Brussels Energy Brief - June 2007
June 2007
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KEY DEVELOPMENTS
Report on the Application of State Aid Rules to the EU Coal Industry
Juan Gutiérrez
The coal industry has been subject to special European Union State aid rules since the expiry of the European Coal and Steel Treaty in 2002. In order to allow for the continued restructuring of the coal industry, Regulation 1407/2002/EC provides for an exception to the general prohibition of State aid. This Regulation will expire at the end of 2010. The Commission has adopted a report analysing State aid granted under the Regulation between 2002 and 2006, and also whether there is a need to amend the Regulation. The report, which was adopted following consultations with Member States and stakeholders, concludes that there is no need to propose any amendments to the Regulation.
Commission Opens Investigation into Regulated Electricity Tariffs in France
Juan Gutiérrez
The European Commission has initiated a formal investigation into potential aid granted to large and medium-sized companies in France in the form of artificially low regulated electricity tariffs. The system appears to be administered by the State and financed mainly by the State-owned company Electricité de France and by parafiscal contributions levied on all French electricity consumers. The Commission is concerned in particular with the so-called "green" and "blue" tariffs, which are the lowest ones and applicable to medium and large companies. The competition problems raised by artificially low State-regulated tariffs were highlighted by the Commission in its energy sector inquiry published at the beginning of the year. Interested parties will have the opportunity to submit comments.
Pioneer CO2 Storage Facility Launched in Germany
Andrea Hamilton
The European Union’s Energy Commissioner has announced the launch of a test carbon dioxide (CO2) facility in Ketzin, Germany. This pilot project, which is co-funded by the EU, involves burying CO2 emissions from power generation in a saline aquifer at a depth of approximately 1,800 metres. Among other things, the project will test different ways of injecting CO2 underground and establish reliable practices for monitoring the long-term stability of stored CO2. The project in Ketzin is a key component of the EU’s overall research project on CO2 storage in Europe, known as “CO2SINK,” which is intended to (i) provide alternatives to the release of CO2 emissions, and (ii) inform future policy decisions concerning energy generation.
EU-US “Green Skies” Partnership
Philip Torbøl
In an initiative that has already been described as the “Green Skies” partnership, the European Union and the United States have agreed to work together on reducing carbon emissions from air transport. The cooperation, formally called AIRE (Atlantic Interoperability initiative to Reduce Emissions), will consist of pooling research funds and improving the compatibility of the parties’ respective air-traffic control systems. Notably, the initiative is designed to accelerate the development and application of new technologies, such as the “smooth” or “reduced engine” methods, which will reduce noise and gas emissions during landing. The partnership is reported to include industry participants such as Airbus, Boeing, Air France-KLM, SAS, Delta and FedEx, as well as providers of aviation navigation services.
Energy Dialogue With Russia
Marta Becerra
The European Parliament has called for a stronger energy dimension to safeguard Europe’s energy supplies in the future partnership and cooperation agreement (PCA) currently under negotiation with Russia. The Parliament’s report notes increasing concern over the “nationalistic and monopolistic trends” in the management of Russian energy resources and the insufficient degree of access to foreign companies operating in Russia’s natural resource sectors. In addition, the report states that Russia should ratify the European Energy Charter. The Parliament reiterates the EU’s support for Russia joining the World Trade Organisation (WTO) but stresses that this must not lead to higher levels of import duties and stronger protectionism.
Parliament and European Regulators Back Commission for Energy Unbundling
Jérôme Cloarec
Following the liberalisation of the gas and electricity markets, the European Parliament and European Regulators (ER) have given their support to the European Commission to push for energy unbundling. The Council of ER has proposed a legislative package to the Commission, which will split companies involved in both production and distribution activities, provide the legal basis for an independent EU watchdog, establish an infrastructure for investment, and create network bodies. The European Parliament has adopted a final report stating that unbundling is necessary for an optimum energy market, noting however that the unbundling model “might not address all the issues at stake such as interconnections or congestion points".
EU-OPEC Energy Dialogue
Marta Becerra
On 21 June 2007, the fourth ministerial-level meeting of the EU-OPEC Energy Dialogue was held in Vienna. The meeting featured presentations by the European Union on the energy policy and action plan adopted in March 2007 and by the Organisation of Petroleum Exporting Countries (OPEC) on oil market developments and prospects. Participants expressed their mutual interest in stable, transparent and predictable oil markets with reasonable prices, and reaffirmed their recognition of the reciprocal nature of energy security, in terms of both supply and demand. They also noted that oil will remain the world’s leading energy source for the future. EU and OPEC representatives agreed upon several specific joint actions, including a workshop on the oil refining sector and the implications of biofuels, a study on the impact of financial markets on oil prices and volatility, and an enhanced discussion on carbon capture and storage (CCS) cooperation. The EU launched the Energy Dialogue with OPEC in December 2004 following concerns about growing global competition for access to scarce oil resources.
EU and Algeria Strengthen Cooperation to Increase Gas Supplies
Geert Dierickx
In a dialogue which took place during the EU-OPEC meeting in Vienna, EU Energy Commissioner, Andris Piebalgs, and Algerian Minister of Energy and Mines, Chakib Khelil, indicated they were looking forward to deepening their bilateral energy cooperation. Algeria is currently the third largest gas supplier to the European Union. For projects now under construction, new gas supplies should be delivered through two new pipelines: “Medgaz” connecting Algeria to Almeria on the south-east coast of Spain, and “Galsi” which would connect Algeria to Cagliari in Italy. Further, the capacity of an existing pipeline linking Algeria to Italy through Tunisia could also be increased. If these projects are successful, Algerian gas supplies to the EU would increase by 23.5 billion cubic metres.
Energy Efficiency Requirements for Light Bulbs on Course for Adoption
Elena Kostadinova
Representatives of European Union Member States, non-governmental organisations, industry associations and standardisation bodies have convened to provide their comments on the measures proposed by the European Commission under the Ecodesign Directive. The Ecodesign Directive requires the Commission to set legal requirements on the environmental performance of products, including energy efficiency. The proposed measures aim at strengthening the energy efficiency of lighting equipment and other energy-using products and could lead to the phasing-out of inefficient incandescent bulbs after 2009. The discussions have focused on issues related to the potential for environmental improvement, product quality and durability, recycling and adequate timing for the phasing-out of inefficient products from the market. This Commission initiative is an attempt to implement the recommendations of the European Council of 8 – 9 March 2007.
Gazprom and ENI Agree on New Gas Pipeline From Russia to EU
Bróna Heenan
ENI and Gazprom have signed a memorandum of understanding (MOU) for the realisation of South Stream, a new gas pipeline system which would link Russia to the European Union across the Black Sea. Preliminary studies determined that the costs of the pipeline would be comparable to the development of a liquefied natural gas (LNG) chain (liquefaction plants, ships and re-gasification plants). A technical and economic feasibility study of the project will now be carried out as well as consideration of the necessary political and regulatory evaluations. The MOU sets out cooperation guidelines for the planning, financing, construction and technical and commercial management of the pipelines. Two different routes (north west and south west) for the onshore section of the pipeline from Bulgaria will be considered.
MERGER NOTIFICATIONS
End May – June 2007
M.4685 - ENEL / ACCIONA / ENDESA (31 May 2007)
M.4723 - ENI / EXXON MOBIL (Hungarian, Czech and Slovak Package) (19 June 2007)
M.4712 - ERG / IPM / ISAB ENERGY SERVICES (22 June 2007)
MEETINGS
July 2007
No energy-related Council meetings scheduled for July.
