stocks should be used to remedy supply disruptions and not to intervene directly on prices. A stockpile also reduces other countries’ leverage upon the EU because a stockpile can help to reduce dependency on third countries and reduces the impact of a supply cut off, in case an ill-intended actor wishes to pursue such a course of action.
Storage also helps to promote European competitiveness. This boosts the stability of European industry and contributes to its competitiveness. This is also true for non-industrial users of energy products, who benefit from stable and secure supplies, ensuring supply of domestic consumption of products and energy is always available e.g. to citizens, ports, militaries etc.
FETSA believes that a national approach is important, but in an emergency, this can lead to a situation whereby there is a lack of coordination over releases and also a mentality to ‘hoard’ instead of helping neighboring jurisdictions. Given the interdependence of European countries when it comes to energy logistics, it would make sense to have a more ‘European’ approach to stockpiles. In fact, a regional approach could be preferable to ensure energy security within regions and such a regime could operate according to regional needs (and not according to a global IEA level
policy approach which has natural tensions between producer and consumer countries). This may require greater coordination between officials on foreseen risk scenarios, demand reduction measures etc. across policy areas such as foreign policy, energy policy, industrial policy, defense policy etc. It should not require joint release policies that may not be suited to different national situations.
In all cases, Europe’s energy security should not be ensured through demand destruction via high prices and economic as well as social hardship. The following steps should be taken to minimise and mitigate the effects of future disruptions to energy carriers used both today and in the near future.
- Product Mix Expansion: Reassess and expand the composition of strategic stocks to include refined products and future energy carriers like hydrogen and renewable fuels.
- Stockpile Size: Maintain or increase stockpile volumes to ensure resilience, reflecting supply chain risks and contingency planning scenarios.
- Fast-Track Permitting: Expedite permits for strategic and dual-use storage capacity to adapt quickly to changing energy storage demands.
- Public Investment: Allocate public funds to address market failures, support infrastructure for future energy carriers, and maintain legacy infrastructure where necessary.
- Logistics Improvements: Enhance logistics for rapid stock availability, including strategic locations, rail capacity, and upgraded infrastructure.
- Reporting Requirements: Simplify reporting obligations while ensuring clarity between commercial and strategic stock levels.
- Release Policy: Ensure stock releases address energy insecurity without distorting markets or acting as price control mechanisms.
- Ownership and Costs: Evaluate ownership models for strategic reserves and consider mutualizing costs or implementing user-pay levies.
- Industry Collaboration: Facilitate regular discussions between the European Commission, national authorities, and the tank storage sector to address energy transition impacts.
- Enhance Existing Mechanisms: Strengthen the EU’s strategic oil stocks mechanism to include a broader range of energy carriers, ensuring it remains a robust economic defense.