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07/12/2016

Leak names ACER as Energy Union supervisor

Energy

Leak names ACER as Energy Union supervisor

Maroš Šef?ovi? [European Parliament]

The Agency for the Cooperation of Energy Regulators (ACER) will be empowered to act as a pan-European supervisor, according to the latest draft of the EU’s plans for Energy Union.

ACER currently only takes decisions at the request of national regulators. It acts through non-binding recommendations and decisions. But the Energy Union communication, obtained by EurActiv, calls for a “significant reinforcement of the powers and independence of ACER.”

That would allow it oversight “as European regulator” of the EU’s internal energy market. It could also “deal with all cross-border issues necessary”.

This would strengthen EU-wide regulation of the single market, the leak said. A review of ACER and the energy regulatory framework will take place in 2015-16, according to an action plan attached to the paper.

Previous drafts of the Energy Union plan, scheduled for launch on Tuesday, did not mention ACER’s elevation.  ACER was created by the Third Energy Package to further progress on the completion of the internal energy market both for electricity and for natural gas. It was officially launched in March 2011 and is seated in Ljubljana, Slovenia. 

The empowerment of the association of national regulators would echo a similar evolution in other pan-European committees of supervisors. The EU’s three European Supervisory Authorities of financial regulation were first proposed in 2009, in response to the financial crisis.

The idea was to bolster pan-EU resistance to financial shocks, which, the crisis showed, could easily spread across borders.

The European Banking Authority, The European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority have been in operation since 2011.

All three were previously committees of national regulators, just as ACER is now. ESMA was later handed direct supervisory powers over credit rating agencies.

Since their creation, the ESAs have pleaded for additional resources to further bolster their independence.

Like the financial supervisors, the strengthening of ACER will come in response to a crisis, this time about security of energy supply.

The Energy Union is the EU’s response to the Russian threat to its gas supplies. The majority of Russian gas imports to the EU, about 30% of its annual needs, goes through Ukraine. In 2009, Russia turned off the taps, causing shortages in the EU.

Since then, the situation has worsened with the annexation of Crimea, the shooting down of the Malaysia Airlines flight by Russian backed separatists, and EU sanctions on Russia.

While the financial crisis lead to the EU Banking Union, with the European Central Bank as Eurozone supervisor, Ukraine has given political impetus to the creation of Energy Union.

Energy sharing

A single supervisor makes sense in terms of the Energy Union, which aims to share energy more effectively across the EU, so that a surplus in one country could be used where there is a shortage, be it because of an unreliable supplier, such as Russia, or any other reason.

Acer will likely have an important role in boosting cooperation and information sharing between national supervisors further.

In order for the Union to function, the collection and analysis of reliable data across the EU will also have to be improved. The plans also foresee a radical overhaul of the EU’s electricity market, which will require policing.

And any governance structure will be vital if the EU is to hit its climate and energy targets for 2030, agreed by EU leaders in October last year. Those targets are also part of the Energy Union project.

>>Read: EU leaders adopt ‘flexible’ energy and climate targets for 2030

A binding target of a 40% reduction was agreed for greenhouse gas emissions at the summit. But renewables and energy efficiency targets of at least 27% are non-binding at national level. Making sure that EU-level targets for renewables and efficiency are hit in the absence of binding national targets will require a governance structure, possibly overseen by ACER.

“The governance structure may need to be set on legislation at a later date,” an internal paper on the Union, dated 30 January, said. But that sentence was removed from the latest draft of the Energy Union communication.

EurActiv was unable to reach ACER for comment by time of publication.

Logical?

Earlier this month, Jean-Arnold Vinois said the evolution of an EU-level regulator was both “consequent and logical”. Vinois is an adviser on European energy policy at Notre Europe – Jacques Delors Institute. He is honorary Commission director of DG Energy. A former advisor to former Energy Commissioner Günther Oettinger, he continues to act occasionally for DG Energy to promote the internal market for energy.

“One day there will be a EU regulator for energy. We’ve seen it with Banking Union – no one would have thought that was possible five years ago,”  he told delegates in a panel debate at an event held by the Union of the Electricity Industry (Eurelectric)

>>Read: Single supervisor mooted for Energy Union, as Šef?ovi? pushes ‘holistic’ approach

Differences between drafts

The most recent leak is largely similar to previous drafts. The Commission’s desire to vet member states energy deals with non-EU countries remains, for example.

>>Read: Commission wants to vet member states’ energy deals

But it does row back on the opening up capacity markets to cross-border investment.

>>Read: Energy Union targets renewables subsidies, boosts idle coal plants

Capacity mechanisms reward power companies – mainly gas and coal stations – for the amount of power they can produce, rather than by buying the energy they actually generate.

Supporters claim the model can prevent blackouts, enabling the surplus capacity to be brought online in case of a shortage or to cover consumption at peak time.

Critics counter that paying for surplus, unused power is a public subsidy for high-carbon industries, entrenching polluting fossil fuel stations for years to come.

The language has softened, discussing the need to co-ordinate the mechanisms across the EU rather than explicitly open them up to investment.

The Commission has also resisted calls by campaigners to explicitly put “energy efficiency first” in the draft. Instead it sticks with a call on EU governments to give efficiency “primary consideration” in their policies.

Background

The Energy Union is the EU’s response to the Russian threat to its gas supplies. The majority of Russian gas imports to the EU, about 30% of its annual needs, goes through Ukraine. In 2009, Russia turned off the taps, causing shortages in the EU. 

Since then, the situation has worsened with the annexation of Crimea, the shooting down of the Malaysia Airlines flight by Russian backed separatists, and EU sanctions on Russia.

Plans for the Union have developed beyond questions of security of supply to encompass issues such as fighting climate change. 

ACER was created by the Third Energy Package to further progress on the completion of the internal energy market both for electricity and for natural gas. It was officially launched in March 2011 and is seated in Ljubljana, Slovenia. 

Timeline

  • 25 February: Launch of Energy Union communciation