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EU Unveils Vast Energy Plan To Diversify Supplies, Protect Environment

Boosting the use of renewable energy, such as bringing online new solar power technolgy (pictured), could be one option for easing reliance on foreign supplies with the commission proposing that member states commit to meeting 20 percent of their needs with sources like wind and solar energy by 2020.
by Leigh Thomas
Brussels (AFP) Jan 10, 2007
The European Commission unveiled a vast plan Wednesday to diversify EU energy sources, slash carbon emissions and boost competition in the face of tension over Russian oil and gas supplies and global warming fears. Calling for a "post industrial revolution", the European Union's executive arm said the 27-nation bloc "needs new policies to face new realities." however, some provisions of the proposal drew immediate objections from France and Germany,

"Europe must lead the world into a new, or maybe one should say, post industrial revolution -- the development of a low carbon economy," commission chief Jose Manuel Barroso told journalists.

"We have already left behind our coal-based industrial past, it is time to embrace our low carbon future," he added.

The main planks of the package, which the commission hopes EU leaders will endorse at a summit in March, include plans to cut greenhouse gas emissions to 20 percent of 1990 levels by 2020 and to spur competition by demanding that big energy companies separate production and distribution operations.

Environmentalists charged that the emissions target was not ambitious enough however, while some EU governments, notably France, balked at the prospect of energy companies having to break up their operations to boost competition.

Energy issues have climbed to the top of the EU's political agenda over the last year owing to surging oil prices and concerns about the reliability of Russian oil and gas supplies.

Fresh anxiety about Russian energy was sparked this week after the flow of Russian oil to five EU states -- including Germany -- was disrupted due to a transit dispute between Moscow and Belarus.

But Belarus said Wednesday it had lifted a demand that Russia pay transit fees on oil exports passing through Belarussian territory, clearing the way for a resolution of the dispute.

Barroso nonetheless maintained that the flap had damaged the credibility of both sides and said it was "unacceptable" that EU supplies could be cut without consultation.

"We believe that it is not in the interests of the supply countries or the transit countries to appear as not credible," he said. "We believe that it is their duty to try to restore the credibility they have enjoyed for so long."

Moscow dismissed such criticism, with a foreign ministry official asserting that Russia had kept EU partners "fully informed about the matter", according to the Interfax news agency.

Despite reservations about Russian supplies, the EU's dependency is only likely to grow in coming years as the bloc becomes more reliant on imports to meet European demand.

If policies were not changed, the EU's energy import dependence would rise from 50 percent currently to 65 percent in 2030, the commission warned.

Boosting the use of renewable energy could be one option for easing reliance on foreign supplies with the commission proposing that member states commit to meeting 20 percent of their needs with sources like wind and solar energy by 2020.

But environmentalists said the targets for renewables and greenhouse gas emissions fell far short of what was needed to meet the challenge of global warming.

"Commission President Barroso's bluster about a 'new industrial revolution' cannot mask the holes in this energy strategy," Luxembourg EU parliamentarian Claude Turmes said.

The commission's plans to boost competition in gas and electricity sectors also came under fire, even though Brussels warned that Europeans were paying too much for their energy.

An official at the French industry ministry said: "We have two points of disagreement with the commission, which are the possible eventual abolition of controlled (energy) prices and the question of separating asset ownership by integrated operators."

The French objection focused on a commission call for the "unbundling" of production and distribution activities.

The commission found that competition was in particular stifled by big energy groups with supply, generation and network activities that reduced potential competitors' access to critical market information.

German Economy Minister Michael Glos also sounded a note of caution, saying: "The commission is now talking about unbundling of ownership and we need to verify first whether this is compatible with the (German) constitution."

earlier related report
France Voices Objections To Parts Of EU Energy Plan
Paris (AFP) Jan 10 - France on Wednesday voiced objections to parts of a new energy plan drafted by the EU commission that call for the separation of energy production activities from distribution networks and an end to controlled energy prices. "There are matters on which we are going to have explain ourselves to the commission," Francois Loos, junior industry minister, told the National Assembly following release of the plan in Brussels.

"It's the question of unbundling distribution and production. On this matter, the Germans, who have the current (EU) presidency, are on our side."

He pointed to RTE, the electricity distribution subsidiary of the French state-controlled gas utility EDF, which he said was "an asset that functioned independently."

The EU executive commission, after a probe of more than 18 months, found that the energy market in the European Union was too heavily concentrated in the hands of companies that controlled supply, generation and infrastructure.

The commission determined that competition was in particular stifled by big energy groups with supply, generation and network activities that reduced potential competitors' access to critical market information.

Because of their integrated structure, big energy concerns sometimes held off making investments in infrastructure to benefit other branches of the group.

