Coordination Time for EU policies on Energy Technologies and Innovation - New Communication from the Commission

On 2 May 2013, the European Commission published yet another communication aimed to draw the lines of the future European low carbon strategy in the time-frame 2030/2050. Entitled Energy Technologies and Innovation (COM(2013) 253 final), this Communication looks at the manner the EU should coordinate its technology and innovation strategy in order to reach energy and climate goals.

The need for new technologies

The first question addressed by the Communication relates to the need for new technologies. The Communication starts with a straight YES, we do need new technologies because they are "vital to achieve all of the EU 2020 objectives in energy, climate, economic and social policy" (p.2). It reiterates here stances taken in two previous communications in 2007 and 2009, namely: Communication on SET Plan (COM(2007) 723) and Communication on Investing in low carbon technologies (COM(2009) 519).

Although the need for technological innovation is continuous, some believe that we primarily need to deploy further the technologies we already have and which will suffice to reach the targets. The diffusion of green technologies - like any diffusion of innovation (see works by E. Rogers) - is as much a question of competitiveness, financing, support to commercialisation, foreign investment policy, patents than absorption capacity and infrastructures. Therefore innovation policy should not be thought in an isolated way, but as part of an industrial and growth strategy. The Communication tends to do so, but could have gone a step further in developing a holistic approach. See for example p. 2: "The EU needs to further reinforce the role of technology and innovation within the energy policy, not just with specific technologies, but also by triggering new business models, market and social adaptation and energy system improvements..."

To put things into a global perspective, the Communication could also have referred to the definition given in Agenda 21, Chapter 34 of "environmentally sound technologies" which "protect the environment, are less polluting, use all resources in a more sustainable manner, recycle more of their wastes and products, and handle residual wastes in a more acceptable manner than the technologies for which they were substitutes." Instead, the Communication refers to "new, high performance low-cost, low-carbon sustainable energy technologies," which could be explained by a clear on energy technologies more than environmental technologies in a broad sense.

The role of the EU in energy technology and innovation

A second question raised relates to the role and ultimately competence of the EU in acting on innovation for achieving energy goals. This is dealt in relation to the completing role that an EU technology strategy has in addition to the EU legislation already in place. This position is probably the most ambitious in the Communication, referring to an "EU's energy technology and innovation policy" and which refers itself to issues of competences of the EU in areas of innovation and research. This is not explained further in the Communication, but one can refer to the call made by the European Council in 2008 for a European Plan for Innovation (cf. para. 18 of the Conclusions).

Combined together, the two questions make it wonder what will be the purpose of the "EU's energy technology and innovation policy". Is it to help developing new technologies, "reducing costs" or "speeding up the introduction of new sustainable technologies to the market". These are different policy orientations. The answer given by the Communication is that it should be all of this concomitantly, answering "the need for an integrated research and innovation chain at EU level that spans from basic research to market roll-out" (p.7).

A "European energy technology and innovation strategy" to 2020 and beyond, a definition

Part 3 of the Communication recalls this plural goal that the strategy should pursue:

1. accelerate innovation in cutting edge low carbon technologies and innovative solutions

2. bridge the gap between research and the market

The "Key principles" are further defined as follows:

• Adding value at the EU level
• Looking at the whole energy system when setting priorities
• Integrating actions along the energy innovation chain and strengthen the link with energy policy
• Pooling resources and using a portfolio of financial instruments
• Keeping options open, while concentrating on the most promising technologies for post 2020

The way forward: proposed implementing measures

An Integrated Roadmap will be the central instrument in addressing energy system and innovation chain integration. It should "cover the entire research and innovation chain from basic research to demonstration and support for market roll-out." It should fall under the guidance of the SET Plan Steering Group and incorporate the key principles and measures described in the Communication. The first Integrated Roadmap should be developed by the end of 2013. The SET Plan will itself remain the central implementation instrument to address the identified challenges, but it needs to be reinforced and adapted to changing needs, as other initiatives like the European Industrial Initiatives and the European Technology Platforms.

An Action Plan should be developed by the Member States and the Commission on the basis of the Integrated Roadmap. It should define coordinated and/or joint investments by individual Member States, between Member States and with the EU. The Communication stresses several times the difficulties encountered by both national budgets and private investments, and proposes to better coordinate investments between the two. It also proposes to "go beyond grant programmes and include financial engineering instruments and procurements." The Action Plan should be developed by mid-2014.

The implementation of the Integrated Roadmap and the Action Plan should be monitored through the Strategic Energy Technologies Information System (SETIS), created under the SET Plan and based on a system of data reporting.

