2 Second strategic energy review
| (30198)
15944/08
+ ADDs 1-4
COM(08) 781
| Commission Communication: Second strategic energy review — An EU energy security and solidarity action plan
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| Legal base | — |
| Document originated | 13 November 2008
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| Deposited in Parliament | 24 November 2008
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| Department | Energy and Climate Change
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| Basis of consideration | EM of 8 December 2008
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| Previous Committee Report | None but see footnotes 8-15
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| To be discussed in Council | 19 February 2009
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| Committee's assessment | Politically important
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| Committee's decision | For debate in European Committee
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Background
2.1 Although the Community has over the years examined aspects
of its energy policy, notably the Green Paper setting out a strategy
for sustainable, competitive and secure, which the Commission
produced in March 2006,[8]
it has in the last two years had before it three major energy
packages. The first — which
we reported to the House on 21 February 2007 — comprised
two core Communications from the Commission, one addressing the
steps which the Community can take up to 2020 and beyond to contribute
to limiting global climate change to 2°C,[9]
and the other providing a strategic energy review ("An
energy policy for Europe").[10]
These two Communications were accompanied by a number of other
documents,[11] dealing
with various related issues, including a European Strategic Energy
Technology Plan, a Priority Interconnection Plan, a Nuclear Illustrative
Programme, sustainable power from fossil fuels, competition in
the European gas and electricity sectors, and renewable energy.
This was followed in September 2007 by a second package, addressing
the regulation of electricity and gas supply and transmission
networks,[12] and the
conditions for cross-border electricity and gas supply.[13]
2.2 The Commission also produced at the beginning
of last year a further package of measures, which we reported
to the House on 27 February 2008. One of the documents in question[14]
sought to set out how to achieve the various measures which the
European Council had agreed should be taken in order to limit
climate change to 2°C, whilst the other again considered
various elements of the Community's energy policy, such as the
promotion of renewable energy, carbon capture and storage, the
reduction of greenhouse gas emissions by 2020, a review of the
Emissions Trading Scheme, and the demonstration of sustainable
power from fossil fuels.[15]
2.3 The Commission says that the "20-20-20"
initiative agreed by the European Council — to reduce greenhouse
gas emissions by 20%, to increase the share of renewables in energy
consumption to 20%, and to improve energy efficiency by 20%, all
by 2020 — will fundamentally alter the Community's energy
outlook, in that it will represent the first steps towards breaking
the cycle of increased consumption and imports. The Commission
adds that this will enable the Community to take the next steps
towards a more sustainable, secure and technology-based energy
policy, but that further action is needed to achieve sustainability,
competitiveness and security of supply, given anticipated trends
in supply and demand. It has therefore put forward in this document
a Second Strategic Energy Review, which is accompanied by a range
of detailed measures.
The current document
ENERGY SECURITY AND SOLIDARITY ACTION PLAN
2.4 The main elements of this Review are contained
in the Energy Security and Solidarity Action Plan, which comprises
five main elements.
Infrastructure and diversification of supplies
2.5 The Commission
notes that (unlike oil) gas supply depends mainly on fixed pipeline
infrastructure, and that imports account for 61% of Community
consumption —
a figure which is expected to increase to 75% by 2020, as indigenous
production continues to decline. With 42% of current imports coming
from Russia, 24% from Norway, 18% from Algeria, and 16% from other
countries, the Commission
suggests that supply is reasonably well diversified at a Community
level, but adds that, since a number of Member States rely wholly
on a single supplier, inter-connection and solidarity are essential
to spread and reduce individual risk: it also believes that major
changes in the Community's
internal energy infrastructure are needed to provide transparent
and reliable conditions.
2.6 It has accordingly proposed six priority
infrastructure projects: a Baltic Interconnection Plan; a southern
gas corridor for supplies from Caspian and Middle Eastern sources
(which it describes as one of the Community's highest energy security
priorities, and says will be the subject of a further Communication
in mid-2009); a Liquefied Natural Gas (LNG) Action Plan; the completion
of a Mediterranean energy ring, linking Europe with the southern
Mediterranean (which will also be the subject of a further Communication
no later than 2010); north-south gas and electricity interconnections
within central and south-east Europe; and a Blueprint for a North
Sea offshore grid (which the Commission suggests should, together
with the Baltic project and the Mediterranean ring, become one
of the building blocks of a future European supergrid).
