Brussels Energy Brief - July 2007
July 2007
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Due to the closure of the Commission and other European Institutions over the summer period, the next issue of Brussels Energy Brief will be on Friday 28 September.
KEY DEVELOPMENTS
Gas Supply Agreement Between Commission and Algeria
Jérôme Cloarec
The European Commission and Algeria have reached an agreement on acceptable clauses related to territorial restrictions and profit sharing mechanisms (PSMs) in gas supply contracts. Territorial restrictions prevent the buyer from reselling the gas outside a certain geographic area (often an EU Member State). PSMs oblige the importer to share a part of the profit with the producer if the gas is sold by the importer to a customer outside an agreed territory, or to a customer using the commodity for a purpose other than the one agreed by contract. Both mechanisms are applied within the European Union, especially with Spanish, Italian and Portuguese companies, thereby preventing gas from being sold into EU markets beyond the Mediterranean region. The agreement between Algeria and the Commission prohibits territorial restriction and limits PSM clauses in existing and future contracts between Algeria’s Sonatrach and EU companies. Competition Commissioner Neelie Kroes hailed this agreement as being a major step towards “the creation of a single EU-wide market in gas”.
Trans-Sahara Gas Pipeline
Michal Cieplinski
During the July 2007 conference devoted solely to the Trans-Sahara Gas Pipeline, the European Union gave strong support to the project, thereby providing additional incentives to and security for the prospective investors. The departure terminal of the 4,300 kilometre pipeline will be Brass in the Niger Delta. Its arrival terminal will either be Beni Saf or El Kala in Algeria. The pipeline’s capacity is expected to reach up to 30 billion cubic metres by 2015. EU access to Nigerian gas reserves is particularly crucial since European gas consumption and gas imports are expected to increase significantly in the future. Consequently, natural gas imports may reach 85 per cent of EU gas consumption by 2030 compared to 50 per cent in 2000. Nigerian gas reserves are estimated at five trillion cubic metres which equals roughly ten years of EU consumption.
Commission Approves Planned Acquisition of Endesa by Enel and Acciona
Juan Gutiérrez
The European Commission has approved the acquisition of Spanish energy company Endesa S.A. by Italy based ENEL S.p.A. and Spain based Acciona S.A. Taking into account the divestment to E.ON of part of Endesa's activities, the only markets affected would be the generation/wholesale and retail supply of electricity in Spain. The Commission concluded that the merger would not significantly strengthen Endesa’s position in either of these markets. Moreover, a number of other competitors such as Iberdrola, Union Fenosa and Gas Natural will remain active. The merger would not therefore appreciably increase the ability of, and incentives for, the main electricity suppliers in Spain to co-ordinate their activities in the market.
Nuclear Energy: Commission Establishes High Level Group to Improve Safety
Benoît Keane
The European Commission has established a High Level Group on Nuclear Safety and Waste Management to improve nuclear safety. The group, which includes senior regulators from EU Member States, will concentrate on issues relating to safety and the decommissioning of nuclear installations, as well as the management of spent nuclear fuel and radioactive waste. The role of the group will be to assist the national authorities in acting together to tackle these issues and to identify what action needs to be taken at an EU level. The first meeting is expected to take place in September/October 2007.
The Biofuel Challenge
Juan Gutiérrez
A new renewable energy directive will be presented by the European Commission to the European Parliament and Council by the end of this year. The new Directive will incorporate the EU Renewable Energy Roadmap proposed by the Commission in January 2007, including the commitment to raise the proportion of biofuels to a binding minimum target of 10 per cent by 2020. The Directive will also contain a biofuel sustainability scheme. The Commission will propose minimum sustainability standards for biofuels, and only biofuels that meet these standards will count towards the 10 per cent target and be eligible for tax exemptions. These rules will apply equally to domestically produced and imported biofuels. The minimum sustainability standards will be determined by the Commission after examining the results of a public consultation of stakeholders from within and outside the European Union. In addition, on 5 and 6 July the Commission and some influential figures in the biofuel sector met in Brussels to discuss the benefits and challenges of biofuel production and use.
Commission Requires Malta to Open up Import Monopoly on Petroleum Products
Yannis Virvilis
The European Commission has sent a Reasoned Opinion to Malta, requiring compliance with the provisions of the EC Treaty that relate to commercial State monopolies. According to the Accession Treaties, Malta had to ensure that petroleum products could be traded through a licensing system not just by the country’s State monopoly, but also from third party companies. However, the Commission found that no licences have yet been issued and the State monopoly (Enemalta) is still the only company active in the import, storage and supply of petroleum products at wholesale level.