A coordinated structure under the responsibility of the Steering Group of the SET Plan should ensure the promotion of investments in research and innovation on energy efficiency.

Other areas of improvement are identified. Of particular interest is the manner EU's external action should reflect and "strengthen" the "EU's excellence and attractiveness as a research partner" (p.12).

What is already in place at EU level

The first part of the Communication describes the measures already adopted by the EU in the matter of technology and innovation applied to the energy sector. Among them are:

- EUs energy legislation - It concerns first the completion of the internal energy market, where new technologies and services will find open and competitive conditions, with renewed energy infrastructures in need of new technologies the integration of which is supported by the network codes currently under adoption and a flexible consumer market (IT-technologies, smart metering, energy efficiency, etc.). It covers also support to technologies within the sector of renewable energy, low carbon and safer nuclear energy.

- EUs action in setting framework conditions for research and innovation, through the initiative Innovation Union  (A Europe 2020 flagship initiative) and  the European Research Area;

- EU's Strategic Energy Technology (SET) Plan, notably defining priorities in European research, in accordance with policy goals, and supporting financially the selected projects under the 7th Research Framework Programme (FP7).

- Intelligent Energy Europe (IEE) Programme, focusing on "market update of technologies and ... non-technological barriers (financial, regulatory and administrative)", in particular in the sectors of energy efficiency and renewable energy.

- Public-Private Partnerships and Joint Undertaking

- Risk Sharing Finance Facility (RSFF) for improving access to debt financing

- Regional and Cohesion policy, contributing to building a regional approach for investment in energy efficiency and renewable energy (e.g., the Wave Hub in South West England or the Green Building Cluster in Lower Austria);

Find out "a system approach"

Based on the review of both the existing mechanisms and initiatives, and the proposed new measures, the Commission seems to propose mostly transitory solutions and guidance instruments on the background of a much more ambitious inspiration towards an EU energy technology and innovation strategy. The Commission calls itself upon the definition of "a system approach" which may need further adjustments if the Member States backs this high ambition level.

Photo credits: European Union (c) 2013 . European Commissioner for Research, Innovation and Science, Maire Geoghegan-Quinn, visiting organic solar films manufacturer in Germany, December 2012.

State Guarantees for Publicly-Owned Electricity Utilities: Iceland Constrained to Change Rules by EFTA Surveillance Authority to Be Compatible with State Aid Regime

EFTA Surveillance Authority (ESA) announced on 24 April 2013 that it had decided to close a case concerning the qualification as state aids and legality of state guarantees granted to two publicly-owned electricity utilities in Iceland, namely Landsvirkjun and Orkuveita Reykjavíkur.

The previous Icelandic rules provided unlimited state guarantees to the two publicly owned electricity utilities, which was considered by ESA as state aids incompatible with EEA law.

To put an end to the investigation, Iceland had to change its rules for the attribution of state guarantees to these undertakings. The main changes adopted relate to:

- the end of unlimited state guarantees for the two publicly-owned electricity utilities;

- the payment by the two companies of a "state guarantee premium" equivalent to the benefits derived from the state guarantee, to be adjusted each year;

- the prohibition from getting a guarantee covering more than 80% of either an outstanding loan or financial obligation;

- the prohibition to include any performance guarantee in any new power purchase agreement.

Although the decision from ESA in the case has not yet been made public, it is worth reminding the legal basis for such assessments which are based on both Treaty provisions and guidelines.

In addition to the general prohibition of state aids defined in Art. 61 EEA Agreement (equivalent Art. 107 TFEU), ESA has adopted guidelines on different specific aid instruments which can qualify as state aids, the compatibility of which must be assessed in a transparent manner (which is the purpose of the guidelines). ESA follows closely the practice of the European Commission on this matter.* One of these instruments is the granting of state guarantees. As indicated in the guidelines, state guarantees can take various forms and are usually "associated with a loan or other financial obligation to be contracted by a borrower with a lender; they may be granted as individual guarantees or within guarantee schemes."  The nature of state guarantees varies very much, and includes among other categories: general guarantees (i.e. not linked to a specific transaction) like a loan or equity investment; guarantees related to a specific instrument (i.e. not related to the nature of the undertaking); guarantees originating from a contractual source; unlimited guarantees (such as in the case at stake in Iceland) granted for unlimited period of time and for an unlimited amount. The Guidelines define then methodologies for calculating the aid element in the guarantee and simplified rules for SMEs. Note that the compatibility as such of state guarantee qualified as state aid is not addressed by the guidelines on state guarantees, but by the guidelines applicable to each sector as well as in the General Exemptions Regulation.

