EU energy governance Contents

Appendix 4: EU energy governance seminar

Introduction

The House of Lords EU Sub-Committee on Energy and Environment hosted a seminar relating to their ongoing inquiry into EU Energy Governance, focusing particularly on two case studies: Capacity Mechanisms in Member States and Renewable Energy Targets. The seminar was attended by Sub-Committee members, representatives of the energy sector, regulators, representatives of the European Commission, the UK Government and invited Member States’ representatives and it took place on Thursday 15 October in Westminster. The full list of attendees is shown below. The seminar was held under Chatham House rules. This note summarises core themes and areas of agreement and disagreement, but does not attribute opinions to individual participants.

Capacity mechanisms

The introduction and role of Capacity Mechanisms (Capacity Markets) were discussed extensively. Some argued capacity markets could play a vital role in balancing new supply dynamics while simultaneously ensuring that sufficient investments were made in the overall level of reliable capacity to provide energy security. The new supply dynamic has been brought about by changing energy supply structures in Member States, whereby an increasing proportion of electricity is supplied by intermittent generators such as wind or solar power and inflexible sources such as nuclear. Cross-border interconnectors would mean that foreign energy supply could support a Member State’s energy security, diversifying the electricity supply available during peak demand and system stress. However, there was trepidation from some that Capacity Markets distort price signals and that, once introduced, are hard to discontinue.

There was some disagreement about the preferred level of regulation within Capacity Markets. Some argued that only light-touch agreements on common principles are needed, and that a one size fits all regulatory model would be incompatible with the significant variations in national electricity sectors, national supply mix and infrastructural arrangements. Others believed that it would be more efficient if there were at least a more regional approach, if not a pan-European one, particularly around cross-border security standards and stress peaks in the electricity market.

Renewable energy targets

There was a substantial debate on the extent to which Renewable Energy Targets are enforceable on a national or EU level. Some participants argued that nationally binding Renewable Energy Targets would have been preferable to the EU-wide binding target of at least 27% of energy coming from renewables by 2030. Concerns were expressed about how to ensure that an EU-wide target would be met, as it could not be enforced under EU law, unlike the existing binding national renewables targets for 2020. Some scepticism was raised over the prospect of free-riding among Member States if the collective target was morally or politically binding rather than legally binding.

The lack of enforcement and clarity about how to handle potential shortfalls on the aggregate EU targets were seen by some as barriers to further investment in renewables. Investors would require firmer commitments to renewable targets to engage with the energy market, particularly since, so far, a fully integrated, competitive market with limited barriers to entry and low production costs for renewables is still to be developed. Interconnection and regional co-operation between Member States would assist in the integration of renewables in the single EU energy market. There was a widespread view that a regional approach would offer the possibility of accommodating national circumstances while still creating a more integrated market. It was also suggested that capitalising on other EU policy areas, such as the Digital Single Market or the Capital Markets Union, could bring about significant benefits for investors, consumers and the market as a whole.

Wider governance framework issues

Going beyond the two case studies of the inquiry, participants discussed the broader issue of Energy Governance.

There was wide agreement that increasing the coherence of existing EU energy regulation under the Energy Union could provide consistent and transparent energy governance in the Union. Several areas of current incoherence in the energy markets were mentioned: geographical incoherence caused by decisions taken in one country appearing less rational on the aggregate than the national level: sectoral incoherence, in particular the incoherence between the standards and assumptions used for different energy types, as well as a substantial incoherence between supply and demand; and temporal incoherence between short-term decision making and the long-term impact these decisions have on the future of the energy market.

It was suggested that a reliable Governance framework could be developed, along the lines of the European Semester, allowing Member States to discuss and agree national targets. Furthermore, it was suggested that the aim of more prescriptive Governance would be not to break down the EU-wide 2030 renewables target into binding national targets, but to provide clarity and commitment for investors.

One suggestion was to enhance the use of National Energy Plans for competitive, secure and sustainable energy by elaborating on these in cooperation with neighbouring Member States (as appropriate), with a strong impetus from the Commission. There was, though, notable disagreement among participants as to whether the assessment of the National Energy Plans should be done by the Commission or by an independent agency. While some argued an independent agency would be better able to assess the robustness of each plan, as well as to advise Member States on future action in an objective manner, others found that the Commission would be well situated in the EU regulatory system to fulfil such a function. Furthermore, some participants were hesitant over enhancing the role of a separate EU agency, given public scepticism towards additional regulatory bodies in the EU. The importance of consumers should also not be forgotten, as they are both users of the system and create the political space for change.

Attendees

Lord Boswell of Aynho, Chairman of the House of Lords European Union Select Committee

Baroness Scott of Needham Market, Chairman of the House of Lords EU Energy and Environment Sub-Committee

Baroness Bakewell of Hardington Mandeville, Member of the Sub-Committee

Lord Bowness, Member of the Sub-Committee

Lord Cunningham of Felling, Member of the Sub-Committee

Lord Curry of Kirkharle, Member of the Sub-Committee

Viscount Hanworth, Member of the Sub-Committee

Lord Krebs, Member of the Sub-Committee

Lord Rooker, Member of the Sub-Committee

Lord Selkirk of Douglas, Member of the Sub-Committee

Viscount Ullswater, Member of the Sub-Committee

Baroness Wilcox, Member of the Sub-Committee

Patrick Milner, Clerk to the Sub-Committee

Celia Stenderup-Petersen, Second Clerk to the Sub-Committee

Antony Froggatt, Senior Research Fellow, Chatham House and Specialist Adviser to the Sub-Committee

Peter Handley, Head of the Resource Efficiency Unit at the Secretariat General, European Commission

Tim Abraham, Head of European Policy, DECC

Elaine O’Connell, Security of Electricity Supply Team, DECC

Stephen Kordasch, Counsellor, Deputy Head of the Department of Economic Affairs, Energy and Global Issues, German Embassy, London

Jonathan Gaventa, Director, E3G

Mark Copley, Associate Partner, Ofgem

Josh Roberts, Lawyer, Climate and Energy, ClientEarth

Gwyn Dolben, Head of European Affairs, Energy UK

Gordon Edge, Director of Policy, Renewable UK

Professor Michael Grubb, Professor of International Energy and Climate Change Policy at UCL Institute for Sustainable Resources, editor-in-chief of the journal Climate Policy, and Senior Advisor on Sustainable Energy Policy to Ofgem.

Christian Stenberg, Counsellor, Danish Embassy, London

Rafał Sordyl, Second Secretary, Energy, Climate, Agriculture, Polish Embassy, London

Francesca Manchi, Political Officer, European Commission Representation in the UK, London





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