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Speech: EU ENERGY POLICY BEYOND 2014

Commission Européenne - SPEECH/13/432   17/05/2013

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European Commission

Günther OETTINGER

EU Commissioner for Energy

EU ENERGY POLICY BEYOND 2014

ACER Conference

Ljubljana, 17 May 2013

Dear Mr Pototschnig,

Dear MEPs,

dear Lord Mogg,

Dear Director-General Philip Lowe,

Dear regulators, TSOs, suppliers,

Dear ladies and gentlemen,

May I thank the organisers and our hosts for giving us the opportunity to discuss issues of fundamental importance for Europe. I am especially pleased to attend such an impressive conference organised by ACER only 3 years after its creation and in Ljubljana, which is ever more becoming 'the place to be' in energy.

I would like to thank the President of the Slovenian Republic for hosting our Agency and providing a stable and good working environment for ACER, since last year, and i hope for the next decades.

I would also wish to thank Director Alberto Pototschnig and all ACER staff for their commitments to their tasks. And I would like to thank you for a constructive relationship with our DG. And I would like to thank the National Regulatory authorities which play a key role in the functioning of ACER.

Before I look to the future, let me talk about today and on my perception of the challenges we still face in achieving the internal market.

[Progress made since 2011]

After the adoption of the third energy package in 2009, the Commission in 2011 launched a debate on the urgency of completing the internal market. We highlighted the central role the internal market plays in securing our supplies in a cost-effective and at the same time sustainable way. And we indicated what still needed to be done to be able to call our internal market truly 'complete' by 2014. Of that list, we have achieved much. To name just a few:

The Energy Infrastructure Package is now in force and even before its formal adoption, ACER started working with the Commission in the selection of PCIs (projects of common interest).

The REMIT Regulation has been adopted, setting clear rules for energy trading and aiming to create confidence in proper market functioning. ACER will be the unique example of the market monitoring by a single body. ACER's power of overall supervision of the markets is unique in the EU and proves a powerful dynamic for the energy market integration.

The first EU-wide Network Code, on allocation of transport capacity in gas pipelines, has recently been adopted by the Gas Committee, and many more of the most important codes, also in electricity, are in their final stages of preparation. Our ability to make so much progress on network codes in such a short period of time is thanks to ACER, to the ENTSOs, and the input of all stakeholders involved. It is also thanks to the close cooperation between the Agency, the ENTSOs and all stakeholders.

Moving forward: the European Council and The role of Member States

Ladies and gentlemen,

Next Wednesday on 22 May the Heads of State and Government of all 27 Member States will meet in the European Council and they will discuss energy policy to see where the EU stands since they last discussed it in February 2011. This fact in itself demonstrates the enormous importance of your and our work.

Ahead of the meeting, Mr Barroso, sent a letter to Member States reiterating the need to step up efforts to complete the internal market, to implement existing legislation and to create an environment conducive to investments. As I just said, we are well on our way for 2014 when it comes to network codes. But at the same time, it seems we are moving backwards.

Indeed, Member States can do a lot in making this market work. But they can also do a lot to make it a failure. If rules are not implemented correctly or if other measures are taken that undermine the functioning of the market, Member States, even with good intentions, risk achieving the opposite of what they aim for.

It is true, there are big challenges in energy that need intelligent solutions, and they are needed fast. The energy sector is a highly political one, touching directly on sensitive and strategic issues of the highest national level - for example what is the energy mix. It also touches directly on the interests of the biggest companies and at the same time is has a direct impact on the daily lives of all us, citizens.

Take for example Bulgaria last week, with elections that were triggered by citizens' concern regarding energy prices.

It may be tempting for politicians to seek quick solutions for possible problems that at first sight may seem purely national in nature, but that in practice almost always have a cross-border impact.

It is however an expensive solution. If every country, or every region, or every consumer, would solve his or her energy supply on his or her own, it would become very costly. Indeed, the internal market is there to benefit from economies of scale and synergies. But why is it then that countries are considering to support investments in national back-up capacity, when their neighbours have lots of unused capacity available?

Look at the Netherlands and Belgium, or France and Spain, or the UK and its neighbours: we have an internal market, but yet countries seek to solve problems on their own. Gas-fired electricity generation in Spain is currently running at, on average, 16% of its capacity and in some months even below 10%. At the same time we all agree that more interconnection between Spain and France is needed. So how is it possible that France claims it needs to support investments in electricity generation in the south?

We need to look at these questions in a European way. The best way to find solutions is together and not in fragmented markets and not in isolation. The newly established Electricity Coordination Group is an important step to share visions on topical electricity challenges, such as security of supply in electricity.

This is the crucial point I wish to underline today: It is a national-centric way of thinking that leads to the introduction of measures that neglect the cross-border benefits of our market and that reveal a mind-set of: 'national first, community-wide second.' This is true for the topical issue of capacity markets and generation adequacy, but also for regulating retail prices.

Measures are being considered or even implemented today that risk jeopardizing the benefits of the European energy market and turning the clock backwards. This ultimately can only be to the detriment of our industry and our citizens.

The Main Challenges

In our Internal Market Communication of November last year the Commission identified three challenges:

  1. the enforcement challenge, addressing the insufficient urgency with which existing rules are implemented and applied in practice

  2. the consumer challenge, addressing the trust of citizens in energy suppliers and the confidence that the energy market will bring them benefits

  3. and the transition challenge, underlining the enormous task ahead of us in making our energy systems fit for a decarbonized energy sector in the future

Today, I will focus on two particularly important aspects that are part of an example in these challenges.