One idea the commission has floated to increase competition would be to force integrated energy companies to separate their distribution networks from their supply and generation businesses.

The second provision on which France has reservations, Loos said, was one calling for the abolition of fixed energy prices.

The energy plan unveiled Wednesday is to be debated by the 27 EU members, after which the commission will draft legislative proposals for its adoption.

A statement from the French industry ministry said while Paris backs the plan's proposals for increased investment in the energy sector, "we do not share the commission's analysis of the functioning of the market."

It said that while "the commission maintains that prices increase because there are still dominant operators and that there is not enough competition," for the French government "the main problem is that there has not been enough investment for the past 10 years, which has created supply and demand tensions that have driven up prices."

Several EU commissioners, notably Competition Commissioner Neelie Kroes, advocate the complete separation of energy production and distribution networks.

But the industry ministry argued: "As long as there are mutual networks that function in the interests of the common good ... we believe that competition can take place quite harmoniously among suppliers."

It said RTE, the EDF subsidiary, was managed independently and that the country's energy regulation commission, the CRE, determines prices for using the network on an equal basis for all potential users.

"There is no problem with competition," it contended.

earlier related report
Germany Cautious On EU Energy Plans
Berlin (AFP) Jan 10 - Germany reacted cautiously Wednesday to the latest proposals by the European Commission to diversify EU energy sources, slash carbon emissions by 20 percent and enforce rules for fuel competition. The German government said it was in favour of the EU's objectives -- even if it was not yet sure about how to achieve them -- while key players in the energy sector condemned the proposals.

German Economy Minister Michael Glos told journalists: "We are in favour of the objectives but we are not yet in agreement in the German parliament about how to achieve them.

"Economic growth will not help us if our environment is at risk but we need to achieve these objectives in a way which does not impinge on our competitiveness," Glos said.

Nevertheless, key players in the German energy sector expressed scepticism about Brussels' proposals.

Three different federations -- the BEE federation for renewable sources of energy, the BWE association for windpower and the BWS solar power body -- described the EU proposals as "meagre" and "lacking in ambition".

"The EU Commission hasn't the courage to lay down binding and clearly defined regulations," complained the head of BEE, Milan Nitzschke, in a joint statement issued by all three federations.

"We're currently seeing just how fatal the EU's dependence is on, say, energy supplies from Russia. If once again, no clear strategy is drawn up to expand renewable sources of energy, that will mercilessly spotlight the shortcomings of European energy policy," Nitzschke said.

The BEE, BWE and BSW associations urged the government, which this year holds the six-month revolving presidency of the EU, to push for an ambitious goal of making renewable energy sources account for 25 percent of all energy production by 2020, instead of the 20 percent targetted by Brussels.

The federations also called for sector-specific targets -- so that at least 35 percent of electricity should be produced from renewable sources by 2020, 25 percent of heat and 20 percent of fuels.

"Only in this way can the EU's greenhouse gas emissions and the bloc's dramatic dependance on oil and gas imports be reduced," the statement said.

The current non-binding targets "give members states and energy suppliers too much room to do nothing for climate protection or security of supply," Nitzschke complained.

The gas industry federation BGW was angered by Brussels' proposals to compel big energy companies to unbundle their supply and generation businesses from their network operations.

The Commission was "fundamentally questioning the companies's rights to ownership of their networks," BGW said in a statement, describing the move as "expropriation".

BGW president Michael Feist, warned that there was a danger, if companies felt their networks would be expropriated by the state, that companies would not invest sufficiently in those networks.

"That will lead to a deterioration of the quality of supply," Feist argued. The German networks regulator, Bundesnetzagentur, also rejected the idea of separating the networks from the utilities. "We should examine whether the current rules to spin off the networks into legally independent units are not sufficient in themselves," Bundesnetzagentur boss Matthias Kurth told the business daily Handelsblatt in an interview to be published on Thursday.

Strict access rules and a functioning supervisory body could ensure that fair network access could still be guaranteed without forcing companies to give up assets, Kurth argued.

He said that with 900 different electricity network operators in Germany and 700 gas network operators, the EU's proposals were not practicable.

A spokesman for the German government described the EU's proposals as "a good basis for preparing the March summit (of heads of state and government chiefs) and for a discussion of energy policy."

The spokesman noted some "very positive aspects", such as the intention to make energy use more efficient and to develop renewable sources of energy.

For his part, economy minister Glos said: "The Commission is now talking about unbundling of ownership and we need to verify first whether this is compatible with the constitution."

Germany would not "take any hasty steps," Glos said.

When pressed on the issue of unbundling, Glos replied: "We are willing to consider issues that we would have rejected six months ago."

Source: Agence France-Presse

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