BRUSSELS INSIDER #1 - August 7, 2018
Note: our EU correspondent Sonja van Renssen is on holiday as long as the Parliament is not in session. We are providing an overview of relevant EU energy news instead.
French President Emmanuel Macron has said increased power links with Spain can be part of a bigger plan for reducing carbon emissions in energy generation, reports Bloomberg.
“The issue of energy interconnections needs to be seen within a broader strategy of sovereignty and the much broader energy transition,” Macron said in Lisbon, where he reiterated that France plans to close coal plants by 2022.
Macron spoke at a joint press conference with Portuguese Prime Minister Antonio Costa and Spanish Premier Pedro Sanchez following a meeting between the three countries about improving energy interconnections between the Iberian Peninsula and the rest of Europe.
“The leaders signed an agreement on European Union grants totaling €578 million for a power line crossing the Bay of Biscay that will double the electricity exchange capacity between France and Spain by 2025.”
Macron also said Spanish and French regulators “will study if it makes sense to have a new natural gas pipeline link between the two countries. There are already two gas pipelines linking those nations. Beyond links to Spain, Macron said the three governments agreed to work on possible links with African countries that could lead to greater interconnections in Europe.”
Europe added 4.5 GW of wind energy in the first half of 2018, according to figures released by Wind Europe. This is down on last year (6.1 GW), but “in line with expectations”, says Wind Europe.
There was 3.3 GW of onshore wind, driven by Germany (1.6 GW), France (605 MW) and Denmark (202 MW). The 1.1 GW of offshore wind was mainly in the UK (911 MW), Belgium (175 MW) and Denmark (28 MW). Germany is set to install new offshore wind in the second half of the year.
For the whole of 2018, Wind Europe expects to see 3.3 GW new offshore wind and 10.2 GW of onshore wind. This will mean 13.5 GW of new wind capacity in total for the year.
WindEurope Chief Policy Officer Pierre Tardieu said: “We are on track for a solid year in new wind farm installations but the growth is driven by just a handful of markets. The figures also mask some worrying trends. France has installed a lot of new onshore wind this year but they haven’t issued a single new permit for onshore wind permit in the last eight months because of an administrative issue – which has also resulted in their latest auction being under-subscribed. So there’ll be a drop-off in their new build now, creating uncertainty in the supply chain.”
“In Germany it’s good that projects now need a permit to bid into onshore auctions, but that rule now needs to be made permanent. Also, there’s no clarity yet on when the 4 GW new onshore wind promised in the coalition agreement for 2019-20 is going to be auctioned. And the new Government is slow in confirming the auction volumes beyond that. Like all Member States they now need to give five years’ visibility on future auction timetable and volumes – under the terms of the new Renewables Directive.
“And in offshore wind, Europe is too dependent on the UK, which is striding ahead in current installations and in committing to future volumes. By contrast, the rate of new installations has slowed down in Germany. Other countries also need to beef up and speed up their plans on offshore wind.”
Spain’s coal mining companies may have to pay back up to €2bn in government subsidies, after environmental groups alerted the European Commission that they could be using the money to support their ongoing activities, rather than to close down, according to a press release from NGO ClientEarth.
Under the Mine Closure Plan, the majority of Spain’s hard coal mines need to close down by the end of 2018, notes ClientEarth. “The government has granted subsidies in excess of €2.1bn to help them do this. But it seems that the companies may be finding ways to use the funds to suit their own ends. ClientEarth warned of this when the closure plan and associated subsidies were approved in 2016.
The aid is given on a ‘no closure, no cash’ basis: receipt of the money is conditional on a commitment to the mines in question closing by the end of 2018. With reason to believe the aid is being misused, NGOs IIDMA, Ecologistas en Acción and ClientEarth have written to the Commission.”
ClientEarth energy lawyer Sam Bright said: “Spanish coal mining companies are receiving significant sums of public money to help them shut down, on the condition that they close their mines by the end of 2018.
“If they were trying to wriggle out of this agreement – taking the money but ignoring their promise to close down – this would be totally unacceptable and a huge waste of public money. This is why we have alerted the European Commission – it has the power to hold the Spanish authorities to account.”
IIDMA lawyer Carlota Jover said: “If mines are using State aid in a way that is contrary to the law, it undermines the objective of the Mine Closure Plan. It is urgent that Spain and the government of Asturias now work to ensure a just transition for mining regions and workers.
“These unprofitable mines are a sinkhole for aid that should be helping to ensure a just transition. We call on the European Commission to monitor the destination and end use of these subsidies, and ensure they are being used as the law and the Mine Closure Plan lays out.”
The European Commission is referring Germany to the Court of Justice of the EU to ensure a correct implementation of the Electricity Directive (Directive 2009/72/EC) and of the Gas Directive (Directive 2009/73/EC). Both directives are part of the Third Energy Package and contain key provisions for the proper functioning of energy markets, the European Commission has announced.
“Germany has not ensured full respect of rules concerning the powers and independence of the national regulatory authority”, notes the Commission. “In particular, the regulator does not enjoy full discretion in the setting of network tariffs and other terms and conditions for access to networks and balancing services, since many elements for setting these tariffs and terms and conditions are to a large extent laid down in detailed regulations adopted by the Federal government.”
“Furthermore, Germany has incorrectly transposed into national law several requirements concerning the independent transmission operator (ITO) unbundling model. For example, the rules on the independence of the staff and the management of the ITO do not fully respect these Directives and the definition of vertically integrated undertaking incorrectly excludes activities outside the EU.
A letter of formal notice was sent to Germany in February 2015, followed by a reasoned opinion in April 2016. Since compliance with EU law is not yet in place, the Commission has to refer these matters to the Court of Justice.”
The Commission is also referring Hungary to the Court of Justice of the EU to ensure a correct implementation of the Third Energy Package’s requirements on network tariffs. “The Third Energy Package requires that tariffs applied by network operators for the use of electricity and gas networks are regulated in order to prevent anti-competitive behaviours, and entrusts national regulatory authorities with the task of setting these tariffs or their methodologies”, writes the Commission. “After it assessed the legislative measures adopted by Hungary in the energy field, the Commission found that Hungarian law excludes certain types of costs from the calculation of network electricity and gas tariffs, in violation of the principle of cost-recovery of tariffs provided for in the Electricity and Gas Regulations.”
“In addition, the Commission found that Hungary adopted amendments to its energy legislation which jeopardise the right of market operators to a full judicial review of the national regulator’s decisions on network tariffs. The Commission addressed to Hungary a letter of formal notice on these issues in February 2015, and two reasoned opinions, respectively in December 2016 and April 2017. Since compliance with EU law is not yet in place, the Commission has decided to refer these matters to the Court of Justice.”
Analysts “have raised their forecasts for carbon prices in the EU Emission Trading System (ETS) to 2020 after a bullish start to the year and on expectations that plans to reform the market will significantly curb oversupply”, reports Reuters.
Analysts expect EU Allowances (EUAs) to average 18.59 euros/ton in 2019 and 20.76 euros/ton in 2020, according to the survey of eight analysts by Reuters published on Monday. The forecasts were up 34 percent and 13 percent, respectively, from prices given in April, when the forecasts were for 13.86 euros for 2019 and 18.36 euros for 2020.
Analysts “also for the first time gave forecasts for 2021 which averaged 21.88 euro/ton, almost 30 percent higher than current trading levels for the benchmark European carbon contract.”