“The Energy Union house is now ready”
Caspian Energy (CE): Mr. Šefčovič, how has the 2016 year been running for the European Commission? Have you succeeded in achieving all the objectives on delivery of the Energy Union?
Maroš Šefčovič, Vice-President for Energy Union: I will remember the 2016 as a year of fundamental change, moving us away from centralized fossil-fuel-based systems built some 100 years ago. Over the past 2 years, we’ve been building the Energy Union “house” floor after floor and at the end of 2016 we finally added the roof. Thus we delivered the most robust package in the history of EU´s energy and climate policymaking, entitled “Clean Energy for all Europeans”. It is a piece of well-rounded Energy Union legislation supplemented by a far-reaching set of facilitating measures to create necessary conditions implementing the Energy Union in practice. The Energy Union house is now ready, its residents can move in, as long as our co- legislators – the European Parliament and the Council - give their final approval.
At the end of 2016 we finally added the roof…
We have also advanced with development of cross-border capacities in gas, allowing hub-based pricing to expand further whilst enhancing market integration and energy security. EU´s gross inland gas consumption manifested the growing role of gas as a support fuel to renewables. In comparison to 2013 and 2014, diversification of gas supplies improved, especially in central European and Baltic countries.
However, some Member States are still fully or predominantly dependent on supply from a single third country, notably Bulgaria, Estonia, Finland, Hungary, Lithuania and Slovakia, in particular for gas but often for oil and/or coal, too.
In comparison to 2013 and 2014, diversification of gas supplies improved, especially in central European and Baltic countries
It is exciting to see that the European society is after 300 hundred years of industrialization moving towards low-impact, sustainable existence. EU emissions are now 22% below the 1990 whilst its GDP has grown by 50% since. This means we have successfully decoupled emissions from our economic growth and continue to be the most greenhouse gas efficient economy among the G20.
The climate change clock is ticking and it cannot be stopped. The question is not what should be done, but how quickly we can do it. Therefore, in 2017 we will shift our focus to speedy implementation of the comprehensive legislation we proposed last year.
I am not afraid that building of secure Energy Union would be in stake
CE: What implications do you see for the energy security of the European Union from Brexit, the political turbulence in Italy, France and elections in Germany in 2017?
Maroš Šefčovič: History taught us that unity is the key to European security. And the energy field is no exception. Remembering the much greater obstacles that have been overcome in the history of Europe, the Energy union offers a long-term advertisement for the virtues of the European Union and our democracy. Energy Union is a project which brings a great deal of certainty and benefits to all European citizens while respecting the differences between member states.
Energy customers are in the centre of our actions. Energy Union is putting industrial, residential and commercial consumers first by allowing them to be active actors via demand-response, decentralized renewables electricity production and free flow of energy in Europe. Even if politics introduce changes into lives of European citizens, thanks to Energy Union they will stay protected from energy poverty, they will be free to choose their supplier or generate their own energy with profit. Thanks to stronger interconnection of energy network they will not be endangered by living in a potential energy island. Equally important is further strengthening of relations worldwide with reliable energy-producing and transit countries and support establishment of infrastructures that allow diversified sources to reach the European markets.
In 2017 we will continue implementing our road map, adopted as part of the Energy Union Strategy in February 2015, with focus on legislation on low-emission mobility and transport. Whatever the future holds, I am not afraid that building of secure Energy Union would be in stake. I believe in EU which truly is united in diversity and could not think of better example for this motto than the Energy Union.
CE: Are there going to be any changes in the provisions of the European Commission’s Third Energy Package? Which novelties do new rules on signing gas agreements with the third countries imply?
Maroš Šefčovič: Our newest package “Clean Energy for All European” proposed changes to the provisions related namely to the internal electricity market.
An important dimension of the new Electricity Market Directive is protection and empowerment of consumers. Adequate warmth, cooling, lighting and the energy to power appliances are essential services to guarantee a decent standard of living and citizens’ health. Furthermore, access to these energy services empowers European citizens to fulfill their potential while at the same time enhances social inclusion. According to the new rules, we proposed, Member States will have to adopt policies helping the energy poor and introduce the procedural guidelines stricter to limit the number of household disconnections.
