SPEECH/07/575
Andris
Piebalgs
Energy Commissioner
European Energy Policy and the role
of Energy
Community
Welcome address at the Athens Investment Conference
Athens, 28
September 2007
Dear Minister Folias,
Dear Minister Popovic,
Excellencies,
Ladies and gentlemen,
We all share the view that – in today's world – energy challenges cannot be matched by any country in an isolated manner. Member States of the European Union have recently decided to strengthen their cooperation and now aim to have a common energy policy formally enshrined in a new EU Treaty. Similarly, the European Union and its partners in South East Europe have joined efforts to form the Energy Community.
The Energy Community Treaty entered into force last year. One sentence in its preamble illustrates the vision of all its signatories: it is " to create a stable regulatory and market framework capable of attracting investment in gas networks, power generation and transmission networks, so that all Parties have access to the stable and continuous gas and electricity supply that is essential for economic development and social stability. This is our common goal. And we will see today how far and how efficient we are. In this respect, I very much look forward to hearing the views of the investors and potential investors present today.
But before coming back to the South East Europe Energy Community Treaty, let me first give you a more global picture of the European energy policy.
Europe's energy policy is part of an integrated climate and energy policy. This makes sense as energy production and use are the main sources of greenhouse gas emissions. It implies a very substantial change in Europe's energy use over the next years and decades, in a transition towards a low carbon energy economy which is more sustainable in climate terms. The results which need to be achieved in terms of emissions are rather clear. The EU is aiming at limiting the global average temperature increase to less than 2°C above pre-industrial levels and has thus made a firm commitment to reduce its greenhouse gas emissions to at least 20 percent below 1990 levels by 2020. If other countries join us in a global, comprehensive climate agreement for beyond 2012, the EU would take 30 percent as its 2020 objective. The clear implication for Europe's energy policy is that now it must be focused on achieving and managing change.
It is in the global energy market that the EU's investments in energy efficiency and diversity will yield most results. It is in a dynamic open internal market that the transition to a more sustainable, diverse, secure energy economy can be addressed.
Let me stress this last point. At the core of our energy policy is a well-functioning internal energy market, with infrastructures adequate to the tasks and arrangements for solidarity in crises. This is the foundation on which Europe will deliver on its strategy of leadership on climate and the transition to high-efficiency, low-carbon energy systems. Clear goals for efficiency and renewables have been agreed, supported by a robust carbon price and investments in new technologies. External energy relations will be pursued with a strong, single voice.
With the Energy Community Treaty, the parties have decided to adhere to the main elements of the European energy policy, in particular as regards the internal market in gas and electricity. This is the beginning of a process and we shall keep the longer perspective in mind, that's to say, the approximation of South East Europe towards the EU.
The approximation of South East Europe towards the EU
In autumn 2005, the European Union opened accession negotiations with Croatia and Turkey and recognized the former Yugoslav Republic of Macedonia as a candidate. In addition, the EU has repeatedly reaffirmed at the highest level its commitment for eventual EU membership of the other Western Balkan countries, provided they fulfill the accession criteria. With all the countries of the Western Balkans the European Union has established a process that aims to bring them progressively closer to the EU. Thanks to this process, these countries already enjoy free access to the EU single market for practically all their exports, and EU financial support for their reform efforts. Existing and future Stabilisation and Association Agreements between the EU and these countries represent an important milestone.
In this global perspective, the reform of the energy sector and the emergence of a regional energy market connected to the EU energy market are playing a crucial role.
Bringing energy security to South East Europe
The Energy situation in South East Europe varies widely across the different countries and regions. However, it is globally characterised by low energy efficiency and by a structural energy deficit.
On the demand side, very important energy savings are possible. Despite good practices in certain regions, we need to face that massive amounts of electricity are still wasted. Household insulation and the modernisation of district heating systems certainly represent one of the best investments to level the energy balance in several regions. This is why we will strongly support all initiatives aiming at greater energy efficiency.
But experience shows that energy efficiency measures can only bring results if the price for energy reflects its real cost. Special attention should thus be given to the gradual introduction of cost-reflective electricity prices. Otherwise, the vicious circle of financial difficulties for energy companies which leads to underinvestment in generation, and, finally, chronic instability in electricity supply, will continue in many places.
This question has very far reaching consequences on the economy. In most of the regions of South East Europe, economy is recovering at a very good pace. In 2006, GDP growth was around 4 to 6%. A severe energy deficit in the next years could slow down the recovery.
