2 European Commission, DG Energy and Transport, Jean-Arnold Vinois, Head of the Energy Policy and Security of Supply Unit Seminar Europe’s Energy Challenge:

2European Commission, DG Energy and Transport, Jean-Arnold Vinois, Head of the Energy Policy and Security of Supply Unit Seminar Europe’s Energy Challenge: Securing Supply, RUSI, London, 21 May 2007.

INTEGRATING INTEGRATING ENERGY & ENVIRONMENTENERGY & ENVIRONMENT

Energy Policy for EuropeEnergy Policy for Europe

(Strategic Energy Review)(Strategic Energy Review)

Limiting Global ClimateLimiting Global Climate

ChangeChange to 2°Cto 2°C

A unilateral EU independent commitment of

at least 20% GHG emission reduction by 2020, compared to 1990 levels

And a 30% reduction if broader participation

STRATEGIC OBJECTIVE


Developing countries GHG emissions

0%

40%

80%

120%

160%

200%

240%

280%

320%

1990 2005 2020 2030 2040 2050

Baseline Reduction Scenario

At EU level at least 20% GHG emission reduction by 2020,

compared to 1990 levels

For negotiations with developed countries: 30% GHG emission

reduction target by 2020, compared to 1990 levels

Developing countries: Decoupling emissions and growth asap,

absolute reductions after 2020

Deforestation: halt within two decades and then reverse

THE STRATEGIC OBJECTIVETHE STRATEGIC OBJECTIVE

Developed countries GHG emissions

0%

20%

40%

60%

80%

100%

120%

140%

1990 2005 2020 2030 2040 2050

Baseline Reduction Scenario

ENERGY FOR A CHANGING WORLD

EXTERNAL RELATIONS

ILLUSTRATIVE

NUCLEAR

PROGRAMME (PINC)

SUSTAINABLE FOSSIL

FUEL TECHNOLOGIES

INTERNAL MARKET

REPORT ON

FUNCTIONING OF

INTERNAL MARKET

DG COMP

SECTOR INQUIRY

PRIORITY

INTERCONNECTION

PLAN

PROGRESS REPORT

RES ELECTRICITY

PROGRESS REPORT

BIOFUELS

RENEWABLE ENERGY

ROAD MAP

SUSTAINABILITY AND LOW-CARBON ECONOMY

ENERGY EFFICIENCY

ACTION PLAN

(19 OCT 2006)

JOINT COMMISSION/ HR /COUNCIL JUNE 2006 PAPERAND COM PAPER OCT 2006

DIALOGUE WITH PRODUCERS:NORWAY-OPEC-GCC-

ALGERIA-CASPIAN BASIN(BAKU PROCESS)

EU-AFRICA PARTNERSHIP

NEGOTIATION MANDATEFOR NEW AGREEMENT

WITH RUSSIA

DIALOGUE WITH CONSUMERS:US, JAPAN,CHINA, INDIA,

BRAZIL

ACTION PLAN 2007-2009

ENERGY PACKAGE2007

ENERGY POLICY FOR EUROPE

GREEN PAPER ENERGY

SPRING EUROPEAN COUNCIL 2007

THE R&D 7TH FRAMEWORK PROGRAMME STRATEGIC ENERGY TECHNOLOGY PLAN (2007)

LIMITING CLIMATE CHANGE TO 2 °C

SPRING EUROPEAN COUNCIL 2006


5

Competitiveness“LISBON”

Sustainable Development

“KYOTO”

Security of supply

FULLY FULLY

BALANCED BALANCED

INTEGRATEDINTEGRATED

AND AND

MUTUALLY REINFORCEDMUTUALLY REINFORCED

I. THE THREE CHALLENGESI. THE THREE CHALLENGES


1. 1. COMPETITIVENESSCOMPETITIVENESS

Problems with the Problems with the Internal Energy MarketInternal Energy Market : :

Incomplete and incorrect transposition of Incomplete and incorrect transposition of EU directives: 26 infringement cases EU directives: 26 infringement cases against 16 MSagainst 16 MS

Different powers and competences of Different powers and competences of national regulatorsnational regulators

Markets are not integrated sufficiently – Markets are not integrated sufficiently – national markets concentrated;national markets concentrated;

Lack of cross border capacity and need for Lack of cross border capacity and need for more interconnections;more interconnections;

Incompatible market design in some cases Incompatible market design in some cases – e.g. balancing, transmission tariff – e.g. balancing, transmission tariff regimesregimes

