I represented the UK at the Energy Council in Brussels on 3 December.
The Council was dominated by exchanges on progress on the internal market. There was a positive outcome from a UK perspective, with growing support for ownership unbundling. The rest of the meeting was taken up by a policy debate on the Strategic Energy Technology (SET) Plan and information from the presidency and Commission on international relations.
On the SET plan, Ministers debated the recently adopted Commission communication and an associated presidency ‘vision statement’. The presidency said it was important the EU took a lead internationally to meet climate goals—the cost of inaction was greater than action. Investment in the development of energy technologies would be critical but there was no single solution—a wide range of technologies was needed. The Commission outlined the content of their communication. To meet our long-term climate objectives the EU had to be ambitious both on its own and in promoting greater international cooperation.
While welcoming the communication, member states demonstrated a wide range of views on the appropriate prescription, particularly when it came to identifying the most important technologies; energy efficiency was the most mentioned sector. There was general agreement on the need for more effective investment in R&D and the importance of the private sector. For the UK, I emphasised the need to translate the plan into early action; referring to the recent UK tender for demonstration of carbon capture and storage I underlined the importance of addressing policy and regulatory barriers to developing and demonstrating new energy technologies. The Commission emphasised the need to prioritise action.
Presenting the Third Internal Market Package, the Commission noted that while liberalisation had brought benefits, competitive markets were not yet complete. To meet the spring European Council mandate, real change was necessary to ensure non-discriminatory access, open and transparent markets, incentives to invest, and to improve the powers and independence of regulators. On the key issue of unbundling, the Commission noted that unbundled markets had experienced lower price rises (6 per cent. as against 29 per cent.) and higher investment. Though the Commission was open to considering alternatives, these had to involve structural separation that ensured the independence of the Transmission System Operator. The Commission called for swift progress in Council.
All member states welcomed the presidency progress report as fair and balanced. The presidency noted the broad consensus on regulators’ powers, objectives and independence as well as the need for greater co-operation, though not yet on the proposed agency model itself, and called on those member states wanting a third option on unbundling to present it soon.
For the UK, I supported the Commission’s analysis that full ownership unbundling was the best way to deliver the necessary network investment and benefits of a competitive market to EU consumers and business as UK experience demonstrated. I emphasised the importance of rapid progress, noting that any third option would have to meet the spring European Council mandate on effective separation of networks from supply/generation activities to ensure independent decisions on investment. I also recognised the special circumstances faced by small or isolated markets.
A large majority of member states supported the UK position in whole or in part. Several others supported the agency while others emphasised the importance of the third country clause.
Two member states in particular, supported by four others, rejected functional separation of networks and supply as a solution to the problem, seeing networks as a natural monopoly. They believed it caused problems for safety, investment, quality and prices, as well as weakening EU operators’ positions against third country companies. They would suggest an ambitious alternative solution next year. The Commission concluded by emphasising that the purpose was to promote the interests of EU consumers, not the energy industry.
On International Relations, the presidency reported on a variety of initiatives, focusing on Brazil and Africa in particular. Energy was now an important component of most EU external relations, for example with China, India and the EuroMed. The Commission agreed and noted the good progress made across the board. On Russia, they would investigate the impact of the third package on Russian companies and they would soon propose modalities for the accession of Moldova, Ukraine, Norway and Turkey to the Energy Community Treaty. The proposed Energy Efficiency Platform, in lieu of an international agreement, was also important; the Commission was looking at ways of supporting its development.
Two member states raised their interest in pipeline developments. The Commission’s co-ordinator for the Nabucco pipeline reported on this project.