On the supply side, we are facing a double challenge. First, in terms of quantity of produced energy, the whole region suffers from a chronic imbalance. Important investments in new generation capacities and transmission capacities are urgently needed. Second, in terms of energy efficiency and ecological footprint, a large number of generation plants need to be upgraded and certain will need to be closed and replaced.
The European Union and the International Financial Institutions have contributed to this effort in the last years, in particular as regards transmission systems and the environmental upgrade of power plants. This effort will continue. However, in order to face the needs of a fast growing region, it cannot replace private investment.
In that respect, I am particularly glad that investors, financial institutions and energy companies, have demonstrated, by their attendance to this conference, their interest to bring their contribution and express their views. I shall encourage them to actively participate in the debates throughout the day.
On my side, let me put forward as an input for the debate, what I believe are three main reasons for private investors to consider investments in energy assets in South-East Europe.
- First reason: South East Europe is a fast developing market connected to the EU market
- Second reason: a major energy cross-road
- Third reason: improving investment conditions
Let me explain to you in more details.
- First reason: South East Europe is a fast developing market connected to the EU market
The positive experience of the 2004 enlargement shows that the reform process and the approximation to the EU have particularly favoured a dynamic economic growth. In South East Europe, the economy is already growing rapidly, inflation is becoming under control. Besides, several EU Member States or countries of the region, for example Slovenia, already constitute an anchor for economic stability and growth. The fast growing Turkish economy will also have a positive impact on trade and overall economic growth in the region. Consequently, a strong demand for energy will continue to develop in the next years. Let me just mention the quick development of tourism and real estate market development along the Adriatic coast, with Albania coming as the next horizon after Croatia and Montenegro.
Besides, projects in the region can easily serve the European market. In that respect, the development of sub-sea high voltage interconnections and gas pipeline are of particular importance. In other words, the market base of projects situated South East Europe may be much larger than this region and, as you know, the EU energy imports even with all the efforts we are making for energy efficiency and renewable energy will continue to grow.
- Second reason: a major energy cross-road
The second reason is linked with the geographical situation of South East Europe that places this region at the cross-road of major energy routes. Major hydrocarbon projects crossing the region are under development. They may not all come in maturity in the same time period, but it is rather clear that several of them are in an advanced stage of preparation and will be realised.
In particular, the opening of new gas routes from the Caspian Region and the construction of LNG terminals on the Adriatic coast will make possible the development of gas-fired power plants. The concept of a gas ring, that will be presented and discussed at the next Gas Forum in Maribor on 9th November, is very promising.
- Third reason: improving investment conditions
The third reason, is linked to the improvement of investment conditions. The Energy Community Treaty provides for a common legal framework for the regulation of electricity and gas markets, for transmission and trade. As I mentioned, its ultimate goal is to create an integrated energy market.
The Energy Community Treaty directly refers to the main EU directives in the matter. I know that all their provisions have not been implemented yet. However, good progress has already been achieved and I am confident that all Contracting parties will fulfill their commitments and pursue the necessary reforms. In the medium-term, the Energy Community treaty, and more generally the approximation towards EU laws and standards, shall bring visibility for investors and shall enhance their confidence in the business environment. This is particularly true for procurement and concession rules, fight against corruption and fraud, as well as transparency of administrative procedures. The pace of reform may differ but the direction is well-known to all parties.
Ladies and Gentlemen,
And now, to conclude, let me turn towards the representatives of the Contracting parties and stress the importance of a regional approach to investment planning.
Dear ministers,
in June during our meeting in Montenegro, we decided to establish a list of priority infrastructure projects using a common set of criteria. To initiate this exercise, all Contracting parties have provided a comprehensive list of projects. These contributions were compiled in a first indicative list which already provides a good update on the projects under preparation or under consideration. It constitutes a starting point for the assessment that will be carried out in the next weeks. From there, we will let emerge a limited list of projects of regional interest.
But let us be clear: such an exercise is not in any manner linked with an increase of public funding. It is clear that, for funding, each project needs to be considered for its own merit and economic viability.
The main benefits I am expecting from this list of priority projects largely lies in the process of establishing of a common approach to an integrated market. All the Energy Community Contracting parties are presenting their list of priorities and we will have an open exchange on how we see the development of main energy infrastructure in the region.
If we demonstrate that we are able to have converging views on the main regional energy infrastructure, this can only, of course, add long term visibility for potential investors.
I wish you a fruitful debate and I would like to thank the Secretariat of the Energy community under the leadership of the Director Mr Neykov for the efforts made in forging a Community wide approach towards investments in the region.
Thank you.