European Parliament

February 2008

3rd energy package

Customers’ point of viewEffects of the Package on Consumers

prof. Krzysztof Żmijewski

Warsaw University of Technology Independent EnergyConsultancy Board

Independent EnergyConsultancy Board

2/2813 feb 2008

Contents

Contents 2

Policy dilemma 3• customer demands 4

• customer dreams 8

Regulatory dilemma 10• contradiction 11

• common regulation 13

In one Europe we are different 16

Conclusions 24

Independent EnergyConsultancy Board

3/2813 feb 2008

Policy dilemma (1)

Customer demands

Customer dreams

• Low prices

• High security

• High comfort

• No threats

• Clean earth

• Welfare society

How can we make it all come true?

Independent EnergyConsultancy Board

4/2813 feb 2008

Customer demands (1)

Low priceslow bills low costs low energy

intensityhigh energy efficiency

High securityEU-15+2 high quality (80%) + low disruptions (20%) EU-10 high quality (20%) + low disruptions (80%)

High comfortEU-15+2 keep the standard high EU-10 increase quality of life

Independent EnergyConsultancy Board

5/2813 feb 2008

Customer demands (2)

Low priceslow bills

low costs

low energy intensity

and the answer is

high energy efficiency

Independent EnergyConsultancy Board

6/2813 feb 2008

Customer demands (3)

High security

EU-15+2 high quality (80%) + low disruptions (20%)

EU-10 high quality (20%) + low disruptions (80%)

and the answer is

common policy must be balanced

Independent EnergyConsultancy Board

7/2813 feb 2008

Customer demands (4)

High comfort

EU-15+2 keep the standard high

EU-10 increase quality of life

and the answer is

common measures are possible intelligent/smart networks distributed/dispersed generation passive/active demand side management

Independent EnergyConsultancy Board

8/2813 feb 2008

Customer dreams

No threats 3rdEPdiversificationsingle energy market

Clean earth 3x20reduction of emissions waste management

Welfare society 7thFPnew innovative technology

reconstruction of awareness ????

Independent EnergyConsultancy Board

9/2813 feb 2008

Consumer issues within the 3rd EP

overcoming obstacles in cross-border supply

standardised, automated and electronic data exchange

quick and easy switching procedures for customers

enhancement of a retail market (DSO owner- ship unbundling?)

Independent EnergyConsultancy Board

10/2813 feb 2008

Contents

Contents 2

Policy dilemma 3• customer demands 4

• customer dreams 8

Regulatory dilemma 10• contradiction 11

• common regulation 13

In one Europe we are different 16

Conclusions 24

Independent EnergyConsultancy Board

11/2813 feb 2008

Regulatory dilemma (1)

Customer demands

Customer dreams

• Low prices

• High security

• High comfort

• No threats

• Clean earth

• Welfare society

How can we make it all come true?

Market mechanisms

Regulatory mechanisms

Independent EnergyConsultancy Board

12/2813 feb 2008

Regulatory dilemma (2)

Customer demands

Customer dreams

Market Behaviour

against

Sustainable Development

as much marketand

as little regulation

as possible – – is it possible?

How can we make it all come true?

Market mechanisms

Regulatory mechanisms

Independent EnergyConsultancy Board

13/2813 feb 2008

The answer to the Regulatory Dilemma

colorless42%

blue15%

orange8,2%

green15%

red16%

yellow2,5%

white2,3%

• green - renewable• red - cogeneration• yellow - gas & small CHP• white - energy efficiency• orange - no emission - CCS• blue - super generation• colourless - non-supported

rainbow certification –regulation through market tools

Keep the dreams cost low

Independent EnergyConsultancy Board

14/2813 feb 2008

There are no panaceaHow to make them come true?fundamental question - what do we support?

wind - investment

• green biomass - exploitation

• red - solid cogeneration - investment + exploitation

• yellow - gas & small CHP - exploitation

• white - energy efficiency - investment

• orange - no emission – CCS - investment + exploitation

• blue - super generation - investment

What do we support: investments or exploitation?

Independent EnergyConsultancy Board

15/2813 feb 2008

Fundamental question (2)

How to make them come true?single versus local market

How do we want to integrate local markets ?

Do we want to integrate local markets ?

Aren’t we members of one EU ?

