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MEMO/07/55

Brussels, 14 February 2007

Memo: Special Energy council on 15 February

Context

This Special Energy Council, following the adoption of the Commissions EnergyPackage of 10 January 2007, will be held on 15 February, in Brussels. This will bethe first occasion in which Energy Ministers will discuss the content of the EnergyPackage at ministerial level. Up to now, there had only been a presentation of thenew Energy Policy for Europe during the Ecofin on 30.01.2007. The conclusions ofthis Special Energy Council will be the basis of the discussion at Head of State level

in the European Council devoted to the energy policy, which will take place on 8-9March in Brussels.

Ministerial dinner (14 February)

The Energy Ministers will dine in the evening of 14 February. During the dinnerparticipants will likely discuss on the nature of the targets for renewables andbiofuels and on the options to be considered for achieving effective unbundling onthe gas and electricity markets. The new Energy Policy proposes a binding target of20% of its overall energy mix to be sourced from renewable energy by 2020. Aminimum target for biofuels of 10% will supplement this renewables target.

After this discussion, ministers will discuss about Solidarity and security of Supply.

In its strategic energy review the Commission proposed the developing of effectivesolidarity mechanisms to deal with any energy supply crisis, including thereinforcement of existing structures (Gas Coordination Group, Oil supply group), arevision of oil stocks directive and an impact assessment over the establishment ofstrategic gas stocks. It also proposes the development a common external energypolicy to increasingly "speak with one voice" with third countries, which willendeavour to develop real energy partnerships with suppliers based ontransparency, predictability and reciprocity.


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Formal Meeting (15 February)

Energy sector competition inquiry results

Competition Commissioner Neelie Kroes will present to Council the final report onthe energy sector competition inquiry, which was published in January 2007 (seeIP/07/26 and MEMO/07/15). The report concluded that consumers and businessesare losing out because of inefficient and expensive gas and electricity markets.Particular problems include high levels of market concentration; vertical integration ofsupply, generation and infrastructure leading to a lack of equal access to, andinsufficient investment in infrastructure; and, possible collusion between incumbentoperators to share markets. To tackle these problems, the Commission will pursuefollow up action in individual cases under the competition rules (anti-trust, mergercontrol and state aids) and act to improve the regulatory framework for energyliberalisation (see also IP/07/29). The Commission already conducted a number ofinspections in companies where these particular issues warrant investigation. Inparticular, in May 2006 the Commission undertook inspections in Germany, Italy,France, Belgium and Austria related mainly to suspicions of foreclosure of wholesalemarkets and infrastructure by companies that can be qualified as incumbents, as

well as to collusion between those incumbents in the form of market sharing (seeMEMO/06/205 and MEMO/06/220). In December 2006, further inspections werecarried out at more than 10 premises of the four incumbent electricity generators andsuppliers in Germany (see MEMO/06/483). The suspected infringements relate topractices on the wholesale market and the balancing market (i.e. the market forensuring balance between power generated and consumed).

Further information on the sector inquiry is available at:http://ec.europa.eu/comm/competition/antitrust/others/sector_inquiries/energy/

Under the header Energy policy for Europe, Ministers will hold a policy debate, on abasis of a questionnaire of two questions, focusing on two priority areas addressedby the Energy Package, namely the internal market and sustainability.

Commissioner Piebalgs will open the debate with a presentation of the EnergyPackage. The elements of the package are:

- (a) An Energy Policy for Europe

- (b) Renewable Energy Road Map

- (c) Biofuels Progress Report

- (d) Report on progress in renewable electricity

- (e) Prospects for the internal gas and electricity market

- (f) Inquiry into the European gas and electricity sectors

- (g) Priority Interconnection Plan

- (h) Sustainable power generation from fossil fuels

-(i) Towards a European Strategic Energy Technology Plan

After the presentation, the Presidency will open the debate on the basis of these twosubjects.

- First part will be focused on the internal market aiming at identifying theconditions, which can guarantee functioning electricity and gas markets andsecurity of supply. Also which additional measures are necessary to guaranteeboth more competition and security of supply, including to the benefit ofconsumers.


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In its Communication on the Internal Market for Gas and Electricity, the Commissionproposed:

- New rules to avoid discrimination, for instance through a clearer separation ofenergy production from energy distribution. Two unbundling options areconsidered to redress the problem, the establishment of a fully independenttransmission system operator, and ownership unbundling. The commissionhas expressed its clear preference for ownership unbundling.

-The establishment of a new single body at EU level or, at a minimum, aEuropean network of Independent Regulators to facilitate cross-borderelectricity trade.

- The increasing of the powers and independence of national regulators

- The promotion of new infrastructures to eliminate bottlenecks, which typicallyoccur at borders between countries and develop interconnection betweennational markets. A number of the most problematic missing links has beenidentified, such as power links between Germany, Poland and Lithuania, off-shore wind power connections in Northern Europe, electricity connectionsbetween Spain and France, gas pipelines from the Caspian to centralEurope.

-New legislation to establish minimum requirements on transparency

- New Common minimum, binding network security standards.

- An Energy Customers' Charter, which will include measures to address fuelpoverty, information for customers to choose a supplier and supply options,actions to lower red tape when changing energy suppliers and to protectcitizens from unfair selling practises.

- In the second part of the council, ministers will debate on sustainability, withtwo main areas of discussion:

- First one is the choice of exisisting low-carbon technologies taking intoaccount the specific situations in the individual Member States

In its energy and climate change package, the Commission proposed that the

European Union commits now to cut greenhouse gas emissions by at least 20% by2020, in particular through energy measures. To reach this goal, the Commissionproposed a number of concreted actions based on a determinate reduction of energyconsumption (20% energy savings by 2020, according to the objective of the EnergyEfficiency Action Plan adopted in November) and the development of an energy mixbased in low carbon technologies. The Commission proposed a binding target of20% of its overall energy mix will be sourced from renewable energy by 2020. Thiswill require a three-fold growth in all renewable energy sectors: electricity, biofuelsand heating and cooling. This renewables target will be supplemented by a minimumtarget for biofuels of 10%. The Commission left to member states the choice or therefusal of nuclear energy but recommends that where the level of nuclear energyreduces in the EU this must be offset by the introduction of other low-carbon energy.

- The other element of discussion in the second part of the council tries toprioritise the research and development choices to be set in the EuropeanStrategic Energy Technology Plan, which was announced by the EuropeanCommission for the second half-year of 2007.


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In the communication on the Strategic Energy Technology Plan, the Commissionproposed three key objectives in the development of its energy technology: to lowerthe current cost of renewable energy, to facilitate the efficient use of energy and toplace European industries in the leading position in low carbon technologies. Thisincludes renewable energies such as wind, second generation biofuels and solar, aswell as sustainable coal and natural gas power plants, including CO2 capture andstorage, and, later still, fuel cells and hydrogen, advanced fission power and fusion.

All this should be done in combination with better use of energy in conversionprocesses, in buildings, industry and transport.

The Commission's view is that the increased budgets for energy research andinnovation of the 7th Framework Programmes (50%, from 574M/year to886M/year), as well as of the Intelligent Energy-Europe Programme (100%, from50M/year to 100M/year) for the period 2007-2013, are a first step in the rightdirection that Member States and industry should at least match.

Ministers will then be invited to adopt the Council Conclusions

At the end of the council, there will be a press conference after the Council chairedby the German Minister of Economics and Technology, Michael Glos, with EnergyCommissioner, Andris Piebalgs.

memo for road map of renewable energy

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