SPEECH/06/330
Andris Piebalgs
Energy Commissioner Energy challenges facing the EU
Polish Senate Conference on “The Security of Poland’s Energy Supplies vs. European Energy Policy” Warsaw, 30 May 2006
Ladies and Gentlemen,
I am delighted to have been invited at this important conference at the Polish Senate. Let me also thank you for the opportunity to discuss with you the European Commission’s approach to the energy challenges we all face presently. I am pleased to see your interest in examining the Polish policy in the light of the most recent developments of the European Energy debate.
You will, of course, all be very conscious that, for some time, the subject of energy has been making its way rapidly up the political agenda. It is safe to say that it has now arrived near, or indeed at, the top or the list. Oil prices have reached very high levels and the consequences are feeding through into prices for other energy products. At the same time the European Union has set itself considerable tasks in reducing greenhouse gas emissions, and in introducing competition.
As a result, EU citizens are worried by our dependency on imports and high, volatile prices and the impact of energy on the environment. These are due not only to instability in many producing regions and rising demand world-wide, but also to the lack of investments in the last years because of low prices. The need for new investments is now estimated at 1000 billion euros in the EU alone over the next 20 years.
The Green Paper
The recently adopted Green Paper on Energy Policy re-affirms the commitment of the Commission to ensure a proper response to these concerns. Progress need to be achieved in favour of ensuring security of supply, competition and sustainability. It states that markets, not protectionism, will strengthen Europe and allow it to tackle its problems. The discussions of the Energy Council of 22-23 April demonstrated that Member States share most of our views about the direction that European energy policy should take. I would therefore like to emphasise some of the key points raised by the Commission and what the next steps will be once the consultation process has finished.
A Common Energy Policy for Europe
Europe’s nations are facing very similar challenges in relation to energy. Europe is a major player in the world energy market, above all and increasingly as a consumer. We form the second largest market in the world with a population of 450 million. However at the same time our views are often diluted through a piecemeal approach to relations with third countries. We need to change this.
We must indeed avoid at all costs dividing up the EU market into individual member States, either in economic or political terms. We must also demonstrate our solidarity in the face of potentially difficult situations that might emerge from time to time such as the current high price levels for some energy products. And I want particularly recall this message before this Audience.
At the same time we must spread the message that there are many success stories that the EU can develop elsewhere which will help alleviate the current tensions in world energy markets. These include the establishment of competitive markets with efficient cost-reflective prices for energy products, particularly gas and electricity; our leadership in renewables and energy efficiency technologies and Europe’s record in diversifying supply. We also need to ensure that these successes can be continued as part of our dialogue with external suppliers.
To achieve this objective, we obviously need to prioritise. What are then our priorities?
a) A Strategic Review of Energy Policy
Indeed, to do all this in a convincing way, the European response to the new energy environment needs to be clear and consistent. With demand for energy rapidly increasing in developing countries, a common response needs to be made in terms of diversifying our energy sources and managing the use of energy. It is for this reason that one of the six policy actions suggested by the Commission in the Green Paper is an Annual Strategic Energy Review to be compiled yearly by the Commission for consideration by Member States in order to provoke ongoing evaluation of the Community’s energy mix. This will be the basis of an emerging European Energy Policy.
The Strategic EU Energy Review should offer a framework for national decisions on the energy mix, by analysing all the advantages and drawbacks of different sources of energy, from indigenous renewable energy sources to coal and nuclear, where Europe needs an objective debate.
The results of this Review could be for Europe to move towards an overall “Strategic European Energy objective” at Community level, for example, to maintain or achieve a minimum level of the overall EU energy mix from secure and low-carbon energy sources.
b) EU Solidarity for Security of Supply
In addition, a degree of solidarity is needed in the European Union’s response to unforeseen events. We have seen during the previous winter how political disputes at top political level, natural disasters, and extreme conditions can create real difficulties for energy supply. The idea of strengthening the role of strategic mechanisms and the way these function also requires consideration. In this respect, I thank particularly the contributions and the interest in this matter by Poland. The Green Paper also puts forward several possibilities in this respect including an initiative to increase transparency about issues such as gas storage and oil stocks. Greater co-operation between gas and electricity system operators is also envisaged, potentially through more formal arrangements.
c) Extending and Deepening the Energy market
A third priority for Europe must be to develop a really integrated energy market. This will improve transparency and predictability for investors in the energy sector and lead to an efficient outcome for consumers. One of the misconceptions about introducing the internal market is that it somehow threatens security of supply. This argument does not, however, stand up too much scrutiny. Investors are more likely to invest if their potential market is the entire European Union. Substantial investment is now being delivered in electricity and gas market, and not just by the large ex-incumbent companies.
Much has been already achieved in introducing competition into the electricity and gas sectors at European level. We have now arrived at a situation where only a few still have not transposed the Directive at all. I am determined that this process will be completed and to a high standard in terms of compliance with not just the letter of existing legislation but also its spirit. In this respect, however, I was “disappointed” to say the least that the Commission had to recently launch infringement cases against 17 Member States which have not adequately transposed the Directive. This needs to be corrected.