2.7 The Commission says that its existing instruments
will be used to achieve rapid progress in all these areas, which
have already been recognised as requiring Community support under
the existing Trans European Network-Energy (TEN-E) programme.
It adds that considerable efforts will be needed to finance these
projects, particularly those with a cross-border dimension, including
closer and more effective collaboration with the private sector
and financial institutions, notably the European Investment Bank
and the European Bank for Reconstruction and Development: and
it suggests that this work should be a key element in the Community's
response to the current financial crisis.
2.8 However, the Commission also considers that,
if further and rapid progress is to be made, existing instruments
are insufficient. Consequently, it says that, in addition to agreeing
that these projects represent energy security priorities, the
Community should establish during 2009-10 the precise detailed
actions needed, leading to the further Communications outlined
above, bearing in mind also the need to ensure that, since all
new infrastructures are in place a long time, they take into account
changing climate conditions for the rest of the century. It goes
to say that, from 2010 onwards, the identified actions will need
to be undertaken, but that, given the limited scope for developing
major projects under the existing TEN-E budget (which was drawn
up when the Community was smaller, and faced energy challenges
of a different order), it is tabling a separate Green Paper,[16]
exploring the possibility of replacing the TEN-E instrument by
a new EU Energy Security and Infrastructure Instrument. In the
light of reactions to this Green Paper, it will then consider
tabling a legislative proposal, and will evaluate the need for
future Community funding, including that for the next financial
framework starting in 2014.
Energy and international relations
2.9 The Commission
notes that countries worldwide are becoming increasingly interdependent
in energy matters, affecting development, trade and competitiveness,
international relations, and cooperation on climate change. It
says that energy must be given the priority it merits in the Community's
international relations, but that the varying interests of producer,
transit and consumer countries require more robust international
legal frameworks, together with the development of trust and more
binding ties.
2.10 As regards the Community's relations with
different suppliers, it says that, as a member of the European
Economic Area, Norway is already integrated into the internal
energy market, with effective collaboration being essential for
the Community's energy security; that the Energy Community is
building up an integrated market in south east Europe anchored
in the Community; and that a strategy with Belarus should be developed.
It comments that the Community has Memoranda of Understanding
on energy with a large number of third countries, and that it
should now adopt a new generation of "energy interdependence"
provisions in broad-based agreements with producer countries outside
Europe, aimed at facilitating the development of the necessary
infrastructure, clear conditions on market access for energy (and
other sectors), transit arrangements to guarantee normal flows
in periods of political tension, dialogue on market and policy
developments, and dispute settlement provisions.
2.11 More specifically, the Commission says that
there should be a new agreement with Russia, replacing and deepening
the one reached in 1997, thereby consolidating the Community's
relationship with its main energy partner, and helping to establish
binding and effective transit rules across the pan-European continent;
that a similar approach should be developed with the countries
of the Caspian region; that the EU-OPEC Energy Dialogue recognises
the common interests of producer and consumer countries in encouraging
regular supply at affordable prices; that energy relations with
Iraq and the Gulf Cooperation Council should be further developed
in the field of hydrocarbons; that cooperation with countries
such as Australia, Canada, Japan and the United States, as well
as emerging countries, should be deepened to promote a common
view on global energy security, transparency and sustainability;
that energy relationships with Africa, particularly Algeria, Egypt,
Libya and Nigeria, should be stepped up, in view of its important
potential, notably as regards renewable energy, and that the Trans-Sahara
gas pipeline represents an important additional opportunity to
diversify energy sources. The Commission also notes that a number
of partners are considering launching or expanding a nuclear programme,
but that many do not have the legislative or regulatory infrastructure
needed to achieve the necessary safety standards. It points out
that this is an area in which the Community enjoys global leadership,
and recalls the initiative[17]
it took earlier in the year to promote the highest standards of
safety and security, using the Instrument for Nuclear Safety Cooperation.
