EXTERNAL DIMENSION OF THE EEP v Filip Černoch cemoch@man.muni.cz EU-27 Energy Impart Dependency By Flu?I Import Otp* ndiocy «t) T9-9i 2000 iXH?> 2 009 2016 3611 fall_4U% 46/7 fc SJJH 3X8« 3U16 J1J*. Mdluek_£M*fa 1* BJH *1,1% 39v*« MrtMft*tfftflJtoB ^.3*1 ?5.7* S J J* fli.J^t SJ.9«* CiH 43.516 57.7* 6431k 6U» 67.0« EU-2 7 Energy Import Dependency - By Fuel.. LEr^S-JOlL <**h r&-La. So4ld i- _-l i PietroCeufn and "iDduc^ Gas. ■ i»s m sooa m soos. m mm ■ 2010 ■ »11 To secure stable and reliable supplies of energy at affordable prices. To improve relationships between consuming countries, producers and tranzit countries. To strenghten the negotiating position of the EU by 'speaking with one voice'. Limited supranacionalisation — energy security as an issue of high policy. Issues outside of the reach of the EU. Weak position of EC. ot clearly defined area — only vague and rather supportive powers of the Commission. Increasing importance due to the disintegration of Soviet Union, accession of new MS, Russia-Ukraine disputes... Support of diversification Diversification of fuels Diversification of suppliers Diversification of transit routes Strategic reserves of oil and gas Export of energy acquis communautaire Network of bilateral, multilateral and global treaties addressing (primarily or as a side-effect) an energy issues 17,5% of the total primary energy supply From 2002 slowly decreasing with return to the growth from 2009. Main source for electricity. In 2013 65% of total consumption of hard coal imported from outside of the EU. Brown coal produced and consumed locally. Still substantial indigenous production — security benefit. Environmental problems (CCS). EU focuses on environmental impacts and state aid. = not a security issue. Hard coal, brown coal, peat and oil shale production in major EU producing countries, 2012 ■ Hard coal Brown coal Oil shah Peat Germany Poland Greece Czech Romania Bulgaria Estonia United Hungary Spain Slovenia Finland Republic Kingdom Sources: IE A (2014a), Energy Balances ofOECD Countries, OECD/IEA, Paris, IE A (2014 b), Energy Statistics of Non-OECD Countries, OECD/IEA, Paris. Coal production in major producing countries, 1990-2012 1990 1994 1998 2002 2006 2010 IM> 1994 1993 2002 2006 2010 ■ Czech Republic ■Germany ■ Greece ■ Poland ■ Spain United Kingdom Bulgaria ■ Romania ■Estonia* " Data for Estonia is for oi sha e. Sources: IEA (2014a), Energy Balances ofOECD Countries, OECD/IEA, Paris, IEA (2014b), Energy Statistics of Non-OECD Countries, OECD/IEA, Paris. 7% of the total electricity generated in the EU. 56 NPPs (131 reactors) in 14 MS. Nuclear energy not a security problem: Diversification of supplies. Mining (1/2 half of the production from Canada, Australia, Nigeria, Kazakhstan, Russia, Namibia) and Yellow Cake production. Enrichment (to raise the proportion of the uranium-235 isotope). Countries with A-bomb technology. Fabrication. High energy content of fuel — Temelin (2xl055MW) — about 4m2/y. Megatons to Megawatts. 32% of the total primary energy supply .efineries face substantial restructuring (low margins and low utilisation rates) due to the decreasing regional demand an increased competition from Middle East, Asia, USA. 15 of them closed between 2008-2014 - 8% decrease in processing capacity of the EU. Inreasing dependence on import of oil products. Indigenous production of crude has been falling faster the decline in consumption. (Norway?) = oil considered as a security (dependency on exporting countries) problem. Crude oil production, 1990-2012 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 France Austria Netherlands Germany Romania Italy Denmark United Kingdom Others* 2012 * Others includes other EU member states which produced crude oil each year. In 2012, Belgium, Estonia, Finland, Ireland, Luxembourg, Portugal, Slovenia, Sweden, Cyprus**, Latvia and Malta did not produce crude oil. mports of crude oil to the EU by country of origin, 2012 Primary Russian Qil and Gas Pipelines to Europe (U) Oil pipeline Proposed oil pipeline Gas pipeline Proposed gas pipeline Russian-dominated pipeline Tanker terminal *AII or most of the oil or gas moving ttirough agiven pipeline is from Russia difficult to replace — mainly in transport and petrochemistry Support of usage of RES instead of oil. Bio fuels — Energy and climate package — 10% of bio fuels (RES) in transport in every MS by 2020. Later on strengthened. RES electricity in energy sector. EU oil consumption by sector, 1990-2012 1990 1992 1994 Notes: TPES by consuming sector. * Other transformations includes refining and energy-own use, ** /ndusfryincludes non-energy use. *** Commercial includes commercial and public services, agriculture/fishing and forestry. 