CLEAN ENERGY PACKAGE

Transcription

1 PRELIMINARY COMMUNICATION FROM THE FRENCH ELECTRICITY SECTOR CLEAN ENERGY PACKAGE The European Commission s legislative package Clean Energy for All Europeans meets the need to provide consumers with a more active role in controlling and steering their own consumption, while encouraging innovation and the emergence of new services. The European Union pursues its commitment to an ambitious clean energy transition, with and for European citizens. The French power system is committed to being a close partner in this endeavour, and welcomes a set of ambitious proposals, although they lack consistency. In particular, the proposed framework for renewable energies and energy efficiency has to be developed taking into account the impact of such policies on the ETS mechanism, central tool for reducing greenhouse gas emissions in Europe. The overlaps between different objectives pursued at EU level shall be carefully examined under the framework of the proposal for a regulation on the Governance of the Energy Union, in order to avoid increasing the cost of decarbonising European economies, at the expense of the consumers. Moreover, the opportunity of the Clean Energy Package must be seized to reconsolidate and rebalance European energy and climate policies, by replacing two major issues at the heart of the provisions for decarbonising the economy: securing EU electricity supply and achieving - under sustainable economic conditions - the investments required for a successful European energy transition. In this regard, the Commission s proposals include welcomed improvements for the integration and functioning of short-term markets, but set aside a necessary thinking on the energy market design, the current setup of which does not allow the emergence of long-term investment signals. Then, and with energy markets being more integrated, the reinforcement of regional dialogue and cooperation is crucial in order to guarantee a better security of supply for the EU. However, proportionality and subsidiarity remain necessary to address the deep mutation of electrical systems and national energy mixes, and shall be respected.

2 POSITIVE DEVELOPMENTS TO WELCOME The Commission rightfully addresses the issue of European industrial policy in relation to the clean energy transition, and includes for the first time the social and industrial component of this transition. UFE has underlined on several occasions the necessity to support the employment and skills transformation in the energy sector, as well as the economic changes for the regions impacted by the energy transition. The European Commission also wishes to enhance the European industrial potential of low-carbon technology innovation, fostering skill-based cooperation between sectors, including renewable energy and construction. These are promising proposals, considering that the structuring of the manufacturing, maintenance, equipment and installation sectors is crucial to enable the effective implementation of energy efficiency policies, reduce their cost and offer attractive career opportunities to energy sector employees. The Commission also provides a more flexible market environment, enhancing the participation of consumers and renewable energies on the market. In order to meet EU ambitions on clean energies, and achieve the objective of 27% renewable energy in EU electricity consumption towards 2030, the Commission strengthens the associated governance framework and introduces simplification measures ( one stop administrative shop ) aiming at facilitating the energy transition. In this new environment, the role of distribution system operators as market facilitators is reaffirmed: the large-scale roll-out of smart meters, already under way in France, will be the first step of this evolution. The European Commission proposes to introduce a common set of rights for EU consumers, related to information, market participation, and protection against unfair business practices. The Commission also addresses the growing issue of fuel poverty in Europe, and recognizes the fundamental need to preserve a flexible framework, that allows Member States to adopt adequate measures. The French Union Electricity warmly welcomes these developments.

3 THE NEED FOR A GREATER CONSISTENCY BETWEEN PURSUED OBJECTIVES AND PROPOSED INSTRUMENTS However, in order to guarantee that European consumers will fully benefit from a clean, safe, and affordable energy, and to guarantee the realization of necessary long-term investments, the European Commission s proposals must become more consistent. A strong ETS is needed, in order to really be the central tool for an efficient energy transition, at the least cost European energy efficiency policies must be correlated with CO2 emissions reduction and target the sectors with the highest potential for the reduction of carbon intensive energy uses (e.g. transport and construction). The carbon price-signal set at the European level must be ambitious enough to reach at the least cost CO2 emissions reduction targets, while promoting energy efficiency actions. If, on the contrary, the price of CO2 remained at its current level, a more ambitious and binding European energy efficiency objective (30%) could be counter-productive, both for the economy and the climate. For this reason, UFE insists on the importance of strengthening the consistency of energy efficiency and greenhouse gas emissions reduction policies, through a robust reform of the EU ETS. However, this does not exclude, rather the opposite, an accurate targeting of those policies, which require a necessary prioritization of cost-effective energy efficiency measures, in the sectors with the highest potential for energy savings. In this respect, the European Commission rightfully recognizes the under-exploited contribution of the heating and cooling sector to the transition towards a low carbon economy. Finally, the UFE emphasizes that the ETS mechanism must be the key tool for CO2 emissions reductions, at the European level. In this regard, the proposal to include a CO2 emissions cap among eligibility criteria for capacity mechanisms can be questioned, as it mixes the tools for reaching security of supply and decarbonisation objectives. Renewable energies are progressively integrated into the market, but technology specific calls for tenders are still necessary If the European Commission s proposals aim to progressively integrate renewable energies into the market, they do not provide sufficient visibility on the evolution of support schemes -after 2020, a crucial aspect to secure future investments and guarantee that 2030 objectives will be reached. With the current state of technologies and market functioning, technologically neutral calls for tenders would lead to selecting renewable energies based only on their average cost of production. However, the robustness of the electricity system also relies on generation assets complementarity (base load, peak load, variability profiles ) A technology mix therefore remains necessary to withstand meteorological fluctuations and guarantee security of supply. Today, only the possibility of technology-specific calls for tenders can guarantee a consistent development of renewable energies, in line with their gradual integration into the market and with the needs of the power system.

