EU Energy Policy Update


EU Energy Policy Update

In Focus


In an attempt to find an answer to Europe’s €300 billion investment gap, on 26 November the European Commission unveiled its long-awaited and much debated Investment Plan. The Investment Plan will mobilise €315 billion to boost the EU economy. Projects in the field of energy infrastructure, energy efficiency, sustainable transport and the digital economy are set to be supported by this new investment fund. Whilst these still need to be selected by a specialised committee made up of technical experts from the Commission and the European Investment Bank, the European Commission President, Jean-Claude Juncker, has already outlined the kind of projects that might be eligible for funding. These include those that promote energy efficiency investments in households and companies, or those that build better waste, recycling and water treatment facilities. For now, Member States have been invited to submit to the Commission the projects they would like to promote in order to partake in this new financial mechanism.

So far so good. But will this plan really manage to boost investments and kick-start the European economy, as Juncker says? Reactions in the European political groups ranged from “a step towards an ambitious reform agenda for Europe” (EPP) to “a good starting point” (S&D) to “Juncker’s plan lacks ambition, means and clear goals” (Greens/EFA). Despite the scepticism, and as expected, all stakeholders are now trying to claim their shares as early as possible, before any concrete proposal is made. Companies, trade associations and NGOs are all jostling to position themselves by voicing their ‘asks’ and ‘wishes’ to the Commission in terms of sectors to target and key priority projects. There is still room for manoeuvre, because while the amount of the overall budget and an overview of the key sectors have already been revealed by Juncker, many questions still remain unanswered, especially on the concrete content of the overall plan. One thing is clear, however: the new investment fund is not so much a paradigm change for EU investments but rather a tool to better channel investments in key sectors and projects, including energy efficiency, sustainable transport and energy infrastructure.

Some of the open questions should be answered later this month. Member States will debate Juncker’s Investment Plan on 18-19 December in Brussels and the first investment projects are expected to be announced just before the Christmas holidays. Then, in January 2015, the European Commission plans to bring forward a regulation on the matter and is asking Member States and the European Parliament to agree to fast-track its adoption so that the new fund can be operational by June 2015. It remains to be seen whether the buzz and excitement among Brussels stakeholders, already quite measured in some quarters, will continue once further details of the plan have been announced.


Energy in Europe

Member States want a timely reform of EU ETS to keep EU atop of climate negotiations

On 5 November, the ITRE (Industry, Research and Energy) Committee in the European Parliament debated the European Commission’s proposed Market Stability Reserve (MSR) for correcting oversupply and potential future undersupply in Emission Trading System (ETS) which, if approved, would start working in 2021. The draft measure would impose automatic supply controls in the EU emissions trading system, correcting the overabundance of permits that have pushed the prices down by about 80 percent. Some countries, such as those of the Green Growth Group (a group of 13 member states committed to ambitious energy legislation and includes France, the UK and Germany) want the market stability reserve to begin as early as 2017, as they believe this would bring emission prices from the current €6 towards the €20 mark needed and would also trigger low-carbon investment much faster. MEPs aim to vote on the MSR mechanism proposal by mid next year, ahead of the 2015 United Nations Climate Change Conference in Paris. It is clear that the EU, the world’s most successful and biggest carbon market, needs to go to Paris as a united and streamlined bloc if it wants to have any leverage in the climate negotiations in Paris. As such, the Energy and Climate Commissioner Arias Canete, has highlighted the reform of the EU ETS as a priority to keep Europe as a leading actor in the fight against climate change.

Read more… 
Platts: EU climate committee seeks stronger carbon market stability reserve
The Parliament Magazine: EU energy policy must assist industrial competitiveness


EU policymakers look at the Mediterranean as an answer to EU energy dependency problems

The European Commission organised a high level conference entitled "Building a Euro Mediterranean bridge: the strategic importance of gas and electricity networks in the context of energy security" on 18 November in Rome. Participants discussed the strategic importance of Euro-Mediterranean gas and electricity networks for energy security in Europe. As the third largest importer of gas to Europe (Algeria, Libya and Egypt provide 15 percent of the EU's total gas imports), North Africa is considered a region that might help solve Europe’s energy security problem, with a considerably large amount of untapped gas resources. Recently, gas deposits have been discovered in the eastern Mediterranean (see APCO’s around the world section below for further information) and the region is thought to have shale gas deposits. Key to taking advantage of this, however, is a more interconnected system between North Africa and Europe, something Commission Vice-President Sefcovic, who attended the conference, declared that the Commission will work on by facilitating cooperation between actors to “transform the Mediterranean into a (gas supply) hub”. If this happens, then southern countries such as Italy or Spain would be very well placed to be the new door-keepers for gas in Europe. Much work still needs to be done by the Commission to boost the interconnection capacity of European countries, however. The Council conclusions on the 2030 Climate and Energy policy framework includes an aspirational target of 15 percent for interconnections which, though it appears and is rather modest, will take a lot of work, investment and political will to meet. For example, Spain is de facto an energy island with just three percent interconnection capacity, while France's is around nine percent thanks to links with other neighbouring countries.