The granting of state guarantees is a relatively common practice (see recent temporarily - due to national financial situation - approval by the Commission of a EUR18 billion state guarantee to cover Credit Immobilier de France's liquidity, February 2013). The Court of Justice of the EU has also previously discussed the (un)enforceability for the borrower of state guarantees recognised incompatible with state aid rules. In a previous state aid case in the energy sector, the Commission obtained that France removed an unlimited guarantee which it had granted to EDF (December 2003). ESA's decision will contribute to clarify applicable rules in the energy sector.

*See i.a. Commission Notice on the application of Articles 87 and 99 of the EC Treaty to State aid in the form of guarantees (OJ C 155, 20.06.2008, p.10, as corrected).

Source: see press release from ESA here.

"Miljøteknologiportalen": Nytt Verktøy for å Finne Riktig Offentlig Finansiering

Innovasjon Norge, gjennom Programråd for miljøteknologi (oppnevnt av regjeringen), har etablert Miljøteknologiportalen (http://www.miljoteknologi.no/) som et nytt portal for å hjelpe bedriftene til å finne den riktige offentlig finansieringskilden. Jakt etter offentlig finansiering kan riktig nok oppleves som å bevege seg i en "virkemiddelskog", og slike verktøy er velkommen. 

Utfordringen er ofte å finne, men også å velge det programmet som skal passe best til prosjektet, ikke bare i kort sikt, men også i lang sikt, men tanke på f. ek.s kommersialisering og transisjon til markedet etter en fase av forskning og utvikling (FoU) samt testing. Hvordan man kan kombinere støtte er også en aktuell problemstilling som bedriftene oppdager etterhvert. 

Et bra tiltak som er verdt å nevne, huske og bruke.

CCS Directive to Enter into Force in EEA countries on 1 June 2013 (Norway, Iceland and Liechtenstein)

The directive on the geological storage of carbon dioxide, Directive 2009/31/EC (so-called CCS Directive), was adopted on 23 April 2009 by the EU legislator. After the clearance on 11 April 2013 by the Icelandic authorities of some constitutional requirements, the Directive is now binding on the three states of the European Economic Area Agreement (EEA Agreement), which are Norway, Iceland and Liechtenstein. Date of entry into force and deadline for transposition are 1 June 2013.

Main components of the CCS Directive

The CCS Directive establishes "a legal framework for the environmentally safe geological storage of CO2"  in the European Union, as an integral part of EU's climate change policy (Art. 1.1). It regulates the whole CCS chain, i.e.:

- evaluation of the available storage volumes, once decision to start storage is made by the state;

- selection of the storage sites, assessment and characterisation of the suitability of the sites, storage complex and surrounding area;

- exploration permitting rules (mandatory), under the supervision of the national competent authority (CA);

- storage permit (mandatory) to the sent to the CA. Information obligations towards the European Commission as regards received permit applications and draft storage permits (non-binding opinion on the latter).

- CA has review obligations as to the permit delivered (particular circumstances for withdrawal include: leakages, irregularities, non-respect of permit conditions, technological progress adaptations);

- storage site operator's duties as to CO2 streams monitoring (monitoring plan) and register;

- third party access rules for the CO2 transport networks and CO2 storage sites;

- financial security to be constituted by the operator before submitting its storage permit application and maintenance of the security;

- closure and post-closure obligations;

- operator's responsibility and transfer of responsibility to the CA after closure.

The directive entered into force on 25 June 2009, and the deadline for transposition into the national legislation of the EU Member States was 25 June 2011. Most of the EU Member States have communicated their national executive measures to the Commission.

The Directive, now binding on the EEA states

Through the Agreement on the European Economic Area (EEA Agreement), the EEA states (Norway, Iceland and Liechtenstein  are committed to transpose into their national legislation the EU legislative acts that are incorporated into the Agreement. The date for entry into force should be as close as possible to the one set for the EU Member States, but in some circumstances, the date can be postponed, either due to political reasons or due to the existence of constitutional requirements in the national states. The general rules for entry into force of legislation incorporated into the EEA Agreement are set in Article 103 of the Agreement.

In the present case, the EEA Committee agreed on the incorporation of the directive into the EEA Agreement by its decision of the EEA Joint Committee dated 15 June 2012. The text was adopted without any particular reserve. However, the date for entry into force was left "pending", which left the three states in a particular situation of not being formally bound as to the entry into force of the text.