23,9% of the total primary energy supply Peak in demand in 2010, now plateaued (slightly decreasing). Dependence on fixed pipelines — low flexibility. nsuring security of gas supply and limiting import dependency a priority = a high security concerns. A growing competition for LNG, higher exposure to price differentials between Asia, North America and the EU. Natural gas production, 1990-2012 Denmark 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 * Others includes other EU member states which produced gas in each year. In 2012, Belgium, Estonia, Finland, Luxembourg, Portugal, Sweden, Cyprus**, Latvia, Lithuania and Malta did not produce gas. Source: Eurostat, 2014. Miliary Russian !as Pipelines to Europe (U) ^5 ,,.,,■^^.^nde'l, Barents VarapiKJV ' if Pechor- TV basin !8 yw* r Siberian j basin *** ? } " /* '^Pechora / w I ^T"-^/ .** ;'/•/ Krasnolenmskava*" * Phased Murmansk >'J^*"'~ Finland * PrajostrJ Murmansk f V--. .-.......Jp Ikhta SjvSt. Petersburg KlrlsTiT 7 ,'/%SCLatviBi MOSCOW (Samara Kazakhstan 4& Atfrau Caspian Pipelin* Consortium Projbcl (CPC) ■ fenglz J V Jlkhoretk [uapse """"^O, Caspian h BAKU !raurum\ ku-Tbilisi-Ceyhan (BIG) 1.1.2009 Russian exports to Ukraine cut off, problems in 16 EU MS and Moldova for 2 weeks (7.-20.1.2009). Part of the Balkans in a humanitarian emergency, economic damages. ■ 15% of EU supplies via the Brotherhood pipeline. The missing 5bcm could be replaced by supplies in the EU gas market (storages in Germany, Austria and Italy), but no interconnections. Wake up call for the EU, investments into the reverse flows, storage capacities, debate about new import pipeline. fa 63 bcm/y. Controlled by Gazprom Export. Two legal issues: Unbundling (OAO Gazprom and OOO Gazprom export + South Stream Bulgaria — different legal entities). TPA Support of diversification Diversification of fuels Diversification of suppliers Diversification of transit routes Strategic reserves of oil and gas Export of energy acquis communautaire Network of bilateral, multilateral and global treaties covering (to some extent) energy Strategic reserves of crude oil and petroleum products — Directive 2009/119/EC — MS are obliged to ensure a total level of oil stocks corresponding to the 90 days of average daily net imports or to the 61 days of average daily inland consumption, whichever of the two quantities is bigger. Regulation No 994/2010 concerning measures to safeguard security of gas supply resolves the situation in case when the single largest gas infrastructure of country fails, which is the so called N-l scenario. In such case, the regulation obliges the MS to ensure the supply for protected customers (mostly households + hospitals...). Support of diversification Diversification of fuels Diversification of suppliers Diversification of transit routes Strategic reserves of oil and gas Export of energy acquis communautaire Network of bilateral, multilateral and global treaties covering (to some extent) energy Energy dialogue Brazil (since 2007), China (since 2005), India (since 2004), Iraq (since 2010), Norway (since 2005), Russia (since 2000), The South African Republic (since 2008), Ukraine (since 2005), USA (since 2006) The bilateral agreements of different sorts treating the economic cooperation in total, including the power industry — for example Partnership and Cooperation Action (PCA), Free Trade Agreement (FTA), Stabilization and Association Agreements. EU economic partners across the world PCA agreements were signed by the majority of CIS countries and represented the foundational element of the Deep and Comprehensive Free Trade Area Agreements, that is, of the instrument set by the Eastern Partnership The memorandums of understanding associated with cooperation in the field of power industry (MoU) EU partners in the field of power industry, including Ukraine and the states from the Caspian Region The memorandums represented the first level of the intensified energy relations 38 Multilateral cooperation Energy Community EU closest neighbors Currently, the membership consists of the Balkan states, Ukraine and Moldavia The observing status is held by Turkey, Norway a Georgia European Neighborhood and Partnership Instrument (ENPI) 17 neighboring states Energy Charter Treaty Oil producers assembled under the OPEC Cooperation with the Gulf Cooperation Council Baku Initiative (INOGATE, Traceca) EU Assistance Program for Turkey and CIS members states (Russia is the observer) Black Sea Regional Energy Centre (BSREC) 11 states from the Black Sea Region Caspian Development Corporation (CDC) Companies from the Caspian Region Union for the Mediterranean, Barcelona Process 16 states located along the Mediterranean coastline in the xt^^u ac;^„ a/t.vmi^ —^ b^iu^. 