Dods EU Briefing: Paving the way for a European Energy Security Strategy

On May 21 2014, in the context of a high-level conference on energy security, Energy Commissioner Günther Oettinger and European Commission President José Manuel Barroso provided orientations on a "European Energy Security Strategy", ahead of the European Council of June 26 and 27 2014. Polish Prime Minister Donald Tusk shared his vision of an Energy Union for the EU.

By Dods EU monitoring

22 May 2014

Please note that this does not constitute a formal record of the proceedings of the meeting. It is dependent on interpretation and acts as an unofficial summary.

Günther Oettinger, Member of the Commission in charge of Energy, explained that in five weeks’ time, a Commission communication on energy independence and security of supply would be published.  

Energy should not be a political instrument. Energy should be a service in open markets, a transparent process, with fair conditions.

In the past few weeks, energy has not been on the list of sanctions imposed because of the Ukraine crisis. Long term intact relations with countries within the EU, outside of the EU and with the Russian federation should be guaranteed.

Where the market works, energy should not be used as a political tool.

He then talked about the completion of the internal market and the price of oil, which, even despite crises, has remained constant. Other energy resources have been used in the EU to compensate for oil.

Gas infrastructure should be achieved in a completed internal EU market, he emphasised. New products on the global market should also be developed. Looking at prices, having only one supplier makes the price increase.

That is why the EU thinks that the completion of the internal market is the most important strategy. Moving forward with LNG is also important.

Energy efficiency is vital to reduce imports and dependency. Unfortunately, energy efficiency is not invested in by the Member States.

Therefore, an ambitious energy efficiency strategy for 2030 will be suggested by the Commission in the future.

At the moment of elections, there is talk of vacuum cleaners and other gadgets and their energy efficiency. The Council of the EU was the one that had suggested focusing on households. He was not happy that the Commission was accused of focusing on “less important topics”.

In energy, there is not always credibility and correspondence between actions and talk. Lots of Member States are thinking in terms of national politics. There is need for a common European energy policy. Some energy agreements do not comply with the EU’s legislation; therefore, unbundling and fair level playing fields should tackle monopolies here, he said.  

More renewable energy sources are also needed. Renewable energy is losing support, for example, in Germany. There are retroactive changes in energy policy, such as in Spain recently.

Solar and wind energy should not be established in places where there are no conditions for it. Counterproductive support systems should not be supported.

Diversification is the most important pillar for gas. The EU also wants to make partners with Norway and Algeria. For security of supply, all 28 Member States should be involved in this. Energy and gas prices should not be used as a weapon against Ukraine or Azerbaijan.

He called for the Member States to think about the task ahead; "are we the EU28 or do the Member States support the Commission in securing a fair market price and that the Commission combats the political tools used against Ukraine", he asked.  

Luckily, there is a positive development in terms of infrastructure; the Connecting Europe Facility (CEF) is designed for this. The latter is more about gas and electricity than oil. He suggested that the political will of the coming months is used to put an end to monopolies and Member States "using the market to their own will". Estonia, Lithuania, Latvia, Bulgaria, are at the forefront; LNG terminals, pipelines, storage facilities, these are the keywords in the context of the CEF, he added.

The CEF has been co-financed with EU funding. Looking at the crisis in Ukraine, it is a matter of building up the network, strengthening pipelines, etc. All of this needs to be financed.

Europe has a strategy where there are short term and medium and long term proposals. In the Council, the priorities for this year will be discussed and the Commission develops all kinds of strategies.

For the more long term strategies, Mr. Tusk and Barroso would speak shortly. Completing the internal market for gas and electricity is a crucial step that needs to be taken. A common energy foreign policy is also needed, when dealing with neighbouring countries.

Europe also needs to invest in strategic infrastructure. The Commission is preparing their strategy and they will present it to the Energy Council, European Council and the G7. Finally, he was grateful that Mr. Tusk had raised energy policy as head of state.

José Manuel Barroso, President of the Commission, (please click here for the full speech), said Mr. Oettinger was doing his best in exceptional circumstances. Europe is facing a threat to its peace and security as a result of the Crimean crisis. The actions of some actors cannot be accepted by the EU. Sovereignty and rule of law is more powerful than the logic of supremacy. Europe’s countries have the right to choose their partnerships.

The current situation is a test to our determination. All this comes together in energy policy. All possibilities have to be explored to arrive to a low-carbon, energy-secure EU.

The Commission has been calling for proposals for a more robust European energy policy. Many times in the past, different Council formations were pleading for a true European energy policy. Minds were not focused on the urgency of a real energy policy for Europe. In reason of the crisis, the EU could now make more progress than before.

The idea of an energy community has always been supported by Poland in particular. He therefore welcomed Mr. Tusk as a speaker for such a union. The Commission is presenting some ideas in the European council next month.

He then gave some figures on the EU’s dependency of different sources of energy. Some countries are particularly vulnerable such as the Eastern countries and Balkans.

