A good theatre company needs a strong podium with open curtains and functional lighting. In much the same way, the various parties in the energy market need a number of fundamental preconditions in order to play their game to the best of their ability. The framework in which they operate must be consistent, predictable and transparent. That was the main message of Gasunie CEO George Verberg at the spring Eurogas conference in Brussels. The main theme of the conference was the relationship between energy liberalisation and sustainable development.
Unlike the situation regarding electricity, the regulation that is introduced within national or EU borders for natural gas also has an impact on the parties operating outside of that domain. After all, the supply of natural gas has a supranational character. We have to consider the integral gas chain in which not only consumption, but also production and transport have a role to play. It is precisely because natural gas production is related to the geographical location of the fields that a global gas market is being created. Gas has to be obtained from increasingly further afield and transported over increasingly long distances. George Verberg: 'Producing countries can decide for themselves who they deliver their gas to. We in Europe have to take care to avoid falling prey to over-regulation, which will result in an unclear, inconsistent and unpredictable market.'That is not an environment in which investors and exporters will want to operate.'
Liberalisation stands or falls on the confidence in the market. Philosopher John Stuart Mill, who laid the foundation for liberalism in the nineteenth century, stated that it was not up to the government to set prices or regulate production processes. 'Both the cheapness and the good quality of commodities are most effectually provided for by leaving the producers and sellers perfectly free, under the sole check of equal freedom to the buyers for supplying themselves elsewhere', wrote Mill in his book 'On Liberty' (1859). Verberg: 'We should therefore resist the temptation to regulate too much under political pressure, for each intervention is also a market disruption and can inhibit the willingness to invest and undermine the market'.
A free market also means learning to deal with risks and uncertainties. It is not appropriate in that environment to use regulation as a means of channelling each new development in the market. 'The purpose of regulation is to leave the market mechanism to do its work and to simply create a framework in which a properly functioning market can come about', said Verberg. 'Accept that a free market means less certainty and teach the participants to deal with that rather than using rules to protect them from reality.'
