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Monday, April 14, 2008

Europe in energy and climate 03.08-Nationalisation of the energy market?

In this issue we have some articles on energy market in Europe for mart. Something interesting you can find in the energy liberalization articles. It seems like a side-effect from the fight with Russia for energy market is the nationalizing from EU of the energy sector. Interesting, right? I mean, it's not exactly a nationalizing, because first EU is not a nation, obviously, and second that independent system operator (IOS) will be made independent from the industry, it will regulate the prices...Reminds you for the good old day? Ok, for some of us :) The quick links for the articles, all for you comfort (sources are in the article themselves):

EU states push for early adoption of biofuel standards

26 February 2008

Member states are teaming up with MEPs in pressuring the Commission to include binding sustainability criteria in a revision of EU-wide specifications for transport fuels.

Representatives of EU governments agreed on 22 February that biofuel sustainability standards should be included in a revised version of the EU's 1998 Fuel Quality Directiveexternal , which relates to the use of petrol, diesel and gas oil in cars, trucks, barges, tractor locomotives and machinery (EurActiv 01/02/07).

A key aim of the proposed review is to get fuel suppliers to reduce greenhouse gases emitted by their fuels throughout their life-cycle (i.e. production, transport and use) by 10% between 2011 and 2020, either by enhancing supply efficiency or increasing the proportion of biofuel they include in their fuels.

The plans have been welcomed by Parliament and member states, but both want the Commission to introduce binding "sustainability criteria" in the directive. They say this is necessary to avoid a situation whereby fuel makers focus purely on cutting CO2 at the lowest possible cost, without any consideration of other potentially negative environmental side-effects – notably those linked to the mass production of biofuels made from agricultural crops, including deforestation, food price hikes and water shortages.

The Commission, however, insists that such criteria are already being proposed in a separate directive on renewables, presented on 23 January, which asks that 10% of all transport fuel consumption in the EU be covered by biofuels by 2020. Under the draft law, the EU executive is proposing that biofuels failing to deliver life-cycle CO2 savings of at least 35% compared to fossil fuels - as well as biofuels planted in protected areas, "highly biodiverse" grasslands, forests and wetlands - should not count towards the 10% target.

But MEPs and member states argue that those criteria are unlikely to be in place sufficiently early to prevent fuel makers from investing in cheap but dirty biofuels.

"We do not want the Fuel Quality Directive, which is much more advanced, to be a victim of the renewables directive," Dragan Barbutovski, spokesman for the Slovenian representation to the EU told EurActiv.

According to a Presidency compromise agreed by member states, an ad hoc working group has been set up, with the aim of drafting "core criteria" for biofuels, that would be included both directives. The group is expected to put forward recommendations in March. "Ideally, these would be 'copy-pasted' into the main renewables directive afterwards," Barbutovski said.

The definition of sustainability criteria is nevertheless likely to remain highly controversial. MEPs are already pushing for stricter terms than those put forward by the Commission's Directorate-General for Energy. In a Parliament environment committee vote in November, they notably called for biofuels counting towards the 10% target to deliver life-cycle CO2 savings of at least 50% compared to conventional fuels – rather than the 35% cut the Commission is proposing. source

E.ON surprise grid offer bolsters EU liberalisation hopes

29 February 2008

The European Commission has won an important victory in its crusade against former energy monopolies when German energy giant E.ON offered to sell-off its high voltage electricity grid to settle ongoing EU antitrust inquiries.

In its third liberalisation 'package' proposals unveiled on 19 September 2007, the Commission left member states with two options to complete the liberalisation of the EU energy sector:

  • Forcing big energy firms to sell off their power transmission and gas storage assets in order to keep these activities fully separate from energy production ('Ownership unbundling'), or;
  • allowing firms to maintain ownership of their transmission assets but leave their management to an Independent System Operator (ISO) responsible for taking investment and commercial decisions.

In a statementexternal on Thursday (28 February), E.ON said it "proposes to commit to sell its electricity transmission system network to an operator which would have no interest in the electricity generation and/or supply businesses".

The surprise offer would effectively 'unbundle' E.ON's electricity generation and transmission activities, a move which the Commission has long supported as a necessary step to complete the liberalisation of Europe's energy sector.

"These proposals, if adopted, would structurally change the electricity sector in Germany and could spur competition in the sector to the benefit of domestic and industrial customers," E.ON said.

The timing of the announcement also came at a crucial moment, just hours before EU energy ministers were to meet in Brussels for a discussion on energy, which included the Commission's controversial 'unbundling' proposals.

