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Friday, June 20, 2008

Energy unbundling, people!Or something like it...

What Brussels decided on the liberasation of energy and the future of energy market in Europe.
  • Brussels sets tough conditions for 'Third Way' on energy
  • Traders and governments at odds over renewables trading
  • MEPs back EU plans to dismantle energy behemoths
  • Europe's energy revolution taking shape?
  • EU seeks more protection for energy consumers
My comments are below. My over-all impression is that things are still far from settling. Which I find disturbing...

Brussels sets tough conditions for 'Third Way' on energy

5 May 2008

The European Commission has put forward detailed conditions for national champions in France and Germany to retain ownership of energy transmission assets in an attempt to strike a compromise over its controversial proposals to open up gas and electricity markets.

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 them to maintain ownership of their transmission assets but leave their management to an Independent System Operator (ISO) responsible for taking investment and commercial decisions.

France and Germany have vehemently opposed the plans and formed a blocking minority with the support of six other member states (Austria, Bulgaria, Greece, Luxembourg, Latvia and the Slovak Republic).

Together, they tabled an alternative proposalPdf – called the 'third way' – which, they argue, would guarantee a similar result by introducing safeguards to ensure the independence of energy grid operators (EurActiv 01/02/08).

In a set of amendmentsPdf circulated in late April, the Commission specifies the conditions under which it could accept the so-called 'Third Way' trumpeted by eight EU countries as an alternative to splitting the production and transmission businesses of large integrated energy firms.

Under the proposed amendments, obtained by EurActiv, former state monopolies such as E.ON in Germany and EDF in France would be allowed to retain ownership of their power grids.

However, they would have to leave their management to an independent subsidiary, the transmission system operator (TSO), with "the power to independently adopt its annual investment plan and to raise money on the capital market, in particular through borrowing and capital increase".

Every year, the TSO would be required to submit a ten-year investment plan to the energy regulator at national level, based on existing supply and demand forecasts.

The TSO would also have a supervisory body "in charge of taking all decisions which may have a significant impact on the value of the assets" of the vertically-integrated company.

EU member states would be allowed to appoint one member of the supervisory body with "a veto right with respect to decisions that in his view may significantly reduce the asset value of the transmission system operator". The other members would be appointed by an independent trustee, who must not have been involved with the vertically-integrated group for at least five years prior to his appointment.source

My comment: If that's not nationalization of the energy sector, I don't know what it is. I think it's for good. The idea isn't so much to harm the national monopolist, but to open the way for the European energy grid. Which isn't so bad I think.

Traders and governments at odds over renewables trading

29 April 2008

The Commission's proposal to boost EU renewable energy use to 20% by 2020 is fuelling disagreements between energy traders and member states over the best regime for promoting renewables trading without undermining existing national support schemes.

On 23 January 2008, the Commission unveiled plans to boost the EU's use of renewable energies by 20% by 2020 as part of a wider climate and energy 'package' (see EurActiv LinksDossier and related coverage).

The proposals set differentiated renewables targets for each member state as part of the overall 20% target, whereby member states have the option to conduct cross-border trade in renewable energy certificates, so-called Guarantees of Origin (GOs), rather than subsidising renewable energy at home.

"The EU can only reach the overall target of 20% energy consumption from renewable sources in a sustainable and efficient manner if an internal trade mechanism for Guarantees of Origin forms an integral part of the legislative framework," says a 16 April letterPdf by the European Federation of Energy Traders (EFET).

The EFET letter is addressed to Green MEP Claude Turmes, Parliament's rapporteur on the Commission's proposal to revise the EU's renewable energy regime.

Initially, the Commission had planned to make GO trading mandatory. But Brussels apparently backed down under pressure from member states like Germany and Spain, who argued that a mandatory trading requirement would undermine internal renewables support schemes like feed-in tariffs. Such schemes can boost the prodcution of solar, wind, hydro and other renewables by guaranteeing producers a buy-back price that is higher than the market price for electricity (EurActiv 16/01/08).

Under the current proposal, member states may invest in renewable energy production in another member state in exchange for GOs that count towards the renewables target. But the trading is to be voluntary, not mandatory, and the Commisson has attached the condition that a country must have already reached its own interim target before being allowed to receive investments and transfer GOs to another member state.

Despite the change, Germany in particular remains concerned that it would end up effectively subsidising the renewable energy obligations of other member states if its own renewable energy firms sell off too many GO certificates.

Berlin has allegedly suggested to the Commission that the directive limit trading even further and include an 'opt-in' for those member states wishing to trade, rather than an opt-out for those that do not.

EFET argues that the issue could be addressed by harmonising national renewables support schemes so that GO trading could develop as part of normal internal market activity.