Read more… 
European Commission: Speech on Building a Euro Mediterranean Energy Bridge, High Level Conference, Rome
Ansamed: Final Statement: Building a Euro-Mediterranean energy bridge: the strategic importance of euromed gas and electricity networks in the context of energy security


European Commission in favour of EU common purchasing of gas

Several Commissioners, including Vice-President for Energy Union Sefcovic, Commissioner for Energy and Climate Change Arias Canete and Commissioner for Competition Vestager, have publically supported the EU joint purchasing of gas that was initially proposed by the new European Council President Donald Tusk in an op-ed on an Energy Union plan published in April 2014. Tusk spearheaded the idea of an EU Energy Union, advocating for the EU to create an efficient network, including pipelines and interconnectors between Member States, and create a system where the EU negotiated jointly for gas purchases. Now, seven months later, at a conference on 17 November, Sefcovic explained that, as the biggest energy consumer, the EU should explore ways to buy gas as a group. The idea has recently gained momentum in Brussels policymaking circles, although many opponents have stated that the project would be unviable as it would raise anti-trust issues. However, the Commission has already said that it will only allow joint purchasing of gas if this does not mean an increase in price for consumers. During a conference at the Centre of European Policy Studies (CEPS) on 27 November, Christian Egenhofer, CEPS Senior Fellow and Head of the Energy and Climate programme, analysed the proposal for joint purchasing of gas and urged the Commission to endow it with sufficient teeth to impact the way Europeans agree on the price of their gas. He stated that the joint purchasing of gas could add strength to European energy companies, although it could be unviable if not shaped correctly. The proposal is expected to be made public in January next year when the Commission publishes its Energy Union strategy.

Read more…
Reuters: EU should work on becoming a single gas buyer - Sefcovic
CEPS: Energy Union: More than joint gas purchasing?
FT: New EU energy chief shifts focus to building common power market



Environment & Climate Change

Circular Economy package being re-considered by newly-elected college of Commissioners

“Better regulation” is one of the new Commission’s flagship initiatives, and the newly appointed College of Commissioners is already revisiting the list of pending legislative proposals put forward by the last Commission, discussing whether to withdraw some. One potentially on the chopping board is “A Zero Waste Programme for Europe”, which was introduced by the former Environment Commissioner, Janez Potocnik, this summer to turn the European economy into a circular economy, use resources more efficiently and simplify waste legislation. A decision will only be taken in December, but already, the fact that the circular economy package might be watered down or even scrapped has caused much uproar, in particular amongst NGOs. They say that not only could a circular economy contribute to creating a sustainable economy but also it could help promote growth and competitiveness. In an open letter to the Commission, the European Environmental Bureau (a major green NGO) estimated that up to 580,000 sustainable jobs in Europe could be generated by this legislation. Meanwhile, Business Europe (the federation of European business associations) has called for the package in its current form to be withdrawn and redrawn to focus on economic rather than environmental terms. It still remains unclear what Juncker’s decision will be with regards to the European circular economy but - whatever it is - it surely will give much to talk about in the future.

Read more…
Resource Efficient Business: Is EU Commission review going to kill off circular economy proposals?
The Parliament Magazine: Circular economy model key to boosting European economy
European Environmental Bureau: Open letter


Parliament and Council reach agreement on plastic bags

MEPs and EU Member States have reached an agreement on the draft Directive to reduce the use of plastic carrier bags. The new measures target plastic carrier bags with a wall thickness below 50 microns - those plastic bags mainly used in the EU. The agreement would give Member States two options for implementation; the introduction of mandatory targets for consumption, or pricing. Concretely this means that Member States could either take measures ensuring that yearly consumption levels do not exceed 90 lightweight plastic bags per person by 31 December 2019 and 40 lightweight plastic carrier bags per person by 31 December 2025 or introduce a mandatory charge for plastic bags by 31 December 2018. It is worth noting that while MEPs and Member States welcomed the agreement reached, even referring to a “historic moment” for Europe, the European Commission does not seem to be too satisfied with the agreed text which differs significantly from its original approach. Unlike the Parliament and Council agreement, the Commission’s original proposal did not introduce any binding reduction targets. Industry also voiced concerns that these new rules could have a negative impact on trade in the EU’s internal market. In terms of next steps, the Council is expected to adopt a political agreement at the Environment Council on 17 December and the Parliament Plenary vote is scheduled for early 2015.