E.ON had until now been a staunch opponent to the Commission's plans for full 'ownership unbundling' and the announcement apparently took the German government by surprise.

Earlier this month, Germany, France and six other EU member states outlined proposals for a 'third option' on energy liberalisation in a move aimed at preventing the breakup of vertically-integrated energy firms such as E.ON and EDF of France (EurActiv 1/02/08).

The ministerial meeting ended with no agreement other than a shared determination to come to a political agreement at the next meeting, on 6 June.

Claude Turmes, a Green MEP who has steered the EU's previous energy liberalisation proposals through the European Parliament, said E.ON’s pro-unbundling decision made German and French energy ministers look "ridiculous" before the Energy Council meeting. "This is a good day for EU energy consumers," Turmes said. "Germany, France and their dominant 'national champions' are now looking completely foolish," he added. "I hope that is the end of the game 'monopoly at home, monopoly abroad' which German and French companies and their national political elites imposed during recent years on EU consumers," Turmes said. source

My comment: Well, how low have we fallen, a energy corporation to help us unbundle the marker. I wonder how and why E.ON decided to make such a generous offer. Because it's not exactly the german style for a industry to offer help. Anyway. Good work, E.ON!

Commission warms to 'third way' on energy liberalisation

25 February 2008

Despite its initially cool reaction, the Commission has signalled it could accept an alternative proposal on energy liberalisation as long as further safeguards are introduced. The alternative, to be officially unveiled by France and Germany this week, would allow large power companies to maintain ownership and limited control over transmission assets.

France and Germany's proposal for a 'third way' on energy market liberalisation has become more appealing to the Commission as a workable alternative to the options set out in its third 'package' of reforms to further liberalise Europe's energy market, according to press reports.

The more positive assessment contrasts the Commission's initial reaction to the 'third way' proposal (EurActiv 15/02/08), which Brussels argued "would not lead to effective separation of supply and production activities from network operators" since the safeguards set out in the alternative scenario "would not sufficiently remove the conflict of interest within the vertically-integrated company".

But the Commission appears to have softened its stance, according to a revised internal document obtained by the press last week (21 February).

Providing certain safeguards are introduced, notably with respect to the investment decisions of electricity and gas transmission subsidiaries - also known as transmission system operators (TSOs) - the Commission may back off from its insistence on breaking up large energy-producing firms.

In its third package, tabled on 19 September 2007, the Commission proposed that vertically-integrated energy firms, which own both the assets to produce and transmit power, must be broken up either through asset separation ('ownership unbundling') or by partially ceding control to an independent system operator (ISO) that oversees the investment decisions and day-to-day management of TSOs.

Neither option appeals to France, Germany and six other EU member states, which have put pressure on the Commission to revise its proposals.

Rather than stripping ownership or control of TSOs from firms as proposed by the Commission, France and Germany suggest that companies be transformed into joint stock companies, whereby a separate management and board is established for the TSO, with clear limits to the influence of the parent company.

EU energy ministers will debate the file this week (28 February) in Brussels during a meeting of the Energy Council, and the Slovenian EU Presidency hopes to see an agreement finalised in June. source

My comment: Now reading this, maybe E.ON was scared exactly by this third option-the joint-venture that will create external control of the industry. It kind of reminds me of the creation of joint-venture of coal and steal-the very same that gave the birth of EU. Hmmm....Interesting. And even more interesting is why E.ON was scared of this.

Energy ministers agree to disagree on liberalisation

Published: Friday 29 February 2008

Energy ministers from the 27 EU member states held a "lively discussion" on the Commission's controversial proposal to split up energy firms, agreeing only to send the matter back to diplomats in view of a deal in June.


In its third liberalisation 'package' proposals unveiled on 19 September 2007, the Commission left member states with two options to complete the liberalisation of the EU energy sector:

  • Forcing big energy firms to sell off their power transmission and gas storage assets in order to keep these activities fully separate from energy production ('Ownership unbundling'), or;
  • allowing firms to maintain ownership of their transmission assets but leave their management to an Independent System Operator (ISO) responsible for taking investment and commercial decisions.
The discussion, held over lunch on Thursday (28 February), gave rise to a head-on confrontation between proponents of full 'ownership unbundling' and countries opposed to the Commission's proposal.

Under the EU executive's plan, vertically-integrated energy giants, such as Germany's E.ON and France's EDF, would be forced to sell-off their transmission assets to focus exclusively on energy production and supply.