39 Global cooperation Signed by 51 countries worldwide Energy Charter Treaty In reality, a vast number of countries active in the energy market remained out of this structure (for example, Norway, Australia did not ratify the document, Russia withdrew in 2009) Kyoto Protocol Signed and ratified in total by 191 countries worldwide, excluding the USA International Energy Forum (IEF) Includes the states which represent approximately 90% of the world oil and gas demand and offer Members are the IEA and OPEC states, China, Russia G8 and G20 8 and 20 richest countries in the world Energy Charter EU, CIS countries (without RF), central Asian states, Azerbaian, Georgie, Turkey. International agreement creating framework for cross-border cooperation in the energy. Covers trade, transit, investments (Yukos'tax evasion), energy efficiency. Legally binding with dispute resolution mechanisms. Energy Charter declaration. 1994 legally binding Energy Charter Treaty (plus Environmental protocol). Building strongly on GATT and WTO rules. 51 parties. Energy Community (2006) EU, Albania, BIH, FYROM, Montenegro, Serbia, Kosovo. Moldova, Ukraine, Turkey and Norway as observers. Extending the (energy) acquis of the EU to countries of SEE. Common regulatory framework in energy (security of supply, energy efficiency, RES, third liberalisation package), environment and competition. Problems with opening of members to competition, with subsidies, unstable investment climate, insufficient measures to protect environments, state regulation of prices____ ] September 2011 EU antitrus officials made unannounced inspections of the energy companies in 10 CEE MS. ] September 2012 — EC opened formal proceedings against Gazprom for allegedly violating EU competition rules (abusing its dominant position in CEE's gas supply markets). ] Three potentially anticompetitive practices: Market partitioning (destination clauses) Barriers to supply diversification (breaching of TPA principle) Unfair pricing (long-term take-or-pay contracts, oil indexation). 43 22.-23. Oct 2014 — European Council on 2030 climate and energy policy framework The EU s proposal 40% reduction of GHG emissions with binding national targets. □ To be revisited after Paris in Dec 2015 yyMS with a GDP per capita below 60% of the EU average may opt to continue to give free allowance to the energy sector up to 2030 ". □ NER300 facility upgraded to NER400 facility, covers also low-carbon investments in manufactoring sectors. 2% of EUAs set aside to address particularly high additional investment in low income MS" — bellow 60% of the EU average. □ 10% of EUAs to countries whose GDP per capita do not exceed 90% of the EU average in 2013. The EU's proposa 40% reduction of GHG emissions with binding national targets. Free allowances to industry at risk of carbon leakage EU ETS sector - Market Stability Reserve may start before 2020 (Fr, UK, Ger) Non-ETS sector — targets from 0-40% based on relative GDP per capita and cost-effectivenes, MS can trade these targets amongst themselves. Some MS may swap reductions in the non-ETS sector for reductions in the ETS sector. 45 80% electricity produced from coal 100 000 miners, more than 240 mining trade unions. Import of the cheap coal from Russia (10% of consumption) In the first half of 2014 companies lost around 250 million euros. According to the Centre for Social and Economic Research between 2010 — 2013 this sector received 5,5 bn euros of state aid. 4/5 coal companies state runned. The only private one is also the only one making profit. Electricity market divided between 4 vertically integrated companies that belong to the State Treasury. The EU's proposal: binding aim of 27% of RES in the mi energy mix. No individual targets. □ The agregated aim is not to be translated into the nationally binding targets. The EU's proposal: binding or nonbinding agregated target of 30%, no individual targets. — , only 27% target. □ The agregated aim is not to be translated into the nationally binding targets. Interconnections Spain and Portugal failed to get a committment of binding 15% interconnection target. Commission will take 'urgent measures'to ensure at least 10% electricity interconnection capacity (notably the Iberian Penisula, Baltic States) no later than 2020.