Brussels Energy Brief - February 2008
February 2008
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KEY DEVELOPMENTS
Commission Adopts Revised Climate Change Package
Elena Kostadinova
The European Commission has adopted a package of proposals that should implement the commitments of the March 2007 European Council to fight climate change and promote renewable energy. The package provides the mechanisms to reach the targets of a 20 per cent reduction in GreenHouse Gas (GHG) emissions in the European Union, a 20 per cent share of renewables in overall EU energy consumption and a 10 per cent biofuel component in vehicle fuel by 2020. The proposals include: (i) strengthening and expanding the scope of the EU Emissions Trading Scheme (ETS); (ii) effort-sharing to meet the European Union’s independent GHG reduction commitment in sectors not covered by the ETS, including buildings, services, agriculture and waste; and (iii) consolidating and strengthening the legislation relating to renewable energy for electricity and biofuels, including heating and cooling.
European Commission Launches Sustainable Energy Week
Mélanie Bruneau
On 28 January 2008 the European Commission launched the second EU Sustainable Energy Week (EUSEW 2008). This was the world's largest open forum on sustainable energy, bringing together stakeholders on a local, regional, national and European level. The programme included renewable energy sources, energy efficiency, clean transport and alternative fuels. During the week, 80 events in eight countries were organised by more than 100 key industry and social players. EUSEW 2008 followed the adoption by the Commission of a revised climate change package (see previous article).
Energy Company Fined EUR 38 Million for Breach of Seal
Yannis Virvilis
The European Commission has imposed a fine of EUR 38 million on a large European energy company for the breach of a seal affixed by the Commission during an inspection in May 2006. The seal had been affixed to secure documents collected at their premises during a dawn raid for alleged anti-competitive practices in the German electricity market. The company denied having broken the seal, and suggested that other reasons, such as the age of the seal or a high level of humidity, may have caused the seal to appear to have been violated. The Commission conducted an investigation, which included the use of outside experts, and concluded that the seals had, indeed, been violated by someone within the company.
Liberalisation of Electricity and Gas Market Goes Too Far
Geert Dierickx
The Committee of the Regions has finalised a consultation on the further liberalisation of the European Union’s electricity and gas market. The general feedback suggests that these proposals are too far-reaching, as respondents argued that it would be better to properly implement the legal framework adopted in 2003. In addition, the feedback suggests that more practical help must be provided to EU Member States and regions that have not yet adopted this legislation. The Commission’s idea to set up an Agency for the Cooperation of European Regulators and its proposal on ownership unbundling (the separation of network activities from supply and production) were both rejected. This was because there was no adequate economic evidence showing these to be necessary to ensure the proper functioning of the market.
Infringement Procedure Against Spain for Conditions Imposed on Endesa Acquisition
Juan Gutiérrez
The European Commission has sent a letter of formal notice to Spain concerning the conditions imposed by the Spanish Energy Regulator (CNE) on the acquisition of Endesa by Enel and Acciona. On 5 December 2007, the Commission declared the conditions imposed by CNE to be contrary to the EC Treaty rules on the freedom of establishment, free movement of capital and free movement of goods. The Commission required Spain to withdraw the conditions by 10 January 2008 but Spain did not comply with this mandate. The letter of formal notice is the first step in infringement proceedings under Article 226 of the EC Treaty. If there is no satisfactory reply within 15 working days, the Commission may issue a formal request to Spain to comply with its decision. The Commission may then bring the case before the European Courts.
Commission Approves Regulatory Regime for Austrian Section of Nabucco Gas Pipeline
Mélanie Bruneau
The European Commission has approved an exemption from the general rules of regulated third party access for the Austrian section of the Nabucco pipeline. Nabucco has requested this exemption for the Austrian, Bulgarian, Hungarian and Romanian section of the pipeline. The exemption, which can be granted for major infrastructure projects, provides Nabucco with more flexibility to determine capacity allocation and transport tariffs. The exemption is provided subject to the Austrian energy regulator’s introduction of certain safeguards to ensure a positive effect on competition. These safeguards include a capacity cap preventing Nabucco from booking more than half of the Nabucco exit capacity in Austria and rules that ensure a transparent and non-discriminatory capacity allocation to third parties. The Nabucco project, which consists of a 3,300 kilometre pipeline, with planned maximum capacity of 31 billion cubic metres per year, will help ensure the provision of gas to Europe from producers in the Middle East and Caspian region.
