EnergyEnergy

State aid and State interventions in the energy market

meeting 12 April 2013

DG EnergyBartlomiej Gurba

8 March 2013

EnergyEnergy

Completing internal market for electricity and gas

• 2009 Third Energy Package + implementing provisions (network codes)

• 2009 Renewable Energy Sources Directive

• 2011 Infrastructure Package + implementation

• 2012 Energy Efficiency Directive

• 2012 Communication on Internal Energy Market:

• è announces guidance documents on Generation Adequacy

• 2012 Communication on Renewable Energy

• è guidance on renewable energy support schemes,

• è guidance on the use of renewable energy cooperation mechanisms

EnergyEnergy

Investment challenge

Letting the market work to encourage appropriate investments:

- - State intervention needs to be optimised and coordinated for support schemes for RES, CM and infrastructure

- - Market Coupling has already integrated national markets

EnergyEnergy

EnergyEnergy

Support for renewables differs significantly across EU-countries

Remuneration ranges (average to maximum remuneration) for onshore wind in the EU-27MS in 2011 (average tariffs are indicative) compared to the long-term marginal generation costs(minimum to average costs).

EnergyEnergy

Monthly average wholesale price

Source: Pöyry

EnergyEnergy

Windproduction

Surplus

Deficit 15

25

Storage hydro

80

3030

25 3510

1025

25

25

2540

50

20

25

20

30

45 5020

10

1010

1025

20

TWh

20 TWh

TWh

TWh

25

40

15

15

10

5

Surplus and deficit areas

EnergyEnergy

-10

-5

0

5

10

15

20

Scen

ario

A

Scen

ario

B

Scen

ario

EU

202

0

Scen

ario

A

Scen

ario

B

Scen

ario

EU

202

0

Scen

ario

A

Scen

ario

B

Scen

ario

EU

202

0

Scen

ario

A

Scen

ario

B

Scen

ario

EU

202

0

Scen

ario

A

Scen

ario

B

Scen

ario

EU

202

0

Scen

ario

A

Scen

ario

B

Scen

ario

EU

202

0

Scen

ario

A

Scen

ario

B

Scen

ario

EU

202

0

Scen

ario

A

Scen

ario

B

Scen

ario

EU

202

0

Scen

ario

A

Scen

ario

B

Scen

ario

EU

202

0

Germany France Great Britain Netherlands Belgium Denmark Norway N. Ireland Rep. of Ireland

Rem

aini

ng C

apac

ity

-Ade

quac

y R

efer

ence

Mar

gin

(GW

)

Generation adequacy 2020 – NW Europe

EnergyEnergy

The advance of market coupling

National measures are insufficient in a

European market

2012 à 2014

EnergyEnergy

Link between State aid and EU regulation

• Aim: Coherence between rules of theCommission's initiatives regarding completion ofinternal market for energy and State aid rules:

è in respect to overall policy aimsè Identification of market failures

è in respect to EU regulationè Necessity of the aid and appropriate instrument

è in respect to Commission's exemption decisionsè Necessity, proportionality of aid

è in respect to assessment of public serviceobligations (PSOs) + Federutility judgment

EnergyEnergy

Summary

• Example I: Implications for capacity mechanisms

• Identify problem (capacity gap) and identify underlying causes of capacity gap

• Target measure to problem

• Address barriers to market delivering generation adequacy in parallel – part of transitional nature of intervention

• (discussed at Electricity Coordination Group)

EnergyEnergy

Impact on IEM

• Impact on IEM

• Distortion of production decisions: static efficiency

• Cross border participation to maximum extent possible

• Regional (2+ MS) schemes preferable

• Technological neutrality

• Distortion of investment decision: dynamic efficiency

• Burdens to consumers

EnergyEnergy

Example II: Energy infrastructure

• Relevant internal market regulation:

Which projects are of EU interest?

• Identification of Projects of Common Interest (PCI)

How all networks shall be operated (proportionality and avoidance of distortions of competition) ?

• Third Party Access to networks provisions of the Third Energy Package

• Smart meters requirements

• Exemptions from TPA and tariff provisions

EnergyEnergy

Implications for energy infrastructure

• Regulated networks: requirement of Third Party Access (TPA).

• Additionally for distribution networks: technologically compatible with smart meters and demand respond appliances.

• Regulated networks subject to exemptions under Third Package Directives: case by case analysis regarding necessity of State aid

• Networks subject to support from Connecting Europe Facility: State aid shall not be granted if the CEF covers the funding gap fully.

• Networks subject to soft regulation (gas storages): case by case analysis. When functionally and legally independent operators are designated and TPA is granted in non-discriminatory manner pre-assumption of lack of major competition distortions

EnergyEnergy

CO2 transportE highwayssmart grids

~ 200 PCIs

Accelerated permit granting

Regulatory measures

EU financial assistance

Criteria / CBA

EnergyEnergy

Financing – Connecting Europe Facility 2014-2020

• Eligibility criteria (in guidelines):

• Grants for studies and financialinstruments – available to all PCIs

• In exceptional cases, grants for works for PCIs where:

– CBA shows positive externalities

– Commercially not viable

– Cost-allocation decision done

5,1 bn €

EnergyEnergy

Scope of Financial Instruments

Financial Instruments as a tool in public policy:

Delivering public goods

Commercially viable

avoid

tax, regulate(internaliseExternalities)

support throughgrants

0

0

promote business

CEF

EnergyEnergy

E/G TYNDP+;

oil; sg; co2

To fulfil all general criteria

To fulfil specific criteria

RG decide on regional

list

ACER opinion (E/G)

Union-wide PCI list

Union-wide PCI list

Accelerated permit

granting

Cross border cost

allocation

Eligibility for

financing

CEF grants:annual / multiannual work programme(all PCIs excl. oil)

Implementing Act

Selection criteria

Award criteria

CEF:annual call

for proposal (open to all

PCIs excl. oil)

Trans-European energy infrastructures PCI process: from project identification to funding

CEF:annual call

for proposal

Every two years

Every year

Financial Instruments by IFIs: due diligence by IFIs

CEF:award

decision

Verification

of eligibi

lity criteri

a

Evaluation of received project proposals

Evaluation of award criteria:- the maturity of the action in the project development stage;- the need to overcome specific financial obstacles- quality of the proposal

Art.4(1) Art.4(2) Art.3(3) Annex III.2(5e) Art.3(6a)

Art.3(6a)Chapter III.

Art.13

Art.15CEF Art.17

CEF Art.17a

CEF Art.17(6)

CEF Art.15

EnergyEnergy

Conclusions

• Coherence of State aid schemes with the regulatory EU framework is an important condition to achieve the EU goal to complete Internal Energy Markets in 2014.