]
www.platts.com
EU Energy
EU ministers back EC to develop
strategy for electric cars
EU industry ministers have agreed that
the European Commission should draft a
common EU strategy on electric cars.
“We are all committed to achieving a
common policy on the electric vehicle,”
Spanish industry minister Miguel
Sebastian told reporters after an
informal meeting of ministers in San
Sebastian in Spain on February 10.
The entire meeting, which was
hosted by the Spanish EU presidency
and included EC officials, was devoted to
electric vehicles, with presentations from
the car, power, infrastructure and
information technology industries, plus
organizations which set European
standards.
“If the electric car is to be a
success, a great deal of harmonization
is needed,” said Sebastian.
The EC’s director general for industry
and enterprise, Heinz Zourek, told
reporters that the EC is already preparing
to commission European standards
organization CENELEC to work on
common standards for electric vehicles.
Sebastian said that Spain, which
holds the six-month rotating EU
presidency until the end of June, wants
to make the electric vehicle “a
cornerstone” of the EU’s 2020 strategy.
The EU has a binding target to
source 20% of its final energy from
renewables by 2020, including a 10%
binding target for renewable energy in
transport.
“The electric car is an ally of
renewables--it gives the stability that
renewables need,” said Sebastian.
continued on page 2
Nord Stream clears final hurdle
with Finnish permit
The regional state administrative agency
for southern Finland has granted final
approval for building the 55 billion cubic
meters/year Nord Stream gas pipeline,
which is to carry gas from Russia to
Greifswald in Germany through Finland’s
exclusive economic zone.
The Finnish construction permit
removes the final political hurdle for the
Nord Stream project and follows an
environmental assessment.
“The main problem was that there
was too much information [about Nord
Stream]...it was very detailed and difficult
to assess,” Mika Seppala, environment
counselor at the agency, told Platts on
February 12. Seppala said the agency
had been concerned that building Nord
Stream, in particular clearing the sea bed
for the pipeline, would set free dioxin and
other harmful sediments.
The McGraw Hill Companies
“At the bottom of the Finnish gulf
there is a lot of dioxin, which could
pollute the food chain in the sea,”
Seppala said. Dioxins are
environmental pollutants considered
highly toxic. He said that building Nord
Stream would also require removing
various World War II mines, which were
left on the sea bed in the 1940s and
whose detonation was likely to have a
polluting effect.
But Seppala said that after careful
study it has become clear that the
environmental risks are minimal and the
permission could be granted.
“There are effects [of the pipeline
construction], but the total amount of
sediments that can spread is small, so
we were able to grant the permit,”
Seppala said.
continued on page 2
Issue 227 / February 26, 2010
Highlights
EU to battle over stricter
plant pollution limits till summer
3
EC’s Lowe to head
new energy department
3
Delbeke to head EC’s
new climate action department
3
Spain approves legislation
on coal aid ahead of EC verdict
4
EP president repeats call
for EU energy union
4
UK, German power demand to hit
pre-crisis levels in 2012: report
5
Dutch lower house passes
grid connection bill
5
UK must push smart power grid
for flexible future say lawmakers
5
EU renewables plans
set to weather Greek crisis: EC
7
Features
Big commitments: Weighing the options
for defending EU antitrust actions
8
New EU regulatory agency readies for
action
12
News
Competition
15
Electricity
16
Emissions
20
Energy Efficiency
23
Gas
24
Renewables
28
Implementation
Electricity directive
32
Gas directive
34
Agenda
Brussels watch, Events
36
Green growth a priority: Barroso
First gas to flow in 2011: Putin
continued from page 1
continued from page 1
Battery technology in electric cars could provide a
large-scale distributed storage system to overcome the
intermittency of renewables, and electric cars could also
take advantage of off-peak power, which would increase
efficiency and lower power tariffs, said Sebastian.
“There are 20 million cars in Spain. The Spanish
power grid operator [REE] thinks we could add 7 million
electric vehicles without investing a single euro [in the
grid] by recharging at night,” he said.
Industry ministers plan to discuss electric cars again
at a formal meeting on March 1-2 in Brussels.
Meanwhile, a day later, EC president Jose Manuel
Barroso said that developing a competitive and
sustainable EU economy through “greener growth” is one
of the top three priorities of the European Commission’s
economic strategy to 2020 Barroso was speaking after
an informal EU summit where he presented the strategy.
In his presentation, published on his website,
Barroso said completing the EU’s internal energy market
could add 0.6% to 0.8% to the EU’s GDP.
A background document, also published on Barroso’s
website, included an EC estimate that unbundling power
grids from supply companies could add €50 billion ($69
billion) to EU GDP. Meeting the EU’s 2020 climate goals
to increase renewable energy use and cut greenhouse
gas emissions could save the EU some €60 billion from
lower oil and gas imports by 2020, Barroso told EU
leaders. And it could also deliver 2.8 million jobs in the
renewable energy sector, he said.
Barroso told reporters after the meeting that the EC
would develop these themes and present a package of
proposals on March 3, in time to be discussed at the next
formal meeting of EU leaders on March 25-26 in Brussels.
Russia’s Prime Minister Vladimir Putin expects that
the Nord Stream gas pipeline to bring Russian gas via
the Baltic Sea to Germany will be built by May 2011,
with first gas via the route in September that year.
“In April, the work will start to lay down the marine
section of the gas pipeline. And as soon as in a year –
in May 2011 – the work has to be completed in full,
both at the marine and inland sections in Germany and
Russia,” Putin said on February 11 during a meeting with
Dutch Gasunie CEO Marcel Kramer, according to a
transcript posted on the Russian government’s website
on February 12.
“In September, gas is to start flowing,” Putin said.
In summer 2011, the partners plan to start test
pumping of gas into the system. “In short, to prepare
everything to get gas flowing to consumers in
September,” he said
The plan calls for the first of two parallel pipelines,
with a capacity of some 27.5 billion cubic meters/year
each, to be operational in 2011.
When the second line comes on stream in 2012,
Nord Stream will be able to transport 55 Bcm/year of
gas from Russia to Germany, where it will be connected
to the European energy grid.
Meanwhile construction of a transfer station at
Lubmin, near Greifswald on Germany’s Baltic coast to
link the the planned Nord Stream pipeline with the 470
km OPAL pipeline to the Czech border has now started,
German-Russian utility Wingas said on February 18.
The OPAL pipeline, which will have capacity to carry
more than 36 billion cubic meters/year of gas from
Lubmin south to Olbernhau on the Czech border, is due
to be commissioned in October 2011, Wingas said.
]
EU Energy
Editor
Gala Colover
gala_colover@platts.com
+44 (0)20 7176 6267
Managing Editor
Paul Whitehead
EU news editor
Siobhan Hall
Editorial Director, European Power
Vera Blei
Editorial Director, Global Power
Larry Foster
Vice President, Editorial
Dan Tanz
Issue 227 / February 26, 2010
(ISSN: 1473–7450)
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EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
HIGHLIGHTS
These rules include the integrated pollution prevention
and control directive and the large combustion plant
directive, which cover industrial emissions such as nitrogen
oxides, sulfur dioxide and dust, but excludes carbon dioxide.
HIGHLIGHTS
EU to battle over stricter plant
pollution limits till summer
A draft EU directive revising rules governing industrial
emissions from large combustion plants such as power
stations and refineries is unlikely to be approved until
summer 2010 because of a dispute over deadlines, an
EU diplomatic source told Platts on February 23.
The EU Council, representing the EU’s national
governments, wants more flexibility for large combustion
plants in the power, metals and oil refining sector to
meet stricter air pollution limits.
In its first formal position adopted on February 15,
the EU Council called for EU governments to able to
apply for an extension from the 2016 deadline proposed
by the European Commission until end-2020.
This would be done using a transitional national plan
to outline annual emissions reductions until they fall in
line with newly-defined best available techniques.
But the European Parliament backed the EC’s 2016
deadline in its first full vote on the directive in March
2009.
The EP, EU Council and EC have to agree a common
text before the directive can become law. The EU
Council’s position now goes back to the EP to be
debated, amended and voted on a second time.
“A European Parliamentary committee hearing has
been scheduled for April but the assumption is that
there will be no agreement even on a second reading
and that we will go into conciliation procedure,” the
diplomatic source said.
The EU Council’s position also allows for combustion
plants smaller then 50 MW to be excluded from the
directive, “BAT immunity” for older plants which will
close by 2023, and a different method of measuring
sulfur emissions for countries heavily reliant on
indigenous lignite.
All of these proposals are likely to be contentious,
the source said.
After the EP committee’s vote the EP and EU Council
have three months to agree a common text before the
EP takes its second full vote.
Such a second reading agreement could be easier
since the changeover in the EP after last year’s
elections, but lobbyists pushing for more stringent
regulations, such as limits for CO2 emissions and EUwide emissions limits as opposed to best available
techniques, could hamper the process, the source
said.
“The directive is aimed at improving local air, water
and soil quality, not at mitigating the global warming
effects of some of these substances,” the EU council
said in its February 15 position.
The EC in December 2007 proposed to update and
consolidate EU emissions rules into a single EU
industrial emissions law.
3
EC’s Lowe to head new energy
department
The head of the European Commission’s competition
department Philip Lowe is to become head of a new EC
energy department created on February 17.
The new energy department consists of the energy
units from the EC’s former joint transport and energy
department dealing with energy issues, as well as the
energy task force from the EC’s external relations
department, said the EC.
As the new director-general for energy, Lowe will be
responsible for the staff working on EU energy policy and
legislation, and will report to new EU energy
commissioner Gunther Oettinger.
Lowe, a British national, joined the EC in 1973 and
became director- general of the EC’s competition
department in September 2002.
In 2005 his department started an in-depth probe
into the EU’s energy market, which led to several high
profile antitrust cases against the EU’s biggest energy
incumbents.
Major results so far include E.ON’s decision to sell
its German power grid and 5 GW of generation assets,
Eni’s offer to sell its stakes in transit pipelines bringing
gas to Italy, and GDF Suez’s decision to release gas
capacity in French import pipelines.
The new EU competition commissioner Joaquin
Almunia has said the EC will continue to pursue antitrust
cases in the energy sector (see feature, page 8).
Lowe’s appointment could allay some observers’
concerns that Oettinger, from Germany, may not be as
interested in pursuing competitive, open energy markets
as he is in other issues in his portfolio such as supply
security and protecting consumers.
Oettinger told a German newspaper on February 14
that “an essential objective of European energy policy
must be that in future dramatic increases in electricity
prices will be curbed.”
But the next day his spokeswoman Marlene Holzner
said there was no suggestion that Oettinger thought
prices should be re-regulated.
Delbeke to head EC’s new climate
action department
The European Commission’s deputy director-general for
environment, Jos Delbeke, is to be the EC’s first directorgeneral for climate action, the EC said on February 17.
The EC has created the new climate action
department to support the new EU climate action
commissioner, Connie Hedegaard.
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
HIGHLIGHTS
The climate action department is to be made up of
the climate units from the EC’s environment
department, the international climate negotiations
activities in the EC’s external relations department and
climate-related activities in the EC’s enterprise and
industry department.
Delbeke, a Belgian, joined the EC in 1986 and
became deputy director-general for environment in
January 2008.
He was the EC’s chief negotiator at the UN global
climate change talks for several years and, as the EC’s
director for climate change and air, led policy
development and legislation in areas such as emissions
trading, carbon capture and storage, air quality and
industrial emissions.
Spain approves legislation on coal
aid ahead of EC verdict
The Spanish cabinet has approved a new law obliging
power utilities to use domestic coal ahead of a verdict
on the proposal from the European Commission. The
legislation must pass through parliament before it can
become law, and as state aid it also needs approval
from the EC.
The government said it had proceeded without an EU
verdict because the national power grid operator REE
needed the legislation in place in order to make the
necessary investments in infrastructure, but that any
changes required by the EU could be incorporated at a
later date.
“… The law will not run immediately: it needs an
adaptation period during which the EU’s answer is
expected to arrive,” explained deputy prime minister
Teresa Fernandez de la Vega
Industry minister Miguel Sebastian confirmed that
the law would not enter into force until the final word
came from the EC. “This is just a way of saving time,” he
said, adding that he felt there was nothing in the law
that would be at odds with EU law in any case.
The measure, which replaces the 1997 Electric
Sector law, is described as a transitional measure and
will not extend beyond 2014, de la Vega said. Once it
enters into force, it would require generators to use
Spanish coal for at least 15% of power up to 2012.
The government defends the measure on security of
supply grounds arguing that coal is the “only domestic
energy source” in a country that relies on imports for
80% of energy needs.
The law is yet to be published in the official state
gazette but has already been slammed by critics
because it will distort the power market and would likely
lead to higher CO2 emissions, as well as being at odds
with EU goals to shift away from coal. And at the same
time it means increased dependence on imported coal
to supplement the poor quality Spanish coal.
But Fernandez de la Vega said it would help achieve
the aims of the 2006-12 National Coal Plan and that “it
wouldn’t distort competition because it comes after
4
prices have been established,” and that increased coal
generation would replace only the most polluting plant
elsewhere in the generation mix.
The government says the law is in line with exemptions
to competition rules allowing the government to intervene
in the energy market in order to guarantee security of
supply, providing any changes respect competition.
According to the legislation, nine thermal power
plants which use domestic coal as a feedstock will
receive a special price set by the government, although
further details have yet to be determined.
State aid for marginalized coal
Coal-fired power generation has been marginalized in
Spain during the past year owing to plenty of supply from
wind, hydro and nuclear sources. Coal-fired units
contributed only 7.3% to total energy use during January,
compared with 19% in January 2009, data from national
grid operator Red Electrica show, while hydro increased
its share from 9% in 2009 to 21.6%. Gas remains the
single biggest power generation fuel, with a share of
23%, while nuclear at 18.5% dropped behind hydro to
number three, and wind in fourth place with a share of
around 16.3%, grid data show.
The Spanish government approved in January €275
million of direct aid to five Spanish coal mines for 2010.
Prime Minister Jose Luis Rodriguez Zapatero, faced with
Europe’s highest unemployment rate, wants to protect
jobs in the national coal-mining industry, which employs
around 8,000 people, mainly in the northern provinces
of Leon, Asturias and Cantabria.
By contrast, Germany’s coal-mining industry, which
employed around 34,000 people in 2007, receives
around €2.5 billion each year in government handouts,
after a deal was struck in 2007 to phase out the west
German hard-coal mining industry by 2018.
EP president repeats call for EU
energy union
European Parliament President Jerzy Buzek repeated his
call for EU leaders to consider creating a “European
Energy Community” during an informal EU summit on
February 11.
“I believe we need to go beyond the Lisbon Treaty
articles on energy solidarity,” said Buzek, referring to the
new treaty governing the EU that took effect December
1. Buzek, a former Polish prime minister, raised the
issue in his first speech as EP president in September
and at his last meeting with EU leaders.
He suggested that Euratom, the EU’s separate treaty
governing nuclear energy issues, could be a model for a
separate EU energy treaty. Or that such a community
could be achieved through “reinforced” cooperation.
Buzek also called for the EU to have “joint
purchasing” of oil and gas imports.
“It will help us to reduce the costs of energy, which
influences all the other costs, but it will also create
greater energy security,” he said.
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
HIGHLIGHTS
UK, German power demand to hit
pre-crisis levels in 2012: report
Electricity demand in the UK and Germany will not reach
pre-recession levels until 2012, but French power
demand will recover more rapidly as it is less exposed to
economic conditions, according to analysts at French
investment bank Societe Generale. Demand across
Europe has been hit during the current recession.
“On average, in Western Europe, demand should
grow around 1% in 2010 vs. 2009,” utilities and energy
senior credit analyst Florence Roche said in an email to
Platts on February 17.
“Only in 2012 should we come back to 2008 levels
in Germany and the UK. In France, the situation could be
slightly different as demand is driven by electrical
heating. Demand fell less [in France] than in other
European countries and demand could increase more
rapidly,” Roche added.
Demand in Germany and the UK is more sensitive to
economic conditions than in France, due to large
industrials consuming 43% of German power and 34% in
the UK, compared with 32% in France, Soc Gen figures
show. Retail demand – arising from small businesses
and services, and from residential customers – is
considered to be comparatively unaffected by the
economy.
However, even Germany’s exposure to large
industrials is overshadowed by the Nordic region, which
have highly cyclical power-intensive industries.
Roche told Platts that demand there might not
recover to the levels seen in 2007 or 2008 for “10
years or so.”
Both Germany and France – Europe’s two biggest
economies – came out of recession last summer, with
Britain following at the turn of the year.
The economic slump impacted energy demand and
prices as factories closed or cut output. Power demand
fell by an average of 5% to 6% year on year in Europe in
the first half 2009, while forward electricity prices
collapsed by an average of 30% year on year over the
first nine months of the year, according to Soc Gen’s
Utilities Credit Outlook report for 2010.
National Grid, the UK’s grid manager, said last year it
did not expect demand to return to pre-crisis levels for
the next three years, while Finnish utility Fortum said on
February 3 demand for power in the Nordic region would
recover back to 2008 levels by 2014.
Subdued demand and the resulting excess cushion
of available capacity will also continue to weigh on power
prices, at least in the short-term, according to forecasts
in the report.
German power prices should remain in a range
between mid-€40s/MWh (mid-$55/MWh) and low€50s/MWh (low-$68/MWh) over the next two years
before creeping up to around €56/MWh in 2012 and
hitting €71/MWh in 2014 as reserve margins – the
difference between available capacity and peak demand
– fall, and as power demand, oil and coal prices
increase.
5
Similarly, UK power prices should top out at around
€56/MWh next year before increasing to €69/MWh in
2013 and €75/MWh in 2014, the data shows.
Dutch lower house passes grid
connection bill
Legislation giving renewables producers a legal right to
be connected to the grid has passed the Dutch Lower
House, normally the main legislative hurdle to a bill
becoming law. It is currently with the Upper House, which
will look at it after its spring recess. The same legislation
will create greater flexiblity in wholesale gas markets.