With the final clearance by Iceland on 11 April 2013, the date for entry into force of the directive in EEA states is now set to 1 June 2013, which is also the deadline for transposition of the text into the national legislation of the three states in the present case. The adoption of national implementation measures is consequently expected before the summer.

Some forthcoming challenges

Getting commercial projects - CCS is technically viable, but finding commercial projects in addition to R&D is currently challenging in Europe and internationally. The European Commission just launched on 3 April 2013 its second call of NER300 programme (see previous post). At international level, the US leads the market, and China is expected to follow in a little decade. In Norway, Gassnova SF published a report as to the conditions for full scale CCS in Norway (press release here, in Nor.). VTT released a report in 2010 as to the Potential for carbon capture and storage in the Nordic region, which includes both Norway and Iceland.

Identifying the reservoirs and directive's scope of application - The Directive applies to storage of CO2 within the territory of the Member States, their exclusive economic zones and their continental shelves. Depending on the location of the reservoirs as decided by the EEA states, their might be some legal issues to sort out as to the geographical applicability of the directive.

Permanent storage and/or Enhanced Oil/Gas Recovery (EOR) - Although the directive aims to the "permanent storage" of CO2, it opens for EOR activities. EOR is seen as a manner to beneficially reuse CO2 and great hopes are put in EOR with storage. But uncertainties remains as to the real level of CO2 volumes for EOR, and, technically and financially, whether EOR feats petroleum exploitation activities. It is notable, as observed by the Global CCS Institute, that CCS has been advancing as two speeds: oil and gas-related projects which are making progress (including with EOR), and industrial and power plants related projects which are advancing slowly and even "locked in the commercial 'valley of death' ". CCS costs will also remain constant compared to decreasing costs for other low carbon technologies such as renewables.

Reporting obligations - Simultaneously to the entry into force of the directive, reporting obligations defined in a Commission decision from February 2011 will also enter into force at EEA level on 1 June 2013 (Commission Decision 2011/92/EU of 10.02.2011; EEA Committee Decision of 29.09.2012). EFTA Surveillance Authority (ESA) will take over reporting obligations control given to the European Commission by the directive. 

Picture: "Carbon capture and storage"

European Parliament Approves EU Energy Infrastructure Regulation in First Reading

The European Commission put forward on 11 October 2011 a proposal for a regulation on Guidelines for trans-European energy infrastructure (COM(2011)658). The regulation is part of the EU Energy Infrastructure Package which is financially supported by the Connecting Europe Facility (CPE).

Yesterday, on 12 March 2013, the European Parliament adopted  in first reading in plenary session, which opens for final adoption of the text after approval by the Council. 

The regulation aims to ensure the "timely development and interoperability of priority corridors and areas of trans-European energy infrastructure". 

- It establishes criteria for identification the priority corridors and areas which are further defined in Annex I to the Regulation. The categories covered include infrastructures related to electricity, oil, gas and carbon dioxide. The concept of "infrastructure" is defined broadly, but has been refined through negotiations. 

- The Projects of Common Interest (PCI) answering the criteria defined in the regulation will be treated under a special granting procedure defined in the regulation, which is a fast track procedure of approximately 4 years (3,5 + some additional months if necessary). Estimates for current projects are 10 years in average. It is aimed to "facilitate the timely implementation of projects of common interest" and "streamlining, coordinating more closely and accelerating permit granting" (wording from the EP version), as well as enhancing public participation. 

- Of interest for the projecting and financing of these projects, the regulation lays down rules for the cross-border allocation of costs and risk-related incentives for the PCI.

- The selected projects will be eligible to financing through the CEF. The regulation has for purpose to accelerate the completion of the internal energy market, focusing on physical aspects.

The text defines 12 Regional Groups which are the basis for the definition of regional lists of projects of common interests. Only projects corresponding to these lists are eligible. The first list of projects is to be adopted by 31 July 2013.

The text needs now to be backed by the Council before final adoption. After approval, the text should enter into force at the beginning of 2014.

Source: press release, European Commission, IP/13/218.

New funding of Carbon Capture and Storage (CCS) Projects Awaited for 3 April 2013 (European Commission)

The European Commission services, DG Climate Action, announced on 4 March 2013 that it will launch a second call for proposals under the so-called NER300 programme on 3 April 2013, with a deadline for application on 3 July (approximately).

NER300 aims to provide financial support to commercial demonstration CCS projects as well as demonstration projects of innovative renewable technologies.

Under the first bidding round, no successful offer had been selected by lack of compliance with the selection criteria.

This news will be updated shortly.

