After more than 12 months of heated discussions over the third package of legislation for the further liberalization of the European Union’s (EU’s) energy markets, it finally looks like agreement has been reached.
On Wednesday 22 April, the European Parliament in Strasbourg, Austria, endorsed legislation that will take us closer to the creation of a single European energy market. It is expected that the EU Council of Ministers, which represents the 27-member bloc, will adopt the agreement sometime in the summer.
It was back in September 2007 that the European Commission (EC) first presented its ‘third package’ of liberalization proposals. However, they sparked controversy, with one issue dominating namely ‘ownership unbundling’. This essentially meant that large vertically integrated energy companies, such as EDF of France or Germany’s E.ON, that own both electricity generation and transmission assets, would have to sell or at the very least spin off their transmission businesses.
According to the Commission, such a structural separation was necessary to provide new market entrants access to networks, thereby promoting greater grid investments and lower energy prices for consumers.
Eight member states led unsurprisingly by the German and French governments didn’t agree and offered a third, looser option, involving internal actions such as the appointment of an in-house ‘compliance officer’ to enforce non-discrimination on grid access.
However, in June last year the Parliament decided to take a hard-line stance and voted for full ownership unbundling as the only option for the electricity market.
More recently however, it had come under pressure to push through the legislation before the end of the current Parliament’s mandate, which is in June, so its demand for full ownership unbundling was dropped.
Instead, the new agreement allows vertically integrated energy companies to opt for two alternative models that enable them to retain ownership of their grids. This is on the condition however, that they either hand over the operation of the transmission assets to an independent system operator, or adhere to rules that guarantee the two sectors operate independently.
According to Andris Piebalgs, the legislation provides a clear framework for a functional internal electricity (and gas) market that will help the EU to meet the challenges of climate change, increased import dependence and global competiveness.
However, not everyone was so positive. Members of the European Parliament who voted against the new legislation said it was neither strong enough to curtail the power of energy giants nor provided genuine competition. They also warned that in a few year’s time, the EU would be discussing a fourth liberalization package.
Christian Kjaer, CEO of the European Wind Energy Association was equally unimpressed, saying that the two options to full ownership unbundling would compromise the EU’s binding target to source 20 per cent of energy from renewables by 2020, and would not encourage fully competitive electricity market. Smaller energy suppliers, especially those in the renewable energy field, have long complained that big players were depriving them of access to electricity grids.
Clearly this topic remains a controversial one, but I’m sure that the Parliament and the Commission are pleased to be able to finally bring this process to a close. As with all legislation, only time will tell whether it will produce a more competitive energy market. If not, I guess we will indeed be seeing a fourth energy liberalization package on the table in a few years.
Finally, I’d like to welcome you to this month’s bumper issue, which is our POWER-GEN Europe Special Issue. POWER-GEN Europe is being held in Cologne, Germany, 26-28 May. I hope you enjoy the issue and I look forward to seeing many of you in Cologne.