  The recently announced Energy Union by the European Commission is the most
recent step in a series of developments aiming at integrating the EU's gas
markets to increase social welfare (SW) and security of gas supply. Based on a
spatial partial equilibrium model, we analyze the changes in consumption,
prices, and SW up to 2022 induced by the infrastructure expansions planned for
this period. We find that wholesale prices decrease slightly and converge at
Western European levels, the potential of suppliers to exert market power
decreases significantly, and consumer surplus increases by 15.9% in the EU. Our
results allow us to distinguish three categories of projects: (i) New gas
sources developed and brought to the EU markets. These projects decrease prices
and increase SW in a large number of countries. The only project in this
category is the Trans-Anatolian Gas Pipeline; (ii) Existing gas sources made
available to additional countries. This leads to an increase of SW in the newly
connected countries, and a decrease everywhere else. These projects mainly
involve pipeline and regasification terminal capacity enhancements; (iii)
Projects with a marginal effect on the (fully functioning) market. Most storage
expansion projects fall into this category, plus the recently announced Turkish
Stream. Our results indicate that if all proposed infrastructure projects are
realized, the EU's single market will become a reality in 2019. However, we
also find that SW can only be increased significantly for the EU as a whole if
new gas sources become accessible. Consequently, we suggest that the EU should
emphasize on measures to increase the available volumes, in particular once the
integration of the market is completed. At the same time, efficiency gains,
albeit decreasing SW, help to improve the situation of consumers and decrease
the dependency of the EU as a whole on external suppliers.
