European energy 2030 : are we ready to manage our own EU challenges?

ATHENS – RCEM & GEF (16th December 2014)Jean-Michel Glachant - Director Florence School of Regulation & Loyola de Palacio Chair

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I’ve been close to business…

I’m a bit less today…

What do I think? Some simplification needed…

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Day-ahead market

Intraday markets

Balancing market

Reserves/ ancillary services

markets

Explicit auctions for transmission

capacity

Implicit auctions

Market coupling

Market splitting

Capacity markets

Bilateral / OTC

Long term contracts

Flexibility market

Baseloadproduct

Peak load product

Congestion management

First: We aren’t in the same world…

• 1 Scarce and pricey fossil fuel

• 2 An internal market for competing CCGTs… or for fed-in RES

• 3 Green revolution, green manufacturing leadership, green jobs

• 4 Putting a price on carbon everywhere

• 5 Fossil fuel pricey but “suppliers secure enough”

Too much significant assumptions gone to not reformulate the frame of our EU energy policy… so 2030 could’nd be 30-30-30… after 20-20-20

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At least 3 challenges for EU …

• 1/ 28 national ways from 20-20-20 to 2030: could it lead the EU somewhere?

• 2/ The energy policy governance: any appropriate framework for a “Towards 2030” EU energy policy?

• 3/ External energy security and policy: at least some Energy Union… or only Energy disunion?

>> Contrasting a “mini” & a “maxi” option for each issue

28 national “target sets” from 20-20-20 to 2030: could it lead EU somewhere?

• End 2007 triple “20” targets: Hence less “EU” and more “renationalisation” of energy targets?

• 1/ - 2030 Target “mini”:

• exiting RES priority (RES biding only “ at EU level”)

• Preparing a gentle phasing-out od feed-in tariffs

• … and scaling back to carbon containment with GHG Cap for each EU country

>> See Stern& Calderon report for UN (before Lima) :

>> they call for fossil subsidy full phasing out + progressive coal ban + some R&D and Green funding …

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28 national “target sets” to 2030: could it lead EU somewhere?

• 2/ - 2030 Target “maxi ” but within Club “of the willing”: energy efficiency target (incl. circular economy & shared economy)…

• 1- doesn’t touch national energy mix (hence: the willing)

• 2- has “growth support” flavor (UK past – GER future)

• 3- time for national action plans (GER Eur70 bn till 2020)

• 4- common EU business models ? Or none? What market & regulation principles + organization of financing & bankability if no “EU frame”?

• 5- some funds taken from Juncker Eur300bn?

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The governance: any appropriate framework for new 2030 EU policy?

• 28 ways to go to 2030: could Commission monitor it with existing (Internal Market) + (Competition tool box)?

• 1/ - 2030 Governance “mini”: do not worry; be EU market happy… EC has all needed weaponry in Internal Market & Competition Policy

• no need to do more than all RES in an open market;

• all capacity mechanisms being DG Comp compliant;

• all retail market and demand response being Internal Market & DG Comp compliant

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The governance: any appropriate framework for new 2030 EU policy?

• 2/ - 2030 Governance “maxi”: do not dream

• you cannot frame a demanding non-market issue like GHG & growth sustainability only with market-related tools while even EU ETS does not give a good carbon price

• time come to discuss a new comprehensive governance equipped with new ad-hoc policy power vis-à-vis any national combination of (GHG / Fuel Mix / Market Rules / & Ener. Efficiency) negative at EU level

• It is: a full fledge “Energy Union”

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External energy security and policy: some Energy Union… or only disunion?

• 1/ External energy “mini”: our best friends to get the max from external energy are our twin internal markets / gas & power… … the more flows will flow and arbitrage work the best possible we will get

• 2/ External energy “mini+”: EU internal markets will give us their best only when integrating all our external borders …

• interconnections planning… & unbundling …access & tariffs

• supply bilateral agreements & contracts compliant with Trade, IntMark& Comp. Policies / or/ pushed towards more SoS (a la Tusk / Oettinger)

• integration between EU Internal markets and Energy Community markets

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External energy security and policy: some Energy Union… or only disunion?

• 3/ External energy “maxi”: only an Energy Union with due and substantial powers would put EU on track for external energy security

• EU external energy security is too close from “hard security affairs” that touch key MS sovereign powers….

• The challenges faced today by EU for its energy security is as big as “European Defense Community “and “European Coal and Steel Community” have been in the 50’…[Jacques Delors; Helmut Kohl last month…]

• But a BIG BUT: how to get there…

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2030 challenges: Conclusion?

# Flexible EU target frame with “room” for national plans & national strategies: from new gas (Poland; Cyprus) to nuclear (UK) to off-shore wind and energy efficiency (Germany)

# and weak “EU target governance”

# even weakest “EU market external borders policy”

>> resulting in an EU “as weak as before” (before Berlin Council Spring 2007)?

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In brief: a lot of change & of workexpected; or none >> back to the EU ‘non-energy policy’ era 1974-2004?

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Thank you for your attentionEmail contact: jean-michel.glachant@eui.eu

Follow me on Twitter:@JMGlachant- already 4 913 tweets

Read the IAEE Journal I am chief-editor of: EEEP “Economics of Energy & Environmental Policy”

My web site: http://www.florence-school.eu