EU should replicate joint gas purchases for hydrogen, critical raw materials – Commissioner

The European Union should build on the success of its new joint gas purchase platform and extend it to other commodities including hydrogen and critical raw materials to ensure steady supplies and affordable prices, Maroš Šefčovič argued on Thursday.

The European Union should build on the success of its new joint gas purchase platform and extend it to other commodities including hydrogen and critical raw materials to ensure steady supplies and affordable prices, Maroš Šefčovič argued on Thursday. 

Speaking to reporters in Brussels, the Commission Vice-President for Interinstitutional Relations and Foresight said the second tender round for gas purchases on the newly-launched Aggregate EU platform had yielded “positive results” that “exceed our expectations.”

European companies had put in bids for nearly 16 billion cubic metres (bcm) with international suppliers offering 15.19 bcm. Out of this, an overall volume of 11.98 bcm has been matched — 1 bcm more than during the first round.

He wouldn’t, however, be drawn to comment on prices arguing the Commission is not involved in the negotiations between buyers and sellers and citing the need to respect business confidentiality. He nonetheless said that the fact that transactions are taking place via the platform is “a good sign that the platform brought something better than what you can usually get on the market.”

EU gas storage filling up

AggregateEU became operational in mid-May in a bid to lower prices and ensure sufficient supply is stored ahead of the critical winter months. It is also meant to prevent a repeat of last year when member states competed with each other to secure gas after Russia turned off the tap in reprisal for wide-reaching sanctions for its illegal full-scale attack on Ukraine.

This outbidding put further pressure on prices, which skyrocketed to record levels of over €300 euros per megawatt-hour for several days last August. 

The bloc responded with several other measures including energy-saving guidelines and mandatory gas storage targets. The new rule dictates that EU countries must ensure that their storage capacities are filled at 90% by 1 November 2023. 

Storage levels across the bloc currently stand at just over 80% while gas prices on the Title Transfer Facility (TTF), Europe’s leading hub, hover between €26 and €30 per megawatt-hour.

Three other gas tender rounds are scheduled before the end of the year with the Commission keen to make further changes to the platform based on industry feedback. This time, for instance, prospective buyers were able to submit their demand for deliveries 20 months away — a must for energy-intensive industries.

‘We should really avoid some kind of outbidding’

But the Commissioner also made the case for “expanding this model to other commodities, including renewable gases, hydrogen and strategic raw materials”

The war in Ukraine forced EU member states to take stock of their dependencies and accelerate the roll-out of renewables in a bid to become self-dependent energy-wise.

Hydrogen, which when produced with renewables does not emit gases during either combustion or production, has been touted as a cornerstone of the bloc’s future energy policy due to the EU’s aspiration to become carbon-neutral by 2050. But the vast majority of the hydrogen production plants in the EU use fossil fuels as feedstock. 

The Commission has however tabled an ambition to produce 10 million tonnes of green hydrogen by 2030 and to import an additional 10 million tonnes from abroad. For Šefčovič, AggregateEU could have a role to play. 

“We should really learn the lessons from the last year and we should really avoid some kind of outbidding among the European eventual customers and players in front of the potential international suppliers.”

He also argued that to “leave it up to the traditional means of the trading as we know them today probably will not bring us the scale we need to to get it moving”.

De-risking from China

The model, he added, can also be replicated for critical raw materials such as lithium, gallium and germanium which are needed to power the energy transition and for which the bloc is highly dependent on third countries, primarily China.

Aware of this keen dependency and its potential geopolitical dimension — China imposed restrictions on the exports of gallium and germanium last week citing “national security interests” which Brussels has cast doubts on — EU leaders agreed last month to “de-risk” from Beijing by diversifying its supply chains where possible. 

The EU’s executive is also championing a so-called Critical Raw Material Pact with like-minded partners to secure the supply of such materials and has already struck such a deal with Canada and discussed the topic with the US and Latin American countries, some of which are major producers of raw materials.

“I think again, the mechanisms that you have in our system — that you would have a steering board of the member states, that you would work closely with the industry, that you would have a service provider who can kind of accumulate the demand, organise the international bids and do this matchmaking — I think that something we can definitely also use in this regard,” Šefčovič said.

“So I hope that the common purchasing platform will indeed become the business as usual and we can kind of expand it to new territories because we see that it works and it could be very, very useful for the future,” he concluded.

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