Read more…
Council of the European Union: Press release
Euractiv: Europe’s ‘historic moment’ on plastics bags contested by industry advocates


Renewable Energy

Largest solar power plant in Europe will be built in France

A 300 MW solar power plant worth approximately €365 million is being built in Cestas, close to Bordeaux, and will start providing solar energy to the French national grid as of October 2015. The plant is property of the French-based company Neoen, and it is expected to be the largest photovoltaic solar park in Europe. With the construction of this solar property, France - a country particularly known for promoting nuclear energy - will become one of the biggest producers of renewable energy in Europe. This comes at a time where France is going through its own particular “Energiewende”. On 1 October, the Minister of Ecology presented the energy transition bill, a flagship of Francois Hollande’s electoral campaign, which aims to define long term objectives for reducing energy consumption and greenhouse gas emissions. The new solar power plant will help achieve the targets introduced by the energy bill, including cutting greenhouse gas emission by 40 percent by 2030. France, which at 9 percent is relatively well interconnected to the rest of Europe, might also be able to export any energy surplus, helping reduce Europe’s energy dependency on third countries.

Read more… 
Clean Technica: France Reveals New 400 MW Tender For Solar PV Projects Over 250kW

EU report finds role of biofuels in reducing GHG underestimated

According to a report commissioned by the European Commission, the EU has misjudged the greenhouse gas emissions savings offered by biofuels by as much as 50 percent. The report explains that when looking at the impact of biomass on greenhouse gas (GHG) emissions, the Commission should measure emissions from the fossil fuels that would be on the market if biomass was not available, and not on the actual market (which takes into account biomass). This, according to the report, leads to a misunderstanding of the contribution of biofuels to achieving the 2030 Framework targets (and further 2050 decarbonisation scenario). The role of biofuels in the energy mix continues to be one of the most contentious policy decisions in the EU, with many NGOs stating that if biomass is promoted for energy purposes, the land for food consumption will be replaced by land for biomass. On the other hand, some Member States such as Italy and Sweden, are promoting biofuel consumption. The private sector remains divided too, although energy companies are increasingly diversifying to include this alternative in their existing offerings. On 20 November, during a dinner ceremony in the United States, Shell Vice President Mathew Tipper declared “We believe our best bet is woody biomass and energy crops as feedstock. We plan to do this with a scale-up of smaller plants with widespread feedstock availability.”

Read more… 
Euractiv: EU underestimates biofuels’ greenhouse gas savings by 50%
Biofuels Digest: Shell: expects to be producing advanced biofuels at scale, in US, by end of decade
Ecofys: Report: Greenhouse gas impact of marginal fossil fuel use



Energy Markets

Poland’s shale gas market less prosperous than originally thought

Amongst European countries, Poland has always been considered a champion for shale gas, not only because it would potentially help Poland reduce its dependency on Russian gas but also because Poland was thought to shelter considerable amounts of this unconventional gas. However, after the first round of explorations has taken place, it has emerged that the gas boom in Poland could take as long as six more years to become commercially viable, due to red tape and an unstable investment climate. Other Member States already experienced similar outcomes, where shale gas prospects were much poorer than originally thought or administrative burdens too heavy to surpass. Hence, after an initial rush, major exploring companies have pulled out citing difficult geological conditions and restrictive regulations. Under these circumstances, it remains to be seen how far Donald Tusk, the new European Council President and a Polish citizen, will go to promote shale gas. As already stated in his proposal for an Energy Union, Tusk believes countries should make shale gas part of their energy mixes. However, the new situation in Poland and the reluctance of some Member States to pursue this alternative might put a break on Tusk’s enthusiasm for the unconventional fossil fuel.

Read more… 
FT: Poland’s shale gas dreams put on hold


EU approves Germany’s Renewable Energy Act (EEG); Germany’s largest power supplier to focus on renewables

Following an in-depth investigation launched in December 2013, the European Commission announced on 25 November that the aid granted for the production of energy from renewable energy sources under the German Renewable Energy Act (EEG) complied with EU state aid rules. Besides a “limited portion” of reductions granted between 2013 and 2014 which exceeded allowance under EU state aid rules (and therefore needs to be paid back), the Commission approved the majority of reductions granted to energy-intensive companies in Germany on a surcharge to finance the support for renewables. On 30 November, Germany’s largest power supplier E.ON announced plans to spin off its operations in the field of nuclear, oil, coal and gas in a move to focus on renewable energy sources, distribution networks and tailor-made energy efficiency services. E.ON’s CEO Johannes Teyssen outlined that this drastic move is necessary to respond to “dramatically altered global energy markets”; broad business models are no longer the right strategy to address today’s challenges of a new energy world. The overhaul of Germany’s largest power supplier comes at a time when the company is already struggling with massive debts. The spin-off is expected to take place in 2016. It will be interesting to see how other major integrated utilities in Germany and Europe will react to E.ON’s strategy shift.