Draft legislation currently in the pipeline is expected
to proceed, despite the fact that the Dutch government
has just fallen, and the upper house is expected to
make only minor revisions to legislation that has passed
the lower house.
The sections of the legislation dealing with grid
access are a form of congestion management deemed
necessary to prevent large plants with long lead times,
which negotiate their grid access requirements at their
inception, crowding out renewables projects which come
along in the meantime.
Studies for the Dutch economy ministry have shown
that the legislation will reduce consumer prices by
enabling the renewables investors to get a return on
their investment sooner.
The congestion management is based on implicit
redispatch of generating capacity through an auction
mechanism. The exact details will be worked out in
secondary legislation. The principle, however, will be that
all producers in affected areas would have to offer
capacity above a predetermined minimum on the dayahead market.
If the offers reveal congestion, non-renewables
producers will have to cut back their planned output.
The main change to the gas market rules is a move
to allow users to sell on gas they buy on the wholesale
market rather than having to use it themselves. This is
expected to make it easier for new companies to enter
the market and the Dutch government sees it as a step
towards making the Netherlands a gas hub in
Northwestern Europe (see story p27).
UK must push smart power grid for
flexible future say lawmakers
The UK urgently needs to develop a smart electricity grid
to allow for future flexibility in power sources and to
avoid being locked into a fixed future energy mix, an
influential parliamentary committee said in a report
published on February 23.
The cross-party House of Commons Energy and
Climate Change Committee’s second report on the future
of Britain’s electricity networks urged the government to
take a strategic role in the smart grid.
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
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HIGHLIGHTS
It also criticized regulator Ofgem for funding new grid
investments before completion of a review on how the
existing set up could be improved.
“Our existing regulatory and policy frameworks,
along with the grid infrastructure we currently rely on,
were developed to serve the fossil fuel economy of the
twentieth century,” said Labour parliamentarian Paddy
Tipping, who launched the report. “The future looks very
different.”
“By 2020 the UK electricity network will need to
accommodate a far more diverse energy mix that
includes a much higher proportion of renewables that
cannot respond so easily to fluctuating demand. The
only cost-effective response to these developments is
the creation of a smart grid that intelligently manages
demand and supply across the energy system,” he
added.
The committee said that while there was a need for
strategic investment in new grid capacities to hook up
new power plants, the current regulatory regime could be
promoting grid investment at the expense of “more costeffective options such as greater management of
demand for energy.”
It concluded that in the longer term electricity
networks should be able to adapt to future changes in
the power generation mix.
“As one witness told us: We should not let the
network tail wag the generation dog,” the report said.
There is short term certainty about the
development of power generation – for example the
policy objective to get 15% of all primary energy from
renewable sources by 2020, most of which is to come
from wind, while transmission system operator
National Grid forecasts 14 GW of additional gas-fired
generation.
But beyond then, flexibility had to be paramount, the
report said.
“Although we know with some confidence how the
electricity mix will evolve in the run up to 2020, there
is much less certainty over what a completely
decarbonized energy system might look like in the long
run,” it said.
The committee urged the government to “seek to
integrate and manage energy demand within the energy
system, minimize regulatory and policy uncertainty for
the companies who must invest in new network assets
and be open to the prospect of a new industrial
structure evolving over time.
The report was welcomed by the Electricity Networks
Association, which represents UK power transmission
and distribution operators for recognizing the role that
flexible networks would play in decarbonizing the
economy to tackle climate change and boost energy
security.
“It was good to see reinforced in today’s report our
view that the ambition of a low-carbon energy sector will
only be achieved through networks that embrace
renewable energy sources and flexible demand from
consumers. These are smart grids and they will shape
the future of energy,” said ENA chief executive David
Smith.
7
Consultation ends on planning policy
A day earlier the UK government said it has received a
good level of response to its consultation on major new
planning policy statements that could help to drive
through nuclear power plants and gas storage facilities.
More than 3,300 people attended 23 events about
the draft National Policy Statements on energy, the
government said. In addition, almost 20,000 people
have visited the consultation website. More than 1,000
organizations and individuals have responded online, via
email or in writing.
The government needs to show it has consulted
widely on the NPSs to give them legitimacy when they
are later used to support controversial building projects,
such as new nuclear power stations.
The NPSs will guide the decision-making of the newly
established Infrastructure Planning Commission, an
independent body that will decide whether major projects
can go ahead in future.
EU renewables plans set to weather
Greek crisis: EC
The financial storm engulfing Greece and worries about
other EU countries’ finances will not blow the EU’s
renewable energy plans off course, a European
Commission spokeswoman said on February 15.
Greece has had to embark on major public
spending cuts after its public debt was projected to
reach 120% of GDP this year – the maximum allowed in
the Eurozone.
“Renewable energy development and policy is
designed for the long term. We have to handle energy
and climate challenges also during the current financing
situation. Therefore our targets and ambitions remain
intact,” EC energy spokeswoman Marlene Holzner told
Platts.
She said that Greece and the EU’s other 26 member
countries were working on their national renewable
energy action plans, which will outline their policies for
renewables growth. The plans are due by the end of
June.
“In these action plans member states will describe
their renewable energy strategy for the next 10 years
giving stability and predictability for investments in the
sector,” Holzner said.
Renewable energy support in the EU is typically paid
by energy consumers, not through state budgets, she
said, and EU countries with renewable-energy support
schemes funded through customer payments should not
face problems even if national governments like Greece
are forced to cut their budgets.
“On the other hand, investing collectively in
renewable energy technologies now will save public
money in the future as it will lower the ultimate cost of
reducing CO2 emissions,” Holzner said. “Money that
would otherwise go to oil and gas-producing countries
will stay within the EU and hundreds of thousands of
green technology jobs will be created across Europe.”
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
FEATURES
Big commitments: Energy firms weigh
alternatives for defending antitrust actions
The European Commission is increasingly using commitments – a relatively new tool
under EU competition law – to settle antitrust cases against EU energy incumbents such as
Distrigas, E.ON, GDF Suez and RWE. The trend raises some interesting questions for
energy companies potentially facing legal battles with the EC, Suzanne Rab, competition
lawyer with Hogan and Hartson, told Gala Colover.
Since May 2004 the EC has had a new way to close
antitrust cases without having to reach a formal
judgment on whether EU competition law has been
broken. Companies can offer commitments – such as
terminating a long term contract, modifying supply
arrangements, or selling off assets – to resolve the EC’s
concerns, thus avoiding lengthy legal battles and
potential fines of up to 10% of their turnover.
“The new legislative framework introduced a provision
that allowed the Commission to bring an end to cases it
was pursuing under provisions in EU competition law
that deal with anti-competitive agreements and abuse of
dominance,” said Rab.
The procedure is set out in Article 9 of EU regulation
1/2003 on implementing the competition rules laid
down in Article 81 and 82 of the old EC Treaty – now
Articles 101 and 102 of the Treaty on the Functioning of
the EU, better known as the Lisbon Treaty which entered
into force on December 1, 2009.
The Article 9 procedure offers potential efficiencies in
investigating and enforcing competition law, said Rab,
but uncertainties over the legal limits of the procedure
are giving pause for thought. This is partly because
closing a case using the commitments procedure does
not require the EC to make a decision on whether or not
EU law has been broken.
But Rab argues that it is also unclear whether and to
what extent the EC needs to satisfy itself that the
commitments are proportionate to the offence for which
the company is under scrutiny. “This has not yet been
conclusively determined,” she said.
Also controversial is the relatively limited discussion of
alternatives to the structural remedies agreed in a
number of cases in the energy sector, she said. For
example, in 2008 E.ON committed to sell its German
high voltage power grid and RWE committed to sell its
German high pressure gas grid, both to settle separate
antitrust cases brought by the EC.
The cases followed the EC’s energy sector inquiry,
launched in June 2005, which found widespread
breaches of EU competition law across the EU’s 27
national energy markets (EUE 165/5). The inquiry
concluded that the main failings included too much
market concentration in most national markets,
customers tied to suppliers through long-term
downstream contracts and a lack of transparently
available market information.
A vigorous debate followed when the EC proposed in
2007 full ownership unbundling of gas and power grids
from parent energy supply companies in its third
package of energy market opening laws to address
these competition concerns.
But the EC failed to convince France and Germany, and
the final version of the third package, adopted last year,
allows national governments to offer one or more of
three unbundling options – one of which allows parent
companies to keep their grids under strict regulatory
supervision (EUE 211/5).
Nevertheless EC competition officials have been clear
that since May 2004 the EC has had the power to
impose structural remedies such as forcing parent
supply companies to sell grids if doing so would resolve
competition concerns. This power is entirely independent
of the EU’s market opening rules such as in the third
package. The difference is that without an EU-wide
unbundling requirement the EC has to target and justify
each case under competition law – a longer and more
labor-intensive approach.
And the E.ON and RWE cases are examples of how the
EC has secured full ownership unbundling using the
commitments procedure under Article 9. This is
significant in terms of the instruments available to
promote or safeguard competition, said Rab.
“We’ve obviously had a heated discussion about the energy
package as to whether integrated energy companies need
to unbundle. That’s been subjected to intense political
debate. Yet in at least two of these cases you have
competition law concerns about access to networks and as
a commitment E.ON and RWE have sold off transmission
assets. So that raises a fundamental question as to the
appropriate basis and means to secure an outcome which
would not necessarily be mandated under the legislation
under the third energy package,” she said.
“In Article 9 commitments cases, by their very nature,
there is no concrete finding of infringement of
competition law but there is a decision that the
8
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
FEATURES
commitments address the Commission’s initial
concerns. But the question has been raised: Does the
solution need to be proportionate? Could something else
have been done to address the concern?”
been offered resolve our concerns.’ That’s very different
from a decision which says ‘x’ energy company has
infringed Article 101 or 102 of the [Lisbon] Treaty and
we will therefore issue a fine.”
And while commitments decisions offer companies the
advantage of avoiding long, drawn-out infringement
proceedings, Rab says those cases resulting in
extremely intrusive rulings, like grid sales, suggest that
there remains a risk that the procedure can be used to
deliver results that extend beyond the EC’s competition
law enforcement remit.
This is a crucial point in terms of the precedent value of
the case, because despite involving quite intrusive
commitments by the parties “all [the EC] has said is
that the case is resolved though commitments. It does
not say that these companies have violated the law. And
that is the interesting issue for the value of future
cases,” said Rab.
“These structural remedies have been hotly debated in
the context of a legislative process and are now being
achieved through a different mechanism, which may
address the issue in terms of the competition concerns.
The remedies may be sufficient, but are they necessary?
That is a different issue,” said Rab.
“The remedies may be sufficient, but are
they necessary?” – Rab
“Where alleged abuses do not consist in denying access
but preferential treatment of the company’s own
operations, less intrusive remedies such as capacity
auctions come to mind,” she said. “This is not to say
that structural remedies can never be appropriate to
resolve competition law concerns – for example, where
abuses derive from the very structure of the companies
concerned (because they have the ability and incentive
to favor their own operations); and there is a risk of
lasting infringement and no equally effective conductbased remedy, then a divestment to an independent
buyer may be what is needed to ensure a level playing
field.”
A full investigation in all cases would destroy the
value of the Article 9 procedure in speeding up case
closure, cutting costs “and just allowing everybody to
move on,” said Rab. “But in terms of the way the law
develops there is surely a need for there to be a
sufficient number of formal findings just to achieve
some clarity. That is not to say that all cases must be
resolved under Article 7, but that where a sufficient
number go down alternative routes this can leave
many open questions as to the limits of the law.”
These issues are relevant for other cases brought by the
EC where commitments have been offered, but not yet
accepted.
The road to commitment
The EC’s antitrust cases against specific energy
companies have tended to follow “unannounced
inspections” at offices to seize evidence. The EC has
followed up by providing the company with a detailed
assessment of the suspected breaches, and then
discussions start on possible remedies. In seven of the
eight cases concluded or nearly concluded by the EC
since 2005 the companies involved have offered
commitments intended to address the concerns.
The EC publishes the commitments in the EU’s Official
Journal and invites third parties to comment. “That’s a
market test,” said Rab. “Following that there is a review
by the advisory committee and ultimately there may be
an Article 9 decision. But the EC is not bound to accept
the commitments offered and may switch to an Article 7
procedure.” Article 7 allows the EC to impose behavioral
or structural remedies “which are proportionate to the
infringement committed and necessary to bring the
infringement effectively to an end,” if it finds that EU
competition law has been broken.
But when a case is resolved by Article 9 commitments,
the EC does not say that there has been an
infringement, said Rab. “All it is saying is that ‘we had
competition concerns. These commitments that have
9
France’s EDF and Belgium’s Electrabel both face cases
involving long term contracts in the power markets, and
commitments offered by Swedish transmission system
operator Svenske Kraftnat to stop limiting export
capacity as a way to manage internal congestion are
currently under consultation (EUE 217/1).
The EC is also market testing proposals by E.ON to
commit to “significant, structural reduction of its longterm gas capacity reservations which prevent access of
competitors to infrastructure needed to supply gas to
customers within E.ON’s network,” (EUE 224/5).
Most recently, the EC this month welcomed structural
remedies offered by Italy’s Eni in response to concerns
that the company may have restricted competition in the
Italian gas market (EUE 226/1).
Rab splits these cases broadly into customer
foreclosure issues, such as tying up customers in long
term contracts – as in cases involving Distrigas and
EDF (EUE 164/5) and issues involving access to the
network, such as alleged capacity hoarding, and
strategic underinvestment, which constitute the
majority of cases being settled using the commitments
procedure.
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
FEATURES
Theory of harm
Here hangs another question mark. “In order to
establish that there is a competition problem, there
needs to be evidence as to why this is a problem
against a coherent legal and economic framework,” said
Rab. This is known as a theory of harm.
“The Commission has raised some quite interesting
theories of harm about capacity hoarding and strategic
under-investment,” she said. “Could ‘strategic underinvestment’ be a problem? Could there be an obligation
under competition law to invest in capacity
enhancements to infrastructure to allow other market
participants to enter? That’s quite a bold theory.”
This is not addressed in the EC’s guidance on abuse of
dominance, she said. “In fact, it may be debated
whether competition law enforcement is the best tool
to raise levels of investment. The use of regulatory
incentives might provide a more targeted and
predictable approach than the use of enforcement
under Article 102.”
Diamond case may offer clarity
The energy industry would do well to follow
developments in similar competition cases in other
sectors which are currently testing the strength of
commitments secured under Article 9, said Rab.
“To date, there have not been challenges of
commitments to the European Courts by parties who
offered those commitments,” said Rab. But third parties
have challenged the EC’s decisions. The first of these to
be reviewed by the General Court (previously known as
the Court of the First Instance) has now reached the
Court of Justice. It concerns the well-known global
diamond company De Beers and a smaller Russian
diamond company called Alrosa.
“The General Court concluded that the Commission
should have looked at the proportionality of the
commitments and Alrosa had a right to be heard as a
third party,” said Rab. “Obviously Alrosa occupied a
unique position on this because Alrosa wasn’t some
unrelated third party. Alrosa was a counter party to the
commitments and to the supply arrangements.”
The EC launched a counter-challenge, and has now taken
the case to the Court of Justice of the EU (formerly the
ECJ). The decision is pending.
“So we await the Court’s ruling on the extent to which the
Commission needs to look at proportionality,” said Rab.
“What we do know is that Article 9 and Article 7 are
different procedures, but the extent to which [the EC] needs
to undertake a full analysis of the facts and the
proportionality of the commitments remains to be decided.”
The ruling could have a big impact. “If [the Court of
Justice rules that] the Commission needs to go through
the full analysis – as it would do with the Article 7 cases
– it would appear to deprive Article 9 of its utility as an
alternative means of bringing these [competition] cases
to an end,” said Rab. “But at the same time Article 9 is
not a free-for-all for the Commission to accept any
commitments that are offered.”
The case offers hope that there will be more clarity. But
even if the EC resolves a case under Article 9,
competition authorities or third parties could still bring the
same case to court at national level. And while EU
countries cannot take action that runs counter to the EC’s
decisions, this means that companies ‘settling’ cases
with the EC using the commitments procedure may still
find themselves having to fend off potential investigations,
fines and damages actions at national level.
Weighing up the options
Although this case is in a different sector, Rab said it
will be instructive for the prospect of companies’ and
third parties’ rights of defense, and it should clarify
issues around whether commitments need to be
proportionate.
The EC’s case against Alrosa and De Beers was
centered on an agreement that Alrosa would sell most of
its export output to De Beers, which the EC said raised
concerns about infringements of EU rules on abuse of
dominance (Article 102) and of provisions on anticompetitive agreements (Article 101).
The EC rejected two draft commitments proposals from
De Beers and Alrosa, but finally accepted draft
commitments offered to the EC by De Beers on its own
that basically prevented the supply arrangement between
Alrosa and De Beers, Rab said, explaining how the case
developed. Alrosa then challenged that decision to the
General Court, which compared the Article 9
[commitments] procedure to the Article 7 [infringements]
procedure.
10
So, with all these issues to take into account – not only
for the parties involved, but for the EC and third parties
as well – what are the benefits of using the
commitments procedure to close cases?
“If you’re looking at it from the Commission’s
perspective, they have the potential to achieve a very
specific modification in the market and they do not have
to go through the full [infringements] process. The
prospect of an appeal may be reduced, although not
eliminated,” said Rab.
“If you look at it from the perspective of the parties
involved, they avoid a fine, which may be a considerable
win for them, [and] they have not had to go through a full
investigation procedure that could well last a number of
years.” A drawn-out legal battle leads to uncertainty as
to where the business stands and causes costly
disruption of management time while they fight an
investigation. “But at the same time the business
agrees to what can be quite intrusive modifications to
their commercial practices.” Whether this is worth
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
FEATURES
Pros and cons of agreeing commitments vs
fighting EC antitrust cases
speedier case closure will very much depend on the
strength of the evidence and legal arguments and the
EC’s appetite to pursue the case, said Rab.