The pro-unbundling camp won a major victory ahead of the meeting on Thursday with a surprise announcement by E.ON that it was ready to sell-off its electricity assets in return for Brussels' clemency regarding ongoing antitrust investigations in the German electricity sector (EurActiv 29/02/08).

However, E.ON's decision has so far not effected the German government's opposition to unbundling.

"It is clear that member states have different views," said Slovenian minister of economy Andrej Vizjak at a press conference after the meeting.

Speaking to EurActiv, EU energy Commissioner Andris Piebalgs confirmed: "At this stage, we know that member countries have very different opinions - their opinion on ownership unbundling hasn't converged."

At the same time, he added that there is "a political spirit to find solutions" in view of the June Energy Council. "We are at the beginning of a difficult path until June but at least we will try our best to try and find a solution in the Council and I very much believe that Parliament will help member countries to find a final compromise. Political will is there."


Earlier this month, Germany, France and six other EU member states outlined proposals for a 'third option' on energy liberalisation in a move aimed at preventing the break-up of vertically-integrated energy firms such as E.ON of Germany and EDF of France (EurActiv 1/02/08).

In response, the UK - which together with Sweden and the Netherlands is leading the group of countries backing the Commission's plans - submitted a paperPdf outlining key principles to achieve "effective unbundling of electricity and gas networks".

"Ownership unbundling is the only certain way of ensuring that the incentive for discrimination is removed and remains our ultimate objective," the paper reads, adding that the 'third option' proposed by France and Germany "falls short" of meeting those requirements.

"Chief among these", the paper goes on, "is the principle that the [Transmission System Operator] TSO must be truly independent from the vertically integrated company." Among the requirements needed to achieve this, the paper notes:

  • Specific obligations for TSO not to discriminate between energy producers;
  • measures to remove any conflict of interest such as a prohibition for TSOs to hold interests in businesses other than transmission;
  • a strict enforcement regime, and;
  • clear accountability rules for TSOs.

Speaking to journalists after the Council meeting, Jean-Louis Borloo, French minister for ecology and sustainable development, spoke strongly against the Commission's unbundling proposals, saying the EU was engaged in "an economic war" on energy.

Borloo in particular rejected the idea that market forces are appropriate to regulate an area as "vital" as energy. "The market does not tell the truth about prices," Borloo said, adding: "The weight of competition in the market today needs to be revised."

"Thinking that we are going to solve the energy problem only with market regulation in the short term - I don't believe in it."

Meanwhile, French diplomats claimed they managed to rally more countries against 'ownership unbundling', saying that a documentPdf prepared by the Slovenian Presidency, which attempted to summarise the discussion, was blocked only due to last-minute opposition from the UK, Sweden and the Netherlands.

"There were up to 24 member states which could live with that document," one diplomat said, adding that France's third-way proposal was "gaining ground" in the Council.

A British source confirmed that the UK had blocked the document because it failed to mention its own paper while making ample reference to the 'third option' proposal backed by the group of eight.

Speaking after the Council meeting, Slovenian minister of economy Andrej Vizjak said experts will discuss "all the proposals" which are on the table, although he stated his preference for the Commission's unbundling proposal as "the most effective method".

"We cannot and we must not ignore reservations by member states," Vizjak said. "As [the current holder of the] EU Presidency, we have to take them into account."source

My comment: I like the Swedish points. They are really essential to the well-being of the project. As for the opposition...I kind of see something big in this, though I still cannot actually make out what it is. Doesn't it remind a little be of nationalising of the energy sector for the EU?!

EU climate goals get national backing

Published: Friday 29 February 2008

Public comments made by EU member states indicate broad support at national level for the Commission's climate and energy proposals. But there are concerns that global average temperatures will rise well above two degrees Celsius, even if the EU's commitments are realised and bolstered by an international deal on CO2 reduction.


The Commission, on 23 January, proposed a package of climate and energy proposals designed to bring the EU's emissions of greenhouse gases (GHGs) down by 20% by 2020 while increasing the use of renewable energies by 20% during the same period. A revised EU Emissions Trading Scheme (EU ETS) with an EU-wide CO2 cap was presented as a central part of the package.

A separate Strategic Energy Technology Plan (SET Plan) was also proposed at the end of 2007. It is meant to support the 20% targets by increasing the use of 'clean' or low GHG-emitting energy technologies. Financing issues related to the SET Plan have been delayed until November 2008 (see EurActiv 27/02/08).

