No Country is an Energy Island: Securing Investment for the EU's Future - European Union Committee Contents


BackloadingRefers to a proposed amendment to the ETS. The amendment would postpone the auctioning of 900 million allowances from 2013-2015 to later in Phase III of the ETS, which ends in 2020. The backloading does not affect the overall volume of allowances to be auctioned in Phase III, only the distribution of auction volumes over the eight-year period (the 'auction time profile').
Cap reductionUnder the ETS, the cap is an absolute total of emissions allowed to be emitted by all participants. It is set by the Commission and each participant is allocated an individual limit or cap for their own emissions. The cap is reduced over time so that total emissions fall. In 2020, emissions from sectors covered by the ETS will be 21% lower than in 2005.
Capacity mechanismA capacity mechanism aims to help secure energy supply by giving energy providers financial incentives to provide reliable energy capacity. The UK Government's Electricity Market Reform initiative includes an example of such a mechanism, referred to as a 'capacity market'.
Carbon capture and storage (CCS)A technology that involves capturing carbon dioxide from fossil fuel power stations (or large industrial sources), transporting it mainly via pipelines and then storing it safely onshore or offshore in deep underground structures such as depleted oil and gas reservoirs or deep saline aquifers. It is estimated that the total reduction in emissions per unit of electricity from the use of CCS is around 70%.
Carbon ceiling priceA maximum price at which allowances to emit carbon dioxide under the ETS may be sold at auction.
Carbon floor priceA minimum price at which allowances to emit carbon dioxide under the ETS may be sold at auction. The UK has had a floor price since 1 April 2013.
Carbon leakageWhere production and the consequent emissions are displaced to countries with less stringent carbon regulation.
Combined Heat and Power (CHP)Technology that integrates the production of usable heat and power (electricity), in one single, highly efficient process. CHP generates electricity whilst also capturing usable heat that is produced during this process.
Contracts for differenceUnder the UK Government's Electricity Market Reform initiative, contracts for difference will lower the risks to potential investors in low carbon technologies (such as renewables, CCS and nuclear) by paying generators the difference between the market price for electricity (the reference price) and the estimated long term price needed to bring forward investment in that technology (the strike price).
Distributed systemDistributed energy resource systems are small-scale power generation technologies used to provide an alternative to or an enhancement of the traditional electric power system. It is also known as 'micro-generation'.
District heatingA district heating scheme comprises a network of insulated pipes used to deliver heat (in the form of either hot water or steam), from the point of generation to an end user.
EU Emissions Trading System (ETS)A 'cap and trade' system, whereby a 'cap' or limit (which is reduced over time) is set on the total amount of certain greenhouse gases that can be emitted by factories, power plants and other installations in the system. Within the cap, companies receive or buy emission allowances which they can trade with one another as needed. They can also buy limited amounts of international credits from emission-saving projects around the world. The limit on the total number of allowances available ensures that they have a value. After each year a company must surrender enough allowances to cover all its emissions, otherwise heavy fines are imposed.
European Atomic Energy Community
Euratom is an international organisation that was founded in 1957 with the purpose of creating a specialist market for nuclear power in Europe, developing nuclear energy and distributing it to its member states while selling the surplus to non-member states. While legally distinct from the EU, it has the same membership and is governed by the EU's institutions.
European Coal and Steel Community (ECSC) The ECSC was designed to integrate the coal and steel industries in western Europe. The original members of the ECSC were France, West Germany, Italy, Belgium, the Netherlands, and Luxembourg. The organisation subsequently expanded to include all members of the European Economic Community (later renamed the European Community) and the EU. When the treaty establishing the organisation expired in 2002, the ECSC was dissolved.
Front End Engineering and Design (FEED) FEED studies are best practice for complex projects in the engineering and construction industry. FEED studies typically follow on from initial high-level plans, and allow project developers to refine designs and, for example, source quotes from suppliers. This is intended to give greater certainty on costs before the project developer commits significant funding on construction.
Fuel povertyA household is currently said by DECC to be in fuel poverty if it needs to spend more than 10% of its income on fuel to maintain a satisfactory heating regime.
InterconnectionFor the purposes of this report, interconnection is the physical connection of two or more energy systems that allows for the sale or exchange of electricity between different Member States.
IntermittencyRefers to the variability of output according to changes in weather.
Investment gradeCredit ratings are opinions about credit risk published by a rating agency. Investment grades range from BBB- to AAA, with the latter being the highest rating and most likely to attract investment.
Levelised costThe average cost over the lifetime of a plant, per MWh of electricity generated.
LigniteThe lowest rank of coal with the lowest energy content. Lignite coal deposits tend to be relatively young coal deposits that were not subjected to extreme heat or pressure, containing 25%-35% carbon. In addition, lignite can also contain high sulphur content.
NER-300Launched by the European Commission in 2008, it is intended to provide financial support for the development of innovative low-carbon technologies, at commercial scale, across the EU. Funding derives from the sale of 300 million allowances (or rights to emit one tonne of CO2) in the New Entrants' Reserve of the EU ETS.
Overseas creditsAwarded to emissions reduction projects outside the EU and can be sold to operators in the EU (and elsewhere) to count towards domestic (EU) emissions reductions. The ETS has only accepted credits that qualify under (and are monitored by) the UN under the Kyoto Protocol, and excludes land-use-based credits; additional restrictions apply from 2013.
Qualified majorityThe EU's system of voting whereby a decision among Member States needs to be supported by at least 55% of Members (currently 15 out of 27) and representing Member States comprising at least 65% of the EU population.
RenewablesEU legislation defines renewables as energy from renewable non-fossil sources, namely: wind, solar, geothermal, wave, tidal, hydropower, biomass, landfill gas, sewage treatment plant gas and biogases.
Shale gasGas that is extracted directly from shale (a sedimentary rock). This has a low permeability and so does not release gas easily. To overcome this, the rock is fractured ('stimulated') to yield commercial volumes of gas.
SupergridA European grid with much interconnection and much more capacity to move power between countries.
Transitional fuelTransitional fuels are temporary energy sources used in the move from fossil fuels to low carbon emitting energy sources.
TrilemmaThe triple challenge of balancing climate change commitments with the need to maintain security of supply whilst ensuring that energy remains affordable to consumers and industry.
Unconventional gasUnconventional gas refers to the source rather than the nature of the gas itself. Shale gas and coal-bed methane are examples of unconventional gas.

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