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Energy Council agrees “general approach” to liberalisation, and European Parliament supports unbundling

09.07.2008

The latest Energy Council, held on 6 June, focused on market liberalisation, agreeing on a “general approach” that would allow vertically-integrated energy companies to keep control of their transmission grids as an alternative to unbundling. Discussions on the Renewable Energy (RES) Directive proposal were cut short through lack of time.

Energy market liberalisation

In September 2007 the European Commission, in its third liberalisation package proposals, mooted the breaking up of large energy firms or ‘ownership unbundling’ in order to make the energy sector more competitive.

It also provided a second option - a compromise whereby companies involved in both energy production and supply would be allowed to retain their network assets, but would give control of commercial and investment decisions to an independent company (the Independent System Operator, or ISO), to be designated by national governments.

The European Commission’s own preferred option was full ownership unbundling, and EWEA supported this choice, with Chief Executive Christian Kjaer stating at the time that “competition in the European electricity markets will continue to be distorted until independent operation has been complemented by independent ownership of the grids. Fair grid access is an absolute minimum requirement if the EU is ever to attain effective competition in the power market while meeting its objective of 20% renewable energy by 2020.”

However, at the beginning of 2008, France, Germany and six other Member States that opposed unbundling attempted to water down the Commission’s second option. They claimed that instead of having third-party (ISO) oversight of grid management, fair competition could be achieved through their ’Third Option for Effective and Efficient Unbundling’ (EEU), which would put day-to-day grid management in the hands of an Independent Transmission Operator (ITO).

Although the Parliament’s ITRE Committee voted for full ownership unbundling at the end of May, the European Council at its meeting on 6 June agreed on a ‘general approach’ that included the ITO option, based on a strengthened EEU approach, as an alternative to unbundling. The Commission would review the chosen system two years after implementation. Indeed, it is already investigating several vertically-integrated energy companies which dominate on a national market for anti-trust activities.

EWEA regrets the Council’s decision to cede to the pressure of a handful of Member States with a blocking minority over the liberalisation issue. It therefore welcomed the European Parliament’s vote of 17 June in favour of full ownership unbundling of vertically-integrated power companies, and its rejection of both the Independent Systems Operator and Independent Transmissions Operator options. The votes demonstrate the Parliament’s support for a properly liberalised energy market and a level playing field for renewables.

Following these votes, the second reading of the draft directive will take place at the end of this year and in the first part of 2009.

RES Directive

As the Council meeting was running low on time, discussions on the RES Directive were limited.

However, there was a joint suggestion from the UK, Germany and Poland to amend the Commission’s proposals on GO trading by proposing a number of ‘opt-in’ flexibility mechanisms, such as allowing countries that beat indicative renewable energy targets ahead of 2020 to statistically transfer their surplus to other governments. They also proposed that countries be allowed to combine their national targets or support schemes, as well as launch joint renewable energy projects and share the credit.

Member States would be free to choose whether or not to collaborate with other Member States to remove fears that trading of renewables could undermine existing national support schemes such as certificate trading and feed-in tariffs.

At a Council working group meeting, governments signalled strong support for the proposal from the UK, Germany and Poland.

For EWEA, it is essential that Member States remain in control of their own successful national support systems in order to ensure a stable market and guarantee continued investment in wind energy.

At the end of the Council meeting, ministers were asked to submit their comments to the secretariat in writing. These written comments will be used to draw up a further proposal.

Read the Council’s press release

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