Emissions Trading: Commission Adopts Decisions on Amendments to Five National Allocation Plans for 2008 to 2012
Frank Schoneveld
The European Commission has decided on certain amendments to the CO2 Emissions Trading Scheme (ETS) National Allocation Plans (NAPs) of Ireland, Latvia, Lithuania, Luxembourg and Sweden. Each Member State determines in its NAP the total amount of CO2 that installations situated on its territory and covered by the EU ETS can emit, and specifies how many CO2 emission allowances each plant will receive. These five countries proposed amendments to their NAPs after the end of the Commission's assessment of their original NAPs in November 2006 but before the deadline for submitting amendments on 31 December 2006. Unexpectedly, the total number of allowances for the 2008 to 2012 trading period for both Ireland and Latvia has been increased by 1.18 and 0.14 million tonnes respectively. An increase in the Kyoto Protocol Joint Implementation and Clean Development Mechanism limits for Latvia (up from 5 to 10 per cent) and Lithuania (up from 8.9 to 20 per cent) have also been approved while the limit for Ireland has been reduced to 10 per cent. Regarding Luxembourg, the Commission has agreed that no auctioning of allowances may take place, and that certain industrial installations are partly or entirely withdrawn from Luxembourg's NAP, correspondingly reducing the total quantity of allowances by 0.2 million tonnes. No amendments were approved for Sweden's NAP. Germany and the Slovak Republic also submitted amendments that are still being assessed. These amendments are the result of a Commission demand in November 2006 to reduce emissions by 7 per cent in the seven countries mentioned.
Commission Approves Cyprus' National Allocation Plan for the 2008 to 2012 Emissions Trading Scheme, Subject to Conditions
Elena Kostadinova
The European Commission has approved Cyprus' national plan for allocating CO2 emission allowances for the 2008-2012 trading period, subject to amendments. These amendments include a reduction of the total number of emission allowances by 23 per cent to 5.48 million tonnes per year, elimination of some ex-post adjustments and sufficient information on the manner in which new entrants will be able to participate in the EU Emissions Trading Scheme. Cyprus’ plan is the 23rd National Allocation Plan (NAP) to be assessed by the Commission. Cyprus' NAP will enter into force automatically after the requested amendments are made.
More Stringent Energy Efficiency Standards in Public Procurement
Geert Dierickx
Pursuant to the new version of the Regulation on the Energy Star Programme, EU Member States must now demand energy efficiency criteria to be met when procuring public office equipment. Energy Star is part of the European Union’s strategy to manage energy demand more efficiently, to contribute to the securing of energy supply and to mitigate climate change. As this is the first time that the Council, the European Parliament and the Commission all agree that energy efficiency criteria must be binding, it is a genuine reinforcement of the European Union’s commitment to reaching energy efficiency targets. According to Energy Commissioner Piebalgs, energy efficient office equipment is cost-effective, so it is hoped that the new Regulation will push the demand for energy efficient equipment and increase its market penetration.
Towards a European Charter on the Rights of Energy Consumers
Elena Kostadinova
The European Commission is considering conducting a public consultation on a proposal for a European Charter on the Rights of Energy Consumers. The Charter should ensure that EU Member States introduce schemes to protect vulnerable citizens from increases in energy prices leading to disconnection. Under the proposed Charter, energy suppliers would be obliged to communicate certain information to the consumer. This information includes their tariffs, the right of withdrawal and details concerning the duration and renewal of the contract. Consumers would be guaranteed the right to change their supplier free of charge and without unduly long and bureaucratic switching procedures. Finally, Member States will be told to ensure that consumers are protected against misleading information and unfair selling practices and that an effective dispute settlement mechanism is put in place. The Charter, which is a response to the full opening of the energy market on 1 July 2007, is expected to become effective at the end of 2007.
Finland Becomes First Member State to Submit National Energy Efficiency Action Plan
Yannis Virvilis
At the end of June 2007, Finland submitted its National Energy Efficiency Action Plan (NEEAP) to the European Commission. It was the first EU Member State to do so, even though the deadline for the submission of NEEAPs was 30 June 2007. Pursuant to the Directive on energy end-use efficiency and energy services, Member States are obliged to draw up and submit NEEAPs, in which they must show how they intend to reach energy savings targets by outlining the energy efficiency improvement programmes and measures they are putting in place.
Energy Consumption: Proceedings Against Greece, Estonia and Poland
Alana Tart
The European Commission has launched court proceedings against Greece for failure to implement the Energy Performance of Buildings Directive. The Commission also sent Reasoned Opinions (the last step before lodging a complaint with the Court of Justice) to Estonia and Poland. The Directive requires Member States to establish minimum energy performance standards for new buildings and major renovations of larger existing buildings. It aims to reduce energy consumption in buildings and should have been implemented by 4 January 2006.
MERGER NOTIFICATIONS
End June – July 2007
M.4672 - E.ON / ENDESA EUROPA / VIESGO (2 July 2007)
M.4782 - DELEK / TEXACO BENELUX (4 July 2007)
M.4652 - NATIONAL GRID / TENNET / BRITNED JV (6 July 2007)
M.4742 - OXBOW / SSM (11 July 2007)
MEETINGS
August 2007
No energy-related Council meetings scheduled for August.
