EU braces for next round of ‘difficult’ energy talks

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The second half of 2007 promises renewed tensions as legislators prepare to hammer out the EU’s future energy policy. Controversial Commission proposals on energy market liberalisation are due in September, with renewables and CO2 burden-sharing proposals scheduled for the end of the year.

  • Calm before the storm?

EU civil servants have left Brussels in a mass holiday exodus, and official EU institutional activity at the “heart” of Europe has come to a near standstill.

But the calm is likely to be short-lived, as the cabinets of Commissioners Nellie Kroes (Competition) and Andris Piebalgs (Energy) are to finalise by 19 September proposals for directives designed to further liberalise the internal market for gas and electricity (EURACTIV LinksDossier).

  • Bungling unbundling? 

On 30 July, a group of nine member states, led by France and Germany, sent a letter to the Commission arguing that the EU executive must do away with the “assumption” that imposing independent ownership of grids and transmission systems – so-called ‘ownership unbundling’ – is the only and best option for developing the EU’s electricity and gas markets.

French and German energy giants in particular have been the focus of scrutiny for alleged anti-competitive behaviour resulting from simultaneous ownership of energy grids and power generation facilities, and MEPs have repeatedly called for full ownership unbundling (EURACTIV 19/06/07 and 11/07/07).

But plans to break up Europe’s “energy monopolies” have met vehement criticism not only from large companies such as RWE, EDF and E.ON, but also from a majority of EU member states (EURACTIV 07/06/07). 

Britain, Spain and Sweden support full unbundling of ownership. 

Speaking with the Brussels-based industry association BusinessEurope, Christopher Jones from Piebalgs’ cabinet said that the current thinking around the energy commissioner is to give member states the option of either unbundling or maintaining ownership, under the condition that transmission system operating powers are transferred to an Independent System Operator (ISO). 

An ISO – a committee composed of national energy regulators chaired by the Commission – would be mandated with ensuring competitive energy pricing and fair access to energy grids. The ISO would essentially act as a trustee of large energy companies’ assets.

  • The renewables mix

A Commission proposal for a framework directive on renewable energies, expected either before or after the 3-14 December UN Climate Change Conference in Bali, will spell out “differentiated national overall targets” that each member state must achieve in order to increase the EU’s total share to 20% by 2020.

Europe as a whole currently stands at around 6.4% currently, according to the Commission.

Once the overall national targets are agreed, it will be up to each member state to lay out sectoral sub-targets for each type of renewable – solar, wind or hydro, for example – in national action plans (NAPs). But Commission officials admitted that determining the individual targets will be “a difficult one” (EURACTIV 21/03/07).

One of the options currently being explored by the Commission is to require an across-the-board renewables increase of 13 percentage points from every member state by 2020, a move which was suggested last month by the European Wind Energy Association (EWEA). “Its appeal is its relative simplicity and equity,” said a Commission official quoted by Point Carbon, a research and advisory firm based in Norway.

But the Commission and EU leaders have already agreed at a summit in March that Brussels should take into account the “different national starting points and potentials” when defining the national figure. Moreover, it remains unclear whether the NAPs, once adopted, will be legally binding and whether the Commission will issue a separate decision to adopt or reject each plan.

Member states will also be left to decide on renewables targets for heating and cooling with the Commission limiting its role to providing “indications”, leaving the specifics up to member states. (EURACTIV 24/05/07). MEPs in the Parliament’s Industry, Research and Energy (ITRE) Committee have signalled their support to this approach in a July vote (EURACTIV 11/07/07).

  • Thirst for biofuels

The first half of 2007 featured numerous conferences devoted to biofuels, including a high-level event attended by Brazil’s President Luis Inacio “Lula” da Silva (EURACTIV 05/07/07). The Commission, renewable energy groups, the agricultural sector and major industries are all looking to the potential of biofuels as a low CO2-emitting fuel for use in transport, chemicals and beyond, while environmental groups urge extreme caution (28/06/07). 

Whether or not the EU can reach its stated goal of 10% biofuels use by 2020 depends largely on the development of second-generation biofuels (EURACTIV LinksDossier).

Biofuels proposals are expected alongside the renewables proposal in December.

  • Carbon and technology 

Emissions trading in the EU enjoyed mixed success between 2005-2007, with carbon prices collapsing in the second half of the trading period (EURACTIV LinksDossier). 

But the EU is preparing for a second round of trading, confident that its “flagship” policy for fighting climate change remains the right instrument for limiting industrial emissions and promoting energy efficiency. 

A number of new EU member states, however, feel the carbon limits put forward by the Commission are too restrictive for their developing economies, and have launched legal action to challenge the Commission’s proposed caps (EURACTIV 01/08/07). 

The Commission is expected to propose a revised EU Emissions Trading Scheme (EU ETS) before the end of the year for the period after 2012. 

To promote the “greening” of the EU’s economy, the Commission is also planning to put forward in December a Strategic Energy Technology (SET) Plan, with details on how research and development of new environmentally-friendly technologies, including “clean coal” systems, will be financed (EURACTIV LinksDossier).

EU commitments to reduce CO2 emissions, increase renewables use and energy efficiency by 20% by 2020 have sent ripples throughout the energy community, as energy giants, environmental NGOs, renewable energy groups and other stakeholders vie for the attention of EU policy-makers.

Meanwhile, the Commission's services are scrambling to prepare a set of legislative proposals that address the triple challenge of fighting climate change while guaranteeing energy security and keeping energy prices low.

  • 19 Sept 2007: Commission to propose third package of directives on liberalisation of energy markets; 
  • Dec. 2007: Commission expected to put forward:
    • a proposal for a comprehensive 'framework directive' on renewable energies including an update of the biofuels directive;
    • a review on the need for harmonisation of national support schemes for renewable electricity;
    • a proposal to revise the EU-ETS for the period after 2012;
    • a Strategic Energy Technology Plan.

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