No offer of commitments
Pros
■
A strong case could result in no infringement
decision and a clean bill of health. But this requires
confidence in the legal case and evidence for the
defense
Cons
■
Potential fines/ Infringement decisions/damage to
corporate health
Explore commitments
Pros
■
Offers insight into the EC’s concerns
■
Shows a willingness to cooperate and goodwill
Cons
■
This may signal some lack of confidence in cases
where a dialogue on potentially offering up some
concessions has already begun.
■
Once a party is engaged in commitments talks
market testing could be perceived by third parties
as a sign of weakness, giving them confidence to
pursue cases against the party in different
procedures at national level.
Offer soft commitments
Pros
■
Shows willingness to cooperate and goodwill
without immediately offering major concessions,
which could be made later if the EC deems the first
offer unsatisfactory.
Cons
■
Similar to exploring commitments, but “too soft”
commitments may also further antagonize third
parties.
Agree hard commitments
Pros
■
Case closure, saves costs of fighting long
infringement proceedings, no fine, less disruption of
management time, enables more consensual
outcome than an infringement decision.
Cons
■
Risk of offering too much, setting a ‘precedent’ for
the future
■
Third parties may still appeal (eg Alrosa)
An Article 9 decision does not preclude private action
in member states in front of the courts, or stop a
national authority making a decision provided it does
not run counter to the commitments decision.
11
“From the perspective of third parties, looking at where
the law stands, they have an outcome and there is case
closure, but in terms of assessing what is needed in the
future [for example] in terms of long term supply
contracts, [or] when a network needs to be open…at the
end of the day, these are not formal findings of
infringement. A commitments decision is less useful
when bringing private actions before the courts as it
cannot be relied on as proof of infringement, although it
may be treated as evidence and the third party may cite
the Commission-raised concerns.”
Companies considering whether to close cases by
offering commitments using the Article 9 procedure
therefore need to carefully weigh their options: offer
commitments or instead object to the EC’s decision, wait
for the investigation to play out – and fight any fine or
infringement decision all the way through the European
Courts, said Rab. Clearly the choices offer pros and
cons (see left).
The Article 9 procedure offers some real advantages for
bringing competition cases to an end quickly, said Rab.
“It means we don’t have to wait around for what can be
many years for a case to be resolved. But this does
afford significant discretion to the Commission as to
how it resolves the cases and going forwards because,
although these cases are very useful, their precedent
value is more limited.”
In January this year, the EC issued a consultation on its
best practices, which includes a commentary about
Article 9. The results are due back in the first week of
March. And the very fact that so many of the cases
being pursued after the energy sector competition inquiry
are being dealt with using the Article 9 procedure makes
the EC consultation highly topical, said Rab.
“When looking at the substantive issues in the energy
sector guidance would be welcome on where all these
cases take us, because there is probably a limit to the
cases the Commission can pursue from the sector
inquiry. We’re now 2 years down the line from that. There
are suggestions that these cases are drawing to an end.
But at the same time these cases are significant. The
principles articulated in the recent cases dealing with
such issues as long-term contracts, capacity hoarding,
strategic under-investment and margin squeeze will
remain relevant as Europe’s energy companies assess
their commercial practices for compatibility with
competition law on an ongoing basis,” she said.
* Suzanne Rab is Counsel of competition law at Hogan
and Hartson. Hogan and Hartson works with a number of
major European energy companies, but has not
represented any in negotiating commitments under Article
9 of the EU Regulation 1/2003.
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
FEATURES
New EU regulatory agency readies for action
Now that the new EU energy regulatory agency has an address – Ljubljana – will European
energy regulators have a single telephone number? Can the new agency function as a
one-stop shop for regulating Europe’s electricity and gas markets? Leigh Hancher* reports
The Agency for the Cooperation of Energy Regulators
officially assumes its functions on March 3, 2011.
Considerable efforts are already underway to ensure it
will hit the ground running. Some of the key actors are
already in place. The new administrative board
(responsible for the budget, financial regulation and
internal rules) has been appointed, and will hold its first
meeting in March (see table).
The board of regulators, also now appointed, and
responsible for regulatory decisions, will meet in April. A
decision on selecting its first director, who will manage
and represent the agency from one of the 700 hopeful
candidates, should also follow in April.
The final piece of the new institutional puzzle, the board
of appeal, must still be appointed. This is the task of
the director, in cooperation with the board of regulators.
Recruiting the agency’s 50-strong support staff is then
likely to proceed, and the agency should be in a position
to start to put its €7 million ($9.5 million) annual budget
to work. But what exactly can and will the agency do?
The EU’s third package of energy market opening laws
places great emphasis on the independence of national
energy regulators from their political masters. Key
decisions must now be made by the regulators, and not
by politicians or government departments.
The agency however is kept on a much firmer leash. The
European Commission declined to delegate any real
decision-making powers to it, maintaining that a very old
ruling from the European Courts – the so called ‘Meroni’
case – set strict conditions on what powers could be
transferred to independent agencies. As a consequence
the agency has a wide range of advisory and monitoring
type functions, ranging from providing opinions on
binding EU guidelines to reviewing conformity of national
regulatory decisions with EU rules.
The agency’s actual decision-making powers are limited
to specific cross-border issues, such as exemptions for
investor or ‘merchant’ projects from third-party access
requirements, and even here it is only entitled to take a
decision on the request of the regulators involved, or in
the event that the national regulators themselves fail to
reach a common decision on a cross-border
interconnector within six months. Even then, the EC can
amend or veto the agency’s decision.
The EC’s commitment to the Meroni doctrine has
adversely affected the division of tasks between the
agency and the new European network transmission
12
system operators for electricity and gas – Ensto-e and
Entsog. It has resulted in a clumsy split between the
roles and responsibilities of the EC, the agency’s director
and the agency’s board of regulators.
Entso-e and Entsog get the first and therefore the
largest bite at the task of drafting key third package
documents – the EU grid codes and the ten-year grid
development plans and of course their own work
programs, statutes and rules of procedure.
The agency can provide opinions to Entso-e, Entsog and
the EC on these codes, development plans and the work
programs, and it provides the EC with its views on the
draft statutes and rules of procedure. The EC has the
final word. The agency is not in the driving seat when it
comes to technical and market issues – Entso-e and
Entsog have been given this privileged position.
Given that the agency only advises the EC, it cannot
arbitrate between conflicting public interests or make
political choices or conduct complex economic
assessments on the merits of one particular
investment project as opposed to another. This is the
EC’s task.
The EC sets the annual priorities for the network codes
and takes the final decision on whether they will become
legally binding. The agency is definitely consigned to the
back seat.
The personal touch
Obviously as with any regulatory agency, personalities as
much as legal constraints can play a crucial role as to
how the agency will position itself vis-a-vis the EC, Entsoe, Entsog and the national regulators. No doubt this will
be on the EC’s mind when the director is appointed.
Some major stakeholders have always been more
sympathetic to a stronger agency – including many national
regulators, as well as the European Parliament. The EP
appoints two of the nine-member administrative board. The
EC appoints two, while the EU Council, representing the
EU’s 27 national governments, nominates five.
The administrative board appoints the director after a
favorable opinion by the board of regulators, which
includes all 27 EU national regulators, plus one nonvoting EC representative. Unfortunately, the new set-up
does not make clear how the board of regulators and
the director should co-operate with each other, and
whether the EC has a role in this process or not. Time
will tell.
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
FEATURES
New EU energy regulatory agency’s administrative board members
Name
Country
Tenure (years)
Job title/background
EU Council nominees
Guido Bortoni
Italy
6
Razvan Eugen Nicolescu
Piotr Grzegorz Wozniak
Detlef Dauke
Philippe Guillard
Alternates
Alfonso Gonzalez Finat
Kristian Moller
William Rickett
Peter Gordos
Maya Hristova
Romania
Poland
Germany
France
6
6
4
4
Director-general for power/gas markets in Italian economic
development ministry
Head of corporate public affairs at Petrom (OMV group)
Former Polish economy minister
Director-general for energy, German economy ministry
Deputy director for energy, French energy ministry
Spain
Denmark
UK
Hungary
Bulgaria
6
6
6
4
4
Former EC renewables energy director
Deputy director-general, Danish Energy Agency
Former director-general for energy
State secretary for energy
Deputy minister of economy, energy and tourism
Peter Mombaur
Germany
6
Carlos Westendorp y Cabeza
Alternates
Uwe Leprich
Jorge Vasconcelos
Spain
4
MEP 1994-2004, rapporteur for 2003 EU cross-border power
trade regulation and 2004 EU gas supply security directive
MEP 1999-2003, chairman of EP energy committee
Germany
Portugal
6
4
Professor, University of Applied Sciences in Saarbrücken
New Energy Solutions; former Portuguese regulator
European Parliament nominees
European Commission nominees
Philip Lowe, EC director-general for energy
Augusto Bonucci, shared resources director, EC energy directorate-general
Source: Ergeg/Platts
Given that the agency could play an important part in
ensuring a wide representation of all the relevant
stakeholders and should guarantee an efficient
cooperation between the national regulators, it may have
the potential to win over powerful allies.
In turn, if the board of regulators makes careful use of
its powers in relation to the selection (and eventual
renewal of the appointment) of the director as well as its
powers to give prior assent to the adoptions of agency
opinions and recommendations, then it could provide a
viable counterweight to the administrative board in giving
overall strategic guidance to the director.
And as with any other regulatory agency, national or
European, it is likely that the agency’s role will expand
into new areas. Again it should not be forgotten that
the scope of the third package rules can and no
doubt will be significantly extended as the EC adopts
technical regulations and guidelines on the basis of
the comitology procedures – using a committee of
national government officials to approve new EU
rules.
The agency will of course have to give opinions on the
draft rules, but in turn these rules may confer more
responsibilities on the agency.
New legislation already in the pipeline envisages a new
role for the agency. The EC indicated at the December
Florence Forum (which brings together stakeholders in
the EU power market) that the agency could have a role
13
in overseeing the proposed measures to introduce more
transparency in wholesale markets.
Nor is it entirely unthinkable that the agency might find
itself monitoring key aspects of the EU’s 2020 climate
targets in the future, for example supervising trade in
renewable energy certificates – the so-called guarantees
of origin.
Who plays the enforcer?
Yet one key area of uncertainty remains – and that
concerns enforcement. Will the EC have the last word on
determining whether this growingly complex and
technical body of legislation is properly enforced? Or is
there scope for the agency’s opinions to carry increasing
weight at national level?
Some stakeholders as well as national governments
have advocated that strong regulators are needed to
oversee the activities of grid operators. And if the
massive investments in Europe’s grids are indeed to be
realized, market players will demand the regulatory
certainty of a ‘one-stop shop’.
As network activities increasingly span regional borders
and as more national grid operators aspire to become
‘European network champions,’ the agency may discover
sooner rather than later that its time has come.
*Leigh Hancher is Professor of European Law, Tilburg
University, The Netherlands; and Of Counsel, Allen &
Overy, Amsterdam.
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
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NEWS
COMPETITION
EU
Oettinger aims to curb dramatic
power price rises
New EU energy commissioner Gunther Oettinger aims to
ensure EU energy policy prevents dramatic price rises
but there is no suggestion that he wants to re-regulate
European power prices, his spokeswoman Marlene
Holzner told Platts on February 15.
In a February 14 interview with German newspaper
Welt am Sonntag, Oettinger said one aim of European
policy should be to stop drastic increases in power prices.
“No one can say how much a kilowatt hour of
electricity will cost in [the] future,” he told the
newspaper. “But an essential objective of European
energy policy must be that in future dramatic increases
in electricity prices will be curbed.”
The quotes have prompted speculation that Oettinger
may seek ways to control prices in future. But Oettinger
“did not talk about regulation,” Holzner said, nor did he
say how price increases could be contained in future.
Oettinger told the newspaper that household power
prices should be in proportion to other costs, such as
rent, food and education, and should not rise more than
the annual inflation rate.
The competitiveness of European industry depended
to a large extent on energy costs, he said, adding that
energy companies “need stable electricity prices.”
In Oettinger’s view, energy policy would become “more
European in the next five years” as national grids become
more interconnected. This would lead to “more freedom
and more competition in the energy sector ahead.”
Commenting on the interview in a note on February
15, investment bank Citi said that any suggestion of a
return to regulated rates would be “extraordinary” and in
contradiction of “the very spirit of the EU that promotes
liberalized markets, and more the ten years of legislation
in favor of gradual opening of electricity and gas markets
to competition.”
“We very much struggle to believe that, if these
statements are true, this is also the opinion of the EU
Commission,” the bank said.
France
EDF CEO welcomes competition,
will not give up market share
The new CEO of French state-controlled utility EDF says
he welcomes competition in France’s electricity market
but not at the expense of EDF’s market share, in an
apparent conflict with government plans to restructure
the power sector.
15
COMPETITION
“My conviction is that competition is absolutely
necessary... [but] you’ll never hear me say that our
ambition is to lose market share,” Henri Proglio said
during EDF’s 2009 results presentation on February
11.
The government last month launched a consultation
on a preliminary draft law on the New Organization of the
Electricity Market, known as NOME.
One of the key changes under proposed law the
would be the requirement for EDF to sell up to 30% of
its annual nuclear production, or 120 TWh, to
competitors at a fixed rate covering the utility’s existing
nuclear operating and maintenance costs.
“I have no wish to give up anything in terms of
production capacity,” said Proglio. “We have a production
fleet at our disposal, there’s no question of us giving it
up, lending it or hiring it.”
But he said he was not opposed to the idea of the
market reform per se. Proglio said it was key for France
to ensure that priority was given to companies investing
in production capacity, thereby enabling the country to
maintain a “coherent” production fleet and to guarantee
production capacity “in the long term” through initiatives
such as nuclear reactor lifespan extension and bringing
new capacity online.
He said he would remain vocal on a subject he
considered core to the interests of EDF stakeholders.
But resistance from EDF is not expected to halt the
move towards distributing nuclear capacity to alternative
players.
Boosting competition in the power market, in
which EDF has a market share of more than 90%, is
one of the commitments the French government
made to the European Commission in September
last year as part of negotiations to end antitrust
proceedings.
CRE happy with TSO transparency,
questions DSO independence
French regulator, CRE, has paid credit in its annual
report on the independence of system operators to the
“unceasing efforts” of system operators in 2009 to offer
services which are non-discriminatory, objective,
transparent and confidential.
However, the French regulator said their websites are
not always up-to-date or user friendly, and that
confidentiality concerns are sometimes getting in the
way of transparency.
Distribution network operators get fewer plaudits
because there has been less of an effort to improve
information, but the CRE notes that instances in which
employees of ERDF and GrDF “denigrate alternative
suppliers or orient [callers] towards the historic supplier
have virtually disappeared”.
Consumers’ ignorance of how deregulation works
and the role of network operators means the distribution
network operators nevertheless need to work extra hard
at explaining their role, the CRE believes.
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
NEWS
This also means ensuring that consumers do not
assume that service quality issues (particularly when
switching) are the supplier’s rather than the network
operator’s fault.
This is also a facet of non-discrimination, the CRE
points out.
The CRE is broadly happy about Chinese walls
between the system operators and their parent
companies in terms of day-to-day organization and
decision-making, but has some concerns about parent
groups taking credit for the system operators’ activities
for example in crisis management, as had previously
been the case with EDF after major weather-related
power cuts.
Distribution network operators, on the other hand
“need to reinforce their independence”.
The CRE is “skeptical” about the approach adopted
by some of the parent companies, where operators often
have recourse to the parent company to carry out many
services. They are not breaching the law as it stands,
but in future this may not be compatible with the EU’s
third energy package.
The distribution network operators also need to do
more to eliminate confusion between themselves and
their parent company in their branding, logo and general
communication, the CRE concludes.
COMPETITION / ELECTRICITY
Germany
Border towns lobby for new link
Around a dozen towns lying close to the Swiss border in
Germany’s Baden-Wuerttemberg region this month called
on both the state councillors and the federal economy
ministry to fund a power connection to the German high
voltage grid network.
Historical and geographical constraints have led to the
German towns receiving power supplies from EKS, the
local utility of the nearby Swiss city, Schaffhausen, for the
last century. The German end-consumers are frustrated at
having to pay for ancillary grid charges, introduced in
October 2008, which the Swiss electricity market regulator
Elcom says must be levied on transmission services
supplied by Swiss utilities to foreign customers.
This has come about because German feed-in tariffs
for green energy are higher than in Switzerland.
The cost of connecting the small Schaffhausen area
and a dozen communities in the Alsace area of France
that are also affected is estimated to run into millions of
Euros, which, to date, no utility is willing to pay.
German authorities did not comment on the case.
Spain
CRE sets 3.9% rise in GRTgaz
transport tariffs
Anti-trust watchdog extends
competition probe to Unesa
French gas transport tariffs charged by grid operator
GRTgaz are to rise by an average of 3.9% from April 1,
energy regulator CRE said on February 10.
GRTgaz’s regulated tariffs were up for review, having
been in place since January 1, 2009. GRTgaz is a 100%
owned subsidiary of GDF Suez.
The forecast level of subscriptions for gas capacity in
2010 is 0.5% lower than forecast the previous year, a
consequence of the economic downturn, CRE said. This
adjustment comes despite the start up of several of gas
fired power plants, it said.
GRTgaz’s authorized revenues for 2010 rose by 2.4%
compared with 2009, a smaller increase than the
average rise of 4.6% per year for the period 2010-2012,
predicted in October 2008, CRE said. This was because
of a lower than expected inflation rate in 2009 and lower
expenses for GRTgaz.
The 3.9% rise takes these conditions into account,
said CRE.