The European Renewable Energy Council (EREC), however, argues that it is too early for such a move given existing distortions in the EU's internal electricity market.

"It seems premature to call for competition in the renewables power segment at a time of non-competition in conventional power," EREC said in a position paper, which argues that "there is no evidence that a harmonisation of RES support mechanisms would deliver any benefits at this stage".

While Berlin and EFET may not see eye-to-eye on trading, both are concerned that energy firms could take governments to court for restricting their trading activities. They say the exemptions included in the proposal for restricting GO trade do not provide sufficient legal certainty.

In a technical annexword attached to its letter, EFET argues that the proposed renewables directive is plagued by "fundamental inconsistencies and breaches of primary EC law".source

My comment: Am I wrong or they are really proposing to trade GOs? Is that the same as certificate of origin? Because if it is, I'm soooooooooo against. The point of this was to prevent doing more damage than good, how did we end up in competition protection and stuff over a market that isn't even existing? Weird!

MEPs back EU plans to dismantle energy behemoths

7 May 2008

A Franco-German alternative to the Commission's electricity market liberalisation proposal was rejected by a narrow margin yesterday (6 May) during a key vote in Parliament's Industry Committee. MEPs also voted against a Commission substitute plan to put in place a strict regulatory regime policed by an Independent System Operator (ISO).

In its third liberalisation 'package' proposals unveiled on 19 September 2007, the Commission left member states with two options. The first is to force 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'). The alternative is to force firms to transfer the management of their distribution operations to an Independent System Operator (ISO) responsible for taking investment and commercial decisions.

By rejecting both the 'third way' and the ISO option, the Parliament's Industry, Research and Energy (ITRE) Committee has effectively given its backing to full ownership unbundling as proposed by the Commission in its third package.

But the narrow margin of the rejection of the third way amendment to the Morgan report - 26 MEPs voted against it, while 22 were in favour and three abstained - may be an indication that France and Germany and the six other member states who support them will continue to push for compromises to full ownership unbundling during upcoming negotiations.

France and Germany's energy giants, notably RWE and EDF, remain vehemently opposed to the breaking up of their assets through unbundling, which they claim is illegal and would not lead to lower prices and more competition, as argued by the Commission.

"The national element will have considerable weight in this vote," Vidal-Quadras told EurActiv in an interview. But the MEP also expects a more "European logic" to prevail as the discussions move forward, implying that Parliament, Council and the Commission could still strike a compromise agreement - possible in heated last-minute negotiations - in order to prevent the third package from failing entirely.

France, so far unwilling to budge on the unbundling issue, has already indicated that it "could live without this package," and the eight member states who oppose unbundling possess enough votes to form a blocking minority in the Council (EurActiv 17/04/08).

The Commission meanwhile has signalled its willingness to compromise on the third way proposal under the condition that a series of tough conditions are taken on board (EurActiv 05/05/08).

Energy ministers will try to reach a political agreement on the file on 6 June. source

My comment: Hm, hm. I liked the ISO option, but obviously other people don't. Oh, well, so really, this is a dead lock. Either the decision is changed or it's vetoed. I don't like it like this.

Europe's energy revolution taking shape?

Published: Friday 9 May 2008

As the EU’s energy liberalisation drive heats up, European consumers may be wondering when and in what shape the EU's new energy policy will begin to transform the way energy is produced and consumed, and if the change will mean lower prices or higher industry profits.

The unbundling saga

On 6 May, Parliament's Industry (ITRE) Committee voted in favour of breaking up large energy firms through ownership unbundling, meaning the separation of a firm's power generation assets from its distribution assets (EurActiv 07/05/08).

The outcome of the vote was widely seen as a setback for Germany and France, who had put forward a proposal for a 'third way' on energy liberalisation that was rejected by a narrow margin of MEPs. The committee's rejection of the proposal came shortly after it emerged that the Commission would only consider the third way if strict conditions - too strict, according to Berlin and Paris - were added to the proposal (EurActiv 05/05/08).

Although the liberalisation package is focused on technical and regulatory aspects of the EU's electricity and gas markets, "fully competitive markets are an essential pre-requisite" for a "new energy path towards a more secure, sustainable and low-carbon economy, for the benefit of all citizens," according to the Commission press release that accompanied the 19 September proposals.

Brussels is thus concerned that a delay in the adoption of the liberalisation proposals may have a negative impact on the wider climate change efforts outlined in the climate and energy package.

Shaky investor certainty and lack of investment are at the heart of these concerns, as continued control over national and regional energy markets by a limited number of energy firms creates few incentives to invest in electricity grid upgrades and other infrastructure investments necessary to boost the efficiency of energy production and transmission, according to the Commission.