Independent EnergyConsultancy Board

16/2813 feb 2008

Contents

Contents 2

Policy dilemma 3• customer demands 4

• customer dreams 8

Regulatory dilemma 10• contradiction 11

• common regulation 13

In one Europe we are different 16

Conclusions 24

Independent EnergyConsultancy Board

17/2813 feb 2008

In one Europe we are different

Structure of energy mix – generation Power plants CO2 emissions Energy prices in EU countries CO2 emissions intensity Energy intensity Investments in new technologies

Independent EnergyConsultancy Board

18/2813 feb 2008

Structure of energy generationDependence of Polish power generation on coal is the highest in EU, but also provides Poland with the greatest security of supply (own resources of coal and lignite).

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Other fuels

Renewables

Nuclear

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Oil

Coal or Lignite

Fuel mix of power sector by (%)

No other large country is as dependent on coal for its power generation as Poland.

* Source: Eurostat

EU- 25 coal share in fuel mix

Independent EnergyConsultancy Board

19/2813 feb 2008

Power plants’ CO2 emissions

500

800

1 100

1 400

GR

1

GR

2

DE

1

DE

2

DE

3

DE

4

DE

5

SP

1

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6

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average

Poland average

A further significant

reduction of CO2 emission is possible only in

the next 6-7 years, by

building new and more

efficient units.

CO2 emissions of certain European hard coal and lignite power plants

(g CO2 / kWh)

GR - Greece DE – GermanySP - Spain PT - PortugalCZ – Czech Republic UK – United Kingdom Source: WWF

Independent EnergyConsultancy Board

20/2813 feb 2008

Energy prices in EU countriesIn real terms, Polish electricity prices are relatively low. However, taking into account the purchasing power of Polish society, a drastic price increase could trigger social unrest.

153

132

109104 103 103

9791 90

74 74 71 69 66 65 65 65 65 64 63 62 6054 53 50 47

41

118

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Final electricity prices for households in PPP on 1 January 2007 (EUR/MWh)

In terms of PPP, Polish power prices are among the highest in the EU

Independent EnergyConsultancy Board

21/2813 feb 2008

CO2 emission

0

500

1 000

1 500

2 000

2 500

NL

SE

FR

DK IE AT

EU

15 UK IT

EU

25

EU

27 ES

DE

BE

LU FI

PT

EL SI

LV

CY LT

MT

HU

SK CZ

PL

RO EE

BG

kgCO2/k€

Source Eurostat 2006

Independent EnergyConsultancy Board

22/2813 feb 2008

Energy intensity

Source Eurostat 2006

toe/M€

0

200

400

600

800

1000

1200

DK IE UK

AT IT DE

EU

15

FR

EU

25

SE

LU

EU

27

NL

ES

EL

BE

PT

MT

CY FI

SI

LV

HU

PL

LT

CZ

SK

EE

RO

BG

Independent EnergyConsultancy Board

23/2813 feb 2008

The age of Polish power plants

Investments in new technologies

More than 30 yr40%

0-58% 5-10

7%

10-2011%

20-3034%

7,8

2,2 1,9 1,1

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bln €

Source: ARE

Estimation of necessary investments in Poland 2008 –

2015

Necessary investments amount to approx. 20 bln €, compared with max 6 mld € worth of missing allowances.

Independent EnergyConsultancy Board

24/2813 feb 2008

Contents

Contents 2

Policy dilemma 3• customer demands 4

• customer dreams 8

Regulatory dilemma 10• contradiction 11

• common regulation 13

In one Europe we are different 16

Conclusions 24

Independent EnergyConsultancy Board

25/2813 feb 2008

Conclusion (1)

There is one EU with 27 members

but

There are two different zones:

EU-10 & EU-15+2

The common policy and its tools should consider this fact.

A

/

B

=3

Independent EnergyConsultancy Board

26/2813 feb 2008

Conclusion (2)

We need liberalisation in the market area

but

We need regulation in the field of investment and efficiency (i.e. sustainable development)

A common certification policy and certification market are needed

A

/

B

=

Independent EnergyConsultancy Board

27/2813 feb 2008

Conclusion (3)

We need more power and independence for national regulators

but

We need better mechanisms for transnational cooperation (i.e. transboundary investments, single certification market, ETS etc.)

A common regulatory policy and tools are needed (say ACER)

A

/

B

=

Independent EnergyConsultancy Board

28/2813 feb 2008

Keep the dreams cost low!

Thank you

Krzysztof Żmijewski

20

20

20