EU ministers go for flexibility on renewables

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Energy ministers agreed to raise biofuels use to a minimum of 10% by 2020 but rejected an EU-wide binding target for renewables, leaving it to member states to decide on specific objectives at national level.

Ministers avoided painful decisions on energy-market liberalisation and renewable energies at a meeting in Brussels on 15 February, preferring to establish greenhouse- gas emissions reduction targets as a priority.

The Council said it “supports ambitious overall EU targets for reducing greenhouse-gas emissions for 2020” but that this should be done “taking into account national circumstances”. As a result, the ministers opted for: 

  • A target of 20% for renewable energies in the EU’s overall energy consumption by 2020, and;
  • a 10% binding minimum target for the share of biofuels in overall EU transport petrol and diesel consumption by 2020.

The ministers also called for “rapid implementation” of the Commission’s energy-efficiency action plan, which, according to Commission calculations, could save Europe some 20% in energy consumption by 2020 and slash its energy bill by more than €100 billion every year.

On energy market liberalisation, the ministers followed France and Germany and “reaffirmed” that the first step should be “full implementation in letter and in spirit” of existing legislation before moving on with additional measures.

The conclusions come as a setback to the Commission and pro-liberalisation states led by the UK who had been pushing for full “ownership unbundling”, a move that would have seen large integrated energy groups split up their distribution and production activities.

The move was defended at the meeting by Competition Commissioner Neelie Kroes, who repeated the Commission’s view that full unbundling was the clearest way to guarantee fair access to energy networks for new competitors.

However, the Commission’s proposal was strongly resisted by France and Germany, which were eager to protect former state monopolies such as EDF and E.ON.

Instead, the Council invited the Commission to ensure “effective separation of supply and production activities from network operations” and “guarantee equal and open access to transport infrastructures” to new energy suppliers.

French industry minister-delegate François Loos told reporters after the meeting that the Council had reached a "suitable" agreement. 

Referring to the unbundling debate, Loos insisted that a distinction be made between the "objectives" and the "means" to reach them, mentioning investments in new network and generation capacity as chief among those.

"What matters are the objectives," Loos insisted, saying that "each country is free" to decide how to meet them. He added that ownership unbundling "might be the solution elsewhere" but that, in France, every network project was able to find sufficient financing without it. 

"I do not condemn the system of ownership unbundling in countries other than France," Loos said. 

According to Loos, France has also put in place "very strong legislation" which guarantees fair access to the network, managed by RTE, a company controlled by EDF and the French state which has kept an 87% stake in the French utility.

"I support the Commission emphatically in the goal of having more competition and, through that, more favourable prices in Europe," said German Economy Minister Michael Glos ahead of the Council meeting. 

But he added that "on the way to meeting that goal, there are the most different of views among the 27 member states". "We will come to an agreement on a middle way," Glos assured.

"Clearly the French and German governments have been long-time champions of their national energy giants," commented MEP Claude Turmes for the Greens in the European Parliament. "However the fact that the UK government is now also swayed by the arguments of these firms, which are active in the UK market, is a serious cause for concern," Turmes said.

EFETthe European federation of energy traders, which includes most large European energy firms and banks among its members, said a "pragmatic approach" was needed on market liberalisation.

Speaking at a press briefing on 16 February, Dr Joerg Spicker, chairman of EFET Deutschland, said there had been "too much focus" in Germany over whether ownership unbundling was good or bad for the country. According to EFET boss Peter Styles, an alternative to ownership unbundling should be put forward to improve the current system for cross-border electricity trade.

This could take the form of "regional system operators" or a system where national- transmission system operators (TSOs) could "transcend" their boundaries to be involved in decisions concerning investments in cross-border transmission capacity. This, Styles admitted, would imply "merging TSOs in many instances".

Global cconservation group WWF said that European energy ministers had made "a positive move" by agreeing on new targets for renewables and biofuels. However, WWF insisted that the objectives be translated into "mandatory targets for different sectors, including electricity, rather than being left to the goodwill of EU member states."

"Only four months ago it seemed impossible to have this goal written in black and white," said Stephan Singer, head of European climate and energy unit at WWF. "It is now essential that these objectives become legally binding," Singer added, saying that "voluntary targets are bound to fail".

Singer also highlighted the "full unbundling of energy grid ownership", coupled with energy liberalisation as "key to allow energy from renewable sources to enter the markets".

These views were echoed by UEAPME, the European small-business association. "The completion of an efficient internal market for energy is a key precondition to reach the European Commission's ambitious goals on energy efficiency, greenhouse gas reduction and renewable sources," the association said.

"As an entrepreneur in an energy-intensive sector, I have seen with my own eyes the negative effects of private monopolies on the performance of companies," said UEAPME President Georg Toifl, terming full unbundling as "badly needed" but "not sufficient".

"Only a strong and independent European regulator will be able to avoid the growth of private network monopolies in the energy sector, and can achieve the goal of a functioning market enhancing cross-border trade," Toifl said.

"National bodies have proven to be weak at best, and excessively obliging towards national champions at worst," he added.

Energy ministers were for the first time debating the Commission's 'energy and climate change package', presented on 10 January 2007. The ministers' conclusions come as a preparation to the forthcoming March summit, which will be urged to reach unanimous agreement on the package, a painstaking process that makes it difficult to reach clear decisions.

The summit will give the Commission a mandate as to the level of ambition it can reasonably expect when it tables formal legislative proposals later in the year.

Once these proposals are on the table, unanimity will no longer be required and decision-making will be easier.

  • Ministers called on the Commission to come forward later in the year with a proposal for "a new comprehensive directive on the use of all renewable energy resources" in Europe. The new directive, ministers said, "could contain provisions" on "member states' overall national targets" and "national action plans containing sectoral targets and measures to meet them."
  • 8-9 March 2007: EU summit to adopt action plan to launch a Common European Energy Policy.
  • 6-8 June 2007: Energy Council to follow up on energy-climate change package.

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