Grant for Lithuanian Gas-Fired Power Plant Does Not Constitute State Aid
Patricia Armesto
The European Commission has concluded that the planned grant of EUR 170 million to support the construction of a gas-fired power plant in Lithuania does not constitute State aid for two reasons. One, Lithuania will not acquire control over the resources allocated to the project. Two, the grant will be provided by the governing body of the Ignalina International Decommissioning Support Fund (IIDSF), which is managed by the European Bank for Reconstruction. The IIDSF was set up in order to pool contributions from international donors to provide support to Lithuania for the decommissioning of the Ignalina nuclear power plant and to set up the new power generation capacities necessary to compensate for the closure. The new plant will supply electricity to the grid and heat to the nearby region.
EU and Iraq Discuss Ways of Enhancing Energy Cooperation
Mélanie Bruneau
The European Commissioner for External Relations and the Commissioner for Energy have met with the Minister of Oil of the Republic of Iraq to discuss the improvement of energy cooperation between the European Union and Iraq. The European Commission considers Iraq to be a natural energy partner for the European Union, both as a producer of oil and gas and as a transit country for hydrocarbon resources from the Middle East and the Gulf to the European Union. The discussions focused on the progress achieved so far in the negotiations of a Trade and Cooperation Agreement between the European Union and the Republic of Iraq (the energy chapter was closed last November) and the importance of enhancing relations in the energy sector. Both sides agreed to focus on: (i) developing a long-term energy strategy for Iraq; (ii) strengthening institutional capacity of the Iraqi Administration in the energy sector; (iii) developing the potential of the Iraqi natural gas sector and export infrastructure to the European Union; and (iv) promoting renewable energy sources and energy efficiency measures. They also agreed to work together on the development of interconnections of Iraq’s gas infrastructure with the Arab Gas Pipeline. As a step towards achieving this goal, Iraq’s Minister of Oil was invited to participate in a Ministerial Conference in support of the Arab Gas Pipeline to be held in Brussels in 2008.
Challenges of Sustainable Energy
Bróna Heenan
On 6 February 2008, the European Commission and World Energy Council (WEC) held a joint seminar in Brussels. It followed the WEC’s report on Europe’s vulnerability to energy crises and the measures it recommended to overcome these issues. The subjects covered included the promotion of renewables, energy mix diversification, the re-integration of the nuclear option in policy and public debate, targeted R&D for new technologies and enhanced cooperation at EU level. The second part of the seminar was an exchange of views about the Commission’s Strategic Energy Technology Plan, which considered a range of activities such as second generation biofuels, carbon capture and storage technologies, and boosting the competitiveness of photovoltaic electricity. Progress in these areas will be reviewed at a European Energy Technology Summit in 2009.
Interconnection Power Project Between Lithuania and Poland Moves Forward
Elena Kostadinova
The Lithuanian and Polish Transmission System Operators have signed a joint venture agreement to link the Baltic electricity grid to the continental network (Germany and Poland). The power link will be composed of an interconnector and internal network developments in Germany, Lithuania and Poland. The Baltic States are currently an “energy island” and the construction of the interconnector is considered an urgent matter in terms of security of supply and functioning of the Internal Energy Market. The joint venture will be in charge of all the preparatory works for the cross-border transmission line. The project’s implementation will be facilitated by the use of EU funding from either the Structural Funds or Ignalina Decommissioning Funds.
Commission Proposes Directive on Geological Storage of Carbon Dioxide
Elena Kostadinova
The European Commission has adopted a proposal for a directive on the geological storage of carbon dioxide (CO2). Carbon capture and storage (CCS) is a sequence of technological processes that involve capturing CO2 discarded by industry and transporting it to, then injecting it into, geological formations. CCS is mainly used to reduce CO2 emissions from power generation from coal and gas, but can also be applied to CO2-intensive industries such as cement, refineries, iron and steel, petrochemicals, oil and gas processing. The Commission proposal enables the use of CCS by providing a legal framework to manage environmental risks and remove barriers in existing legislation. The proposal also aims at stimulating companies to invest in CCS projects. Thus, State aid may be provided to cover the additional costs related to pioneer CCS projects. In addition, the EU Emissions Trading System will recognise CO2 captured, transported and safely stored as not having been emitted.
MERGER NOTIFICATIONS
End January 2007 – February 2008
M.5023 - COFATHEC / EDISON (25 January 2008
M.4799 - OMV / MOL (31 January 2008)
MEETINGS
March 2008
WIREC 2008 – International Renewable Energy Conference, Washington (4 – 6 March 2008)
Energy Conference “Energy will design the future of economies”, Ljubljana (6 March 2008)
Permanent High-Level Group – Energy Community, Vienna (11 March 2008)
Gleneagles Dialogue on Energy and Climate Change within G8, Chiba, Japan (14 – 16 March 2008)
Opening of European Wind Energy Conference 2008, Brussels (31 March 2008)