Read more… 
European Commission: Commission approves German aid scheme for renewable energy (EEG 2012); orders partial recovery
Deutsche Welle: German energy giant E.ON to focus on renewables


Russia announces end of South Stream pipeline project

On 1 December, Russia’s President Vladimir Putin surprised many when he announced that he would bring the construction of the South Stream gas pipeline to a halt, due to alleged EU intransigence. Considered as the cornerstone of Russia’s foreign affairs policy in the field of energy, many pundits fail to understand this latest move. The project would have de facto increased Europe’s energy dependency on Russia’s gas imports, and therefore even further leveraged Moscow vis-a-vis Europe. Putin has justified the decision by stating that “in the current conditions Russia cannot continue with the realisation of this project.” Putin also criticised the non-constructive behaviour of the European Commission, saying that the South Stream pipeline could only be realised if fully supported by the EU. For many years, the Russian President had been a strong supporter of the construction of the pipeline to transport gas to Southern Europe, which would have imported gas into Europe through the Black Sea to Bulgaria, bypassing Ukraine. Particularly affected by this decision will be Bulgaria which stands to lose about €400 billion in transit fees. It is no coincidence that Russia announced this change in plans during a visit to Turkey, as Moscow is seeking to build relations with Turkey, and has announced that it will work to develop a gas hub to southern Europe via Turkey. To this end, a memorandum of understanding was signed by Turkey and Russia on 1 December.

Read more… 
BBC: Russia drops South Stream gas pipeline plan
EU Observer: Putin says will not build South Stream gas pipeline



APCO Around the World

At a conference of energy ministers from European and Middle Eastern countries in Rome in November, Israel Minister of National Infrastructure, Energy, and Water, Silvan Shalom, suggested to Vice-President for Energy Union, Maros Sefcovic, support for building a natural gas pipeline from Israel to Europe.

The proposal comes a few weeks after the EU announced that it would contribute €1.32 million to an electrical cable between Israel and Cyprus. The cable is part of the Connecting Europe Facility (CEF) plan, which will facilitate transmission of electricity in either direction. Its capacity will be 2,000 megawatts at a distance of 1,518 kilometres making it the longest subsea electric power cable. This will end Israel’s position as an energy island.

A detailed proposal for the gas pipeline is to be submitted to EU Member States in a few weeks’ time and will suggest a multi-billion euro investment in a pipeline which could carry Israel’s abundance of offshore natural gas to the continent through a pipeline to Cyprus. From Cyprus, the gas would be transported to neighbouring Mediterranean states, Greece and Italy.

Two recent developments have led to this proposal from the Israeli government to Europe. The first is the anti-Israel rhetoric by Turkish President Recep Tayyip Erdogan, which seems to have buried any chance for a joint Israel-Turkey energy corridor. The second is the continued deterioration of relations between the EU and Russia which has led the Commission to delay talks with Russia over the South Stream pipeline project, to the extent that the latter has now called off the plans.

The strategic importance of lessening the EU’s dependence on imported energy from Russia has been noticed in Jerusalem which is looking to leverage Israel’s major gas finds as a regional strategic lever.

Israel has already announced major export projects to Jordan and Egypt which are both in need of energy resources. Together with Cyprus, an EU Member State which likely shares some potential gas reservoirs with Israel, it stands to have its offer seriously considered by a Europe keen to diversify its energy resources.

The proposed pipeline would help Israel to export gas reserves, currently estimated at 1,000 BCM. The main difficulty for such a pipeline is technical - it would be 1,250 kilometres long and pass through waters with a depth of up to 3,000 metres. It could transport 10 BCM annually, and is expected to cost over approximately €12 billion.


Events

December

3:  The contribution of sustainable resource management to a circular economy (Brussels)
Organiser: ACE - The Alliance for Beverage Cartons and the Environment

9:  Energy, Smart Grids and Sustainability (Brussels)
Organiser: BritCham

8-10:  World Congress on Sustainable Technologies 2014 (London)
Organiser: IEEE UK/RI Computer Chapter

11:  10th Annual CEE Energy Conference (Warsaw)
Organiser: EEL Events

22:  Turkey Launch of the World Energy Outlook 2014 (Istanbul)
Organised by the Turkish Industry and Business Association (TUSIAD) in cooperation with the Sabanci University Istanbul International Center for Energy and Climate (IICEC)