2.12 The Commission concludes this section by
saying that it is vital that Europe should speak with one voice
and act accordingly, though it adds that this means not a single
Community representative for external issues, but effective planning
and coordination. It intends in 2009 to identify the mechanisms
needed to ensure transparency between the Member States and the
Community so as to achieve better coordination, and it will at
the same time consider proposing a revision to Regulation 736/96,
which obliges Member States to notify it of investment projects
of a Community interest in the petroleum, natural gas and electricity
sectors.
Improved energy stocks and crisis response mechanisms
2.13 The Commission
suggests that, in order to meet its energy security objectives,
the Community also needs to ensure that its internal rules and
mechanisms are as effective as possible, and it therefore proposes
that the existing rules in this area should be updated. It points
out that a mandatory regime of emergency oil stocks has existed
since 1968, and that, although this has been effective in dealing
with limited disruptions, improvements can be made. It is therefore
proposing[18] a revision
of the EU emergency oil stocks legislation to improve its coherence
with the International Energy Agency regime, increase the reliability
and transparency of available stocks, simplify compliance and
verification, and clarify emergency procedures. In particular,
it suggests that data published by the Community on the level
of strategic oil stocks for each Member State should now be extended
to commercial stocks (in line with practice in the United States),
and that this should be published weekly on an aggregate basis.
The Commission adds that it has also reviewed the effectiveness
of the Security of Gas Supply Directive, and believes that the
Community's crisis response coordination must be improved, with
consideration being given to a more suitable threshold for triggering
action and a clarification of compensation arrangements. It says
that, in the light of the reactions to its recent Communication[19]
on this subject, it intends to propose a revised Directive in
2010.
Improved energy efficiency
2.14 The Commission
says that the Community's
commitment to achieve a 20% improvement in energy efficiency by
2020 will greatly help to achieve, not only its climate change
objectives, but also to those on sustainability and competitiveness,
not least by reducing dependence on fossil fuels and imports and
by providing new economic opportunities, particularly for small
and medium sized enterprises, during the current economic downturn.
It therefore says that energy efficiency has to be at the heart
of this Action Plan.
2.15 In particular, it points out that existing
measures should achieve an efficiency improvement of some 13-15%,
and it has therefore put forward in conjunction with this Communication
a new Energy Efficiency Package,[20]
aimed at making further important progress towards achieving the
20% objective. This includes a revision of the Energy Performance
Directive to extend its scope and to develop energy performance
certificates into a real market instrument; an extension of the
Energy Labelling Directive beyond household appliances to include
a broader range of commercial and industrial energy-using products;
a wider implementation of the EcoDesign Directive; the promotion
of co-generation; the development of benchmarking and networking
mechanisms to disseminate best practice, with Community funds
(including the Intelligent Energy Europe programme) being allocated
for this purpose, and a new Sustainable Energy Financing Initiative
being launched jointly with the European Investment Bank (and,
where appropriate, the European Bank for Reconstruction and Development).
The Commission also notes that over €9 billion has been allocated
for the promotion of energy efficiency and renewable energies
under the cohesion policy in the period 2007-13 to cover a wide
range of activities, and that, since some of these activities
may also be funded under other budget headings, the total allocation
in this area is likely to be much higher.
2.16 In addition, the Commission says that it
will present a Green Tax Package to complement the energy and
climate change package, including a proposal to amend the Energy
Tax Directive and an examination of how VAT and other fiscal instruments
can be used to promote energy efficiency. It will also continue
efforts to promote the liberalisation of energy-efficient goods
and services in the context of trade negotiations, adding that
it is at least as important to achieve improved energy efficiency
in other industrialised countries and emerging economies as it
is within the Community. It will therefore build upon the International
Partnership on Energy Efficiency Cooperation agreed in the G8
context with China, India and Korea in July 2008 to promote common
product standards, and will participate in its launch in 2009.
Finally, the Commission says that it will evaluate the Energy
Efficiency Action Plan in 2009, and (as requested by the European
Council) prepare a more focused Plan.
