A single EU gas zone with a single wholesale price, an entry fee and two exit fees to differentiate customers needing Security of Supply. Research by Karen Sund and Thierry Bros.

As one of the goals at the EU is “reduction (or elimination) of price differences across the continent that are due simply to competitors being able to exercise market power in certain geographic regions”, 2020 could be the best timing to implement a single EU zone and to charge producers for entering the single zone and consumers for burning gas (exit). TTF becomes the de facto the trading reference. It increases its liquidity as all trades are done there. As transport inside the single zone is “free” there is no place having a discount or a premium.

This drastic change in vision will also allow resetting the Regulated Asset Base (RAB) of each player and the total remuneration of all transport companies in Europe. To maximize its welfare, EU should change the regulation to only build infrastructure going ahead when this can guarantee putting additional pressure on all suppliers. The total remuneration of transmission system operators should be fine-tuned by the EU to incentivize only new relevant infrastructure and to force decommissioning of old/unused infrastructure. A simple solution could be to set the remuneration of transport players linked to volume effectively sold and put into storage in 2020 (weather corrected) and a fine system in case of congestion (as this will impede the EU gas market). As the total remuneration is going to be set by the regulator and lower than actual remuneration, transmission system operators will have to decommission redundant infrastructure (to reduce their RAB) while maintaining some spare capacity in the system (to avoid fines).

The entry fee will have to be low enough to incentivize all suppliers to provide gas. This puts all suppliers at a level playing field as they will receive for their gas the hub price – entry fee. The idea behind is to have a competitive entry fee to allow suppliers to enter the EU market, to compete and keep prices as low as possible.

To achieve the best regulation taking into account Security of Supply (SoS), the exit tariff should be set in a way where clients needing SoS pay a premium vs other consumers who have no SoS concern. Again, the exit fee must be competitive to allow consumers to select gas vs other fuels.

A scenario for future demand, where gas has a role of offering storage and transport in a transition period will be helpful for the transport operators and suppliers – this should include new services, greener gas and better cooperation with the rest of the energy system.


This paper is the property of Sund Energy with Thierry Bros. Dr. Thierry Bros is a Senior Research Fellow of The Oxford Institute for Energy Studies, the world leading independent energy institute specialising in advanced research into the economics and politics of international energy. Thierry Bros was from 2010 to 2016 Senior European Gas and LNG Analyst for Société Générale where he was highly regarded by the energy community, notably accredited as the best European gas analyst in the banking industry for four years in a row (2013-2016). He joined Société Générale in 2007 as a Senior Financial Analyst to provide recommendations on listed pan-European gas stocks and in-depth research on gas issues. From 2002 to 2007, Thierry was a Senior Oil & Gas expert at the French Ministry of Economy, Finance and Industry, where he represented France on oil markets and advised on emergency issues at the International Energy Agency, the European Commission and the Energy Charter. Prior to that, Thierry worked, for eight years in a French oil & gas research institute.

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