B2/Avis/2010/CEDECpositon paper-2010-07-02
PUBLIC CONSULTATION
by the European Commission
“Towards a new Energy Strategy for Europe 2011-2020”
CEDEC Position Paper
CEDEC defends, at European level, the interests of local energy companies.
CEDEC represents 1500 companies with a total turnover of about 100 billion Euros, and
more than 250.000 employees. Together, they serve 60 million electricity and gas customers.
These predominantly medium-sized and small local energy companies have developed
activities as electricity and heat generators, electricity and gas distribution grid and metering
operators and electricity and gas suppliers.
CEDEC attaches great importance to this public consultation.
Concerning priority areas for the future strategy, CEDEC asks for specific attention for the
following points :
(1) Modern integrated grids
A key focus in EU energy policy in the coming years will be energy infrastructures.
To be able to realize the goals that have been set for 2020, it is essential that the EU
disposes of energy networks – specifically from distribution level point of view – that allow to
feed more renewable energy production into the European supply system, and that are
smart, in order to integrate intelligently initiatives and actions of local generators and
consumers.
To contribute to the realization of these goals, the Commission intends to present a new
proposal for an Energy Infrastructure Package by the end of 2010.
This new package, replacing the current TEN-E framework (Trans-European Networks for
Energy), should form the basis for future strategies to develop infrastructure and
interconnections at the European level. This package should clearly include infrastructure at
local generation and distribution network level.
To meet the ambitious energy and climate policy goals, the networks – specifically at
distribution level - must become more flexible, to allow integration of renewables, and to be
capable of incorporating new energy demand technologies, such as "smart" metering, and
new demand patterns, such as plug-in electric vehicles.
Therefore a clear and stable improvement of the current framework conditions is crucial for
the demanded investments in distribution networks (including metering & communication),
and for renewing power generation.
By priority, the development of smart grids has to be promoted. This can include – without
being a conditio sine qua non - the (partial or complete) roll-out of smart meters, depending
on the national evaluation foreseen in the 3rd package.
Finally, representative DSO organisations such as CEDEC, want to be involved in the
realization of these innovative projects and their funding in the framework of the Energy
Infrastructure Package.
(2) Making progress towards a low-carbon energy system
On the preparation of a new framework for efficiency policies, priority should be given to the
development of appropriate regulatory conditions for the take-off of demand response
services offered in the electricity market or offered by DSOs (in view of the management of
their smart grid).
(3) Leadership in technological innovation
Technological innovation will be needed to develop efficient and low carbon technologies,
and will be crucial for Europe to achieve its 20-20-20 climate action targets and to complete
its 2020 Agenda for smart, sustainable and inclusive growth.
Priority should be given to the promotion of local energy solutions, for the realization of which
local energy companies - like the members of CEDEC - are perfectly placed.
In the “smart cities” initiative, the coordination between local authorities and their local energy
companies should be stimulated in order to maximize clean and energy-efficient investments.
These general CEDEC positions are developed in more detail in the following pages.
_______________________
Public utilities - strong partners for an energy economy which is sustainable in the
future
The energy economy, which necessarily includes the public utilities, is in the midst of a farreaching transformation process, definitively characterised by the establishment of
European and national regulatory frameworks both for competition in and the regulation of
the energy market and for the implementation of climate protection targets.
Any energy policy which is to realise the aim of cutting greenhouse gases by 20%,
respectively 30% once an International Agreement is signed, by 2020 must focus on the
development of technologies and processes which are tailored to sustainability and must
draw on the innovative strengths of competition. Having several competing market players is
therefore a key prerequisite for the sustainable development of the energy economy.
The future energy economy system will be marked out as being more decentralised, with the
system being operated by medium-sized enterprises. Sweeping changes are emerging,
notably in energy production and network infrastructures.
Public utilities, as a key cornerstone for any properly developed energy economy tailored to
sustainability, are with their decentralised energy production and network infrastructures,
together with the energy services which they provide, reliable partners. With the extensive
investments which they plan to make in more efficient power stations, with the maintenance
and extension of the future "intelligent" distribution grids, and through the expansion of the
energy services which they offer to trade and industry and to private customers, public
utilities can also make a considerable contribution to the achievement of politically agreed
climate protection targets.
The commitment on the part of the public utilities depends considerably on whether a
regulatory framework can be established which is resilient over the long-term and on
whether the local energy economy can rely on there being adequate investment incentives.
CEDEC and its members therefore welcome the "2011-2020 Energy Strategy for Europe",
which is geared to the long-term, and would like to bring into the political discussion
proposals for shaping an energy economy which is equally competitive and geared towards
[the achievement of] climate protection targets.
I.
Sustainable energy production: competitive, decentralised, local
A sizeable part of Europe's fleet of power stations will have to be rebuilt by 2020 if old power
stations with high CO2 emissions are to be replaced by modern, highly efficient plants. With
investments totalling some EUR 6,500 million, local enterprises are currently offering
capacities of 3,500 MW in Germany alone, and this from power stations which are either in
the process of being built or for which the permit procedures are ongoing. A further 5,000
MW (investments totalling some € 6,000 million) are at the planning stage.
To ensure the proper development of competition in the energy production market and the
achievement of climate protection targets over the medium and long-term, there is a need
for political flanking manoeuvres designed to expand the range of local energy production
sources on offer :