Making better use of indigenous energy resources
2.17 The Commission points out that, although
the production of energy within the Community was set to fall
from 46% to 36% of consumption by 2020, implementation of the
new "20-20-20" initiative will keep that figure at around
44%, and it comments that all cost-effective measures to promote
the use of indigenous resources should be an important part of
the Energy Security and Solidarity Action Plan. It suggests that
renewable sources represent the Community's greatest potential
source of indigenous energy, and it says that it intends to focus
on monitoring and facilitating the implementation of the new Renewable
Energy Directive. In the light of that experience, it will then
table a Communication aimed at overcoming barriers to the use
of such energy. In addition, it says that it is working with financial
institutions to set up the EU Sustainable Financing Initiative
to mobilise large-scale funding from capital markets.
2.18 The Commission also believes that the use
of technology is essential if the Community's natural resources
are to be maximised, and it draws attention to the initiative
being pursued through the Strategic Energy Technology Plan, which
it says will be followed in 2009 by a Communication on financing
low carbon technologies. This will evaluate the resources needed
to support large-scale demonstration projects, taking into account
revisions to the Emissions Trading Scheme which will help to stimulate
such activities. The Commission goes on to note the importance
of coal for energy supply both within Europe and more widely,
and of promoting carbon capture and storage if its continuing
use is to be compatible with climate change objectives; the need
— notwithstanding the technological and environmental challenges
involved — to stimulate the extraction of indigenous oil
and gas reserves (as well as sources such as oil shale and peat);
the importance of oil refining capacity (where it anticipates
the publication of a further Communication in 2010); and the role
of nuclear energy. In particular, it notes the Communication accompanying
this document, providing an update of the earlier Nuclear Illustrative
Programme,[21] and its
intention to put forward a revised Directive setting up a Community
framework for nuclear safety.[22]
TOWARDS A VISION FOR 2050
2.19 The Commission says that the Community's
agenda for 2020 sets out the essential first steps towards achieving
the "massive" switch needed to high-efficiency, low
carbon energy technologies, but that deep structural change will
take considerably more time. The rest of the current Communication
therefore looks ahead to 2050, and identifies a number of possible
longer-term objectives, such as:
(i) decarbonising electricity supply, which the
Commission
describes as a huge, but necessary, challenge if the Community
is to reduce greenhouse gas emissions, implying a further shift
to renewable energy, carbon capture and storage and, where appropriate,
nuclear energy: and it suggests that, if strategic investment
decisions are taken rapidly, nearly two-thirds of European
electricity generation could be low carbon in the early 2020s,
compared with 44% at present;
(ii) ending oil dependence in transport, through
a shift to electric, hydrogen and alternative fuel cars, where
the Commission says that it will consider the need for tax breaks
and other incentives for the purchase of greener vehicles and
the early retirement of older polluting ones, examine the possibility
of requiring a minimum proportion of all new government and local
authority vehicles to be electric, biomethane or hydrogen, and
also look at the possibility of requiring filling stations to
introduce the necessary infrastructure;
(iii) lower energy and positive power buildings,
where the Commission notes that, whereas 40% of final energy is
consumed in buildings, these can be designed in such a way as
to avoid consuming more energy than they are able to produce (and
indeed to become net energy producers);
(iv) a smart, interconnected electricity network,
where the Commission suggests that, rather than transmitting electricity
from large power plants to national retail distribution networks,
tomorrow's grid will need as well to serve an integrated European
market with multiple small suppliers of renewable energy: it adds
that huge changes will be required, and that it will be necessary
to explore concepts such as an offshore super-grid ring around
Europe to connect southern solar, western wave and northern wind
or hydro energy with main consumption centres, with smart meters
also helping to increase energy efficiency; and
(v) promoting a high-efficiency, low-carbon energy
system throughout the world.
The Commission adds that this is not an exhaustive
list, in that it simply reflects technologies which have been
shown to work on an experimental scale. It also says that these
changes will not take place without a coordinated agenda for research
and technological development, regulation, investment and infrastructure
development, often on a continental scale. Consequently, in order
to take matters forward, it intends to prepare in the context
of the Strategic Energy Plan a Roadmap towards a 2050 energy policy,
and in particular to use this to set out the action needed to
achieve a zero-carbon electricity supply for the Community by
2050.
