The third energy market package agreed between EU and EEA/EFTA states

The Third Energy Market Package – EU energy market rules, were incorporated into the EEA/EFTA Agreement last week. Norway and the EU are closely connected through the energy market – by including the Third Energy Market Package into the EEA/EFTA Agreement, Norwegian actors are secured access to the EU-market. 

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The aim of the Third Energy Package is to improve the functioning of the Internal Energy Market. The package separates energy supply and generation from the operation of transmission networks, and strengthens the independence and cooperation of energy regulators. It also covers cross-border cooperation between transmission system operators and increases transparency in retail markets to benefit consumers. The Joint Committee Decision (JCD) contains substantial adaptations necessary for the participation of the EEA EFTA States in the Internal Energy Market. The approval of the Third Energy Package – by both sides – is the result of constructive discussions between the EU and the EEA EFTA States.

25th anniversary – The EEA Joint Committee provides a forum for the EEA EFTA States and the EU to exchange views and take decisions by consensus to incorporate EU legislation into the EEA Agreement. The meetings last week marks the 25th anniversary of the signing of the EEA Agreement since the first one in Porto, Portugal. The Agreement brings together the EU and EEA EFTA States in a Single Market, ensuring legal homogeneity. Since its entry into force in 1994, a lot of  acts have been incorporated.

EEA – The European Economic Area (EEA) brings together the EU Member States and three of the EFTA States (Iceland, Liechtenstein and Norway). It was established by the EEA Agreement, an international agreement which enables these three EFTA States to participate fully in the Single Market. The objective of the EEA Agreement is to create a homogenous European Economic Area. All relevant EU legislation in the field of the Single Market is integrated into the EEA Agreement so that it applies throughout the whole of the EEA, ensuring uniform application of laws relating to the Single Market.

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Renewable energy sector – The Third Energy Package Agreement between EEA/EFTA and EU is also of importance for the renewable sector in Norway – this means that there will be a close connection to the EU renewable energy market.

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BREXIT – A brief view of some of the energy implications of the UK voting to leave the European Union

BREXIT

The result of the UK referendum over EU membership has potentially huge implications for renewable energy. Perhaps the most significant of these is the UK may no longer be in the EU Internal Energy Market (IEM).

Completion of the EU’s internal market requires the removal of obstacles and trade barriers; the approximation of tax and pricing policies and measures in respect of norms and standards; and environmental and safety regulations. The objective of these is to help create a functioning market with fair access and a high level of consumer protection as well as adequate levels of interconnection and generation capacity. The IEM has led to the development of interconnections, to help reduce isolation of Member States from the European gas and electricity grids. Being part of energy union would have provided a huge market for UK renewables, such as its growing offshore wind fleet. Furthermore, it would have benefited energy security as renewable generation increases its overall share in the grid, through smoothing of generation variability.

The National Grid are certainly fearful of an exit from the IEM, with a spokeswoman saying: “It is vital the UK retains access to the IEM, which provides stability for energy companies and helps keep household bills down…UK energy security depends on gas and electricity from the IEM and it is essential therefore that we take no risks with that. The issue of energy needs to be treated with the highest importance by the government as the negotiations on Britain’s exit begin.”

Key players and commenters in the sector are almost unanimously giving a negative outlook as a result of the leave vote. These include factors such as higher costs, consumer impacts and a likely reduction in funding of scientific research; but the result is perhaps best summed up by Professor Rob Gross, of Imperial College, who said: “victory for leave creates uncertainty, risks instability, weakens the UK’s negotiating position and, at least in the short term, discourages investment.”  The lack of stability and certainty will not only impact renewables but other low carbon energy projects; for example, the scraping of the controversial proposed nuclear power plant at Hinkley Point (which was to be built by the French company EDF) seems a likely outcome of the referendum.

It is clear that energy policy needs to be a priority for the new government, to give reassurance to the industry. However, even if it does become a priority it would seem optimistic not to view the vote to leave the EU as negative for the UK energy system and low carbon energy in particular.

Sources:

Quotes are taken from https://www.theguardian.com/environment/2016/jun/28/leave-vote-makes-uks-transition-to-clean-energy-harder-say-experts

For background information on the IEM http://www.europarl.europa.eu/ftu/pdf/en/FTU_5.7.2.pdf