Limited wholesale tradingLimited wholesale trading


Concentration of Concentration of national gas marketsnational gas markets

BelgiumFranceHungaryPoland

AustriaDenmarkGermany

ItalyNL

UK

0 20 40 60 80 100

Incumbent(s) share of available gas in %


UK – fairly competitive market

SPAIN - duopolyFRANCE - single dominance

GERMANY - oligopoly

Concentration in electricity Concentration in electricity marketsmarkets


Estimated hours of congestion as a percentage of all hours, Jan-May 2005

0

25

50

75

100

SK -HU

FR -CH

DE -DK

NL -BE

FR -UK

DE -NL (1)

FR -ES

CZ -DE

NL -DE (1)

BE -NL

DE -FR (1)

CZ -AT

DE -CZ (1)

UK -FR

FR -DE

Selection of borders

Hou

rs w

hen

requ

este

d ca

pac

ity e

xcee

ds

avai

labl

e ca

paci

ty a

s a

perc

enta

ge o

f al

l hou

rs

NL DE FR CZ

Electricity interconnectors are often chronically congested


Average industrial electricity prices 2002-2006

Member States with regulated tariffs such as France and Spain are not representatives

Euro/MWh net of tax

Belgium

DenmarkGermany

Italy

Hungary

Czech RepFinland

UK

Sweden

0 20 40 60 80 100

Prices for commercial Prices for commercial electricity userselectricity users


1. COMPETITIVENESS1. COMPETITIVENESS

Source: EUROSTAT

EU-27 INVESTMENT NEEDS up to 2030: EU-27 INVESTMENT NEEDS up to 2030: €€11.79 trillion.79 trillion

RES-H&C5%

Generation65%

Transmission8%

Distribution27%

Electricity77%

Oil5%

Gas12%

Coal1%


Source: European Environemental Agency Report 2006

22. . SUSTAINABLE DEVELOPMENTSUSTAINABLE DEVELOPMENT

Energy => 80% of EU-GHGEnergy => 80% of EU-GHG

Energy 59%Transport 21%

Agriculture 9%

Industrial processes 8%

Waste 3%


-200

-100

0

100

200

300

400

500

600

2000/1990 2010/1990 2020/1990 2030/1990

transport industry electricity/steam other total CO2

Mt CO2 – relative to 1990 (Baseline)Mt CO2 – relative to 1990 (Baseline)

TRENDS IN CO2 EMISSIONS up to 2030TRENDS IN CO2 EMISSIONS up to 2030



EU-27 ENERGY MIX: High dependence on fossil fuels EU-27 ENERGY MIX: High dependence on fossil fuels => Business as usual is => Business as usual is NOT SUSTAINABLENOT SUSTAINABLE

Source: EUROSTAT

Solid fuels18%

Oil38%

Gas24%

Nuclear14%

Renewables6%

Other0%

Oil34%

Gas27%

Nuclear11%

Renewables12% Solid fuels

16%

20042004 2030 2030 (BaU)(BaU)



15

Sources : European Commission Eurostat 2004

3. SECURITY OF SUPPLY 3. SECURITY OF SUPPLY

EU-27 ORIGIN OF GASEU-27 ORIGIN OF GAS

EU37%

RUSSIA29%

ALGERIA13%

NORWAY17%

EU-27 ORIGIN OF OILEU-27 ORIGIN OF OIL

SAUDIARABIA

9%

IRAN5%

LIBYA8%

RUSSIA26%

Others10% EU

18%

NORWAY13%EU-27 ORIGIN OF COALEU-27 ORIGIN OF COAL

EU 54%RUSSIA

8%SOUTHAFRICA

13%


THE KEY DRIVERS 3x20% by 2020THE KEY DRIVERS 3x20% by 2020

20% by 2020 EFFICIENCY20% by 2020 EFFICIENCY

BIO-FUELSBIO-FUELS

Min 10% bindingMin 10% binding

E-ELECTRICITYE-ELECTRICITY

MS bindingMS binding

choicechoice

HEATING & COOLINGHEATING & COOLING

MS bindingMS bindingchoicechoice

By 2020 binding 20% RENEWABLES By 2020 binding 20% RENEWABLES

EU levelEU level

NATIONAL TARGETS and ACTION PLANS NATIONAL TARGETS and ACTION PLANS

By 2020 20% EU GHGBy 2020 20% EU GHG


II. II. Actions for aActions for a Post- Post-Industrial RevolutionIndustrial Revolution THE ACTION PLANTHE ACTION PLAN

Fully realising the Internal market for electricity and Fully realising the Internal market for electricity and gas and improving interconnectionsgas and improving interconnections

Making solidarity a daily realityMaking solidarity a daily reality

Strong measures to improve energy efficiencyStrong measures to improve energy efficiency