CRE also said that initial studies for improved
intraday flexibility of gas transport, to accommodate
new gas-fired power plants, could incur further charges
which are not currently included in the gas transport
tariffs.
This could mean GRTgaz transport tariffs are
adjusted further in 2010, it said.
CRE is to review the tariffs of both GRTgaz and
France’s other gas grid operator, Total’s TIGF, by April
2011.
Spanish anti-trust watchdog, CNC has extended a
competition probe in the electricity sector to power
industry association Unesa. It opened an investigation
into major utilities Endesa, Iberdrola, Hidrocantabrico,
Gas Natural and E.ON in June 2009 on suspicion that
they were blocking new entrants gaining sufficient
access to customer information, which in turn makes it
difficult for customers to switch to new suppliers. Those
who do not remain on default “tariffs of last resort” with
their traditional supplier.
The CNC conducted initial investigations at Unesa’s
offices in November and now suspects the association
might have been involved. Unesa said it did not know why it
was being investigated and was awaiting a formal summons.
16
ELECTRICITY
EU
Six-way integrated power market
faces key month: EPEX Spot
European power exchanges face an important month
ahead toward the realization of a six-way integrated
power market, EPEX Spot CEO Jean-Francois ConilLacoste told Platts in an interview on February 10.
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
NEWS
Scandinavian Nord Pool Spot, Iberian OMEL, AngloDutch APX-ENDEX, Belgian BELPEX, Italian GME and
EPEX Spot power exchanges will all contribute to the six
way integration.
“The next month is a crucial period and by the end of
it we will have a clear road map for market integration,”
Conil-Lacoste said on the sidelines of the eWorld Energy
and Water conference in Essen, Germany.
“EPEX Spot will be at the core of this solution which
we hope will be the way forward,” he said. “Even though
the European Commission is keen to integrate the
market we must still convince them and the
[transmission system operators] of this…We will know
more by the end of February.”
Conil-Lacoste said power market integration is key to
enable price coupling in Europe and the exchanges have
made good progress since their original agreement.
“We had already signed a six party non-disclosure
agreement and we are now working toward a letter of
intent,” he said. “The whole process was made a lot
easier due to the amount of exchange consolidation we
have seen already.”
Anglo-Dutch exchange APX-ENDEX said on February 9
that it was working closely with neighboring exchanges
to introduce pentalateral coupling by the second quarter
of 2010. The five countries included in the coupling
process are Belgium, France, Germany, Luxembourg and
the Netherlands.
“We hope to see the introduction of pentalateral
market coupling by the second quarter after trilateral
coupling proved to be such a success,” APX-ENDEX CEO
Bert den Ouden said. “The whole process was embraced
in Germany and we should now see more convergence in
European spot prices…This is the next step to a more
integrated market.”
Den Ouden said the exchange is open to further
consolidation opportunities but highlighted the importance
of integration, its main focus for the immediate future. “We
are always open to opportunities of consolidation but at
the moment integration is more important because the EU
needs this to happen fast to create one common system,”
he said. “Consolidation may happen but it will take much
longer…Cooperation is needed to make it work but we feel
we have already played our part in four key consolidations
recently including that creating APX-ENDEX.”
Austrian, Czech and Polish
exchanges sign coupling plan
Austrian, Czech and Polish energy exchanges EXAA, PXE
and TGE said on February 19 they had signed a
memorandum of understanding to introduce market
coupling on their spot electricity markets.
The three exchanges aim to establish a regional
electricity market in central and eastern Europe based
on the principles of the Central Eastern European Forum
for Electricity Market Integration, signed by various EU
member states of the region in December 2009, a joint
statement said.
17
ELECTRICITY
EXAA, PXE and TGE have appointed a steering
committee and a working group to take care of the
integration of the respective spot markets, it said.
“We welcome this initiative because it will
significantly boost liquidity and it supports the
cooperation to develop a common power market for
Central Europe,” EXAA CEO Juergen Wahl said.
“This will not only be beneficial for traders but for all
relevant stakeholders,” he added.
“When we were creating PXE platform, we had a
vision of a unified Central and Eastern European
electricity market – a market that would be transparent,
easily accessible to everyone and provide equal
opportunities for all market participants ... [this]
materializes our vision,” said PXE’s David Kucera.
“Creating the regional markets is a major step
towards the integrated European market. Poland should
be very interested in this process as it gives us a
chance for a bigger competition and lower prices for all
consumers,” TGE president Grzegorz Onichimowski
said.
Representatives of other exchanges which operate in
the region and the transmission system operators of
central and eastern Europe will be invited to cooperate
in the establishment of the market coupling plan, the
joint statement said.
Finland
Finland, Estonia sign deal for
650 MW EstLink2 cable
Finland and Estonia have signed a preliminary
agreement to build the €300 million ($408 million)
650 MW EstLink 2 power cable connection between
the two countries.
The agreement is to be followed by a final capital
investment decision if certain conditions are met,
Finnish power transmission system operator Fingrid and
Estonia’s power TSO Elering said on February 15 in a
joint statement.
The conditions include that Estonia’s wholesale
power market opens up as expected and that the project
receives €100 million in co-financing from the EU’s
energy infrastructure fund for projects launched by the
end of 2010.
The new line would complement the 350 MW Estlink
direct current power cable between Finland and Estonia
and would not come online until at least the end of
2013, said the TSOs. It would integrate the Baltic power
market more with the Nordic market and contribute to
the Baltic countries’ power supply security.
The TSOs said that the Nordic power exchange Nord
Pool Spot would expand to Estonia on April 1, when price
area Estlink will be introduced. “The pivotal objective of
the electricity exchange is to create a reliable market
price for electricity throughout the Baltic region,” said the
TSOs. The next stage would be to expand Nord Pool
Spot to Latvia and Lithuania.
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
NEWS
“EstLink 2 is an important step in our vision of
creating a common Baltic Sea region electricity grid. It
gives benefits to the whole region in the form of
increased security of supply and [a] more efficient
electricity market,” said Fingrid CEO Jukka Ruusunen.
“The grid is also needed to meet the climate targets of
the countries around the Baltic Sea.”
Elering CEO Taavi Veskimagi said that the preliminary
agreement on Estlink 2 gave a further boost to opening
the Estonian power market. “EstLink 2 project is a
cornerstone of Estonian security of supply, to proceed
with the market opening and integrating the markets of
Baltic and Scandinavian countries,” he said.
ELECTRICITY
Lacoste said the building, operation and
decommissioning of the plant should be carried out by
“a clearly identified” company, Le Figaro said. Lacoste
said this could mean the project company could operate
the plant. Up until now, EDF has been the sole operator
of all of its French nuclear power plants, with some
power companies gaining access to output through
offtake rights.
The government could choose to hand responsibility
for the Penly project to EDF, and give its competitor GDF
Suez the ownership over a third reactor, Le Figaro
suggested. But it is unclear as to when a third EPR plant
might be built.
According to the government, France does not need
to build a third EPR plant before 2020.
France
Greece
Safety checks needed before
nuclear extension decision: ASN
The French nuclear safety regulator ASN said on
February 16 that EDF must perform further maintenance
checks on its reactors to gain the authorization to
extend lifespans to 40 years.
EDF operates 58 nuclear reactors in France, of which
34 are of 900 MW. capacity
The plants currently have 40-year lifespans, but
state-controlled EDF is considering running the facilities
for 60 years. All nuclear plants in France must undergo
inspections every 10 years to gain another 10 years in
lifespan.
Last July, ASN agreed in principle to extending the
lifetimes of EDF’s 900 MW power reactors by 10 years
to 40 years.
In its presentation on February 16, the regulator said
it would examine every single reactor vessel within EDF’s
900 MW units.
ASN’s head Andre-Claude Lacoste was quoted in the
Financial Times newspaper on February 17 saying that
extending the lifespan of French nuclear power plants by
another 20 years would require massive investment. “To
go beyond that [40 years] without doubt would require
massive investment,” he said.
Lacoste added that even if his body approved the
safety of continuing to run the plants, EDF might decide
there was not an economic case for doing so.
According to the same day’s Le Figaro newspaper,
Lacoste also said the ASN is against shared
responsibility for the planned European pressurized
reactor at Penly, Normandy.
EDF is scheduled in 2013 to start commercial
operations at its first 1,650 MW EPR plant at
Flamanville, also in Normandy.
The French government has given its backing to the
second EPR reactor.
Under an agreement in principle, EDF, GDF Suez and
Total are to all invest in the project. EDF is to hold a
majority stake, GDF Suez is to hold 75% of a 33% stake,
and Total is to hold 25% of that 33% stake. Startup is
planned for 2017.
18
Power market may misunderstand
Greek ‘export fee’ change
Changes to the Greek grid code from March 16 have
been misinterpreted by some traders as a plan by
transmission system operator HTSO to cancel export
fees, a market source told Platts on February 16.
TSOs in some markets of central and southeast
Europe charge an export fee in the absence of a
Europe-wide incentive scheme to invest in the grid, but
traders say such fees are illegal. The European
Federation of Energy Traders argues that tariffs applied
to transactions across borders are not permissible
under European laws related to the free movement of
goods.
News of changes to the Greek system has been
welcomed by some market participants as a move away
from export fees, but the Greek fee is related to the
capacity agreement certificates that each exporter needs
to submit in order to be allowed to export power. Power
producers receive these certificates, which they can then
sell to interested parties.
To date – using the transitional articles of the Greek
grid code – HTSO has been buying all the certificates at
€35,000 per megawatt year.
All exporters have to declare their participation in
the transitional capacity certificate mechanism at the
start of each reliability year (October 1-September 31)
and in doing so they automatically receive the
necessary certificates from HTSO each time they need
to export.
At the end of each reliability year, HTSO charges
exporters the proportionate amount it has paid to
producers. This is the Greek “export” fee under existing
conditions.
“Under the new code producers will be selling the
certificates directly to exporters without the interference
of HTSO and as a result HTSO will charge no fee to
exporters. This does not mean that the exporters will
pay nothing, as they will need to pay producers for the
certificates,” the source said.
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
NEWS
Italy
Ministry earmarks €22 million for
energy research and innovation
Italy’s Ministry of Economic Development passed a
decree on February 18 that assigns €22 million ($29.8
million) for financing of research initiatives in the
electricity sector, with a special focus on renewable
energy.
According to Minister Claudio Scajola, the initiative
“aims to ensure energy security, reduce energy costs for
citizens and businesses, and develop clean energy
sources,” with the results being used “for the
development of new industrial products and innovative
services.”
During the preliminary phase 82 project proposals
were put forward by companies, research organizations
and universities that participated in the invitation to
tender. The goal was to identify research initiatives to
develop not just the renewables sector but also the
transmission and distribution networks and technological
innovation in the electricity system.
Alongside the decree, the ministry has also approved
a list that assigning €22 million to the 26 best-selected
projects for which funding will help develop total
investments of nearly €70 million.
Terna to invest €4.3 bil in strategic
development plan
Italian energy transmission operator Terna said on
February 18 it has adopted a strategic plan for the
period 2010-14 which foresees the investment of €4.3
billion ($5.83 billion) mainly for network development.
This figure represents an increase of €900 million
(plus 26%) on what was stated in the previous plan (€3.4
billion). Investments in network development represent
77% of the total and will be mostly concentrated in central
and south Italy, while investment in interconnections with
other countries will reach €650 million.
The €4.3 billion figure does not include €300 million
of investment in land adjacent to power plants currently
not in use and aimed at the realization of small scale PV
generating capacity with a target of 100 MW by 2010.
The key strategic projects within Italy are the DoloCamin Fusina Line (Veneto), the Chignolo Po-Maleo Line
(Lombardy), the second SA.PE.I cable (Sardinia-Italian
peninsula), the Santa Barbara-Casellina Line (Tuscany),
Sorgente-Rizziconi Line (Sicily-Calabria) and FoggiaBenevento Line (Apulia-Campania).
In terms of interconnections, planned investments
are for Italy-Montenegro, for which an intergovernmental
agreement has been signed by which Terna will build a
450 km cable (375 km undersea) between Villanova and
Tivat and two electricity stations. The investment
amounts to €760 million in total, of which €590 million
are included in the Strategic Plan 2010-14.
19
ELECTRICITY
The agreement further provides for a strategic
partnership between Terna and the local transmission
operator Prenos including, among other things, the
acquisition of a minority stake in Prenos. A second initiative
will focus on the Italy-France interconnection, whose
authorization process was initiated in October 2009.
Lithuania
EBRD to loan €70 million for
CCGT plant
The European Bank for Reconstruction and Development
said on February 19 it would lend €71 million ($96
million) to Lithuania’s AB Lietuvos Elektrine to aid the
construction of a 450 MW CCGT plant.
The EBRD said in a statement the loan would be
used to finance the plant at the current Lithuanian Power
Plant site 50 km west of the capital Vilnius.
AB Lietuvos Elektrine currently operates a 1.8 GW gas
and fuel oil operated facility at the site, and the new CCGT
plant is expected to replace two of the eight existing
generation units at the facility on completion in 2012.
EBRD is set to provide around 20% of the project
funding which is expected to total €360 million.
“Increasing the generation capacity of LPP is a key
priority for Lithuania and the EBRD is pleased to support
AB Lietuvos Elektrine in the implementation of this
strategic project. The construction of the new modern
power plant will alleviate the impact of lost capacity in
Lithuania and will support the creation of a secure and
reliable power system in the region,” said Nandita
Parshad, EBRD Director for Power and Energy.
Poland
Govt sells 16% stake in Enea
Poland’s finance ministry set the final price for the sale
of a 16.05% stake in the country’s third largest power
group Enea at Zloty 16/share, valuing the package at
Zloty 1.13 billion (€280 million, $380 million) on
February 10.
Bookbuilding for the sale of the 70.9 million shares
ran from February 4 to 9.
On February 8 the ministry set the price range at
between Zloty 15.5-17.5/share. The final price offered a
nearly 9% discount on the Zloty 17.4 closing price of
Enea’s shares on February 9.
The ministry sold the stake as part of the
government’s privatization program, which has set an
ambitious target of reaching Zloty 25 billion this year.
The government still owns 51% of Enea, and plans to
sell 50% to a strategic investor, despite failing to sell off
its entire 67.05% stake in October after sole bidder RWE
backed out. RWE said its offer could not meet the
market expectations, which valued the stake at Zloty 7
billion ($2.4 billion).
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
NEWS
Currently, less than 5% of Enea’s shares are listed
on the stock exchange, making it difficult to calculate a
reliable market valuation.
Enea held an IPO in November 2008, in which
Sweden’s Vattenfall acquired an 18.67% stake.
In 2008, Enea, based in Poznan, western Poland,
produced around 7.7% of Poland’s power and sold 17.5
TWh to around 2.3 million customers, giving it a 15.8%
slice of the Polish energy sales market.
UK
Regulator raises concerns over
Westinghouse AP1000 reactor
ELECTRICITY / EMISSIONS
“We remain totally committed to resolving these –
and all other – concerns so that a meaningful generic
design assessment outcome can be achieved in mid2011,” he said.
US-based Westinghouse Electric Co is owned by
Japan’s Toshiba Corp.
The generic design assessment is expected to be
completed by the end of June in 2011. Once a reactor
type has been accepted, the vendors will be able to use
them in several different power stations without having
to get design approval for each one.
The UK needs to replace at least 20 GW of aging
coal and nuclear power generation capacity in the next
20 years.
EMISSIONS
The UK health and safety executive’s nuclear regulator
has a major safety concern over nuclear vendor
Westinghouse’s AP1000, one of two reactor designs
proposed for the UK’s next generation of nuclear power
plants.
HSE said on February 16 it had raised a regulatory
issue, the highest of three levels of concern, against the
Westinghouse AP1000 after the company proposed a
shield building modular construction design for key
structures within the reactor.
HSE, which is overseeing the generic design
assessment of both Westinghouse AP1000 and the
European pressurized reactor from the French team of
Areva and EDF, said it needed to be provided with
evidence that demonstrates the strength and durability
of the AP1000’s structures.
“Westinghouse is proposing to use a new
construction methodology for key structures within the
‘Nuclear Island,’ essentially using a sandwich of steel
plates filled with concrete, rather than using more
conventional reinforced concrete, which is
strengthened with internal steel bars,” HSE said in a
statement.
“This is new and we need to be reassured that key
structures would be sufficiently robust to protect the
reactor’s safety systems under normal conditions, and
also from severe weather and other external hazards,
such as physical impacts,” it said.
The HSE said it wanted “to be assured that the
structure will hold together.”
Issuing a regulatory issue did not mean that the
design is unsafe, it said. It is still assessing designs on
paper, so any safety deficiency is still in the design
stage.
“Westinghouse is considering a number of possible
solutions, such as further analysis, testing and possible
changes to the design, and intends to provide detailed
proposals and supporting evidence by the end of
October 2010.”
Westinghouse UK chief executive Mike Tynan said
that the issues raised were not new and that his
company has been working with the regulators “for some
months” to provide them with the assurances and
information they need.
20
EU
New registry rules crack-down on
emissions fraud
The European Union agreed to tough new measures
designed to prevent fraud in the greenhouse gas
emissions trading market after EU member states on
February 17 approved European Commission proposals
for revising the system of national registries in the EU
Emissions Trading Scheme.
The overhaul mainly aims to change the system to
include aviation sector emissions starting in 2012 and
move EU Allowances from individual national registries to
the new EU registry that same year, the EC said in a
statement.
Aside from the need for greater centralization, the
revision also aims to counter the recent problem of
fraudulent and criminal activities against the registries
system, the EC said.
National emissions registries in a number of member
states were illegally hacked into recently by a phishing
scam, under which fraudsters obtained registry log-in
details by posing as, for example, online security firms.
After extensive consultations with member states
and February 17’s vote in the Climate Change
Committee, the revised regulation will be examined by
the European Parliament and Council and formally
adopted by the EC “as swiftly as possible,” the EC said.
