Turkish Stream and its implications for the EU. European Policy Brief No. 34, March 2015

“A first assessment is that this would not work”, EC Vice-President in charge of Energy Union Mr. Maros Sefcovic said in an interview with The Wall Street Journal at the World Economic Forum in Davos on the 22nd of January. He was commenting on the recent announcement by President Vladimir Putin and Gazprom’s Alexei Miller. Indeed, the Russian gas giant’s CEO announced that South Stream would be replaced by a new project, Turkish Stream, linking Russia to the European part of Turkey and this in addition to the existing 16 billion cubic meters (bcm) Blue stream. This policy brief looks at the various implications this new reality could have for Europe’s energy security.

Capacity mechanisms. A credibility test for the Energy Union? EPC Policy Brief, 11 June 2015

Recently, few aspects of the debate surrounding energy have been as divisive as capacity markets. After having given a green light to a capacity remuneration scheme in the UK in 2014, the EU Commission is now considering starting a sector inquiry in several member states. This paper aims at shedding some light on what capacity markets are about and what are the EU-specific implications, arguing that the debate is ill framed within a market context still focused on conventional power generation, and making the case for a coordinated approach to solve the fallacies of the present system.

Consensus, contradiction, and conciliation of interests: the geo-economics of the Energy Union. EPC Policy Brief, 8 July 2015

European Union energy policy calls for nothing less than a profound transformation of the EU's energy system: by 2050 decarbonised electricity generation with 80-95% fewer greenhouse gas emissions, increased use of renewables, more energy efficiency, a functioning energy market and increased security of supply are to be achieved. Different EU policies (e.g., EU climate and energy package for 2020) are intended to create the political and regulatory framework for this transformation. The sectorial dynamics resulting from these EU policies already affect the systems of electricity generation, transportation and storage in Europe, and the more effective the implementation of new measures the more the structure of Europe's power system will change in the years to come. Recent initiatives such as the 2030 climate/energy package and the Energy Union are supposed to keep this dynamic up. Setting new EU targets, however, is not necessarily the same as meeting them. The impact of EU energy policy is likely to have considerable geo-economic implications for individual member states: with increasing market integration come new competitors; coal and gas power plants face new renewable challengers domestically and abroad; and diversification towards new suppliers will result in new trade routes, entry points and infrastructure. Where these implications are at odds with powerful national interests, any member state may point to Article 194, 2 of the Lisbon Treaty and argue that the EU's energy policy agenda interferes with its given right to determine the conditions for exploiting its energy resources, the choice between different energy sources and the general structure of its energy supply. The implementation of new policy initiatives therefore involves intense negotiations to conciliate contradicting interests, something that traditionally has been far from easy to achieve. In areas where this process runs into difficulties, the transfer of sovereignty to the European level is usually to be found amongst the suggested solutions. Pooling sovereignty on a new level, however, does not automatically result in a consensus, i.e., conciliate contradicting interests. Rather than focussing on the right level of decision making, European policy makers need to face the (inconvenient truth of) geo-economical frictions within the Union that make it difficult to come to an arrangement. The reminder of this text explains these latter, more structural and sector-related challenges for European energy policy in more detail, and develops some concrete steps towards a political and regulatory framework necessary to overcome them.

Iranian-Saudi tensions: the energy dimension. EPC Policy Brief, 9 February 2016

Following the execution of Saudi Shiite cleric Nimr Baqer al-Nimr, the deep rooted rivalry between Iran and Saudi Arabia entered a new phase in January 2016. While the main objective for both countries still is regional hegemony, the Iranian-Saudi competition takes many different forms and shapes, and also extends into the field of energy. In this Policy Brief, David Ramin Jalilvand gives a detailed analysis of the energy-related aspects of the Iran-Saudi Arabia rivalry and its possible consequences for Europe’s energy market; both countries hold giant hydrocarbon reserves, so European energy will probably be affected by their competition in several regards; increased oil supplies will be available for the European market, while the cycle of low oil prices will be prolonged. According to Jalilvand, this is a mixed blessing; Europe’s energy import bill will be reduced, but its indigenous production will suffer, while Russia’s role in European natural gas will only continue to grow.