Longer term and binding targets for renewablesLonger term and binding targets for renewables

A strategic approach to energy technology, with a A strategic approach to energy technology, with a priority for low carbon technologiespriority for low carbon technologies

A clear perspective on nuclear A clear perspective on nuclear

A common A common internationalinternational energy policy and a energy policy and a common voice in negotiations with external partnerscommon voice in negotiations with external partners

Market analysis and reporting Market analysis and reporting


1. INTERNAL ENERGY MARKET1. INTERNAL ENERGY MARKETPolicy ActionsPolicy Actions (1) (1)

Enhancing the role of national regulators: Enhancing the role of national regulators: On third party access to networks and gas storage Balancing mechanisms Cross-border issues Market surveillance and consumer protection

Reinforcing co-ordination of regulators at EU level =Reinforcing co-ordination of regulators at EU level =>> OPTIONSOPTIONS

Enhanced co-operation between national regulators Binding power decision making to the European

Regulators Group for Gas and Electricity A new, single Community body


Non-discriminatory access to networks through Non-discriminatory access to networks through

unbundling =unbundling =>> 2 OPTIONS 2 OPTIONS Ownership unbundling as the most efficient means Independent System Operator (ISO) second-best

Interconnection: more co-ordination between Interconnection: more co-ordination between Transmission System Operators (TSOs)Transmission System Operators (TSOs)

Increased Transparency of the marketIncreased Transparency of the market

BindingBinding network security standardsnetwork security standards

Energy Customers CharterEnergy Customers Charter

Assessment of Investment needsAssessment of Investment needs

1. INTERNAL ENERGY MARKET1. INTERNAL ENERGY MARKETPolicy ActionsPolicy Actions (2) (2)


The Commission will develop an Energy Customers‘ The Commission will develop an Energy Customers‘ Charter to, inter alia:Charter to, inter alia:

tackle fuel poverty (public services obligations)tackle fuel poverty (public services obligations)

improve the minimum level of information available to improve the minimum level of information available to citizens to help them choose between suppliers and citizens to help them choose between suppliers and supply options and to increase energy efficiencysupply options and to increase energy efficiency

reduce red tape when customers change suppliersreduce red tape when customers change suppliers

protect customers from unfair selling practices in protect customers from unfair selling practices in compliance with the relevant EC directivescompliance with the relevant EC directives

1. INTERNAL ENERGY MARKET1. INTERNAL ENERGY MARKETEnergy CustomersEnergy Customers CharterCharter


1. 1. INTERNAL ENERGY MARKETINTERNAL ENERGY MARKET Priority Interconnection PlanPriority Interconnection Plan

Continuous identification of missing infrastructureContinuous identification of missing infrastructure

European coordinators for 4 priority projects:European coordinators for 4 priority projects: Power-Link Germany, Poland Lithuania, Power-Link Germany, Poland Lithuania,

Connections to off-shore wind power Northern Europe, Connections to off-shore wind power Northern Europe,

Electricity interconnections France-Spain, Electricity interconnections France-Spain,

Nabucco pipelineNabucco pipeline

TEN-E projects of “European interest”: planning and approval TEN-E projects of “European interest”: planning and approval procedures to be completed in maximum 5 yearsprocedures to be completed in maximum 5 years

Possibility to increase funding for TEN-E (155 millions € for Possibility to increase funding for TEN-E (155 millions € for the period 2007-2013)the period 2007-2013)

New Community mechanism for TSOs coordination of New Community mechanism for TSOs coordination of network planningnetwork planning


2. SOLIDARITY IN SECURITY OF SUPPLY2. SOLIDARITY IN SECURITY OF SUPPLY

A fully functioning internal energy market is the A fully functioning internal energy market is the best guarantee of supply security and best guarantee of supply security and contributes to a better prediction of demandcontributes to a better prediction of demand

Gas Coordination Group Gas Coordination Group

Oil Supply GroupOil Supply Group

Energy Correspondents NetworkEnergy Correspondents Network

Communication on strategic stocks (oil and gas)Communication on strategic stocks (oil and gas)

Effective mechanisms for energy crisis Effective mechanisms for energy crisis managementmanagement

Electricity InterconnectionsElectricity Interconnections


33. ENERGY EFFICIENCY. ENERGY EFFICIENCY Saving 20% Saving 20% energy energy by 2020by 2020

Energy Efficiency Action PlanEnergy Efficiency Action Plan - - adopted on 19 October 2006adopted on 19 October 2006

Most issues are as valid for Russia as for EUMost issues are as valid for Russia as for EURealising the Potential:Realising the Potential: Transport: fuel efficient cars; better use of public

transport; introduction of biofuels

Appliances: tougher standards and better labelling

Buildings: improving the energy performance of the EU’s building stock

Improving the efficiency of heat and electricity generation, transmission and distribution

Competitiveness and Innovation Programme (CIP) funds the intelligent energy-Europe programme=> 640 millions € for the period 2007-2013


44.. RENEWABLE ENERGY SOURCESRENEWABLE ENERGY SOURCES 20% 20% RES RES by 2020by 2020

Commission proposes a binding overall Commission proposes a binding overall EU 20% target by 2020 and a EU 20% target by 2020 and a 10% minimum binding target for biofuels for each Member State.