Some EU carbon market participants take the view
that fraudsters have done the EC a favor by helping to
highlight weaknesses in the EU ETS that can now be
fixed before the scheme’s Phase III period begins in
January 2013.
Most of the revisions will take effect from January 1,
2012 and will require extensive IT work before they can
be implemented.
But the anti-fraud measures will enter into force once
the revision is published in the EU’s Official Journal,
which is expected to happen this summer, and some
aspects may be rolled out immediately, the EC said.
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
NEWS
The anti-fraud measures include authorizing national
administrators to refuse to open a new account and to
suspend or close accounts, subject to an appeals
procedure, it said.
“The revision also sets out rules on the sharing of
registry information at EU level with law enforcement
agencies and other national authorities, which should
make the fight against crime more effective,” the EC
said.
Industry, MEPs welcome ETS handout rules, fear CCS delays
The EU’s ability to have 12 carbon capture and storage
projects up and running by 2015 is in doubt after rules
for allocating post-2012 emissions trading scheme
allowances to them took more than a year to agree,
according to European Parliament member Chris Davies.
“I welcome the support now given to the European
Commission’s proposals for the use of the 300 million
allowances from the new entrants’ reserve of the ETS,
though I regret that it has taken so long to gain approval
for the procedures,” Chris Davies, the UK Liberal
Democrat party MEP who negotiated for the EP on the
EU’s 2009 carbon capture and storage directive, told
Platts on February 10.
“It took more than 13 months for the principle to
gain practical form. We have lost a lot of time,” said
Davies. “The big question is whether we will have 12
demonstration projects in operation by 2015. That looks
unlikely to me, and this is unacceptable.”
EU government officials agreed the EC’s draft rules
for allocating the allowances – worth around €4.5 billion
($6 billion) at €15/metric ton of carbon dioxide – to CCS
and innovative renewable energy projects on February 2.
The new rules mean EU funds could cover up to 50%
of eligible projects costs, a move welcomed by power
industry association Eurelectric. It said on February 5
that this would allow companies to finance large
demonstration projects.
Any delay in the commercial deployment of CCS
would “seriously delay efforts towards a carbon-neutral
economy,” said Eurelectric.
The rules envisage funding for eight CCS projects
and 34 renewable energy projects over two calls for
proposals, it said.
For CCS projects, at least one and at most three
projects could be financed in each of the three capture
technology fields – post combustion, pre-combustion and
oxyfuel. At least three projects must demonstrate
storage of the captured carbon dioxide in hydrocarbon
reservoirs and at least three in saline aquifers, it said.
If the draft rules are confirmed by the EP and the EU
Council, the EC could adopt them into law in May and
open a first call for proposals shortly after.
The EC said February 3 that on this timetable it aims
to make the first awards by end-2011, and that this
would ensure that the CCS demonstration projects can
be up and running by end-2015.
21
EMISSIONS
Climate Commissioner to tour
major emitters in charm drive
The EU’s new climate action commissioner Connie
Hedegaard is to consult with the world’s big emitters as
part of an EU drive to reinvigorate the UN- sponsored
talks for a global climate agreement.
“We need to build bridges with our international
partners. That’s why Commissioner Hedegaard is going
to be traveling to all the major negotiating partners,”
European Commission spokesman Michael Mann told
reporters on February 19.
EC President Jose Manuel Barroso wrote to all EU
leaders on on February 18 saying that he had asked
Hedegaard “to undertake a consultation of key
international partners to find ways to reinvigorate the
international process.”
Barroso said the December UN climate conference in
Copenhagen had been “a reality check,” where the EU’s
strategy to lead by example in cutting its emissions had
not been enough to convince others to do the same.
“Our core goal must be to bring all partners closer to
our own ambitions and to our commitment to a
multilateral agreement,” he said.
Hedegaard aims to meet with key partners including
the US and China in the next two months, said an EC
source. She is to travel to some of the countries, and
have telephone or videoconference meetings with
officials from others.
Barroso wrote that he hoped to have “some first
thoughts” on the negotiation process by EU leaders’
meeting in Brussels in March, and fuller results by their
June meeting. The EU has set itself a binding unilateral
target to cut its emissions by 20% below 1990 levels by
2020, and has offered to go to 30% if other countries
make comparable commitments.
France
Govt launches consultation on
revised CO2 tax proposals
The French government has launched a consultation on
a more broadly-based carbon tax on industry than was
approved by the French Parliament last December but
rejected by the Constitutional Court because the
coverage was too limited.
The government argued originally that a carbon tax
on companies already subject to emissions quotas
would impose a double burden, but the Constitutional
Court said this was not a valid argument. The average
level of tax envisaged is unchanged at €170 ($231).
The proposals include a significant reduction in the
tax (80% in 2010) for conventional power plants with the
aim of allowing them to compete on a level playing field
with peak power suppliers in neighboring countries, and
to discourage a switch to less efficient foreign
producers, and consequently higher emissions.
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
NEWS
The government is also suggesting that the tax would
not apply on CO2 in energy inputs that is captured in
final products so not emitted. And it has suggested that
carbon tax liability be reduced by any amount that
companies have to pay for quotas. These ideas will have
to be approved by the European Commission if they go
ahead.
Italy
Study shows Italy on track to meet
Kyoto target in 2012
Italy is on track to meet its Kyoto greenhouse gas
emissions reduction target, according to a study
released on February 15 by former Italian environment
minister Edo Ronchi.
The recent economic downturn, combined with
measures targeted at reducing CO2 emissions, would
allow Italy to hit its Kyoto target of 6.5% emission
reductions from 1990 levels by 2012, said Ronchi,
who is now president of sustainable development
industry association Fondazione per lo Sviluppo
Sostenibile.
“By 2012 Italy could manage to reduce greenhouse
gas emissions to 483.3 million [metric] tons, 6.5%
below 1990 levels, in line with the Kyoto Protocol
commitments,” Ronchi said in the study.
“Our projections show that thanks to measures
adopted to reduce emissions and Kyoto flexible
mechanisms already operating, Italy would reach a
reduction of 5.4%, very close to its target, and it could
hit the target with a further effort by 2012, although not
as an average of the 2008-2012 period as required by
the Kyoto Protocol,” Ronchi said in an interview.
Italian figures show that from 1990 to 2005,
greenhouse gas emissions increased to 573.6 million
mt CO2 equivalent from 516.9 million mtCO2
equivalent.
The study says emissions began to fall after 2005,
long before the global recession started, and after
implementing the Kyoto Protocol and measures aimed at
reducing emissions.
As a result of those measures, emissions fell to
538.6 million mt CO2 equivalent in 2008, a drop of 35
million mt CO2 equivalent from 2005.
Emissions fell a further 36.3 million mt CO2
equivalent in 2009 to 502.3 million mt CO2 equivalent,
mainly because of the economic downturn, but also on a
9.3% increase in renewable energy use and improved
energy efficiency. That put Italy’s emissions at 3% below
1990 levels at the end of 2009.
But Italy needs to cut emissions by another 19
million mt CO2 equivalent to meet its Kyoto target of
483.3 million mt.
In Ronchi’s view, Italy should manage to hit its
targets without any problem in the next three years. “It
is even possible, as shown by our study, that the CO2
reduction could be greater than 6.5%,” he said.
22
EMISSIONS
Norway
22 mil mt cut in CO2 emissions
expected by 2020
Norway can reduce its carbon dioxide emissions by 22
million metric tons by 2020, as much as 7 million mt
more than the government’s goal, a government
appointed committee said in a report released on
February 17.
But politicians must be prepared to spend as much
as NOK 4,400/mt (€549/mt, $749/mt) if the most
expensive emissions reductions in the transport sector
are to be included, the committee said.
Although the committee listed 160 possible
measures that could help cut emissions – from carbon
capture and storage to increased CO2 taxes – it did not
make recommendations about which measures it
thought were best.
“It’s the politicians who have to choose and set
priorities,” said committee member Ellen Hambro, who is
also head of the Norwegian Climate and Pollution
Agency.
The costs for the measures would range between
NOK 1,000 for the least expensive form of CCS and
NOK 4,400 for the marginal cost of developing special
biofuels, the committee said.
Emissions could be reduced by about 3 million mt by
2020 in non-oil and natural gas sectors covered by the
EU Emissions Trading Scheme, the committee said, and
by about 5.5 million mt in the key offshore oil and gas
industry. Sectors not covered by the system could cut
emissions by about 2 million mt.
But the committee said there are “great
uncertainties,” about the technological developments
needed to help the oil and gas industry cut its
emissions, notably carbon capture and storage, even
though the industry is already capturing CO2.
The committee said that if the technology can be
developed, it could also be used for Norway’s landbased industry, yielding a CO2 emissions cut of about
3.3 million mt at a cost of NOK 1,000 to NOK
1,700/mt.
The Norwegian government is also helping to develop
a sweeping CCS program for gas-fired power plants in
Norway.
Transport sector emissions could be cut by as much
as 4.5 million mt of CO2, the report said.
The report predicts a very broad spread of prices for
emissions allowances in 2020 – from €20/mt to
€60/mt. The lowest price is based on an international
reduction agreement being reached to replace the Kyoto
Protocol, but one with a low reduction goal.
Environment and International Development Minister
Erik Solheim said the government will not comment on
the suggestions in the 334 page report until it has
reviewed it.
The report will form the basis for the government’s
new climate policy, scheduled to be presented to the
parliament in autumn 2011.
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
NEWS
Poland
Emissions credit sales set to bring
in €1 billion by 2012
Poland hopes to raise €1 billion ($1.37 billion) from
selling its Kyoto surplus greenhouse gas emission
credits by 2012, the country’s environment minister
Andrzej Kraszewski said on February 16.
“We have 500 million metric tons in total to sell.
This could be worth around €4 billion…However, there’s
no way we can sell such an amount because there are
simply not enough clients,” he told Radio PiN. “I would
be delighted [if] by 2012 I obtained €1 billion out of
that.”
The credits are Kyoto Protocol Assigned Amount
Units, which cover the six greenhouse gases that Kyoto
regulates and are granted to countries which have
ratified the Kyoto Protocol.
Poland has the third largest surplus of AAUs in the
world after Russia and Ukraine. It raised €15 million
from a deal with Spain in November and another €15
million from a deal with Ireland in December.
The amount of AAUs each country holds is
determined by its Kyoto emissions reduction target for
2008-12 against its 1990 baseline. Poland has a
surplus because of the economic restructuring the
country undertook after the collapse of communism in
1989 which caused the shutdown of many polluting
factories. Poland has reduced its greenhouse gas
emissions by 30% since 1988.
Kraszewski said that the government is in
negotiations with potential buyers. “The queue is quite
long,” he said. “I think it will go quickly.”
In August Poland adopted new legislation to allow it
to carry out such deals. The funds will be deposited in a
special account and will be used for investments to
reduce greenhouse gas emissions, the environment
ministry has said.
EMISSIONS / ENERGY EFFICIENCY
However rising renewable power generation and lower
demand as a result of the economic downturn mean
emissions fell by 7.7% in 2009 compared with the
previous year.
UK
CCS levy extended to include gasfired power projects
The UK government has extended a carbon capture and
storage levy included in the Energy Bill to the gas-fired
power generation sector. The levy was previously
applicable only to coal-fired power generation.
Energy minister Lord Hunt confirmed on February 10
that the government is lodging amendments to the
Energy Bill, including one to extend the CCS levy to
include gas-fired projects.
The Energy Bill was introduced into Parliament in midNovember. Among other measures, it sets out a financial
incentive to support developing up to four commercialscale CCS projects in the UK. This would be by means of
a levy on electricity suppliers to help fund the four
demonstration projects, which would be sited at coal-fired
power plants, and now also gas-fired power plants.
The original CCS amendment was lodged by Scottish
National Party energy spokesman Mike Weir when the
Energy Bill was at committee stage.
“This is a welcome climb-down by the UK government
and great news for Scotland’s renewable sector,” said
Weir, a member of the House of Commons energy and
climate change committee and MP for Angus.
“Scotland has some of Europe’s largest carbon
storage reserves in our North Sea oil and gas fields,
combined with the expertise on how to access
them…The inclusion of gas projects mean that there will
be greater opportunities for Scotland to take full
advantage of the possibilities of CCS not only for our
coal-fired developments but also for existing gas-fired
stations,” said Weir.
Spain
Govt expects to spend €2.5 billion
to meet Kyoto target
Spain expects to have to spend €2.5 billion ($3.4
billion) buying AAU emissions allowances on the
international market in order to meet its Kyoto target to
cap emissions at 15% above 1990 levels in the 200812 compliance period, the country’s environment
minister Elena Espinosa said on February 3 after Spain
submitted emissions projections for the next year to the
EC. The country expects to have to buy allowances for
around 253 million metric tons of CO2.
The cost of these permits will be shared almost
evenly by end-users and the 1,091 Spanish polluters
currently included in the EU emissions trading
scheme.
23
ENERGY EFFICIENCY
France
Powernext considers launching
white certificates market
French energy exchange Powernext is considering
launching an organized market for French energy savings
certificates.
ESCs, also called white certificates, were
implemented by a French law voted on in July 2005.
The certificates are tradable and are combined with
an obligation to achieve a certain target of energy
savings for some energy suppliers.
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
NEWS
The reduction is measured in a formula – the socalled cumac – that calculates the total discounted
energy savings per kWhover the life of an appliance.
The first phase of the scheme ran from 2006-09 with
a second phase due to start during 2010.
“Within the study framework, the vast majority of
actors approached, whether companies obligated by the
scheme or companies eligible to freely intervene on it,
agree on the fact that the market will play a key role
during the second phase and that it is necessary to
organise it, in order to improve its effectiveness,”
Powernext said, adding that the first phase was “not
favorable” to the development of the market but that the
second phase will be “altogether different.”
The exact terms of the second phase will be
determined by a law known as Grenelle 2 that lays out
the spending plans behind France’s environmental
objectives, which include a 20% reduction in energy
consumption by 2020.
The law was approved by the upper house, Le Senat,
in October, and is currently going through parliament.
The government last May said the second phase
target had been raised by at least 100 TWh cumac per
year, from a “largely surpassed” 54 TWh cumac target
for 2006-09 (the total saved as of October 2009 was 70
TWh), according to the statement.
In phase 2 “the stiffening of obligations announced
by the national authorities, the arrival of new actors
(obligated and eligible companies), and the new
collective better understanding of the interest and
durability of this mechanism will greatly modify the
dimension and conditions of the ESC market,”it said
“We could bring our expertize on ESCs and
participate in the great challenge of energy efficiency,” to
encourage the emergence of a reference price, said
Powernext CEO Jean-Francois Conil-Lacoste.
The ESC platform, although still subject to
parliamentary debate on Grenelle 2, could be available
“shortly after” completion of the exchange’s discussions
with interested parties, it said.
ENERGY EFFICIENCY / GAS
GAS
Bulgaria
Ministry pushes for higher transit
tariff on Russian gas
Bulgaria wants to increase transit tariff fees for
shipments of Russian gas across its territory, the energy
ministry said on February 17.
Bulgaria charges $1.70/1,000 cubic meters of gas
for every 100 km, among the lowest in Europe.
Bulgarian Prime Minister Boyko Borisov and President
Georgi Parvanov pushed for improved contract terms in a
meeting on February 16 with Russia’s Gazprom
president Alexei Miller.
“Prime Minister Boyko Borisov has raised the
question of existing gas transit to Bulgaria to be
considered in the context of the project South Stream in
a manner in which our country will not be adversely
affected,” an energy ministry spokesman said.
“We have said that when we discuss South Stream,
we have to see what happens with the transit fees in the
current contract for transit,” Bulgarian economy and
energy minister Traicho Traikov said.
The ministry said Traikov laid out several options for
increasing tariffs without giving further details.
The discussion focused upon setting out new
contracts for the supply and transit of Russian natural
gas by the end of 2012, as some existing contracts
have already begun expiring, the ministry said.
At the meeting, Bulgaria pushed again with
requests to deal directly with Gazprom in matters of
gas supply, rather than intermediaries, according to
the ministry.
This request was first made after last January’s gas
crisis, which Bulgaria partially attributed to Gazprom’s
insistence on using intermediaries.
Switzerland
EU
Finance chiefs review energy
efficiency tax
The Swiss federal finance ministry EFD opened a public
consultation on February 4 seeking comments on plans
to introduce a tax-incentive scheme to encourage
investment in energy efficient buildings. Comments can
be submitted to the ministry until April 1.
At the same time, the EFD announced proposals to
harmonize the calculation of taxes on specific energy
measures designed to increase the value of buildings
where investments have been made to increase energy
efficiency. The tax burdens have been widely criticized for
deterring property owners from investing in energy
efficiency, effectively undermining recently-launched
programs that aim to produce the opposite effect.
24
Russia dismisses competition from
western European shale gas
Potential shale gas projects in Western Europe will not
be able to compete with conventional gas projects in
Russian on the basis of economics, an executive with
Novatek, Russia’s second largest gas producer, said on
February 16.
“I am quite certain that shale certainly is real but in
terms of replicating it in Western Europe, that certainly
isn’t going to happen,” Novatek CFO Mark Gyetvay told
an IP week forum in London..
“Sweeping out Russian gas, I think that’s a crazy
scenario,” he said. To develop a 30 billion cubic meter
shale gas field, a capital investment of $60-65 billion
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
NEWS
(€44-47 billion) is necessary over a period of 20 to 25
years, said Gyetvay, adding that development of a
conventional 30 Bcm gas field in Russia would cost
$1.5 billion.
Novatek, Russia’s largest independent gas producer,
saw output grow 6.2% year-on-year to 32.78 Bcm in
2009.
Russia’s largest gas producer, Gazprom, said earlier
in February that it would delay making an investment
decision on development of the giant Shtokman gas field
until the market ramifications of shale gas developments
were known.