EU efforts to reduce GHG emissions will be upped to 30% by 2020, under the condition that an international agreement for tackling climate change beyond the expiry of the Kyoto Protocol in 2012 is reached.

During a public deliberation in Brussels on 28 February, a majority of EU energy ministers backed the Commission's proposals, although views diverged on the extent to which trading in renewable energy certificates, also known as Guarantees of Origin (GO) certificates, should be used to reach the 20% renewable energy target.

Some member states also argued that their individual renewable energy targets are too high and do not take previous efforts into account sufficiently.

Other concerns revolved around the threat of delocalisation of energy-intensive industries to beyond the EU's borders in response to a tighter EU carbon market. And a number of member states expressed the need for strong biofuels sustainability criteria, in particular with respect to the use of agricultural land and sensitive natural habitats.

During a separate meeting, the Commission's SET Plan was also endorsed by the ministers, despite Austria's reservations about the promotion of nuclear energy, one of the focal points of the plan. source

My comment: Oh, well, nothing new in here. I already said what I think about the CO2 allowances-it's stupid to have free allowances. Absolutely useless.

Financing woes plague EU climate technologies

27 February 2008

Discussions between EU policymakers and energy sector stakeholders reveal sharp differences about how, and by whom, expensive CO2 capture and other 'green' technologies should be financed.

Technologies are considered a cornerstone of EU efforts to tackle climate change. On 22 November 2007, the Commission presented its Strategic Energy Technology (SET) plan, along with a technology map, designed to invigorate the development of 'clean' technologies in the EU (EurActiv 23/11/07).

The Commission has also put forward a communication on lead markets, featuring six priority areas including renewable energy and sustainable construction (EurActiv 10/01/08).

A communication on how the SET Plan will be financed is expected before the end of 2008.

On 21 February, EU Energy Commissioner Andris Piebalgs reportedly told a group of representatives for 14 major energy sector firms that, until 2013 and possibly beyond, "there is no money" in the EU budget for supporting carbon capture and storage (CCS) projects.

CCS is considered a crucial technology for the prevention of CO2 emissions during the production of electricity in coal-fired power plants. But the techology is highly expensive, and both public authorities and the private sector have been reluctant to offer the financing necessary to jump start the uptake of CCS on a commercial scale.

The European Investment Bank (EIB) in 2007 put €8.2bn into green technology financing, and Citigroup is expected to invest €50 bn over the next five years in clean energies.

But Europe's overall investments and venture capital flows into the sector have been steadily declining since the 1980s, and currently amount to only one-third of US efforts, according to figures presented during the closing plenary of the 21-22 February European Business Summit (EBSexternal ) in Brussels.

  • Carbon pricing

Most experts agree that the right price signals for carbon would encourage the private sector to sink more money into more expensive low carbon technologies, particularly if non-emitted CO2 can be credited to companies and sold at a high price in the EU's (and eventually a global) carbon market.

Brussels has responded by revising the rules for the 2007-2013 trading period of the EU Emissions Trading Scheme (EU ETS) in order to allow CO2 captured through CCS to be sold in the form of emissions permits (EurActiv 16/11/07).

But building CCS plants will become profitable only if the price per tonne of CO2 increases considerably to €40 or €50, according to Neil Eckert of the carbon-trading firm Climate Exchange. Currently, the CO2 price is hovering around the €20 mark, according to the latest figures cited by EU Environment Commission Stavros Dimas during the EBS.

  • ETS auction revenues

The Commission has floated the idea of siphoning off a certain percentage of the proceeds obtained through the auctioning of CO2 permits under the EU ETS in order to transfer those monies towards a fund for clean technologies.

But Peter Vis of EU Energy Commissioner Andris Piebalgs' cabinet says this is a "tricky issue" for member states, who are opposed to Brussels setting 'earmarks', or percentage-based obligations, on how the proceeds from auctioning should be spent (see EurActiv 11/02/08).

Member states are also opposed to any specific time-frame and target for committing funds to the SET Plan, according to Evans.

Energy ministers will be in Brussels on 28 February to discuss the SET Plan during a meeting of the Energy Council. Apart from financing issues, ministers are expected to discuss the plan's overall strategy.

Council sources indicate that Austria, for example, is opposed to the inclusion of nuclear fission as one the focal points of the SET Plan. source

My comment: Again the stupid CO2 credits. Very obvious...As for nuclear plants-well, obviously they should be included in the count. Because we don't have the necessairy number of wind and other plants for the moment. And nuclear energy is the cleanest after the renewables...

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