We also ask Member States to adopt legal frameworks enabling a free and barrier-less development of local energy communities where citizens can establish their own energy provision at the local level. Such local energy arrangements should be of interest to environmentally conscious communities who are not satisfied with sustainability goals of the incumbent energy companies, or who simply believe they can organize sustainable energy production better themselves, for and with the locals. At the same, we hope unleash a surge in switching rates which are a good proxy increased retails market competitiveness. Therefore, suppliers will be obliged to facilitate switching within 3 weeks of consumers request without termination fees, except for instances of early fixed contract termination.
Renewable technologies are mature enough to compete with conventional generation
Support schemes should also become more market-oriented, cost-effective and open to cross border participation. Renewable technologies are mature enough to compete with conventional generation.
When concluding the proposed Intergovernmental Agreements, Member States must take utmost account of the Commission’s opinion
The decision on Intergovernmental agreements has been adopted just before Christmas. Practice has shown that renegotiating Intergovernmental Agreements, once they have been concluded, is very difficult - to the detriment of the Member State concerned and the European Union. This legislation will ensure that rather than assessing whether international agreements comply with EU law after they are signed, Member States will now do so in advance. Moreover, when concluding the proposed Intergovernmental Agreements, Member States must take utmost account of the Commission’s opinion. This is a big political and legislative achievement.
CE: What changes are expected in the “winter package” containing a series of proposals concerning the EU’s energy policy?
Maroš Šefčovič: To support reaching 2030 Framework for climate and energy targets (a 40% cut in greenhouse gas emissions compared to 1990 levels, at least a 27% share of renewable energy consumption and at least 27% energy savings compared with the business-as-usual scenario) the European Commission introduced in November 2016 the Clean Energy for All Europeans package, sometimes called «winter package» aiming to modernise the economy and accelerate the transition to a low carbon economy through a range of policies and instruments reflected under the Energy Union Strategy. As a result of the package Member States need to respect binding targets to cut their emissions by 30% (compared to 2005). The EU emissions trading system remains to play a key role in the EU’s policy to combat climate change.
The package introduces a new transformational paradigm towards de-centralised, clean power production with consumers at the centre-stage. The new legislation ensures the right of every individual to produce renewable energy, self-consume, store and/or sell it into the grid and earn fair revenue from this. One of the goals is to gradually phase out price regulation in order to encourage competition. In the core of the package are measures to protect consumers in general and specifically vulnerable groups who are more at risk of energy poverty.
The package is not only about legislation. It also includes facilitating actions (smart finance for smart buildings initiative, a clean energy innovation strategy, measures supporting research and innovation) which aim at producing short to medium term impact.
TAP project is on time despite delays in the region of Puglia
CE: Currently the Netherlands legislatively limits gas production, the gas production in the UK is falling and the uncertainty around US energy supply is increasing. Given this background, how do you evaluate the increased risks of implementation of the Southern Gas Corridor (TAP) project in Italy (Puglia Region)?
Maroš Šefčovič: Gas remains playing an important “bridge” in Europe’s energy transition. Natural gas pollutes half as much coal and therefore is a key part of transition from more polluting fossil fuels to cleaner sources of energy. Gas therefore can serve as back-up to renewable energy sources and plays also a key role in the decarbonisation of the transport sector as an alternative fuel for trucks and ships. Therefore, gas continues to be important in EU energy mix (23% in 2015 – 430 bcm a year). In terms of our future demand by 2030 – we estimate to consume more-less the same volume (370 bcm to 440 bcm).
TAP has a capacity to offer Europe new economic opportunities not just by increasing a level of gas sources delivered to the country; the pipeline will bring employment opportunities to highly skilled technicians and engineers as well as investments into local communities. Further decentralization of gas supplies will foster competition in the European market and decrease a wholesale price for consumers. TAP is being consulted extensively with the relevant authorities and makes construction progress.
Azerbaijan is an important energy partner for the EU
CE: Can the outcomes of the referendum in Italy affect the implementation of the TAP project and the Southern Gas Corridor in general and how can the European Commission influence the present situation legally?