4 The emergence of long-term price signals is indispensable for investors to guarantee security of supply Over the last ten years, short-term wholesale electricity prices have fallen drastically, as a result of a reduction in demand due to the economic crisis, public policies favoring energy efficiency, the financially supported introduction of new low-carbon generation capacities with low variable costs, low commodity prices, and a very weak carbon price signal. These wholesale prices are now far below the level that is necessary today for the long term financing of new conventional or renewable generation assets. Without a swift introduction of capacity mechanisms able to deliver adequate long term price signals, operators will keep on closing or mothballing capacities which could be necessary and cost efficient for security of supply. They will also scale down their investment programs in new assets and demand response solutions. Last May 2016, eight associations in the French, German, Belgian, British, Irish, Italian, Portuguese, and Spanish electricity sectors issued a strong alert to the European Commission on this situation. In this regard, and as a positive development, the Clean Energy Package includes a legal recognition of those mechanisms, and first signs of a European framework. However, it does not address the lack of medium- and long-term pricing to support investment, but rather the opposite. In the first place, the European Commission conditions the implementation of capacity mechanisms to the sole outcome of the adequacy assessment carried out by ENTSO-E. This proposal contradicts the conclusions of its own Interim Report of the Sector Inquiry on Capacity Mechanisms, which acknowledges, for the British and French cases, the relevance of the adequacy assessments led by National Grid and RTE, which both integrate the regional dimension. The same report underlines the need to improve the methodology of adequacy assessments carried out at the European level, before they can be considered sufficiently reliable. UFE therefore supports a progressive harmonisation of the tools for a better understanding of adequacy needs at regional and European levels, but underlines that security of supply must remain under Member State responsibility. They should be able to assess the need for capacity mechanisms based both on regional adequacy assessments and on a more refined assessment, carried out at a national level. Beyond the strong doubts on the added value of such an approach, the stop and go framework proposed by the Commission will strengthen the state of uncertainty hanging over market actors, thus jeopardising the emergence of vital investments for EU security of supply. Finally, UFE wishes that capacity mechanisms, whether there are market-based or strategic reserves, shall be bound by the same regulatory requirements, especially regarding cross-border participation. The development of innovative offers and services must be enabled to reveal the value of flexibility on the market UFE supports the European Commission s intent to offer a wide array of choice to consumers but considers that the proposed provisions are not necessarily in line with the stated objective. UFE sees dynamic pricing offers and explicit promotion of demand response as two complementary means to value flexibility. However, in order to respond and innovate in line with consumer needs, suppliers should remain free to propose, or not, dynamic pricing offers. The proposed framework for demand response should also be revised, to ensure that aggregators are responsible for balancing, on a level playing field with other actors of the power system. In this regard, an aggregator should compensate the expenses of generation or energy acquisition engaged by the suppliers of the clients valuing their flexibility. Besides the lack of clarity of the proposed framework, regarding the integration and promotion of aggregation services on the market, the European Commission paradoxically introduces a legal uncertainty that could hinder the development of such new services.

5 THE RIGHT BALANCE OF RESPONSIBILITIES BETWEEN LOCAL, REGIONAL, AND EUROPEAN LEVELS IS NEEDED Then, and with energy markets being more integrated, the reinforcement of regional dialogue and cooperation is crucial in order to guarantee a better security of supply for the EU. The French Union of Electricity insists on the need for a tiered approach along with a clear and efficient articulation between national, regional, and European levels of governance, in line with the principle of subsidiarity. Any transfer of competences from one level to the other should be justified by an in-depth cost-benefit analysis, in order to guarantee that the benefits for European consumers are higher than the implementation and transition costs. In this regard, the Commission s proposals need to be rebalanced. While the creation of an EU DSO entity, associating distribution system operators to the European governance framework, is a significant progress, other aspects of the framework proposed must be substantively improved. On the establishment of Regional Operation Centers (ROCs), UFE regrets the lack of distinction between analytical and operational missions that could be delegated to these entities. The transfer of specific analytical tasks can be justified for the integration of the Internal Energy Market at the regional level: most of them are actually already part and parcel of the services proposed by the Regional Security Cooperation Initiatives (RSCIs). Initially developed at the initiative of European TSOs, this model of voluntary cooperation is now part of a Regulation establishing a guideline on electricity transmission system operation, the System Operation Guideline. In line with this regulation, the major analytical functions mentioned above will be entirely covered by these regional entities by On the possibility to delegate some operational functions, ROCs should be able to provide expertise and advice services, but should by no mean contradict the capacity of TSOs to ensure the stability of the system close to real time. Indeed, when it comes to security of supply, it is crucial not to dissociate operational decision and responsibility, and both should remain TSOs prerogatives. Instead of setting up a framework that would be too binding and systematic, UFE favors supporting and building upon the success of ongoing voluntary cooperation initiatives between transmission system operators, whose efficiency and performance also relies on the flexibility and agility of their structure. That is all the more relevant in a context of transition towards a more variable and decentralized energy system, in which UFE would like to stress the key role played by transportation and distribution system operators, to ensure the stability of the electricity system at the benefit of European consumers. Likewise, the Commission s will to foster transparency and regional cooperation for interconnection projects is well-intentioned, but provisions on the use of congestion rents prove counter-productive. Indeed, keeping congestion rents in specific separate accounts would deprive consumers from the benefits of investments that they yet have financed through network tariffs, and the development of new interconnection projects might be hindered. (Or even worse, this could encourage the development of non-profitable interconnection projects burdening the consumer s bill). The UFE considers that provisions addressing the decision-making process and funding modalities for interconnection projects should rather be addressed consistently within the framework of the Infrastructure Package revision. Finally, the evolution of the Agency for the Cooperation of Energy Regulators (ACER) should also take into account the need for a balanced governance framework at national and European levels, fostering a better cooperation between national regulators, in order to secure the development of a consistent European regulatory framework, and to set up the right environment for a successful energy transition.

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