The LNG component of the Shtokman gas project is
at the center of Gazprom’s concerns. If the US shale gas
market continues to grow, then forecast demand for
imported Russian LNG in the US is set to fall.
Gazprom, like Novatek, however, says it is not
concerned that potential developments of shale gas in
West Europe could present competition for conventional
gas projects.
Gazprom deputy chairman Alexander Medvedev said
earlier in February that increasing concerns about the
environmental impact of the hydraulic fracturing process
used to extract shale gas rendered similar developments
in Europe unlikely.
“We have just received environmental approval for
the construction of Nord Stream, and the level of
environmental protection regulation was extremely high,
strict. Were similar requirements applied to shale gas in
Europe, it is hard to imagine it” [gaining approval], said
Medvedev (see page one).
Trans-Adriatic gas line to start
Greek route survey by end-June
The Trans-Adriatic gas pipeline project plans to move
ahead with the survey of its planned route across
Greece by the end of June, a spokeswoman for the TAP
project told Platts on February 17.
The TAP gas pipeline project aims to bring natural
gas from the Caspian Sea and Middle East regions to
Europe. The planned 520 km line would start in Greece,
near Thessaloniki, cross Albania and the Adriatic Sea,
and enter southern Italy near Brindisi.
During the course of 2009 the TAP partners completed
the assessment of various pipeline route alternatives in
Italy and Albania, TAP said in its February update.
The pipeline is planned to tie into the existing
national gas systems in Greece and Italy. The project is
a joint venture of the Swiss EGL energy trading group
and Norwegian oil and gas major Statoil.
During the course of 2009 the TAP partners
completed the assessment of various pipeline route
alternatives in Italy and Albania, TAP said in the update.
Environmental and technical teams, supported by
international experts carried out the surveying work.
The preferred route avoids densely populated areas
and protected nature reserves in Italy and Albania, TAP
said.
25
GAS
The TAP project says on its website its object is to
open a new Southern Gas Corridor to Europe. It is
designed to expand transportation capacity from 10 to
20 billion cubic meters a year depending on throughput.
It also includes development of gas storage facilities
in Albania to further ensure security of supply during
operational interruptions of gas deliveries.
The southern corridor between the Caspian and
Western Europe has a number of pipelines vying for the
available gas, of which TAP is one.
TAP could compete with two EU-backed projects:
most directly with the ITGI Turkey-Greece-Italy gas
pipeline, which includes the projected Poseidon line
from Greece to Italy, but also with the Nabucco
pipeline, which would run across five countries from
Turkey to Austria.
A third competitor would be the Gazprom-operated
South Stream line from Russia to Italy via the Black Sea.
In March 2008, TAP partner EGL signed a long-term
contract with Iranian state company NIGEC to purchase
gas on a DAF basis at the Iranian-Turkish border. The
agreement starts from 2012 and covers a volume of up
to 5.5 Bcm/year.
Romania confirms interest in
South Stream: Gazprom
Romania has confirmed its interest in participating in the
South Stream gas pipeline to to build a 63 billion cubic
meters/year gas pipeline across the Black Sea to
Europe. and had presented documents needed to
prepare a feasibility study for the route to go via its
territory, Russia’s gas giant Gazprom said on February
17.
The comments followed a meeting between
Gazprom’s deputy CEO Alexander Medvedev and
Romania’s Minister of Economy Adriean Videanu in
Bucharest, Gazprom said.
Russian Prime Minister Vladimir Putin and his Greek
counterpart, George Papandreou, said on February 16
that the economic recession has not adversely affected
plans for the South Stream project.
“There are absolutely no financing problems [with
South Stream],” Putin told reporters after a meeting with
Papandreou in Moscow, Russian newswire Prime Tass
reported. Putin added that at least 10 European
countries are interested in the project going ahead.
Papandreou said economic difficulties in his country
will not adversely affect South Stream. “The situation
which is unfolding in Greece today does not hold any
potential negative effects for the development of this
project. Most likely it will be quite the opposite, it will
help to support its further successful realization,” he
said.
The South Stream project is a 900 kilometer gas
pipeline from Russia under the Black Sea to Bulgaria
and then on to the heart of Europe via two offshoots,
which Russia’s gas giant Gazprom will build jointly with
local partners.
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
NEWS
One line will run southwest to Greece and into
southern Italy. The other will go northwest via Bulgaria,
Serbia, Hungary and Slovenia to northern Italy, with
possible offshoots to Austria and Croatia.
Gazprom and Italy’s Eni hold 50% each in the
South Stream project but, after agreements signed in
November and December, expect to reduce their
stakes by 5% to allow France’s EDF to take a 10%
stake.
France
CRE launches consultation on
France-Belgium gas capacity
The French energy regulator CRE has launched a market
consultation on a project to make available gas
transport capacity from France to Belgium from 2015, it
said on February 18.
Shippers can currently obtain gas transport capacity
at the Taisnieres entry point on the Belgian border, in the
direction of Belgium to France.
Since gas is odorized in the French network, but is
not in the Belgian grid, it is not possible to reverse
these flows towards Belgium.
France is to increase its total gas import capacity,
through new LNG terminals and pipeline import capacity
from Spain.
Alongside these projects, the ability to transport gas
northwards into Belgium would make the French gas
market more attractive to shippers, and better integrate
Europe’s gas markets, the regulator said.
A deodorization station would be put in place at
Taisnieres, which would allow 300,000 cu m of gas to
flow towards Belgium per hour, it said. That equals 7.2
million cu m/day.
At the same time, French and Belgian grid operators
GRTgaz and Fluxys are studying interest on increased
pipeline capacity from France to Belgium.
The capacity would be made available by the creation
of a new interconnection point allowing the export
towards Belgium of non-odorized Norwegian gas arriving
at the Dunkirk entry point.
CRE’s market consultation ends on March 17.
Germany
Regulator takes Wingas to court
Germany’s federal cartel office the Bundeskartellamt has
opened proceedings against German-Russian gas
supplier Wingas.
The official opening of proceedings against
Germany’s second largest gas supplier follows an
investigation by the regulator into so-called “sell-on
prohibitions,” which were included in numerous gas
supply contracts and which ban the customer from
reselling gas.
26
GAS
“As part of the wider market investigation by the
regulator into take-or-pay clauses in gas supply contracts
Wingas has also been contacted,” a spokesman for
Wingas told Platts.
“Wingas has several contracts that include such a
[sell-on prohibition] clause. These clauses were drawn
up in the 1990s and represented the market norm at
the time, but have not been used by Wingas for some
time,” he added. The regulator was not immediately
available for comment.
The prohibition clauses have a limiting effect on
competition and are specifically problematic when
relating to gas volumes that the customer is obliged to
take under take-or-pay conditions, the Bundeskartellamt
said in December when it first announced its plans.
It said then that it planned to extend such official
proceedings to the German power sector.
The regulator’s move comes at a time of fierce debate
between producers and their customers to renegotiate
some of the take or pay deals and is likely to be welcome
by companies whose gas demand has been dramatically
reduced as a result of the economic downturn.
Italy
Regional government rejects Triton
5 Bcm/year LNG project
The planned 5 Bcm/year Triton LNG project offshore Italy
suffered a setback on February 17, when the regional
government rejected the proposed regasification terminal
due to environmental concerns.
The Marche regional government said it rejected the
project, which is to be sited about 34 km off the coast
of Porto Recanati, after completion of the environmental
impact assessment by the Environmental Service.
The project developer, France’s GDF Suez, will now
have to satisfy the Marche government’s objections. To go
forward, the project needs authorization from both the
national environment ministry and the regional authorities.
The regional government cited concerns about the
effect of plant construction on fishing, marine ecology,
sea turtles and tourism, and other issues.
It said it had previously asked Italy’s environment
ministry for information to clarify environmental matters
regarding the plant, but said the ministry’s responses
were inadequate and “do not allow assessment of
whether the installation of the project at sea may result
in adverse effects on the marine ecosystem.”
The region said the ministry has authorized other
terminals without a national energy plan, and cited the
risk of an “overlapping of the effects of pollution related
to the construction of more terminals without a
comprehensive evaluation.”
Planning process delays already caused GDF Suez to
push back its time table for Triton last year. A final
investment decision is now expected in 2010, with a
commissioning date in 2013, the company said in April
2009.
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
NEWS
The LNG storage capacity of the vessel will be about
170,000 cubic meters, and the initial 5 Bcm/year
regasification rate could be doubled through the addition
of a second vessel, according to GDF Suez. It has not
said where it will source the LNG.
Netherlands
New platform seeks to establish
NW European gas hub by 2030
A cross-sectoral Gas Hub Platform in the Netherlands
that seeks to make the country the Northwest European
gas hub by 2030 had its first meeting, attended by
economy and energy minister Maria van der Hoeven, on
February 11.
The platform agreed four main focus areas: the
overall climate for oil and gas development, a roadmap
for the next two decades, the positioning of gas in the
energy mix and the gas hub’s international position.
The platform has twenty members, including all major
energy companies and companies with gas transmission
interests, the major research bodies, power exchange
APX Endex and the competition authority, which is also
the energy regulator.
Poland
Algeria, Poland sign energy deal on
LNG, exploration
Algeria and Poland have signed an energy cooperation
agreement that envisages future Algerian LNG supplies
to Poland and Polish companies being invited to take
part in future Algerian licensing rounds.
The agreement was signed on February 14 by
Algerian oil minister Chakib Khelil and Polish deputy
Prime Minister Waldemar Pawlak in Algiers, news agency
APS reported.
“This agreement covers several economic areas,
including the sale by Algeria of LNG and the participation
of Polish companies in exploration bidding rounds this
year,” Khelil said.
Poland is to build an LNG terminal at the port of
Swinoujscie in northwest Poland that could have an
initial capacity of 5 billion cubic meters/year. The plant
is set to be built by 2014.
PGNiG to receive 9 Bcm of
Russian gas in 2010
Poland will get up to 9.03 billion cubic meters of
Russian gas this year under a new supply deal, Joanna
Zakrzewska, spokeswoman for the country’s dominant
gas company, PGNiG, said on February 17.
27
GAS
PGNiG this month approved a new supply deal
between the two countries to boost Russian gas imports
to Poland from around 7-8 Bcm/year to 10.2 Bcm/yr.
Zakrzewska told the state news agency, PAP, that
Poland would take advantage of a clause in the new
contract which gives it the right for five years to reduce
annual imports by up to 15% depending on demand.
Zakrzewska said PGNiG would import up to 9.03
Bcm in 2010, and up to 9.7 Bcm in 2011. The company
expects to import the full 10.2 Bcm/yr only after 2012,
she said.
The new contract extends Russian gas imports to
Poland until 2037 and guarantees Poland’s status as a
transit country for Russian gas to Germany until 2045.
The deal has been criticized by the main opposition
party in Poland for extending Poland’s dependence on
Russian energy supplies. Russian gas accounts for more
than 90% of Poland’s imports and around two thirds of
its annual 13-14 Bcm consumption.
UK
Gateway gas storage project wins
government license
The UK energy ministry has licensed the Gateway
offshore gas storage project, in the east Irish Sea. The
project entails creating 20 salt caverns that will hold a
total 1.5 billion cubic meters of gas.
The chairman of Gateway Storage, George Grant, said
the support and encouragement by the UK energy
ministry to bring the project forward through the new
consenting process had been invaluable, as had been
the Crown Estate’s agreement of the offshore site
license.
The energy ministry said on February 15 that the
Energy Act of 2008 was “proving its worth by enabling
the government to license an important new gas storage
project.”
Gateway Storage hopes to make a final investment
decision at the end of this year, with a view to starting
commercial operations in 2014.
The storage site would cost around £600 million
(€686 million, $934 million) and funding could be the
key remaining obstacle. The project has the funds for
studies, but is still talking to parties regarding further
costs, and could approach the European Investment
Bank.
Gateway Storage, which is managed by Edinburghbased Stag Energy, secured offshore consent from the
UK government in November 2008 and onshore consent
from Barrow Council in June 2008, and a site license
agreement from the Crown Estate in 2007.
The UK has around 4.7 Bcm of gas storage capacity,
enough to store about 5% of annual UK gas demand of
90-100 Bcm/year. Around 2.9 Bcm of potential new UK
onshore gas storage has planning permission, most of
which is salt cavern projects. Including the offshore
Gateway project increases this total to around 4.4 Bcm
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
NEWS
IGas makes ‘significant’ shale gas
discovery in NW England
UK gas producer IGas Energy has discovered a
“significant” shale gas resource at its license area in
the northwest of England. It said the shale has been
identified as potentially extending over 1,195 sq km of
its acreage with an expected average thickness of 250
meters.
“These shales are understood to be hydrocarbon
bearing as they have been locally demonstrated to be
the source rock for hydrocarbons in the Liverpool Bay
area,” IGas said on February 15.
It said it believes the total organic content of the
shale ranges from 0.7% to 5% and will report soon on
the potential of the shale to produce gas.
IGas said it already has gas in place across its
acreage of 3.82 trillion cubic feet in the mid-case
scenario. In the high-case scenario, IGas said the gas in
place could be as high as 8 Tcf.
“This continuing work on understanding the full
potential of our acreage to deliver gas once again gives
us greater confidence in the resources we hold,” said
IGas CEO Andrew Austin.
“The potential of delivering shale gas is particularly
exciting, as this sector has seen significant growth in
North America and increased interest across continental
Europe,” said Austin.
RENEWABLES
Czech Republic
CEZ, E.ON freeze grid connections
for solar, wind projects
The Czech Republic’s two biggest regional distribution
companies, CEZ Distribution and E.ON Distribution, said
on February 16 that they will not authorize new grid
connections for wind and solar power projects.
The move follows a warning from national grid
operator CEPS on February 10 that the number of
projects, especially solar, in the pipeline threatens to
overload the high voltage grid and cause blackouts.
CEPS wrote to local distribution companies on February
3 asking them not to connect new solar and wind
projects to the grid.
CEZ said that it agreed with CEPS’ analysis of the
threat and had already begun in 2008 to ration
approvals for new connections of wind and solar power
in north Moravia, as well as north and east Bohemia.
The freeze on new approvals will start immediately,
it said. E.ON Distribution made a similar
announcement.
The Czech Photovoltaic Association, representing
around 60 solar power companies, said it was taking
legal advice on whether to challenge the move, as it
28
GAS / RENEWABLES
may break a law which obliges distribution companies
to connect renewables unless there are technical
barriers.
CEPS said a total of 600 MW of wind and solar
power projects are connected to the grid, with approval
for another 3,500 MW already given.
“That total is higher than acceptable for the secure
and reliable functioning of the electricity network in the
Czech Republic,” it said in its February 10 statement.
CEPS said a new framework for approving solar and
wind power must be found this year.
France
GDF Suez plans major PV plant
French utility GDF Suez is to build France’s largest
photovoltaic solar power facility in Curbans in southeast
France.
The plant, which is scheduled to come online in
August 2011, will have total output of 33 MW and will
comprise 145,000 photovoltaic panels producing 43.5
million kWh/year, GDF Suez said on February 10.
The energy produced will be equivalent to the annual
power demand of 14,500 households, excluding heating.
GDF Suez said that it has created a project company
with two financial partners, EuroFideme 2, Natixis
Environnment & Infrastructure’s investment fund for
renewable energy projects in Europe, and SEIEF, part of
Dexis, for the construction, operation and financing of
the plant over 20 years.
“The project is part of the group’s strategy by the
year 2013 to have a diversified electricity production
base with an installed capacity of 10,000 MW,” it said.
GDF Suez said it is France’s leading wind power
producer with 525 MW installed as of June 30, 2009,
and its second largest hydroelectric power producer, with
installed hydro capacity of 3,714 MW. Its solar portfolio
stands at close to 200 MW. GDF Suez said its total
installed capacity in France exceeds 6,600 MW, of which
nearly 70% is derived from renewable sources.
Government to block some solar
projects from higher tariffs
The French government is to publish a decree for
photovoltaic solar tariffs in early March, which aims to
stop many of the solar projects that applied late last
year from gaining older, more favorable rates, it said in
mid February.
There was a surge of applications for solar PV
installations in November and December 2009, after the
government announced its tariffs for new projects would
fall from January 2010.
The government’s new tariffs differ between building
type, and location, ranging from €00.31/MWh for ground
mounted systems in the sunnier south of the country, to
€00.58/MWh for residential building-integrated projects.
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
NEWS
The government is to present a new decree in
March which will differentiate between “abusive or
speculative projects on the one hand, and projects of
reasonable size submitted in good faith, notably in the
agriculture sector, on the other,” it said in its
statement.
The applications made before November 1, along
with applications made by the smallest projects of
capacity under 36 kW before January 11, 2010, will be
entitled to the older tariff rates.
Under the planned decree, projects of capacity
between 36 kW and 250 kW which applied for tariffs and
for connection before January 11 will also gain the older,
higher tariffs, the government said.
Applications from the agricultural sector would also
be able to gain the older tariffs if the project is
integrated into a working building or if the site applied
for a construction permit before January 11, and as long
as they have not applied through a third party.
The new tariffs of €00.50/MWh or €00.58/MWh for
non-residential and residential building integrated
projects will only be available for projects with capacity
below 250 kW, the government said.
Germany
Renewables fill 10.6% of energy
mix in 2009: industry group
The share of renewable energy sources in the overall
energy mix in Germany rose to 10.6% in 2009, up from
9.5% in 2008, the German Association for Renewable
Energy (BEE) said on February 18.
Renewable sources contributed 252 TWh in 2009,
10.8 TWh more than 2008.
According to a statement, the use of renewable
energy sources saved a total of 111 million mt of CO2
equivalent in 2009. It also saved Germany €6.4 billion
($8.8 billion) in fossil-fuel imports.
The biggest rise for renewables was seen in the
heating sector, where it increased from 110.7 to 125.3
TWh, covering 9.6% of total German heating demand, the
statement said.
