The EU's energy goals

19 September 2007

Angelika Niebler, Chair of the European Parliament’s Committee on Industry, Research and Energy (ITRE), put her presentation in the context of the European Commission’s forthcoming ‘legislative package’ on energy and the Internal Market, designed to implement part of the EU energy package adopted in early 2007.

She said energy policy was a top priority on the ITRE Committee’s agenda, and stressed that the development of a genuinely competitive internal energy market and a balanced approach towards energy efficiency, energy saving and reducing emissions are preconditions for securing a competitive, affordable and clean energy in the future.

The Parliament has prepared three resolutions on the EU energy package: the Vidal Quadras Report on the Internal Market; the Reul Report on conventional energy sources, including nuclear and energy technology; and the Thompson Report on renewable energy sources.

Six key energy issues

The Committee has identified six key energy issues, said Ms Niebler.

The first concerns the need to develop new clean energy technologies. Europe already has a strong renewables sector and is investing in research to make the sector fully competitive, but more needs to be done.

Secondly, Europe needs a road map for “climate-friendly” and “environmentally-friendly technological innovation”. For example, biofuels need to be sufficiently competitive to make public subsidies or tax exemptions unnecessary, and the European Parliament has called for biofuels to be produced sustainably in order not to endanger food production.

Thirdly, said Mrs Niebler, energy efficiency and energy saving, which can make a “very significant contribution” to improving environmental sustainability and competitiveness, should be at the heart of all energy policies. The EU’s target of improving energy efficiency by 20% by 2020 is an “ambitious goal” and while progress has been made, the Parliament has stressed that there is “significant potential” for improvement.

Fourthly, Europe needs to manage its conventional energy sources sustainably as well, since these will be needed for “a long time to come”. Mechanisms are therefore needed to use fossils fuels in a sustainable way and guarantee security of supply.

The clean and efficient use of coal, including technology such as Carbon Sequestration and Storage (CSS) to cut CO2 emissions during mining, will be one of the biggest challenges in the near future.

Fifthly, given that Europe is increasingly dependent on imports of fossil fuels, particularly oil and gas, it needs to foster greater solidarity between Member States and more international cooperation, and diversification of supply countries, supply routes and energy sources. The EU has to keep all its options open, accepting that nuclear energy plays an important role in maintaining security of supply and in avoiding harmful CO2 emissions.

An internal energy market

Finally, there are the challenges involved in creating a fully integrated internal energy market, particularly for gas and electricity, and the forthcoming legislation is designed to do just this.

Ms Niebler said the three key objectives - security of supply, competitiveness and sustainability - can only be achieved if a genuine internal energy market is established.

Markets are not yet fully integrated: domestic “incumbent” suppliers continue to dominate markets, there are very few cross-border energy flows and cross-border interconnectivity is poor, making it difficult for new suppliers to gain access to grids and limiting customer choice.

“Energy markets are still largely national,” complained Ms Niebler, adding that without an EU-wide market, it will be difficult to achieve any of the Union’s core energy objectives. It will be difficult to encourage sufficient investment, which could result in higher prices and cause black-outs, and the emissions’ trading mechanism will fail to work properly.

Three steps are needed to overcome this. The first is to enforce and implement the existing regulatory framework to increase competition and give consumers more choice, and speed up infringement procedures. “The European Parliament wants to ensure better regulation, not more regulation,” she insisted.

Member State regulators’ powers should also be strengthened and they should be given additional competences if necessary. A further step would be to set up a new Energy Agency to aid cooperation between these regulators, with powers to regulate and advise on cross-border issues.

‘Unbundling’ one of the keys

A major step in creating an internal market is to “unbundle” the gas and electricity markets, separating the production and distribution sides of the market. The Parliament’s Vidal-Quadras Report has recommended full ownership unbundling if existing powers are not strong enough to carry this through.

Mrs Niebler acknowledged that this might be “a hot potato” in some Member States, such as Germany, where unbundling could result in de facto “dispossession” and interfere with national law, and might not result in lower prices or greater competition.

Nevertheless, unbundling was likely to be at the heart of the anticipated proposals on the Internal Market, and the Commission had alternative suggestions should unbundling fail to create proper competition, such as creating Independent System Operators (ISOs) to run the transmission grids.

Ms Niebler finished by declaring herself “quite optimistic” that solutions could be found to enhance competition and create a level playing field in energy markets while avoiding over-regulation. She said the European Parliament would check carefully that proportionality and subsidiarity are respected in the forthcoming European energy legislation.