As well as this, however, I am also of the view that it is now time to start considering whether what is in place to create a real internal market is fully adequate. A key theme of the Green Paper is the fact that what consumers need to really exercise their rights at European level, is a European gas and electricity grid. We need fully consistent network access procedures in terms of tariffs and conditions including the detailed system operation rules such as nomination timetables. It is for this reason that another of the six priority areas for the Commission is to consider the extent to which a European Network with appropriate level of Regulation is needed to achieve these aims.
We also need to continue to work on removing congestion as far as possible. I believe much could already be done without building a single new line if there was greater co-ordination at European level. However it is also clear that there are certain new projects that are indispensable. The Commission therefore puts forward the concept of a priority infrastructure plan in this respect, which will be presented at the end of this year together with the Strategic Energy Review. In doing so we should look beyond the sterile debate about how difficult it might be to construct high voltage lines, to an additional consideration of what can be done immediately to improve the way the European network is managed.
Such improvements to the way in which the Internal electricity and gas markets work will require appropriate governance and regulatory structures at European level to support this work. At the very least it will require strong and equivalent powers for national regulators to supervise the required changes. It may also mean the introduction of new mechanisms at European level.
A competitive market, integrated to the maximum possible extent, will go a long way towards addressing the concerns of the many customers which are now faced with increasing energy bills. It may be that rules, for example on unbundling and the powers of energy regulators, need to be strengthened in this respect. A real common level-playing field for all EU companies irrespective of where they are located is essential. The outcome of a further review by the Commission on progress in electricity and gas markets, as well as the sectoral inquiry will be a key input to the decision making process at the end of this year. At this point I expect to reach concrete conclusions on any additional measures that may be necessary to guarantee a real level playing field and guarantee the development of effective competition across the entire EU. I look forward to your views on these issues.
d) Common external energy policy
Put simply, Europe needs to define clearly its goals and aspirations regarding its international energy partners, both suppliers and consumers, and then speak with one voice to pro-actively promote these interests.
We therefore need clear agreement on our goals. This will be done through the Strategic EU Energy Review to enable not only an effective exchange of information but also a real co-ordinated approach: I.e. to enable the EU “to speak with the same voice”.
e) Energy Efficiency and New Technologies
I would like to conclude by returning to two of my top priorities; namely energy efficiency and the potential for new technologies.
Energy is a precious commodity. The continuation of our efforts to save energy must remain at the heart of European energy policy. Despite what has already been achieved, I am convinced that the potential for further savings exists as noted in the Commission’s Green Paper on this subject in 2005, which estimates that up to 20% of energy demand could be cut with relatively simple measures in household use, transport or by industry. This would translate into a saving of over 60 billion Euros and the creation of hundreds of thousands of new high quality jobs in Europe.
We also need to maintain efforts to diversify towards new energy sources such as renewable electricity generation and bio-fuels. On current trends the EU may have difficulties to attain its targets for 2010 in this respect. We need to rapidly review the existing policies in this area and bring about the necessary changes in order to fulfil these commitments. In parallel, careful consideration must be given to further ambitious targets post-2010. Again, I intend to reach conclusions on this at the end of this year in the Strategic Energy review, on the basis of a detailed cost-benefit impact assessment.
In ensuring these objectives, the role of new technologies is crucial. Europe needs to be leading markets for energy innovation.
The Commission’s proposal for the 7th R&D Framework Programme 2007-2013 intends to tackle EU under-investment in research compared to US and Japan by exerting leverage on national and private investment.
Main energy priorities for the period are: hydrogen and fuel cells, renewable power generation, fuel production and heating and cooling technologies, nuclear safety. This year, the Commission is also proposing to investigate on clean coal, CO2 capture and storage for near zero emission generation and obviously on energy efficiency and savings.
f) Reaffirming the climate change commitment
A final discussion is necessary on the EU commitment to avoiding climate change. This subject is of crucial importance to EU governments and citizens who, across the board, continue to see the reduction of CO2 emissions as a vital objective.
The EU commitment to carbon reduction is a long term commitment and other regions of the world will have to face up to the issue sooner or later. The CO2 price already provides clear incentives in favour of low carbon generation and as already mentioned, many technologies already exist which should be able to take advantage. The Commission will closely examine the coherence of different policies in relation to climate change and will carefully consider possible improvements. However I repeat that the core objectives of ensuring sustainability energy will not change.
Ladies and gentlemen,
These are just a selection of the suggestions outlined in the Green paper. Taken together they constitute a comprehensive tool kit to develop a real European Energy Policy.
We have opened an intensive period of public consultation till 24 September. Taking into account the results of this consultation, and in particular the views of the Member States and the Parliament, the Commission will be looking to table concrete proposals quickly after the end of this period.
We all know that developing a European energy policy will be a long term challenge. It will require understanding, commitment and collaboration from all sectors of society.
I would like to invite you and the organisations you represent to express a position on the Green Paper. We have launched a major debate on a key subject. I am convinced that this strategy also offers Poland great opportunities. Don’t miss the opportunity to convey your views in this debate.
Thank you for your attention.
