Summary: Speech by EU Energy Commissioner Andris Piebalgs- "External projection of the EU internal energy market" (20 November 2006, Brussels)
Dear Ministers, Ladies and Gentlemen, Distinguished Guests,
I am pleased to have this opportunity to welcome you in Brussels.
This conference marks important developments in the energy policy within the EU which aim at reinforcing its external aspects - ensuring the security of our energy supply, support to the international efforts in combating climate change and promotion of access to energy worldwide.
The present session will address only one of the aspects of this external energy policy - extension of the EU internal energy market which proved to be a useful instrument for ensuring stable and predictable regulatory frameworks for development of energy markets beyond the borders of the EU and for providing stable conditions for the necessary investment in the supply of hydrocarbons.
As you know, it has been for some years now that the European Union has been constructing its Internal Energy Market. I can say that in doing so, we have achieved a great deal of experience, some successes and we see some further challenges.
Looking at the developments since the adoption of the EU directives for electricity and gas markets, I can say today that prices for electricity have remained constant or declined in real terms, despite much greater regulatory demands, especially in the environmental area. I can also that say that the EU gas market is progressively becoming more competitive at a time when the external challenges to get gas are increasing.
Moreover, we have also been active in other areas of our energy policy - going beyond the electricity and gas market liberalisation.
We have developed renewable energy sources and a solid basis for the demand side management, in particular in the area of energy efficiency.
I believe that as a result there are threefold benefits:
• concrete benefits to end consumers - affordable prices and improved quality of services,
• solid basis for investments with stable and predictable regulatory framework
• and good basis for increased economic integration and political co-operation in other areas.
Following the recent reports by the IEA and Sir Nicholas Stern we can boast that our approach proved to be right as both of them confirm that environmental sustainability should lie at the heart of global energy policies.
One can honestly say nowadays that the European model is becoming a 'pole of attraction' in global energy regulation and environment-friendly energy policies.
We are more than willing to share our experience. In fact we have already developed several instruments that enable us to do so - I have in mind the Energy Community, Euromed energy cooperation, the Baku Initiative, bilateral energy dialogues and partnerships that focus on progressive integration between the EU and our partners' energy markets.
I would like to stress that the cooperation does not need to be a one way street - the EU can learn as much from its neighbours as they can from it. But - I think - we have a model that is starting to work and that we can build on in our cooperation with you.
Let me explain now how do I envisage future developments based on progressive extension of the EU internal energy market.
I see this as a development of several cooperation groups - let's call them circles or rings - because they are build around the EU energy market.
The first cooperation ring is a highly complex and regulated EU internal energy market which is still in development.
For the second ring of states, the European Commission has initiated the Energy Community, which binds the European Union and Contracting parties in a common Energy market with set of rules based on EU norms. The Energy Community replicates the Internal Energy market in its essentials: the rules on the gas and electricity markets are there, competition rules, renewables, environmental safeguards etc.
The Energy Community sets concrete and strict deadlines in terms of alignment with these rules. For examples, in 2007 all contracting parties are bound to open their wholesale electricity and gas markets and to remove non-tariff barriers to trade. We also intend to put a greater emphasis on energy efficiency and introduce a significant oil dimension into the Energy community.
At present, the full participation in the Energy Community is limited to the countries of South East Europe. However, on the occasion of the last week's Ministerial Council of the Energy Community held in Skopje, an observer status was granted to four countries: Moldova, Norway, Turkey and Ukraine.
This opens new horizons for the Energy Community's extension.
I believe that further consideration could also be given to those of the European Neighbourhood countries that are willing to engage in the reform process in their energy sector and apply the principles of the EU internal energy market.
Finally, for the third, outer ring of countries that lie beyond our immediate neighbourhood, I think that we need to do three things to enable a correct development of the local energy markets:
• Firstly, we need an appropriate legal regime for investments.
• Secondly, we need greater international co-operation amongst donors and banks.
• Thirdly, we need a commitment to good governance.
As for the legal regimes, we should seek stable, predictable and non-discriminatory frameworks to ensure that the necessary investment in the energy sector takes place. We need to discuss what the best legal instruments (multilateral or bilateral) for achieving these objectives are.
Secondly, donors and financial institutions, including private banks, need to combine to reinforce their efforts in channelling the investment to those geographical locations and industry sectors where it is needed. The Commission is ideally suited to coordinate these efforts and is willing to take on this role.
Lastly, we need a commitment to good governance. Initiatives such as the Extractive Industries Transparency Initiative (EITI) need to be adhered to. International accounting standards need to be in force. A commitment to proper and sound statistics needs to be made. The environmental challenges cannot be ignored.
Once these conditions are realised - we will discuss how to address the regulatory aspects of the energy policy - building on the EU experience.
Let me now focus on one final aspect of the EU internal energy market - supplies of hydrocarbons.
The EU primary fuel mix is based for 80% on hydrocarbon energy sources. Our own production is diminishing. The EU is a region where oil and gas production has already peaked.
At the same time, the world demand for hydrocarbons has increased and will continue to rise in the future.
In order to guarantee future supplies to the EU, we need to make multibillion investments into infrastructure projects (in production, transit and distribution). To mobilise these investments and to ensure an efficient use of the new infrastructure in the future, we need clear, predictable investment conditions and regulatory frameworks. And from this point of view, the EU internal market approach is the most appropriate to ensure the mutual benefit of all market participants.
Ladies and Gentlemen,
Over the course of 2007, I will be pursuing this vision and trying to extend the approach of the Internal Energy market. I will work with all partners concerned.
I want to see a mutually co-operative energy system and market where producers feel comfortable that they receive a fair return, consumers feel that they have secure and affordable energy supplies. Extending EU's internal market approach means also an essential step towards a clean, clever and competitive energy future.
I count on your participation and support in this process.
Thank you.
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