First, network codes. One of the key projects for the creation of a European-wide internal market is the ongoing project to harmonise the main rules for electricity and gas trade. This is a process in which ACER has a key role to play, by setting the boundaries, and determining the scope and content for every code through the Framework Guidelines.

Is it not strange that we can book a train ticket from Portugal to Estonia and can buy our textiles and cars from all over Europe - but for energy markets we are still stuck with our national suppliers? The Europeanisation of market and grid rules through network codes can be a decisive step in this respect and create a truly integrated energy market.

While the benefits of an integrated market are obvious and everybody, at least in words, supports the idea, the success of this project is, however, not for granted. The opening of the borders through the harmonisation of the main rules can only succeed if Member States are ready to find the necessary compromises to agree on common rules. This is where I see the greatest risk for our harmonisation project.

Let me take the example of the creation of an EU-wide market for intraday trading of electricity which is currently blocked because of a dispute between Member States, each favouring their own IT-system (!). We all agree that EU-wide intraday markets are desperately needed to cope with more and more intermittent generation, for example renewables such as solar and wind. How can we seriously explain to our citizens that we cannot implement this key project just because stakeholders and Member States cannot agree on a common IT platform? We need better governance and common decisions.

The creation of an EU-wide energy market will not be possible without compromises. It may even require giving up some established national practices in favour of European-wide solutions. However, given the uncontested benefits of the harmonisation project, I am still confident that we will be able to agree on the necessary rules before the end of next year.

Another example. As mentioned earlier we are in the middle of an energy transition. When we talk about 'system change', it is tempting to think that it is a matter for the major strategic thinkers. But everyone has a role, even individual consumers, installing a smart meter. We discuss a topic that is so big that it is sometimes difficult to oversee. Who knows where we will be in 30 years from now? No-one! Yet, if we are to realize our policy objectives we need to have a firm view today on where we are going and clear policy that supports it.

Especially in the energy sector, with long lead times and long life times for investments, a clear long term perspective is essential to make the necessary transition to an affordable, low-carbon and secure energy supply by 2030, by 2050 and beyond. A power plant that is built today, will still be around in 2030 and perhaps even in 2050 or 2060.

In the long term perspective, the enormous sums of money that are mentioned in the context of replacing and building energy infrastructure sound large, but I believe they can be achieved, if the conditions and incentives are right.

In this context I want to highlight that the Commission is aware that in certain circumstances its objectives in the field of the two aims of unbundling and increasing investment may seem contradictory, particularly in the case of financial investors considering participating in both transmission and generation projects. To address these concerns, the Commission this week published a Staff Working Document providing pragmatic guidance to explain the unbundling rules providing potential investors with greater certainty on the applicable legal framework.

Ladies and gentlemen, I want to continue to make steps forwards rather than backwards. Now we have got this far, I want us to do all we can to make sure the internal market works, as a single market, as an efficient market, and as a competitive market, for affordable energy, for high levels of services, for satisfied consumers.

Our internal energy market is one of our strongest assets in the global competition for supplies and markets. It is the European wide network which will make energy transformation possible in the next 20 years.

Looking further into the future

To give clear direction and restore certainty for policy makers and investors, the Commission has produced its 2050 Roadmap, and, for Energy, a specific Energy Roadmap for 2050.

The Commission believes that it is important to develop European solutions, involving all Member States, sectors and interest groups. According to our 2050 scenarios, to deal with these challenges in a cost effective way - to keep our competitiveness, AND make the shift to a new low-carbon future, AND keep our supplies secure - we must do it as Europe with a common market, common policies, common targets, and common rules.

2030 Green Paper and competitiveness

And so our 2030 Green Paper starts an important consultation on what our energy and climate plans for 2030 should be. Because our 2020 targets are one our most relevant instruments to Europeanise our energy policy. But 2020 was yesterday, and 2030 is tomorrow morning. So we should continue our policy.

One of the key questions in the Green Paper is what to do about targets for 2030: Do we need them? And if yes, which?

Targets do have advantages. They create more certainty, transparency and solidarity. But we want to learn from the 2020 framework and take a fresh look.

A simple repetition of the 2020 targets, maybe 30/30/30, sounds good, but is not a solution.

    - How can we make sure that any new targets do not have adverse impacts on the competitiveness of our industry and the affordability of energy for our citizens?

    - How can we better reflect the new risks which come with a different energy system that is based on more renewable, and thus less manageable, electricity production: What does that mean for uninterrupted electricity supply, for loopflows, for infrastructure investments, for market integration?

The point of the Green Paper is to lead to a decision which has the support and commitment of all Member States. We shouldn't delay, because getting the changes we need in our energy system takes a very long time.

To get all Member States to commit, we will take account of everyone's concerns.

    - We have to make our strategies cost efficient. We have to avoid adverse impacts on competitiveness. And we have to take into account international developments, such as climate change negotiations.

    - And we must ensure that the burdens - but also the opportunities - are fairly distributed among Member States, among industrial sectors.

    - Member States must retain their right to decide which fuel mix is most appropriate for them, while still being able to deliver on European commitments.

I invite you to make your views known through the online consultation.

Closure

Ladies and gentlemen, thank you for inviting me to Ljubljana. It is always a pleasure. I wish Mr Pototschnig and his staff all the best for the coming year keep up the good work, do your best and hopefully I see you here again next year to celebrate a more complete Internal Energy Market.


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