First of all, let me thank the organisers for the opportunity to share with you some ideas about EU energy policy. More precisely, today I would like to focus on the integration of 28 national energy systems into a one large common energy market across the EU.
Let me briefly reiterate the main aims of the EU energy policy, that is to establish a sustainable European energy system, enhance competitiveness and improve security of supply for our citizens and industry. In my opinion, the key tool at the EU's disposal is a competitive, well interconnected and integrated Internal Energy Market. This is number one priority and for that we need to address energy policy together – we need more Europe.
Back into February 2011, EU Heads of States clearly committed to complete the EU internal energy market by 2014 and eliminate energy islands after 2015.
During this year Summit in May the European Council tasked the Council to report till the end of this year on progress regarding the elements agreed as crucial in achieving the goals set. Given the increasing interlinking between internal and external energy markets, the May European Council also requested us to review Council Conclusions of November 2011 on external dimension of the EU energy policy.
The Lithuanian Presidency took the lead to fulfil these two tasks and paid huge attention in having extensive input provided by the Commission, Member States. We are grateful that the European Parliament expressed its view on the subject by adopting the Internal Energy Market Report prepared by Mr Buzek at the Plenary session in September.
As a concrete result of our efforts and commitment to completing the Internal Energy Market and strengthening the external dimension of EU energy policy, two Council Reports have been prepared and endorsed by the Energy ministers last week (at the December 12 Energy Council).
Self-control and self-evaluation is of crucial importance while aiming at such overarching goals. Therefore, these Reports take stock of what has been achieved so far and identify areas for further efforts.
I see harmonisation of market and network operation rules together with adequate energy infrastructure as the basis for integrated Internal Energy Market. And if I had to evaluate where we stand now with the Internal Energy Market project, I could firmly state that we have already achieved a great progress in integrating our markets, however, we have not yet arrived to our final destination.
To identify essential elements for all of us to work out, allow me to refer to what has been agreed among the Member States in the Council Report on the Internal Energy Market.
Firstly, we need further energy market liberalisation through full transposition and implementation of the Third Energy Package together with adoption and application of networks codes. This will ensure a stable, predictable and coherent regulatory framework which is a cornerstone of a unified European energy market with effective competition and active consumers.
I would like to stress the role of network codes. The road towards the Internal Energy Market is grounded on the philosophy of regulatory convergence. Harmonized EU-wide rules for the entire energy sector are critical to boosting cross-border energy flows and the integration of markets.
As you see, we have already agreed on a stable long-term regulatory framework – with the network codes in the epicentre of this – enabling integration of energy markets. What Europe needs today the most – is full commitment by all Member States and strong enforcement from the guardian of the Treaty – the European Commission.
Another crucial element to be further worked on is development of energy infrastructure without delay. Europe needs a truly physically interconnected market – this is a precondition for a fully functioning Internal Energy Market, providing a solid backbone for electricity and gas flows where it is needed.
To achieve that, Europe must face immense investment challenges – we still need to connect "energy islands", fully integrate intermittent renewable energy and replace retiring capacity.
This is firstly and directly linked to the implementation of Projects of Common Interest. After the Commission adopted the first EU-wide PCIs list in the middle of October, it was officially presented in energy infrastructure conference in Vilnius at the beginning of November. This high level conference provided a venue to overview what Europe has already achieved, what challenges stand ahead, what solutions can be found in order to complete the Internal Energy Market. Appropriate financing and regional cooperation are crucial for successful implementation of PCIs. Full public acceptance is also needed and this conference served also as a tool to communicate with the public about the EU's priority energy infrastructure projects.
The process of the endorsement of the PCIs list hopefully will be finalized by the end of this year. This illustrates how our common dedication and our attitude gives the right results – the endorsement of PCIs means that we are jumping into the implementation stage of the projects, which are the key for the Internal Energy Market and integration of energy systems.
The 248 PCIs have been selected by twelve regional groups and are the priority projects for ensuring the necessary interconnectivity among Member States. The PCIs list targets infrastructure bottlenecks that are crucial for completing the IEM and, importantly, € 5,85 billion will be allocated from the EU budget for non-competitive energy infrastructure. Without this financial support these infrastructure projects will be just impossible to implement.
When implemented, PCIs will decisively contribute to the elimination of energy isolation, higher interconnectivity level and diversification of Member States' energy sources, routes and suppliers. This will lower energy dependency and increase energy security in the whole EU.
In electricity sector, they will ensure adequate level of cross-border interconnection capacity – almost all EU countries will achieve 10% interconnectivity target in electricity. This is critical to avoid renationalisation of energy policy, cases which we can currently witness. In gas significant change will also occur – the N-1 infrastructure standard will be fulfilled by majority of Member States. In terms of access to new energy sources, all Member States will have access to at least two supply sources.
Moreover, the PCIs list is unique not only from the form, but also from its content perspective. Besides the interconnection of the separate Member States or achieving certain level of interconnectivity, the list of PCIs also encompasses the projects, which connects and integrates the whole energy systems. Here I am referring to the Baltic States synchronous interconnection project with the Continental Europe Networks.
The implementation of this project will ensure Baltic States fully-fledged integration into EU energy map – not only from the market, but also from the system perspective.
The PCIs list creates a precedent in the history of EU energy policy. It is a prominent example of European solidarity and a great achievement in interconnecting regional markets that will further unify into a single European market.
Now we have a very clear programme ahead of us – implementation of these priority projects. To turn them into reality we need successful cooperation and agreeing on practical regulatory issues.
Outstanding challenges remain to be resolved before we can consider the Internal Energy Market as completed: effective unbundling of production and transmission activities, interconnectivity, smart appliances and grids capable accommodating variable renewable energies, network codes, empowering consumers to play active role in energy retail market.
I am confident that by the end of 2014 we will have made the decisive steps towards completion of the EU Internal Energy Market – now we shall ensure that progress is not reversed by unilateral policy choices that may fragment the European market.
We have to admit that some of the EU energy policy areas remain national and in some cases state intervention in the market is needed.
As an example, currently Member States' subsidies for renewables are purely national and in practice we compete with these subsidies among ourselves. Well, this is how we ourselves can cause collateral damage for the internal energy market by fragmenting and distorting it.
Here, we can see positive changes – the recent Commission Communication on public interventions in electricity market provides much needed guidance on reforming national support schemes for renewable energy, design of back-up capacities and enhancement of the role of consumers in electricity market.
As regards generation adequacy, it is my strong belief that the Commission's guidance will also contribute to ensuring that generation adequacy is achieved in cost-efficient ways and without jeopardising the Internal Energy Market functioning. It makes a significant contribution to a more European or regional approach in electricity markets – I refer here to the coherent criteria for an ex ante check of the conditions for the need to establish a capacity remuneration mechanism. Careful and comprehensive evaluation of these criteria should prevent market distortions and inefficiencies, such as support for inefficient plants.
Greater demand side response and flexibility are essential for the Internal Energy Market future. Demand side – households and businesses – shall be enabled to participate actively in the market. They should obtain the benefits of lower bills and at the same time help to optimize the use of infrastructure and to avoid new expensive investments. I see it as a greatly important element of an integrated European market contributing to system efficiency and reliability.
In brief, an integrated energy market could enhance security, promote affordable energy and favour the transition to low-carbon economy.
We already have good background on regulatory and infrastructure areas, what we need is to ensure its proper implementation! This is the only way to convert our expectations into reality.
Thank you for attention!
