In the days before the European Commission launched its raft of energy policy recommendations on January 10, France and Germany had their oars in the water paddling in a different direction.
Enforced ownership unbundling would be expropriation, utilities charge, and they are supported in Germany & France.
Forcing vertically integrated power utilities to sell their networks was not an option, both countries have made clear.
The French government also opposes the EC's drive to end regulated electricity tariffs. And while member states agree that the internal energy market requires better integration, full regulatory harmonization is a pipe dream.
These political realities were reflected in the Commission's final strategic energy review ('Communication - An Energy Policy for Europe'), in which the EC steps back from an unequivocal demand for full ownership unbundling, instead presenting two options: full ownership unbundling; or establishment of fully independent transmission system operators, under which vertically integrated utilities retain ownership of networks but are not responsible for grid operation, maintenance or development.
The EC itself backs full unbundling, and says the independent TSO option is complicated and less effective - but it offers the option because it has to.
Enforced ownership unbundling would be expropriation, utilities charge, and they are supported in Germany and France.
The option may well rule out ownership unbundling in the Netherlands, where the government has had second thoughts.
In both the Communication and competition inquiry report published on the same day, the EC once again finds serious fault in EU energy markets.
The inquiry identifies high market concentration, lack of transparency and liquidity, lack of cross border integration, industrial user distrust of pricing mechanisms, inadequate unbundling and negative impact of long term contracts and of regulated tariffs.
But while the Commission's diagnosis of internal market failure is damning throughout the review and the inquiry, many of the remedies appear compromised.
There are options on unbundling; options on regulation; another call for expansion of cross-border infrastructure (perpetually blocked by planning and cost issues); national "flexibility" offered on renewables policy (perceived as an own-goal by environmentalists); a binding renewables target; and various measures to facilitate new entry and support clean generation.
There is no news, meanwhile, on specific anti-trust investigations into a number of European utilities, which are on-going, or on enforcement actions against several member states in breach of previous directives.
Targets galore
The Communication is big on targets, with the bravest a call for a binding 20% target for renewables in the energy mix by 2020. This will be a hard sell in the Council of Ministers, with to date only Germany and Denmark supporting binding targets.
The EC also calls for an EU commitment to achieve at least a 20% reduction of greenhouse gases by 2020 compared to 1990, and an EU objective in international negotiations of 30% reduction in greenhouse gas emissions by developed countries by 2020 compared to 1990.
"In addition, 2050 global GHG emissions must be reduced by up to 50% compared to 1990, implying reductions in industrialised countries of 60-80% by 2050."
And the Communication says the EU must aim to become the world's most energy efficient region, meeting the objective of improving its energy efficiency by 20% by 2020.
While energy efficiency is a headline issue in the document, much of the detail focuses on the supply side.
The EU is to increase "by at least 50% its annual spending on energy research over the next seven years, to accelerate the competitiveness of low carbon technology," it says.
And in a boost to clean coal, the EC is to examine how to set up by 2015 up to 12 large scale demonstrations of Sustainable Fossil Fuels technologies in commercial power generation.
Created: January 18, 2006
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