Investments which contribute to the accelerated rebuilding of the energy economy
system, and notably to the task of evening out the fluctuating supply of Renewable
Energies, should be flanked. This includes notably storage technologies and flexible
power stations in the peak load and medium load sector.

Politicians and the power station industry should agree on a concept which contributes
towards making the case in public for the need to build new power stations.
1. Energy efficiency through the use of CHP
The European energy economy is also facing huge challenges in terms of energy efficiency.
In this connection, the EU and the Member States have already launched a range of
measures, without however so far sufficiently taking into account the [possibilities offered by
the] combined production of heat and power.
With a level of efficiency of up to 90%, cogeneration (CHP) is by far the most efficient
energy production technology. The highly efficient fuel use in CHP plants considerably
reduces CO2 emissions. Through their combined production of useful heat and power, in
2008 the public utilities in Germany alone saved around 9.4 million tons of CO2.

A basic prerequisite for any Europe-wide expansion of CHP is the further development
of cogeneration guidelines, this with a view to setting minimum standards for the
promotion of cogeneration in the Member States.

The EU should check on how the competitive disadvantages faced by CHP heat as the
result of auctioning in emissions trading might be counterbalanced.
2. Use of Renewable Energies
CEDEC supports the Commission's intention to remain committed to the expansion of
Renewable Energies. It is however as yet too early for the creation of a uniform promotion
scheme. The European legislative bodies should therefore pay special heed to ensuring that
they do not impair the functioning of the [existing] promotion schemes of the Member States.
Schemes providing for compensation for electricity fed into the grid, such as the German
Renewable Energies Act (EEG), have in particular proved to be sustainable and costeffective means of promotion and should be retained.
Alternative support schemes systems should preferable promote energies on a technologyspecific basis, as to facilitate targeted support for technologies which have a promising
future but whose potential has not yet been exploited.
II.
Distribution grids as keys for "smart technologies" and decentralised
production
The grid infrastructure of the energy economy is also already seeing signs of the
changeover to decentralised structures, bidirectional communications (e.g. through the
introduction of Smart Meters), and the control of energy production, use and storage.
The Smart Grids of the future will emerge as the result of this combined growth of ICT and
energy infrastructure into more intelligent systems. As the result of the expansion of
decentralised production structures in particular, energy flows ranging from low to high
voltage levels will appear more often in an electricity grid which has until now been based on
an energy supply which is, primarily, centralised. The challenges to the development of the
power grid into the Smart Grid are in this connection to be found mainly at the distribution
grid level. These presuppose capable partners with a strong, regional connection - demands
satisfied notably by public utilities. They have the necessary know-how to bring together at a
local level the complex, local conditions of production and consumption.
1. Smart Grids / Intelligent grids of the future
To ensure the continued existence of a stable, undisrupted energy supply, suitable
measures need to be implemented with a view to linking all market players, without
discrimination, to one another and to correcting load fluctuations in the short term.