Due to a drop in wind power, electricity generated
from renewables remained at 93.3 TWh in 2009, similar
to the previous year’s level.
However, due to lower overall power consumption,
renewable energy still increased its share in electricity
generation by one percentage point to 16.1%, mainly due
to the rise of biomass, the statement said.
However, the use of biofuels in the transport sector
continued to decline, dropping to just 5.4% or 33.8 TWh
in 2009, the statement added.
Installed capacity of wind, solar, biomass, geothermal
and other renewables rose by 5,400 MW in 2009, the
BEE said.
According to its own estimates, renewable energy
could be able to cover 47% of Germany’s energy needs
by 2020.
29
RENEWABLES
“The extension of nuclear run-times as well as the
construction of new coal-fired power stations is not
necessary and could be even contra-productive,” BEE
managing-director Bjorn Klusmann said in the statement.
The renewable industry lobby group also rejects the
government plan to use proceeds from the extension of
nuclear lifespans for the development of the renewable
energy sector.
The BEE is the German renewable energy industry’s
federal lobby group with 22 member associations and
around 30,000 individual members.
Netherlands
Government plans new law to
optimize offshore grid hook up
The Dutch government is likely to propose legislation
late this year or early next setting out enforceable
guidance on where offshore wind farms can be located
in order to optimize grid connection costs. Energy
Minister, Maria van der Hoeven, has told Parliament the
government will put forward new legislation on offshore
wind farm concessions at the same time.
The location of those offshore wind farms that get
subsidies in a 2010 tender will have a bearing on which
locations will subsequently be considered efficient from
a transmission perspective. It is not until the next round
– Round 3 – after the new legislation is in place that the
government will be able to take decisions based on
maximizing grid efficiency.
The ministry of economic affairs is also waiting for
decisions in a new national water plan on what new areas
offshore can be opened up for wind farm development.
Round 3 will involve 4.8 GW and be tied to a specific
network configuration, with the responsibility for the
offshore cable network construction to lie with TenneT
The total cost is expected to be €2.4-€3.2 billion ($3.34.4) depending on the distance offshore, with annual
operation and maintenance costs of €59-€72 million.
The Dutch government has floated five options for
financing this network: either the total cost is met by the
wind energy producers, the cost is shared across the
whole sector as is the case at present for the onshore
transmission network, producers pay 25% or 50% of the
cost and the rest is mutualized, or finallyi nvestment costs
are met by the state and only operational costs are funded
through tariffs, and the cost is met by a levy per kWh.
Spain
Solar PV producers face 25% cut
in feed in tariffs
Spain’s solar photovoltaic power producers face a 25%
cut in their feed in tariffs in 2009 an industry ministry
source told Platts in mid-February. It said it needed to
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
NEWS
make cuts of up to €450 million ($612 million) n its
budget because of the economic downturn.
The source said the ministry was meeting to discuss
the cut with representatives from the main solar industry
associations, Asif, Appa and AEF.
Tomas Dias of PV industry association Asif said that
while PV producers understood the need for cuts they
wanted to renegotiate the timeframe, proposing, for
example staggered cuts of 8% to 10% in the period to
2012.
The industry points out that only 20% of eligible PV
capacity was developed in 2009, as only 96 MW of new
capacity was installed out of a total eligible of 500 MW
under the government’s cap on PV installations. And it
warns that up to 30% of planned capacity that has
already been registered is at risk of not being built
because developers only have a year in which to build a
plant after the pre-registering it.
As a result the industry faces losing up to €10
million in lost deposits, which are put down when preregistering a proposed PV plant for feed in tariffs prior to
construction. Asif is calling for developers to be given a
further four-month grace period to avoid losing their
deposits.
The latest round of projects pre-registering for feed in
tariffs was published by the industry ministry on
February 12. Projects totaling 118.2 MW were approved.
The authorizations, published in the official State
Gazette on February 15, are for 49.9 MW of ground units
and 68.3 MW of building-mounted arrays.
Subsidies for feed-in tariffs are guaranteed for 25
years if the units are installed within 12 months based
on a formula introduced in September 2008, the
ministry said. The tariffs, which range from €0.34/KWh
($0.46/KWh) for building-mounted arrays, as well as the
yearly capacity caps that were put in place, are designed
to curb what the government considered excessive
growth in Spain’s solar sector.
This is the fifth round of registrations since the new
registration system launched in 2008.
RENEWABLES
desired effect of ending speculation in the sector, but
has also had the unintended consequence of blocking of
up to 8 GW according to AEE.
Wind generators are expected to receive up to €1.2
billion from feed in tariffs in 2010, but this is not
enough, according to AEE. It has put forward a plan to
replace existing wind installations over the next 10 years
through an €8 billion program to replace up to 5 GW of
current capacity of 19 GW.
Cost of feed in tariffs set
to rise 47% in 2010
The cost to the Spanish treasury of the country’s feed-in
tariffs, which award premium prices to renewable power
generators is expected to reach €6 billion ($8.165
billion) in 2010, according to an early analysis from the
Spanish regulator CNE. This is 47% higher than the €4
billion needed in 2009 and 13% more than had been
projected.
As a result, renewables and other “special regime”
power producers, including combined heat and power
producers, are to account for 37.2% of the power
sectors regulated cost base (€15.8 billion).
The cost of feed in tariffs passed from the utilities to
the general budget in 2009 as part of the settlement
reached with the utilities on securitizing the country’s
power tariff deficit (EUE 224/23)
However, support for renewables is helping Spain to
meet its goal of getting 20% of all energy from
renewable sources by 2020. The latest projections
submitted by Spain to the EU show the country on
course to get 22.7% of all electricity from renewable
sources by 2020, with 42.3% of electricity coming from
renewables.
Sweden
Wave power project wins
€25 million government grant
Spain has most new EU wind
installations, but ‘sector in crisis’
Spain saw the highest number of new wind power
installations in Europe in 2009 according to figures from
the European Wind Energy Association and was the third
biggest installer of wind capacity globally (after the US
and China).
According to the EWEA, Spain installed 2.459 GW of
wind power in 2009, accounting for 24% of the EU total
of 10.160 GW, and ahead of Germany, which accounted
for 19%.
But the absence of clear legislative framework and
the fact 2005-10 targets have already been exceeded by
500 MW means the industry faces paralysis and job
losses in 2010 according to the Spanish wind energy
association AEE . A 2009 legal change requiring
generators to preregister for feed in tariffs has had the
30
The Swedish Energy Agency has approved an investment
grant for a planned wave power project near Smoegen,
on Sweden’s west coast, according to project developers
Fortum and Seabased Industry.
The agency will contribute SKr139 million ($20
million) to the total investment sum of about €25 million
($34.5 million), Finland-based utility Fortum said in a
statement on February 11.
Fortum said the state’s grant will be used to further
develop the necessary technology, which is not yet
commercially mature, to help provide a significant source
of energy in Europe.
The planned wave power plant will be the world’s
largest full-scale installation of its type, with 420
interconnected units and output of about 10 MW, said
Fortum.
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
NEWS
RENEWABLES
Switzerland
UK
18% PV feed-in cutback shocks
industry, utilities
Biggest coal-fired plant dumps
biomass plans: report
Switzerland’s federal energy and infrastructure
department, Uvek, has announced a substantial 18% cut
in the feed-in tariff for investments in photovoltaic power
generation. In a note published on February 4, Uvek said
the reduced tariffs are retroactively effective from the
beginning of this year.
The Swiss federal office for energy SFOE supports
the decision, arguing that the strength of the Swiss franc
against the Euro has led to a price drop of around 10%
for imported PV systems.
This has made it significantly cheaper to generate
solar power than before. It also noted that the tariffs
had already been earmarked for an annual decrease of
8%.
But the PV industry and utilities were still taken by
surprise by the government’s decision.
Social democrat member of parliament Eric
Nussbaumer, who is associated with the independent
power producers, criticized Uvek’s actions as “unwise
and unjustifiable”. And Hans Buettiker, CEO of the
Muenchenstein-based power utility EBM, said the
decision drew into question the reliability if the federal
feed-in scheme, and said that investors would exercise
more caution when considering taking positions on PV in
the future.
The UK’s biggest coal-fired power plant, the 4 GW Drax
plant in Selby, North Yorkshire, is suspending plans to
co-fire large volumes of biomass alongside coal, its CEO
Dorothy Thompson told the Times newspaper in an
interview on February 19.
“We are not confident that the [subsidy] regime for
what is one of the cheapest forms of renewable energy
will support operating the biomass unit at full load,”
Thompson said. “The UK is missing out massively on
the potential for renewable energy from biomass. We
want to run in a low carbon way but policy is against us.”
The paper said that Drax had bought 2 million mt of
biomass but was considering selling it abroad.
It was cheaper to keep burning coal and buy
emissions permits than switch to co-firing biomass,
Thompson said.
Drax has invested £80 million ($123 million) in a
400 MW direct injection biomass co-firing facility at
Selby, enabling the power plant to handle an additional
1.5 million mt of biomass material per year. This takes
the Selby site’s co-firing capability to 500 MW.
Co-firing biomass in a coal plant earns just half a
Renewable Obligation Certificate per MWh produced. The
high cost of biomass and low price of wholesale power
have made it uneconomic to co-fire under the current
subsidy.
Separately, Drax is developing three dedicated
biomass power plants in a £2 billion partnership with
Siemens Project Ventures. Dedicated biomass power
stations earn two ROCs per MWh, but Thompson
questioned the reliability of this support.
“We do not believe we can create a credible
investment case for our shareholders if there is
complete regulatory uncertainty. This is a very serious
issue because renewable energy through biomass is a
key component for delivering the 2020 target,”
Thompson told the Times.
Drax is also unhappy with Renewables Obligation
legislation constraints on co-firing.
The number of ROCs that can be earned by
generators using co-firing is capped at 10% of total
obligation. This is to rise to 12.5% from April 1 this
year.
Drax said the cap “restricts competition and
disproportionately penalizes independent co-firing
generators [which are not among the six biggest
vertically integrated companies]. The cap forces such
generators to participate in a partitioned marketplace,
and consequently to accept significant discounts in price
for their ROCs.”
Drax said it has called for an increase in the cap to
17.5%, “to ensure that technical constraints rather than
policy constraints are binding, which would act to
increase the ability of independent co-firing generation to
compete.”
Environmental groups fight wind
power projects
The Swiss federal energy and infrastructure department
UVEK plans to relax the country’s strict approval
procedures for feed in-tariffs for wind energy, it said on
February 4.
The energy ministry hopes this measure will speed
up the permitting process for new plants and boost the
sector.
But the government department faces stiff
competition from a group fo environmental organizations,
including Swiss environmental groups Pro Natura, WWF
(Schweiz) and the national landscape preservation group
SL, who have clubbed together to lobby against wind
energy projects being built in protected areas,
Switzerland has an estimated potential to generate
1.5-4 TWh per year from wind power, of which just 27
GWh is currently being tapped.
While installed generation capacity from wind –
currently 27 GWh – is expected to double this year,
growth in the sector is still small, having been hampered
by a hardening conflict between, both local and national
environmental groups.
This opposition has prevented the federal energy
agency SFOE from achieving targets for the sector,
developed three years ago.
31
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
IMPLEMENTATION
ELECTRICITY
Ownership
unbundling
of TSO
Production:
type of
system
Electricity directive
Eligible customers &
Declared market
opening (%)
Transmission:
type of
system
Distribution:
type of
system
Austria
10/01: All (100%)
No
Authorization
Reg TPA
Reg TPA
The Energy Market Liberalization Act (12/00) provided for marked opening from 10/01 and required grid operators to source 8% of delivered
electricity from small hydro (<10MW) and to increase the percentage of energy from other renewables to 4% by 2008. The Green Energy Act (08/02)
shifted administration for this obligation to the transmission grid operators and increased the target for production from small hydro to 9% by 2008.
Legislation introduced in 2006 increased the target for other renwables to 10% by 2010.
Belgium
01/03: >10GWh
No
Authorization
Reg TPA
Reg TPA
07/04: Walloon Region,
Brussels-Capital Region:
all professional customers
connected to the distribution network
07/03: (Flanders only) all
01/07: Walloon region
all household customers
01/07: All (100%)
Regulator for gas and electricity is CREG. Regional regulator for <=70kV grid. Elia formally designated as TSO. Bottlenecks at borders, especially
northbound at French border.
Bulgaria
07/04: 40GWh (22%)
No
Authorization
Reg TPA
Reg TPA
07/07: All (100%)
Bilateral contracts; power exchange generation market design. Seven significant competitors in the generation market, including Kozlodui NPP and
Maritsa Istok III. The latter has a 15 year PPA with NEK up to 2020. Distribution tariffs are published.
Czech Rep
01/02: >40 GWh
Yes
Authorization
Reg TPA
01/03: >9 GWh
required for plants
01/05: All non residential customers
>30 MW
01/06: All (100%)
Bilateral and power exchange generation market. 66.7% state-owned CEZ dominates the Czech Republic’s power market.
Reg TPA
Denmark
01/03: All (100%)
Feed-in tarriffs have developed wind energy industry.
Reg TPA
Reg TPA
Reg TPA
Reg TPA
Yes
Authorization
Estonia
2005: 40GWh (12%)
No
Authorization
2009: 35%
2013: All (100%)
State utility Eesti Energia dominates the Estonian power market. TSO and DSO are legally separated.
Finland
All (100%)
Yes
Authorization
Reg TPA
Reg TPA
for environmental,
not market, purposes
Transmission grid is an independent company. Since 01/05 transmission and distribution companies have needed the Electricity Market Authority’s
approval for changes to their methodologies for calculating tariffs.
France
02/03: 7GWh (34.5%)
No
Authorization
Reg TPA
Reg TPA
07/04: All nonresidential customers (>66%)
07/07: All (100%)
EDF holds auctions to sell capacity (virtual power plants) but EDF still enjoys near total monopoly. Grid operator RTE is legally separated from EDF.
Germany
All (100%)
No
Authorization
Reg TPA
Reg TPA
Reg TPA provided for by the Energy Act of 13/07/05 and enforced since energy regulator (Bundesnetzagentur) was established in July 2005.
Greece
07/04: All nonNo
Authorization
Reg TPA
Reg TPA
residential customers (70%)
01/07: All
Greece has requested a derogation from EU rules for micro-systems on all non-interconnected islands (excluding Crete and Rhodes), those
customers remain captive to the incumbent supplier and generator PPC (RES, CHP and autoproducers are exempt). PPC owned 95.3% of installed
generation capacity in 2006. RES, CHP and autoproducers supported through a regulated feed-in tariff. The electricity volume traded outside PPC
was approx. 0.84% of the total electricity volume consumed in 2006, including electricity produced by autoproducers and RES and imports.
Hungary
07/04: All nonNo
Authorization
Reg TPA
Reg TPA
residential customers
07/07: All (100%)
The state-owned MVM Group plays a dominant role in the wholesale market, although former long term PPAs have been replaced by 5-8 year-long
agreements. There are three significant players in the Hungarian retail market.
Ireland
2002: >1GWh
Yes
Authorization
Reg TPA
Reg TPA
02/04: >0.1GWh/yr (56%)
02/05: All (100%)
All Ireland single electricity market from 11/07. This is hoped to assist in resolving any problems which may have existed with market entrants
securing finance. New build process speeded up through Strategic Infrastructure Bill.
Italy
2001: 20GWh/yr
Yes
Authorization
Reg TPA
Reg TPA
2002: 9GWh/yr
05/03: 0.1GWh/yr
07/04: All non residential (80%)
All consumers have been free to switch supplier since 07/07. AEEG continues to set prices for residential consumers and small businesses who
have not yet switched supplier. No single entitity allowed more than 50% of generation and imports. Problems persist with limited import capacity.
Wholesale power pool IPEX introduced 03/04.
32
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
IMPLEMENTATION
ELECTRICITY
Ownership
unbundling
of TSO
Production:
type of
system
Electricity directive (continued)
Eligible customers &
Declared market
opening (%)
Transmission:
type of
system
Distribution:
type of
system
Latvia
07/04: All non residential
No
Authorization
Reg TPA
Reg TPA
customers (76%)
07/07: All (100%)
No customers have exercised their rights to switch energy supplier yet due to the small size of the generation market (5.6TWh in 2004) and the
vertically integrated state monopoly Latvenergo holding a 95% share in domestic production. TSO “Augstsprieguma tikls” started operating as a
legally separate company from 09/05. Latvenergo holds 99% of the electricity distribution market.
Lithuania
07/04: All non residential
No
Authorization
Reg TPA
Reg TPA
customers
07/07: All (100%)
Closure of Ignalina NPP with 1300 MW installed capacity from 2010. No direct transmission lines with the Central/Western Europe and
Scandinavian countries. Plan to abolish the end-user prices gradually by 2015. One TSO, two main DSOs/Public Suppliers and 24 licensed
Independent Suppliers in the Lithuanian electricity market.
Luxembourg
07/04: All non residential
customers
07/07: All (100%)
No
Authorization
Reg TPA
Reg TPA
Netherlands
2000: >2MW
Yes
Authorization
Reg TPA
Reg TPA
2002:>3*80A
07/04: All (100%)
Independent regulator for gas and electricity (DTe). Reciprocity clause invoked. All consumers free to buy green power since 1/1/01. Import capacity
bottlenecks. Full ownership unbundling of distribution networks mooted July 2009. Introduction of trilateral market coupling with Be, Fr (11/06).
Poland
07/04: All non
Yes
Authorization
Reg TPA
Reg TPA
residential customers
07/07: All (100%)
Generation market design: long-term PPAs still exist (60%), however an Act discharging them was passed on 29/07/07 and came into force
04/08/07. Long term PPAs will be gradually discharged through a compensation scheme. Bilateral contracts; limited significance of power
exchange (1%). Poland has nine significant competitors in the power sector.