The Government's view
2.20 In his Explanatory Memorandum
of 8 December 2008, the Minister of State at the Department of
Energy and Climate Change (Mr Mike O'Brien) observes that this
is a "comprehensive" Communication,
covering many areas which will be subject to individual scrutiny.
He therefore comments only briefly in this Explanatory
Memorandum, pointing out
that on energy infrastructure, the UK particularly welcomes the
focus on bringing gas from the Caspian, and would be directly
connected to a North Sea offshore grid; that it supports increasing
the effectiveness of the Community's
external energy policy through greater coherence and transparency,
whilst respecting subsidiarity and Community
competence; that, in the case of oil and gas stocks, it would
be concerned about any compulsion for agency or government-owned
stockholding, and that it would like to see a thorough impact
assessment carried out before any decision was taken to publish
weekly the level of commercial stocks; that it strongly supports
action to increase the Community's
energy efficiency, but will need to look at the details of the
individual proposals before coming to a view; that the section
dealing with indigenous resources is wide-ranging, but in many
cases contains little detail of the measures which might follow;
and that the Government
intends to take a full role in the Commission's
consultations on the way ahead to 2050.
2.21 The Minister adds that this package was
to be discussed by the Energy Council on 8 December 2008, and
again on 19 February 2009, and that the spring European Council
on 19-20 March is expected to adopt a Action Plan, based on the
various recommendations. He also says that consultation and negotiation
on the individual strands of work are likely to continue throughout
2009.
Conclusion
2.22 As the Minister suggests, this is a wide-ranging
Communication,
and together with the measures which accompany it (on which we
are reporting separately), it constitutes a formidable package
in more senses than one, in what is self-evidently an area with
highly significant political, economic and environmental implications.
For that reason, we have no hesitation in recommending that it
should be debated in European
Committee. We also consider that the other documents associated
with it — apart
from the Green Paper on European Energy Networks (which we are
also recommending should be debated in its own right) —
are relevant to that debate.
2.23 The issues covered by the package are
inevitably many and complex, and we have sought to identify these
both in this chapter and in the other chapters of this Report.
However, we do also have one more general comment. This is the
third — and indeed arguably the fourth — major set
of documents produced by the Commission on energy within the last
two years, and, whilst we do not question that this is an important
and fast-moving area, we are concerned at the risk of overkill.
In particular, we wonder whether all the players involved, including
not least those actually concerned with the production and supply
of energy, are able to digest fully the contents of any given
initiative before it is replaced by another one. We are also concerned
at the growing complexity of the structures being put in place
(or proposed) to address the various issues, and we are struck
by the bewildering array of strategies, action plans, initiatives,
roadmaps and the like, which seems to us to carry with it a very
real risk of confusion and lack of focus. We hope therefore that,
in presenting the Strategy to the European Committee, the Government
will comment on this aspect.
8 (27343) 7070/06: see HC 34-xxvi (2005-06), chapter
2 (26 April 2006). Stg Co Deb, European Standing Committee,
27 June 2006, cols. 3-18. Back
9
(28275) 5422/07: see HC 41-x (2006-07), chapter 1 (21 February
2007). Back
10
(28276) 5282/07: see HC 41-x (2006-07), chapter 2. Back
11
See HC 41-x (2006-07), chapters 15-20. Back
12
(28932) 13043/07 and (28933) 13045/07: see HC 16-iv (2007-08),
chapter 1 (28 November 2007). Back
13
(29034) 13046/08, (28935) 13048/07 and (28936) 13049/07: see HC
16-iv (2007-08), chapter 2 (28 November 2007). Back
14
(29403) 5866/08: see HC 16-xiii (2007-08), chapter 8 (27 February
2008) Back
15
See HC 16-xiii , chapters 1-4 and 7 . Back
16
(30195) 15927/08: see chapter 1 of this Report. Back
17
(29718) 10049/08: see HC 16-xxvi (2007-08), chapter 3 (2 July
2008). Back
18
(30192) 15910/08. Back
19
(30188) 15905/08: see chapter 10 of this Report. Back
20
(30191) 15908/08: see chapter 12 of this Report. Back
21
(30194) 15923/08: see chapte 11 of this Report. Back
22
(30232) 16537/08: see chapter 4 of this Report. Back
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