To ensure the realisation of expansion targets for CHP and Renewable Energies,
together with the concurrent achievement of CO2 reduction and energy-saving targets
and the transportation of energy produced from decentralised sources rendered
necessary as the result of this, considerable investment needs to be made in distribution
grids. CEDEC therefore expects there to be recognition of these additional expansion
and rebuilding costs in the incentive regulation system.

To ensure that these developments, which form the central component of the future
Smart Grids - the intelligent distribution grids - occur with the required speed and to the
required extent, a framework is required in which investment is encouraged through
"innovative regulation for Intelligent Grids". In particular, the extensive investments in
new ICT technology at the distribution grid level must be taken into account without
exception into the revenue caps.

To prevent measures targeting the expansion of the grid, despite the increase in highly
volatile electricity feed-in mechanisms, additional investment [still] needs to be made in
innovative storage technologies. Storage facilities can be used to even out fluctuations
and to achieve uniform grid utilisation. They in turn prevent costs being incurred on the
otherwise necessary expansion of the grids and/or on the use of expensive control
energy. To ensure that storage facilities can be used to a greater extent, suitable
mechanisms are required for promoting research into and the use of new, innovative
technologies.
2. Integration of decentralised electricity production plants into the grid
Seen in perspective, it is necessary to use modern ICT technology to establish intelligent
networks between the resultant decentralised production, part of which is concentrated in
low-consumption areas and/or on a regional basis, with their frequently fluctuating feed-ins,
and local consumers and decentralised energy storage facilities; this will at the same time
permit expansion targets to be met and system stability to be maintained.

The Smart Grid capabilities of decentralised energy plants - inter alia, their integration
into ICT communications and their control - must be defined both at the maximum
voltage and at the medium and low voltage levels (photovoltaics, micro CHP etc.).

If the optimum capacity utilisation of the power grids is to be achieved, then the
development of both active power management and reactive power management at
lower grid levels, and the creation of a marketplace through which these services can be
requested and accessed from the grid, is required. As a consequence of this, grid
expansion and reinforcement will be kept to a minimum.
3. Effects of demographic change on power grid structures
Declining energy usage volumes as the result of shrinking populations have a sizeable
impact on local economy networks because of the high share of fixed costs represented by
grid-bound infrastructures. The costs of existing grids must be borne by ever fewer
customers.

III.
Any measures which need to be implemented in terms of the adaptation and dismantling
of grids represent a task the completion of which society as a whole is responsible for. It
cannot be done by local grid operators alone, but is in contrast reliant on corresponding
promotional measures.
Trading and sales in the energy market
1. Transparency in the electricity wholesale market and for consumers
CEDEC considers that high market transparency is an important prerequisite for raising the
maturity level of the energy market and supports suitable proposals for increasing
transparency. There is however a high level of transparency, based on existing statutory
regulations and voluntary agreements; this can be seen in the transparency platforms which
exist in some regions, which make key data available to market participants.

CEDEC welcomes the policy's aim of increasing transparency in energy trading in order
to improve the functionality of the markets, argues the case however against
unreasonably high demands being made in terms of transparency and for care to be
taken to ensure that the data to be collected is relevant.

CEDEC is of the opinion that the majority of the transparency obligations introduced
must be looked at from the point of view of their impact before further obligations are
implemented.
2. Market abuse regime for energy trading
Energy trading is subject to various regulatory proposals at European level, e.g. there is the
proposed initiative of the EU Parliament and of the Commission; DG ENER and DG
MARKET. In this connection, special regulations governing insider trade and market
manipulation are on the one hand being contemplated in the context of the reformulation of
the market abuse guideline applicable to securities and derivatives trading, and on the other
hand, regulations are under discussion for the organisation of the derivatives markets. It is
important to have specific regulations for the energy market, regulations which are not
depleted in any adoption of regulations [intended] for other financial markets.

CEDEC proposes that a European Act be issued with a view to establishing
comprehensive and uniform regulations for the prevention of market abuse in energy
trading and to supporting the functioning of the energy wholesale markets.

Particular attention must be paid to preventing an excessive burden being imposed on
smaller to more medium-sized energy firms, since they are not system-relevant.