Member States to set national targets and to adopt action plans on:

RES in electricity

Heating and cooling

Biofuels


5. RESEARCH 5. RESEARCH Strategic Energy Technology PlanStrategic Energy Technology Plan

Ready by the end 2007Ready by the end 2007

To be discussed by the Spring European Council 2008To be discussed by the Spring European Council 2008

Sustainable coal and gas: to make power plants Carbon Sustainable coal and gas: to make power plants Carbon

Capture and Storage (CCS) ready by 2020Capture and Storage (CCS) ready by 2020

Second generation biofuels, photovoltaic, large-scale Second generation biofuels, photovoltaic, large-scale

offshore-wind, hydrogen fuel cellsoffshore-wind, hydrogen fuel cells

Generation IV fission power, nuclear fusionGeneration IV fission power, nuclear fusion

Energy efficient transports, appliances and industrial Energy efficient transports, appliances and industrial

systemssystems


In the 7th Framework Programme (FP) energyIn the 7th Framework Programme (FP) energy

funds increased by 50% in comparison with the funds increased by 50% in comparison with the last FP:last FP:

2007-20132007-2013 Non nuclear Energy: €2350 millionNon nuclear Energy: €2350 million

(>50% for RES and energy efficiency)(>50% for RES and energy efficiency) Environment : €1890 million (including Environment : €1890 million (including

climate change) climate change) Nuclear (Euratom): €2751 million (of which Nuclear (Euratom): €2751 million (of which

€1947 for fusion, €517 CCR research and €1947 for fusion, €517 CCR research and 287€ for fission)287€ for fission)

5. 5. RESEARCHRESEARCH FundingFunding


Up to 12 industrial-scale demonstration Up to 12 industrial-scale demonstration

facilities of sustainable power generation from facilities of sustainable power generation from

fossil fuel in Europe;fossil fuel in Europe;

Clear timeframe for installation of CO2 capture Clear timeframe for installation of CO2 capture

& storage (CCS) for coal- and gas-fired power & storage (CCS) for coal- and gas-fired power

plants;plants;

CCS fitting any new fossil fuel plant after 2020;CCS fitting any new fossil fuel plant after 2020;

Retrofitting of existing plants to be examinedRetrofitting of existing plants to be examined

Improvement of the legal framework (eg CCS in Improvement of the legal framework (eg CCS in

Emission Trading Scheme; storage) and public Emission Trading Scheme; storage) and public

acceptance acceptance

5. 5. RESEARCHRESEARCH Sustainable Fossil FuelsSustainable Fossil Fuels


66. THE FUTURE OF NUCLEAR. THE FUTURE OF NUCLEAR

Around 1/3 of the electricity and 15% of the EU energy Around 1/3 of the electricity and 15% of the EU energy mix is from nuclear; 15 Member States concernedmix is from nuclear; 15 Member States concerned

CO2-free source with importance in low emission CO2-free source with importance in low emission scenariosscenarios

Concerns on nuclear waste and decommissioningConcerns on nuclear waste and decommissioning

Illustrative Nuclear Programme (PINC) describes Illustrative Nuclear Programme (PINC) describes present EU and world situation of the nuclear sectorpresent EU and world situation of the nuclear sector

Policy Actions:Policy Actions: EU High Level Group on Nuclear Safety and Waste EU High Level Group on Nuclear Safety and Waste

ManagementManagement Support R&D on waste management under FP7 Support R&D on waste management under FP7

research programmeresearch programme Nuclear Forum to be set up (with all stakeholders)Nuclear Forum to be set up (with all stakeholders)


NEGOTIATIONS & AGREEMENTS on energy, climate, trade and NEGOTIATIONS & AGREEMENTS on energy, climate, trade and

technology:technology: Post-2012 climate regime to be discussed in UN frameworkPost-2012 climate regime to be discussed in UN framework

World Bank Gas Flaring Reduction PartnershipWorld Bank Gas Flaring Reduction Partnership