System Costs of Variable Renewable Energy in the European Union. Bruges European Economic Policy (BEEP) Briefings 37/2015

To shift to a low-carbon economy, the EU has been encouraging the deployment of variable renewable energy sources (VRE). However, VRE lack of competitiveness and their technical specificities have substantially raised the cost of the transition. Economic evaluations show that VRE life-cycle costs of electricity generation are still today higher than those of conventional thermal power plants. Member States have consequently adopted dedicated policies to support them. In addition, Ueckerdt et al. (2013) show that when integrated to the power system, VRE induce supplementary not-accounted-for costs. This paper first exposes the rationale of EU renewables goals, the EU targets and current deployment. It then explains why the LCOE metric is not appropriate to compute VRE costs by describing integration costs, their magnitude and their implications. Finally, it analyses the consequences for the power system and policy options. The paper shows that the EU has greatly underestimated VRE direct and indirect costs and that policymakers have failed to take into account the burden caused by renewable energy and the return of State support policies. Indeed, induced market distortions have been shattering the whole power system and have undermined competition in the Internal Energy Market. EU policymakers can nonetheless take full account of this negative trend and reverse it by relying on competition rules, setting-up a framework to collect robust EU-wide data, redesigning the architecture of the electricity system and relying on EU regulators.

Energy across the Mediterranean: a call for realism. Bruegel Policy Brief ISSUE 2016/03 APRIL 2016

Political instability in the southern Mediterranean countries have highlighted the unsustainability of their economic models. Widespread economic discontent, and in particular very high youth unemployment, underpinned the Arab Spring uprisings. As the refugee crisis shows, this is also Europe’s problem and Euro-Mediterranean economic cooperation needs to be reviewed. Energy is a key part of the cooperation framework.

The Policy Effects of Multilevel Regulation in Europe. Insights from the Energy and Postal Sector

This paper examines the policy effects of multilevel regulation in Europe. It finds that the extent to which negative integration effectively narrows the range of policy options available domestically tends to be overstated. Drawing on empirical evidence from EU-induced reform in electricity supply and postal delivery, the paper illustrates that liberalisation and institutional reorganisation may lead to relatively little policy change. Although a lack of centralised regulatory capacity at the European level is identified as a key explanatory factor for the cases studied, the findings also point to the relevance of sector specificities and the role of exogenous drivers of change.

Commission v. Gazprom: The antitrust clash of the decade? CEPS Policy Brief No. 285, 31 October 2012

This new CEPS Policy Brief boldly asserts that the antitrust case launched by DG Competition against Gazprom on September 4th will turn out to be the landmark antitrust case of this decade, in much the same way that Microsoft v. Commission was the defining antitrust lawsuit of the last decade. The paper argues that, for a host of political and economic reasons, this case is likely to be hard fought by both sides to a final prohibition decision and then onwards into the EU courts. In the process, the European gas market and the powers of DG Competition in the energy field are likely to be transformed.

EU-Russia energy diplomacy: The need for an active strategic partnership. EU Diplomacy Paper 4/2012, July 2012

This paper explains the conflictive and cooperative elements of energy diplomacy between the European Union (EU) and Russia. It argues that interdependence forms the underlying principle of this relationship and creates both sensitivity and vulnerability for the interdependent parties, thus carrying the sperms of both conflict and cooperation. Both sides would be negatively affected by the other side’s noncooperation within the current policy framework and the prevailing mistrust and recurring tensions can be explained by this sensitivity. However, even if both sides’ policies were adjusted, vulnerability interdependence would still prevent them from seriously reducing their energy cooperation. It is necessary then to see how EU and Russian energy diplomacy can converge and how their strategic energy partnership can be cemented.