The Euraucrats are back from their summer recess. What does it mean for energy policy this autumn? Very much on the agenda are Carbon Capture and Storage, Internal Energy Markets and EU ETS reform to name only a few.
Over the summer, the Commission published a report on the use of European economic recovery money for energy infrastructure. Despite good progress on most gas and electricity infrastructure projects, it said the supported CCS projects are still behind schedule. None have adopted final investment decisions. Two of the projects also appear in first and second place on a list of preferred projects for additional, EU carbon market funding published at the start of the summer: the UK's Don Valley project and Poland's Belchatow lignite plant. The Netherlands's Green Hydrogen project is third of this preferred list. Up to three CCS and 16 renewables projects are set to benefit from the carbon market funds. This is fewer than the Commission originally intended, which is due to the persistently low carbon price. The projects are to be funded from the proceeds of ETS auctions, and they look to deliver only up to €1.5bn now, not the €4.5bn originally foreseen. Successful applicants will be named by the end of the year. The Commission is still considering a fresh policy paper on CCS.
On Friday 21st September, the European Commission's DG Energy held a CCS Roundtable in Brussels to address the short term challenges facing the six recipients of the EERP (European Economic Recovery Programme) funding in 2009-10.
The meeting was held at the behest of the Energy Commissioner, Gunther Oettinger. The Commissioner has more recently displayed a strong interest and has personally initiated a number of CCS activities. In particular he is very concerned about the lack of progress of several of the projects that received EEPR funding.
Commissioner Oettinger made the following points in his opening remarks;
- The Commission has done its bit with the development of the regulatory framework and various funding mechanisms.
- The European Council of Ministers' goal of 10-12 CCS projects operating by 2015 is now unrealistic.
- The EEPR projects have been delayed primarily for the following reasons:
- lack of transposition of the CCS Directive;
- limited support at Member State level, and
- public opposition.
- These issues must be addressed or projects will be further delayed / cancelled making it harder to reach EU carbon targets, raise the costs of reducing emissions and also impact on industry.
Although Commissioner Oettinger clearly identified the need for further funding, it was unlikely to come from EU sources. Additionally, Member State funding is also likely to be problematic due to a number of economic pressures. Hence industry needs to find new sources of finance to "kick-start" slowed projects. This could include additional parties/investors to current project sponsors and the project sponsors' appetite for this was raised by the Commissioner.
As had been widely expected before the meeting there is a strong focus at EU level for the need to support the ROAD CCS project in Rotterdam, and there are indications that there may be companies from further afield willing to provide some support given favourable circumstances.
Internal energy market
The Commission's Energy Department is currently preparing a new policy paper on the internal energy market for release on 15 October. As EU energy commissioner GŁnther Oettinger said recently: "Our internal market communication will be the start of a debate about market design, market mechanisms and capacity markets." It is capacity markets in particular that will be the focus of the new communication. These are markets that reward the Megawatt rather than the Megawatt-hour, in other words, the availability of generation capacity rather than the production of energy. Capacity markets, which are necessary to cope with the intermittency of energy from renewable sources, are springing up all over Europe and Brussels would like to impose some kind of harmonisation on them.
EU ETS reform
The reform of the EU Emission Trading Scheme (ETS) is a big legislative item in the energy arena in Brussels this autumn. At its very last meeting before the summer break, on 25 July, the Commission kicked off action on the ETS with a proposal to delay the sale of a certain number of carbon allowances into the market from next year. Its goal is to raise the EU carbon price - still languishing at or below €10 per tonne. It wants to make up for the effects of the economic crisis in Europe, which has reduced industrial production - and therefore emissions - and left the carbon market with a surplus of allowances.
How many allowances should be delayed, if any, is what member states are supposed to decide by the end of the year. The European Parliament will have a veto. The Commission, which suggests between 400 million and 1.2 billion, is consulting on this until 16 October. At the same time as launching its proposal to delay allowance sales, the Commission is also asking member states and MEPs to confirm in law its right to do so. It appears to be taking no chances after several representatives from energy-intensive industries questioned its legal right to "intervene" in the market like this.
Later in October or November, the Commission plans to follow up with suggestions for deeper, structural reforms to the ETS, such as tightening the emissions cap for 2030. This will feed into the debate over a 2030 EU climate and energy package. Note that specific industry sectors, such as steel and cement, are currently developing their own 2050 low-carbon roadmaps to help shape this debate. It is also worth noting that at the end of August, the Commission announced plans to link with Australia's fledgling ETS by 2018. A partial link from 2015 would already allow Australian firms to buy EU allowances - another good way of eating into Europe's allowance surplus.
That is a summary of what to expect from Brussels this autumn. The energy agenda is a busy one, with issues such as the ETS having effects on large parts of the European economy beyond just the energy sector. The EU's guide for its energy future remains the energy 2050 roadmap (yet to be accepted by Poland), which sets out scenarios for secure, sustainable, affordable energy supplies. The debate unfolding now is how to get to there.
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