Extractive Industries Transparency InitiativeExtractive Industries Transparency Initiative

Energy Charter Treaty to be fully functioningEnergy Charter Treaty to be fully functioning

Extension of Emission Trading Scheme (ETS) to global Extension of Emission Trading Scheme (ETS) to global partners and to other sectorspartners and to other sectors

International agreement on energy efficiency of interest for all International agreement on energy efficiency of interest for all major consumers of energy, including Russiamajor consumers of energy, including Russia

Energy Star (office equipment)Energy Star (office equipment) ENERGY RELATIONS WITH EU NEIGHBOURS:

(Norway, Energy Community Treaty, European Neighbourhood Policy, Egypt, Mashrek/Magreb, Libya, Algeria, Turkey)

77. INTERNATIONAL ENERGY POLICY. INTERNATIONAL ENERGY POLICY ( (11))


77. INTERNATIONAL ENERGY POLICY. INTERNATIONAL ENERGY POLICY (2) (2)

EU - RUSSIA ENERGY COOPERATIONEU - RUSSIA ENERGY COOPERATION

Energy partnership in the framework of the post-PCA agreement and strengthening the energy dialogue through joint works.

COOPERATION WITH KEY ENERGY PRODUCERS, TRANSIT COOPERATION WITH KEY ENERGY PRODUCERS, TRANSIT COUNTRIES AND CONSUMERSCOUNTRIES AND CONSUMERS

OPEC, Golf Cooperation Council, Central Asia (e.g. MoU Azerbaijan, Kazakhstan), Baku InitiativeLatin America, Caribbean Africa-Europe Partnership

NETWORK OF ENERGY CORRESPONDENTSNETWORK OF ENERGY CORRESPONDENTS

NON-PROLIFERATION and NUCLEAR SAFETY AND SECURITY NON-PROLIFERATION and NUCLEAR SAFETY AND SECURITY with IAEAwith IAEA


IIIIII. Costs and benefits(1). Costs and benefits(1)

Investments in a low carbon economy: 0.5% of total global GDP 2013-

2030

20% share for renewables: - additional costs of €18

billion/year (oil prices of $48/barrel by 2020)

- or €10.6 billion ($78/barrel)- no additional costs if carbon

price at €20

Business as Usual would cost more: $100/barrel in 2030 would add €170 billion to our bill

What about the cost of the uncertainty of oil and

gas prices and climate damages?


IIIIII. Costs and . Costs and Benefits(2)Benefits(2)

Improvement of the Emission Trading Scheme Reduction of abatement costs for regulated industries and

sectors but need to extend sectoral and geographical coverage; Stimulation of growth and job creation and innovation

Saving 20% energy by 2020 Would save €100 billion and around 780 Mt CO2/year in 2020 or

1/5 of today's emissions

Technical progress fostered by clear policies Efficiency gains New technologies being developed to make fuel mix more

sustainable and to deploy renewables sources of energy

Internal Market Efficiency gains and competitive prices Downward pressure on costs for downstream industries and

consumers; Enhanced solidarity between Member States Credibility of EU speaking with common voice


IV. THE EUROPEAN COUNCIL ACTION PLAN 2007-2009IV. THE EUROPEAN COUNCIL ACTION PLAN 2007-2009

European Council fully endorsed on 9 March 2007European Council fully endorsed on 9 March 2007 an action plan an action plan for An Energy Policy for Europe, for An Energy Policy for Europe, based on Commission’s proposals.based on Commission’s proposals.

European Parliament had been more ambitious in European Parliament had been more ambitious in its resolution ofits resolution of 14 December 2006.14 December 2006.

Legislative proposals to be tabled by the Legislative proposals to be tabled by the Commission (eg internal market and Renewables) Commission (eg internal market and Renewables) in autumn 2007.in autumn 2007.

UNFCCC & Kyoto Protocol processes (2007-2009)UNFCCC & Kyoto Protocol processes (2007-2009)

June G8 meeting in Heiligendamm under DE Pres.June G8 meeting in Heiligendamm under DE Pres.


THANK YOU FOR YOUR ATTENTIONTHANK YOU FOR YOUR ATTENTION

All documents on the climate and energy package are available on:

http://ec.europa.eu/energy/energy_policy/index_en.htm

EENERGY FOR A CHANGING WORLDNERGY FOR A CHANGING WORLD

2 European Commission, DG Energy and Transport, Jean-Arnold Vinois, Head of the Energy Policy and Security of Supply Unit Seminar Europe’s Energy Challenge:

Documents

internal energy market

securing supply

european commission

jeanarnold vinois

cspring european council

joint commission hr

ghg emission reduction

functioning of internal