Maroš Šefčovič: The Southern Gas Corridor is a strategic initiative to bring Caspian gas resources to the European markets. This diversification objective has been emphasized both in the European Energy Security and the Energy Union strategy. The key projects of the Southern Gas Corridor, the expansion of the South-Caucasus Pipeline, TANAP and TAP have been identified as Projects of Common Interest and have been also included in the list of critical projects under the European Energy Security Strategy. Azerbaijan is an important energy partner for the EU, currently supplying around 5% of the EU’s oil demand but Azerbaijan’s pivotal role is related to its position as an ‘‘enabler’’ of the Southern Gas Corridor to bring Caspian gas resources to the EU markets. Its timely completion is critical, so that gas from the new suppliers can flow to Europe by 2020.
We follow up every advancement on TAP construction very closely
As stated in the Energy Union framework strategy, energy diversification is crucial for ensuring secure and resilient energy supplies to EU citizens and companies. In this context, the European Union is particularly committed to diversification of gas suppliers (countries), counterparties (companies) and routes. TAP will not only increase the supply. It will also strengthen economic cooperation between EU and neighbourhood countries by opening possibilities for building new interconnectors and storages.
We follow up every advancement on TAP construction very closely. The economics and technicalities of the project do not pose any barriers at the moment and the project is on time despite some delays related to the landing point in the region of Puglia.
In order to successfully coordinate the implementation of the Southern Gas Corridor, the President of the Republic of Azerbaijan Mr. Ilham Aliyev established the Southern Gas Corridor Advisory Council, co-chaired by the European Commission; the 3nd Ministerial Meeting will be held in Baku on 23 February.
The invited participants to the meeting are the Ministers of Energy of Albania, Azerbaijan, Bosnia and Herzegovina, Bulgaria, Croatia, Georgia, Greece, Italy, Montenegro, Serbia and Turkey, representatives from United Kingdom and the United States, as well as senior executives of shareholder companies of the Shah Deniz Upstream and the South Caucasus Pipeline Expansion projects, Trans Anatolian Pipeline and Trans Adriatic Pipeline projects, and other participants including central global and European financial institutions.
EU is the global leader on climate action
CE: How far has the European Union progressed in achieving the climate goals?
Maroš Šefčovič: I am proud to say the EU, which played a decisive role in building the so-called Coalition of Ambition making the adoption of the Paris Agreement possible, is the global leader on climate action. We are more ready than ever to drive the global innovation and clean energy transition. The EU will remain proactive in the international climate negotiations to ensure that the ambition set by the Agreement is translated in all its implementing elements.
Domestically the EU has very ambitious emissions reduction targets for 2030: a 40% cut in greenhouse gas emissions compared to 1990 levels, at least a 27% share of renewable energy consumption and at least 27% energy savings compared with the business-as-usual scenario.
Among the first measures we adopted under the Energy Union Strategy was the legislation on the EU emissions trading system (EU ETS) which is a cornerstone of the EU’s policy to combat climate change and its key tool for reducing greenhouse gas emissions cost-effectively and reform of non-ETS sectors - concerning emissions from sectors not included in the EU Emissions Trading System, such as transport, buildings, agriculture and waste. In 2016, we also presented a European low emission mobility strategy with a clear ambition: by mid-century, greenhouse gas emissions from transport should be at least 60 % lower than in 1990 and be firmly on the path towards zero, while ensuring the mobility needs of people and goods as well as global connectivity. As already mentioned above, these measures are going to be complemented by the Clean Energy for All Europeans package, introduced by the European Commission last November.
Recently published the Second Report on the State of the Energy Union shows that the modernisation of the European Union economy and the transition to a low-carbon era are happening. In terms of greenhouse gas emissions, energy efficiency and renewable energy, Europe is on track to reach its 2020 targets. In 2015, EU greenhouse gas emissions were 22% below the 1990 level. The EU is also on track in the renewable sector where – based on 2014 data – the share of renewables reached 16 % of the EU’s gross final energy consumption. In a fast-changing geopolitical environment, a successful Energy Union is crucial to protect the long term economic interests and well-being of Europe and of Europeans. That is why work on the Energy Union in the past months has included a reinforced focus on energy diplomacy, designed to strengthen security of energy supply, to expand exports of EU low carbon technology solutions and to boost Europe’s industrial competitiveness.
Thank you for the interview