Portugal
01/04: All businesses
07/04: All (100%)
Yes
Authorization
Reg TPA
Reg TPA
A government Decree (240/2004) on 07/12/04 scrapped long term power purchase agreements and created compensation measures to replace
them. TSO REN is 31% state owned; 20% Caixa Geral de Depósitos; 5% Gestmin; 5% Logoenergia; 5% OLIREN, 5% Red Electrica de España; 5%
EDP; and 24% freefloat.
Romania
07/07: All (100%)
Yes
Authorization
Reg TPA
Reg TPA
Bilateral and power exchange generation market design. There are eight significant competitors in the power generation sector. Five distribution
companies had been privatized by 08/07. By end 2007 some 50% of consumers had changed their supplier. In 04/07 the electricity and gas
regulators merged to become the independent Romanian Energy Regulatory Authority (ANRE).
Slovakia
01/04: 20GWh (40%)
01/05: All nonresidential customers (79%)
07/07: All (100%)
Yes
Authorization
Reg TPA
Reg TPA
Bilateral generation market without power exchange. Slovenské Electrárne (SE) dominates the Slovakian power market. The New Energy Acts came
into force on 01/01/05, bringing market opening fully into compliance with the EU Directives. The reformed Electricity Market Rules came into
force on 15/07/07. Legal unbundling of distribution system operator from other activities from 07/07.
Slovenia
07/04: All nonYes
Authorization
Reg TPA
Reg TPA
residential customers
2005: 77%
07/07: All (100%)
Bilateral and power exchange generation market design. There are two main wholesale competitors and 12 suppliers in the Slovenian power sector.
Spain
2003: All (100%)
Yes
Authorization
Reg TPA
Reg TPA
New entrants frustrated by lack of electricity export capacity with France. Customers were able to choose to stay on regulated tariffs until July
2008. Regulated tariffs abolished July 2009, but sub 10kW consumers can opt for capped tariff of last resort.
Sweden
01/96: All (100%)
Yes
Authorization
for environmental, not
market, purposes.
Regulator sets guidelines for access prices. Consumers file complaints to the regulator.
Reg TPA
Reg TPA
Turkey
01/07: 3 GWh (38.6%)
No
Authorization
Reg TPA
Reg TPA
01/08: 1.2 GWh (41%)
Market opening extended in January 2008 by decision of the Board of the Turkish Energy Market Regulatory Authority. Bilateral contracts market
design with residual balancing pool. Electricity market activities are unbundled along the path envisaged by the EC Second Directive, except for
legal unbundling of DSOs. The TSO has a separate corporate identity. Turkey’s wholly stae-owned Electricity Trading and Contracting company
(TETAS) and Electricity Generation Company (EUAS) are the dominant market players.
UK
All (100%)
Yes
Authorization
Reg TPA
Reg TPA
Ofgem is the regulator for England Wales and Scotland, while the Northern Irelarnd Authority for Utility Regulation is responsible for energy regulation in
Northern Ireland. .
Source: EU Energy
33
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
IMPLEMENTATION
GAS
Gas directive
Eligible customers &
Declared market
opening (%)
Ownership
unbundling
of TSO
Grid/Storage
access
Publication
of access
conditions
Austria
Regulator
2001: 49%
No
Reg TPA (Grid)
Yes
10/02: All (100%)
Neg TPA (Storage)
OMV remains the principal importer of gas and a major player in supply through its jv with Energie Allianz, Econgas.
E-Control (gas
and electrcity)
Belgium
CREG (gas
and electricity)
2001: 59%
No
07/03: Flanders: all
customers connected
to the distribution network
01/04: Wallonia >1m cu m
07/04: federal level: all
final customers connected
to the transmission network
07/04: Walloon Region and
Brussels-Capital Region:
all professional customers
connected to the distribution network (91.5%)
01/07: Brussels: all; Walloon
Region: all household customers (100%)
Regulators both regional and national. Legal unbundling for TSO and DSO.
Reg TPA
Code of
good conduct
and principal
conditions
Bulgaria
Reg TPA
Accounts published.
Tariffs approved ex-ante
20 million cu m (83%)
07/07: All (100%)
No
Energy and wa
-ter regulatory
Commission
Part of the definition of eligibility is that customers must pay their bills on time – many large customers do not. Another requirement is that they
should buy gas to satisfy their own demand, so GDSs are not defined as eligible. Legal, dunctional and account unbundling of TSOs. No unbundling
for DSO (the number of customers of gas distribution companies is well below 100,000). The dominant gas company is Bulgargaz.
Czech Rep
2005: >15 million cu m (28%)
No
Reg TPA (Grid)
Yes
ERO
2007: All (100%)
Neg TPA (Storage)
Unbundling for TSO and DSO by account. Legal unbundling for TSO (2006) and DSO (2007). Gas market dominated by RWE Transgas A.S. An
amendment to the Energy Act adopting the EU Second Gas Directive came into force from 30/12/04.
Denmark
2000: 30%
Yes
Reg TPA (Grid)
Yes
DERA
2004: All (100%)
Neg TPA (Storage)
Gas incumbent Dong Naturgas unbundled its grid in 2003, Dong Transmission, onrenamed Gastra, which in 01/05 became part of state-owned
system operator Energinet.dk. Neg TPA for storage. DERA regulates for gas, electricity and district heating.
Estonia
200,000 cu m (95%)
01/07: All (100%)
No
Reg TPA
No publication of accounts Estonian
Tariffs approved ex-ante Competition
Authority
Legal unbundling for transmission system operator and distribution system operator. Eesti Gas is the dominant player in the Estonian gas market.
Finland
2000 >5 million cu m (90%)
No
Reg TPA
Yes
EMA
On paper, the market is open for energy consumers, but in reality only about 1% of the market is open. Due to single supply source (Russia), no
competition at wholesale level envisaged. Competition exists for the “after market”, but there is no legal unbundling between the distribution
system operator and supply in the wholesale market. Energy Markets Authority regulates for electricity, gas and emissions trading.
France
2000 >22 million cu m
No
Reg TPA (Grid)
2001: 20%
Neg TPA (Storage)
2003 >7.5 million cu m
2004: All non residential customers
7/07: All (100%)
Over 66% of the market open from July, 2004 (for industrial energy consumers). The transmission network
Total Infrastructure Gaz France (TIGF) and GRTgaz, unbundled from January 2005.
Germany
1998: All (100%)
Publication of
standard conditions
and tariffs
CRE (gas and
electricity)
is managed by two independent TSOs,
No
Reg TPA (Grid)
Yes
BundesnetzNeg TPA (Storage)
agentur
Market fully open since 1998. Reg TPA for grids provided for by the Energy Act of 13/07/05 and enforced since the energy regulator
(Bundesnetzagentur) was established in July 2005. Storage facility operators are obliged to publish the location of storage facilities and
information on available capacity, terms and conditions for access to storage including: procedures for requests to access storage; characteristics
of the gas to be stored; nominal working gas capacity and feed-in and output storage periods; and minimal volumes for feed-in and output.
Greece
07/05: Generators &
No
Reg TPA
Yes
RAE (gas and
Cogenerators >25 million cu m
electricity)
Derogation awarded until 2009 (0%)
New Gas Law in place since 12/05 implementing Directive 2003/55/EC. 03/07 legally unbundled TSO (DESFA SA) established. DESFA owns and
operates the transmission network and is responsible for its developments. Terms and conditions for TPA access to the network established through a
Standard Transportation Agreement and the corresponding Tariff Decree. Three regional gas distribution companies operate in the urban areas of Attiki,
Thessaloniki and Thessaly (Larissa/Volos). Each has a 30-year license to exclusively develop and operate the gas distribution system and supply all
consumers with demand <10 million cu m/yr. The Law on deregulating the Greek gas market also renders gas exempt from the country’s special
consumer tax until October 31, 2013 and until December 31, 2020 for gas used in cogeneration, agriculture, vehicles and the home.
Hungary
01/04: all non-residential (67%)
07/07: All (100%)
No
Reg TPA, Neg TPA
(for free market)
Yes: Tariffs, terms
& conditions
HEO (district
heating, gas
& electricity)
Legal unbundling of TSO and DSOs with more than 100,000 customers, accounting unbundling for smaller DSOs. A few players dominate the
market. Effective market opening threshold reached 34 % in 2008. Act XLII of 2003 on Natural Gas Supply was fully replaced by Act XL of 2008
from 1/7/09, which abolished the former public utility supply and introduced the universal supply on the Hungarian natural gas market.
Ireland
04/02>2 million cu m (80%)
Yes
Reg TPA for
Yes
CER (gas and
20/07/04: All non residential (85%)
transmission &
electricity)
07/07: All (100%)
distribution
Significant investment in gas network infrastructure in recent years and to 2012. Arrangements and access conditions for storage published in
2006. Transmission and distribution system access conditions, price methodology and levels published.
34
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
IMPLEMENTATION
GAS
Gas directive (continued)
Eligible customers &
Declared market
opening (%)
Ownership
unbundling
of TSO
Grid/Storage
access
Publication
of access
conditions
Italy
01/03: all consumers (100%)
No
Reg TPA
Yes
Latvia
0%
No
Neg TPA
Regulator
AEEG (gas &
electricity)
From 2002 suppliers restricted to selling <75% of national consumption into the grid, reducing 2%/year to reach a 2009 target of 61%. Since
2003 no entity has been permitted to sell to final clients >50% of national consumption. Exploitation of gas reservoirs is licensed by the Ministry
for Economic Development. Neg TPA for upstream gas slots. Reg TPA to pipeline network for imports and national production.
No publication of
Public Utilities
accounts. Tariffs
Commission
approved ex-ante
Latvia has a derogation until 2010 to implement the EU’s Second gas Directive. Unbundling for transmission system operator and distribution
system operator by account. Publicly available accounts required from 01/06. The dominant player in the gas market is Latvijas Gaze.
Lithuania
> 1m cu m (90%)
No
Reg TPA
Accounts published.
NCC (gas &
07/07: All (100%)
Tariffs approved ex-ante
electricity)
Unbundling for transmission system operator and distribution system operator by account. The dominant player in transmission and distribution is
Lietuvos Dujos. Lietuvos Dujos and Dujotekana UAGas supply Lithuanian consumers. All gas imported to Lithuania is sourced from Gazprom.
Luxembourg
07/04: All non
No
Reg TPA
Published for
ILR (electricity,
residential customers
high pressure grid
gas, telecoms
2005 > 80%
and postal
07/07: All (100%)
services)
Full market opening preceded legal transposition of the second EU gas liberalization directive on 01/08/07. One 350 MW gas-fired power station.
Netherlands
2002 > 1 million cu m
Yes
Reg TPA (Grid)
Publication of terms
2000: 45%
Neg TPA (Storage)
for tariffs, transport
2002: 51%
& services
07/04: All (100%)
Reciprocity clause in place. Access to gas storage controversial. Flexibility services offered by GTS with help of GasTerra (2006).
Poland
07/00: 25 million cu m
01/06: 71.2%
07/07: All (100%)
Yes
Reg TPA
DTe (gas &
electricity)
Tariffs
approved ex-ante
Energy
Regulatory
Office (gas &
electricity)
Legal and ownership unbundling for TSO (Gaz-System). Legal unbundling for DSO (six distribution companies within the frame of the PGNiG Capital
Group). The dominant gas market player is PGNiG.
Portugal
01/07: All power generators
Yes
Reg TPA
Conditions published
(45%)
by regulator
Granted derogation to 2010. Supplier choice for all commercial users from June 1 2009, residential from January 2010.
ERSE
Romania
01/02: 25%
Yes
Reg TPA
Accounts published.
ANRE
01/05: 50%
Tariffs approved
01/06: 75%
ex-ante
01/07: all nonresidential
07/07: All (100%)
Legal unbundling between TSO and DSO. 04/07 the electricity and gas regulators merged to become the independent Romanian Energy Regulatory
Authority (ANRE).
Slovakia
01/04: >5 million cu m (33%)
No
Neg TPA
No publication of
Regulatory
01/05: All non residential
Reg TPA
accounts. Tariffs
office for
customers. (72%)
for transit
approved ex-ante
network
07/07: All (100%)
industries
TSO and DSO unbundling by account. Gas market operator SPP dominates the market. The Energy Act allows SPP to refuse TPA to other gas
suppliers on the basis of ‘take-or-pay’ contracts in line with Directive 2003/55/EC. Slovakia fully transposed the EU’s second gas directive 09/07.
Slovenia
07/04: All non
No
Reg TPA
Indicative terms for
Energy Agency
residential customers
tariffs, transport &
(gas &
07/07: 100% (All)
services are published
electricity)
Legal unbundling for transmission system operator and account unbundling for distribution system operator. Incumbent Geoplin dominates the gas
market. From July 1, 2004, Slovenia opened its gas market to all non-household customers in compliance with the EU’s Second Gas Directive.
Spain
01/03: All (100%)
Reg TPA/ Neg TPA
Yes ( conditions:TPA
CNE (gas, oil
(non-basic storage)
tariffs & contract models) & electricity)
Main Security of supply rules: to keep dependency on one gas source to below 50%, 20 days of firm consumption as strategic reserves and N-1
criterion (preparedness of the system to supply firm demand in case of failure of the biggest entry point). All market participants have import cap
of 70%. Six LNG terminals in operation. Regulated tariffs abolished end-2007 but customers can opt for supplier of last resort tariffs.
Sweden
Yes
2000: 47%
07/05: All non
residential users (95%)
07/07: All (100%)
Svenska Kraftnat is the system operating authority (ISO).
No
Reg TPA
Turkey
No
Reg TPA
1 million cu m (80%)
Tariffs approved
ex-post
Tarif fmethod
ex-ante
Energy market
Inspectorate
(gas &
electricity)
No publication
EMRA (gas,
of accounts. Tariffs
electricity, LPG
approved ex-ante
& petroleum)
Unbundling for transmission system operator and distribution system operator by account. Botas is the dominant company in the gas market.
UK
1998: All except N. Ireland (100%) Yes
Reg TPA
Published tariffs
Ofgem/NIAUR
Ofgem is the regulator for England Wales and Scotland, while the Northern Irelarnd Authority for Utility Regulation is responsible for energy regulation in
Northern Ireland.
Source: EU Energy
35
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
AGENDA
BRUSSELS WATCH / EVENTS
BRUSSELS WATCH
Spanish presidency of the EU
June
Draft agenda (selected dates; meetings in Brussels
unless otherwise stated)
January 1 – June 30, 2010
7 Eurogroup
8 Ecofin (Luxembourg)
17-18 European Council
21 Environment Council (Luxembourg)
24 TTE (Energy Council)
28 Agriculture Council
March
1-2 Competitiveness Council (San Sebastian)
12 TTE (Energy Council); (El Escorial)
15 Eurogroup; Environment
16 Ecofin; Conciliation EP
23 Agriculture Council (Luxembourg)
25-26 European Council
European Parliament meetings:
Plenary sessions
March 8-11 (Strasbourg)
March 24-25 mini plenary (Brussels)
April 19-22 (Strasbourg)
May 5-6 mini plenary (Brussels)
May 17-20 (Strasbourg)
June 17 (Strasbourg)
April
17-18 Informal Ecofin (Madrid)
May
List of EU presidency-holders 2010-2012
17 Agriculture & Fisheries Council
18 Ecofin Council
25-26 Competitiveness
30 Informal Agriculture Council (Merida)
31 TTE (Energy and Telecom Council)
Year
2010
2011
2012
1st semester:
1/1–30/6
Spain
Hungary
Denmark
2nd semester:
1/7–31/12
Belgium
Poland
Cyprus
EVENTS
Ergeg workshop on Electricity 10year network development plan
Ergeg stakeholder workshop on
Smart Grids
9th Novel Gas Conversion
Symposium
Brussels, Belgium
February 11, 2010
www.energy-regulators.eu
Brussels, Belgium
March 17, 2010
www.energy-regulators.eu
May 30-June 3, 2010
Lyon, France
www.ngcb.org
Power in West Europe
Transmission & Distribution
/Smart Grids Europe 2010
Gas Storage 2010
March 11-12
Brussels, Belgium
www.platts.com
Hidden Costs: Energy Procurement
in a Low Carbon Economy
March 4, 2010
London, UK
www.carboninternational.com
Supergrid: The future of
renewable energy integration
March 9-10, 2010
London, UK
www.cityandfinancial.com/conferenc
e/supergrid
Amsterdam, The Netherlands
March 29-31, 2010
www.td-europe.eu
www.smartgrids-europe.com
EU Sustainable Energy Week
March 22-26, 2010
Brussels, Belgium
http://www.eusew.eu/page.cfm?pag
e=registration
European Wind Energy 2010
April 20-23, 2010
Warsaw, Poland
www.ewea.org
36
June 28-29, 2010
London, United Kingdom
www.smi-online.co.uk
Energy Trading Central & South
Eastern Europe 2010
June 10. 2010
Warsaw, Poland
www.energytradingcsee.com
11th IAEE European Conference
August 25-28, 2010
Vilnius, Lithuania
www.iaee2010.org
EU ENERGY / ISSUE 227 / FEBRUARY 26, 2010
Group Booking Discounts Available
Power in West Europe
Evolution and Revolution in the World’s Most Dynamic Power Markets
11-12 March 2010
Hilton Brussels
Brussels, Belgium
Hear from Europe’s leading utilities, regulators, policy makers,
project developers, observers and financiers, including:
RWE, Vattenfall, E.ON, GDF Suez, European Commission, European
Parliament, EURELECTRIC, International Energy Agency (IEA),
CEER/ERGEG, Advanced Power, DONG Energy, MGT Power,
European Investment Bank, Barclays Capital, Standard & Poor’s,
CALYON, OECD Nuclear Energy Agency (NEA), European Wind
Energy Association (EWEA) and Platts
For more information quote ‘PLTSNEW’ and contact:
Stacey Knox
+44 (0) 20 7176 6226
stacey_knox@platts.com
www.events.platts.com