Europe is also struggling to find the cash necessary to fund renewables and expensive 'clean' technologies like CCS.

UK Liberal MEP Chris Davies, Parliament's rapporteur on a Commission proposal for a legal framework for CO2 storage, argues that the EU Emissions Trading Scheme (EU ETS) could be leveraged to solve the financing problem.

In addition to adopting a position on the third way proposal, MEPs also voted in favour of consumer protection measures designed to bring down energy prices for consumers in the EU (EurActiv 08/05/08). National authorities should "mandate electricity undertakings to introduce pricing formulas which increase for greater levels of consumption," according to a proposed amendment backed by MEPs from all political groups.

Currently, large energy consumers like industrial installations can negotiate with power suppliers for lower energy prices. The amendment, if adopted in the final text of the proposal, would "turn the system on its head," according to UK Liberal MEP Fiona Hall, one of the supporters of the amendment.

Large consumers would instead pay higher prices in order to motivate energy efficiency improvements, while consumers who use less energy, such as low income households in particular, would in turn pay lower prices.

In response to queries about whether industries would oppose such moves, Hall told EurActiv that "this should not be the concern. Climate change should be the concern," she said.

MEPs, backed by the EU consumer organisation BEUC, are also in favour of allowing regulators to impose temporary price caps on energy in the event of sudden price hikes. source

My comment: Ok, that's not so bad. I mean the second part-it makes sense to stimulate people to economize the energy by decreasing the price of small consumers. At least it makes sense to me. I wonder how the big consumers will accept that. But I agree with the guy-this shouldn't the major concern.

EU seeks more protection for energy consumers

8 May 2008

Amid concerns over rising energy prices, the Commission is preparing a new online information pool on the rights of energy consumers, while MEPs in the Parliament's Industry Committee have voted for stronger consumer protection measures in the EU's energy market liberalisation drive.

Industries and private households are in theory able to freely choose their energy supplier following the entry into force of EU directives in 2004 and 2007, but energy consumers continue to complain about high prices and a lack of supplier choice.

Partially in response to these concerns, the Commission on 5 July 2007 launched a new initiative for a European Charter on the Rights of Energy Consumers (EurActiv 06/07/07).

The charter, which is non-binding but compiles existing EU energy consumer rights in a single text, was criticised by the European Consumers' Organisation (BEUC) for lacking teeth, while the German Centre for European Policy (CEP) argued that the charter would undermine freedom of contract and disturb market development (EurActiv 30/07/07).

Consumer issues are also addressed in the Commission's 'third package' of proposals to liberalise the energy sector (EurActiv 20/09/07).

The rights of energy consumers are outlined in the EU's 2003 directives on electricity and gas liberalisation, but Europeans have a "limited" awareness of their rights, according to the Commission, which on 6 May set in motion the creation of a European Energy Consumer Checklist.

The checklist will compile information in an online database about local and regional energy markets. The information will be presented in the form of responses by member state authorities to a collection of 'frequently asked questions' about various aspects of retail energy markets. The list of questions, which are being prepared by the Commission, has not been finalised.

A new Citizens' Energy Forum is also being established by the Commission as a platform for debating consumer protection issues between "stakeholders active on all aspects of retail markets," EU Energy Commissioner Andris Piebalgs announced in Brussels on 6 May.

The forum will include "energy regulators, competition authorities, national bodies competent for enforcing energy consumer rights, member states' energy and consumer administrations and industry and consumer associations, from both European and national levels," he said.

While the checklist and the forum constitute non-binding measures, MEPs in the Parliament's Industry Committee on 6 May voted in favour of a series of consumer-related measures to be added to the Commission's third energy package.

In addition to guarantees relating to access of information, MEPs want to give consumers a legal right to withdraw, without penalty, from contracts with electricity providers and to obtain compensation for poor service quality.

MEPs are also calling for the provision of 'smart meters' to consumers within 10 years of the entry into force of the third package. Such meters provide more detailed information on energy consumption, both to consumers and utilities.

Amendments to protect the poorest citizens were also endorsed by MEPs, who want member states to "implement appropriate measures to achieve the objectives of social and economic cohesion which shall lower the cost of energy to low income households and guarantee the same conditions for those living in remote areas," the amendment said.

While MEPs did not vote in favour of a system of state-regulated energy tariffs, which are popular in France, the committee did vote in favour of allowing national authorities to set temporary (one month or less) price caps in the event of sudden hikes in energy prices. source

My comment: What about the internet access? On some places the only provider is the local telecom which is not exactly willing to lower the prices and improve the quality. And what choice of energy provider, that's an absurd. In Bulgaria we have like 3 providers each of which is working in its region of the country and the only choice people have is to move. Is that a choice, really?


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