"Smart strøm trenger smarte forbrukere" (Innlegg i Energi & Klima nettmagasinet)

Les mitt innlegg om innføring av "smarte strømmålere" og hvordan vil forbrukerne reagere i Energi & Klima nettmagasinet:

"Norske forbrukere får bedre tid til å venne seg til smarte måele, men hvor aktive og interesserte vil vi være?

Siste mandag ble det kunngjort at Norge utsette utrullingen av Avanserte Måle- og Styresystemer (AMS) ..."

Les resten av innlegget her: 

http://energiogklima.no/nyhetsblogg/banet/smart-strom-trenger-smarte-forbrukere/

February EU Infringement Package: Signs of "Getting to 2014" in Completion of the Internal Energy Market?

Ensuring Implementation

Lithuania has now joined 10 other EU Member States that still have not communicated national measures aimed to transpose the provisions of the Electricity Directive 2009/72/EC and the Gas Directive 2009/73/EC under the Third Energy Package. Deadline for full transposition was 3 March 2011. (Reference: MEMO/13/122, 21.02.2013)

Lithuania received this February a reasoned opinion which is the second stage in the infringement procedure, after the sending of formal letter. In total, 15 Member States have received a reasoned opinion from the Commission on the matter. 6 of them have been referred to the European Court of Justice, which is the next stage of the infringement proceeding procedure (see press release of 24 January 2013, announcing that Bulgaria, Estonia and the UK had been referred to the Court by the Commission). For 5 of the original 15, the Commission decided to close the case. The press release from the Commission does not detail which transposition measures have not been notified to the Commission.

"Getting to 2014" ... ?

The European Commission is responsible for ensuring that EU law is correctly applied. By continuing the procedures of infringements, the Commission is also pursuing its objective of completion of internal energy market by 2014, an objective which has been politically set by the European Council in February 2011. The question is: Are the Member States going to reach the deadline?

In 2011, the European Commission in charge of Energy, Oettinger, already "observed with concern delays in its implementation". Things are moving, but not so quickly. Meanwhile, the 2014 deadline is still used as reference, as attested by the last Communication of the Commission "Making the internal market work" (COM(2012)663) :

"By 2014 the existing legislation needs to be implemented fully, including putting in place the essential technical rules of EU level, and providing regulators with necessary tools and resources to enforce legislation effectively." (p.2)

The Commission also noted that, as of November 2012, the EU was "not on track to meet the deadline".

Certain "challenges ... need to be tackled urgently" in order to try reaching the deadline. In the 2012 Communication, the Commission refers to the following forthcoming initiatives which are in progress or should be taken in 2013:

- pursuing infringement procedures, to ensure full transposition of the Third Energy Package

facilitate exchange of information between the Member States on key consumer issues, including price comparison tools, transparent pricing and billing, and concept of vulnerable consumers. By the adoption of the two recent infringement packages, the Commission is following this approach and showing determination, but the procedures are lengthy, and not able to ensure by itself completion by 2014.

- "press" public authorities in ensuring completion with concession rules for different kinds of facilities and infrastructures. This action is not really apparent for the moment. The Commission should assess "the adequacy of the existing regulatory measures" which are currently used, and the results of this assessment could well be used in forthcoming legislative proposals, and why not a fourth liberalisation package.

- promoting the virtues of regional initiatives following a bottom-up approach, and this together with ACER. See other post on this blog on ACER's report on the status of "Regional initiatives and the road to 2014."

- following-up the phase-out of regulated prices in favour of market-based price formation. Recent legal actions against some Member States indicate that this is still a strategy followed by the Commission.

- developing technical rules like network codes enabling the development of cross-border, wholesale markets or balancing markets in practice. ACER is also very active on this matter, in association with ENTSO. One can also mentioned the efforts back the REMIT Regulation for the supervision of wholesale energy trading, and where ACER again plays a central role.  

- issuing guidance on best practice in renewable energy support schemes and on support scheme reform. The Commission published two communications on the topic in 2012.

- issuing new guidelines on state aid for environmental protection, which will cover elements of renewable energy sources. The guidelines are indeed expected in the Spring.

- following the adoption and implementation of the Energy Infrastructure Package. The file is already well advance as regards legislative proposals: proposal for a regulation on Guidelines for trans-European energy infrastructure (advancing but still awaiting first reading) and Connecting Europe Facility

Annex I to the Communication contains a table summarising the timetable for adoption of these measures.

Some tasks must be initiated and/or followed up by national energy regulators and competition authorities, which is of course not under the direct control of the Commission, except in some competition cases of EU dimension.