Russia exports 80 % of its oil and more than 70 % of its gas to the EU. He then talked about interruptions of energy supplies in recent years and said that since then the Commission has done much progress in the completion of the internal market and inter-connections.

The European council in March had invited the Commission to develop a strategy for reducing our energy dependency by June. Energy security issues are addressed too often at national level.

Action is therefore needed for:

  • Reducing energy demand – as a price taker the EU cannot rely on cheap energy. Energy efficiency targets by 2020 already help but efforts on heating and buildings, transport and equipment, should be made.
  • Increasing energy production where possible – renewable source energy production is possible and the 2020 goal could be achieved. Heating is a good example here.
  • Nuclear energy is an option that the Member States are free to go for.
  • Hydrocarbons and shale gas have been considered by some Member States. The Commission view is that it has notified such countries that such resources should be managed responsibly.
  • Building a resilient internal market remains a challenge: reverse flows must be considered. He mentioned the CEF in this context and said that permits should be allowed.
  • Emergency action and crisis coordination mechanisms should be secured.
  • Developing technological capabilities and CO2 capture and storage should also be considered.

The June European Council will also consider the EU’s final decision for the 2030 climate and energy framework. Moreover, a UNFCCC meeting is taking place in the autumn. The sooner the Member States agree on the 2030 horizon, the better.

Next winter, developing reverse flows, LNG and storage will all be considered. The South Gas Corridor will play a key role here.

He then mentioned the recent reverse flow agreement between Slovakia and Ukraine. The Commission was leading on behalf the 28 Member States the trilateral discussions on gas between Ukraine, Russia and the EU.

Moreover, during the previous day, he had answered to Putin on "what the EU’s position was". He had also received the Georgian government who were planning to join the Energy Charter.

Measures are also needed for the internal market. European financial instruments such as the ERDF, the CEF, the Horizon 2020 and the European Neighbourhood Policy instruments could provide a part of the answer here. There are budgetary windows to support some measures and involve private companies, he added, referring to those financial instruments.  

European energy security should also be a priority for European Investment Bank interventions.

More coordination of national energy policies is necessary was his final message.

Donald Tusk, Polish Prime Minister, said he had been collaborating with the European Commission on energy policy. Europe’s energy sovereignty should be discussed; this had been stated by the last European Council.

The crisis in the Ukraine has meant that this subject has become more popular. A similar crisis happened in 2009. The energy security problem has been on the European agenda for a long time. Energy dependence is a political problem and an economic burden. It restricts Europe’s political possibilities. The way in which the EU can react to Russia’s aggressive manoeuvres in Ukraine is restricted.

He then spoke of the EU answer, the banking union, to the financial crisis and said that the Ukraine crisis was giving the EU a similar lesson and there should be lessons learnt here. If the EU wanted to be an equal partner with Russia, a similar EU solution should be created, in particular for gas. The EU would need to create a transparent gas market in the EU. 

The high prices of gas are affecting EU effectiveness. There is not sufficient infrastructure for transporting or storing gas either. The price of gas does not reflect to the prices paid when trading in gas, either.

The problems in the gas market also lie in the lack of transparency in agreements between different countries. Some clauses therein mean (sometimes) that the EU is shut out. The EU is committed to achieving the internal market. A lot of Member States are dependent on one gas supplier.

Therefore, a European solution should be found to this. He then mentioned an interconnection between Portugal and Spain and the rest of the EU and said that already this would increase energy independence in Europe.

There should be a European body that looks into buying gas. He had talked about this with many leaders across Europe. However, a common purchasing policy had been perceived as impossible.

However, the banking union had also seemed impossible to people but it had nevertheless been attempted.

Secrecy in gas contracts is a barrier for setting up an internal gas market. He thought, however, that these secrets should be told to a European authority. Gas agreements affect consumers at every level. The main supplier, Russia, has exerted pressure that these agreements should be done at a bilateral level. The Polish had asked the EU to be involved in the discussions with Russia. He suggested other Member States to do the same. There should be a list of banned contracts, he added. He did not mean a single price for the EU but to comply with European rules.

Are common purchases of gas possible? That was something the Commission was looking into. It could be done through a common purchasing consortium. There have been such mechanisms: nuclear energy, for example, which was different to gas, but it could be used as an example of common purchases of raw materials for energy production. This could mean that stock markets would set the prices of gas. This would mean that the same price would apply across the board.

Real diversification should also be considered here. The more suppliers of gas to Europe, the better it is. The EU should not voluntarily give up its own sources of energy either. Poland had its coal, Romania was interested in shale gas. Cleaner coal was needed, for example, in Poland. The Visegrad group was going to set up a group of cooperation in energy in this field. The Energy Community should also be strengthened. The Balkans should be included.

Finally, he said that the situation in Ukraine is such that it should comply with European (energy) rules. He opposed the relations between the Member States and bilateral relations between Member States and Russia and wondered which relations were more important.

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