Ensuring Energy Security in Europe: The EU between a Market-based and a Geopolitical Approach. EU Diplomacy Paper 03/2013

The question of energy security of the European Union (EU) has come high on the European political agenda since the mid-2000s as developments in the international energy sector have increasingly been perceived as a threat by the EU institutions and by the Member State governments. The externalisation of the EU’s internal energy market has in that context been presented as a means to ensure energy security. This approach, which can be called ‘post-modern’ with reference to Robert Cooper’s division of the world into different ‘ages’,1 however, shows insufficiencies in terms of energy security as a number of EU energy partners belonging to the ‘modern’ world do not accept to play the same rules. This consequently poses the questions of the relevance of the market-based approach and of the need for alternative solutions. This paper therefore argues that the market-based approach, based on the liberalisation of the European energy market, needs to be complemented by a geopolitical approach to ensure the security of the EU’s energy supplies. Such a geopolitical approach, however, still faces important challenges.

The Enlarged European Union and its Eastern Neighbours: Problems and Solutions. OSW Point of View, October 2003

The EU enlargement is scheduled to take place in 2004. After this date, it should be a priority for the EU to develop a coherent and comprehensive policy towards its nearest neighbours, i.e. countries bordering the Member States, which cannot join the EU in the nearest future due to their location or weaknesses of their political and economic systems. There are at least three reasons for this. Firstly, good relations with neighbours will underlie the broadly understood security of the Community. Relations with the nearest neighbours will determine both military security of the EU (including the combating of terrorism) and its ability to prevent other threats such as illegal migration, smuggling, etc. Secondly, good economic relations with neighbours may contribute to the Member States' economic growth in the longer term. And finally, the EU's ability to develop an effective and adequate policy towards its nearest neighbours will demonstrate its competence as a subject of international politics. In other words, the EU will not be recognised as a reliable political player in the global scene until it develops an effective strategy for its neighbourhood.

Rethinking the external dimension of the European Energy Policy. OSW Report, January 2011

The external dimension of the EU Energy Policy, the question about the challenges regarding the effectiveness of the actions in this field and the search for innovative solutions are now one of the key-issues being raised during European energy policy discussions. The European Commission brought up the issue in the "Energy 2020 - A strategy for competitive, sustainable and secure energy" and questions about the most important directions, goals and tools of the external energy policy are the subject of public consultations announced in December 2010 by DG Energy (the final effect of the consultation and the EC’s work in this field is to be published by in 2011). The external dimension of the EU’s energy policy is also set to be one of the priorities of the Polish Presidency of the EU Council in the second half of 2011.

The Iasi-Ungheni pipeline: a means of achieving energy independence from Russia? Moldova's attempts at gas supply diversification. OSW Commentary No. 118, 2013-10-08

Since taking power in 2009, the Alliance for European Integration (AIE) has been trying to end Moldova’s dependence on Russian gas. Currently, natural gas accounts for about 50% of the country’s energy balance (excluding Transnistria), and Gazprom has a monopoly on the supply of gas to the republic. The key element of Chișinău’s diversification project is the construction of the Iasi-Ungheni pipeline, which is designed to link the Moldovan and Romanian gas transmission networks, and consequently make it possible for Moldova to purchase gas from countries other than Russia. Despite significant delays, construction work on the interconnector began in August 2013. The Moldovan government sees ensuring energy independence from Russia as its top priority. The significance and urgency of the project reflect Chișinău’s frustration at Moscow’s continued attempts to use its monopoly of Moldova’s energy sector to exert political pressure on the republic. Nonetheless, despite numerous declarations by Moldovan and Romanian politicians, the Iasi- -Ungheni pipeline will not end Moldova’s dependence on Russian gas before the end of the current decade. This timeframe is unrealistic for two reasons: first, because an additional gas pipeline from Ungheni to Chisinau and a compression station must be constructed, which will take at least five years and will require significant investment; and second, because of the unrelenting opposition to the project coming from Gazprom, which currently controls Moldova’s pipelines and will likely try to torpedo any energy diversification attempts. Independence from Russian gas will only be possible after the the Gazprom-controlled Moldova-GAZ, the operator of the Moldovan transmission network and the country’s importer of natural gas, is divided. The division of the company has in fact been envisaged in the EU’s Third Energy Package, which is meant to be implemented by Moldova in 2020.

The EU regime on biofuels in transport: Still in search of sustainability. Egmont Paper No. 68, July 2014

Like other regions of the world, the EU is developing biofuels in the transport sector to reduce oil consumption and mitigate climate change. To promote them, it has adopted favourable legislation since the 2000s. In 2009 it even decided to oblige each Member State to ensure that by 2020 the share of energy coming from renewable sources reached at least 10% of their final consumption of energy in the transport sector. Biofuels are considered the main instrument to reach that percentage since the development of other alternatives (such as hydrogen and electricity) will take much longer than expected. Meanwhile, these various legislative initiatives have driven the production and consumption of biofuels in the EU. Biofuels accounted for 4.7% of EU transport fuel consumption in 2011. They have also led to trade and investment in biofuels on a global scale. This large-scale expansion of biofuels has, however, revealed numerous negative impacts. These stem from the fact that first-generation biofuels (i.e., those produced from food crops), of which the most important types are biodiesel and bioethanol, are used almost exclusively to meet the EU’s renewable 10% target in transport. Their negative impacts are: socioeconomic (food price rises), legal (land-grabbing), environmental (for instance, water stress and water pollution; soil erosion; reduction of biodiversity), climatic (direct and indirect land-use effects resulting in more greenhouse gas emissions) and public finance issues (subsidies and tax relief). The extent of such negative impacts depends on how biofuel feedstocks are produced and processed, the scale of production, and in particular, how they influence direct land use change (DLUC) and indirect land use change (ILUC) and the international trade. These negative impacts have thus provoked mounting debates in recent years, with a particular focus on ILUC. They have forced the EU to re-examine how it deals with biofuels and submit amendments to update its legislation. So far, the EU legislation foresees that only sustainable biofuels (produced in the EU or imported) can be used to meet the 10% target and receive public support; and to that end, mandatory sustainability criteria have been defined. Yet they have a huge flaw. Their measurement of greenhouse gas savings from biofuels does not take into account greenhouse gas emissions resulting from ILUC, which represent a major problem. The Energy Council of June 2014 agreed to set a limit on the extent to which firstgeneration biofuels can count towards the 10% target. But this limit appears to be less stringent than the ones made previously by the European Commission and the European Parliament. It also agreed to introduce incentives for the use of advanced (second- and third-generation) biofuels which would be allowed to count double towards the 10% target. But this again appears extremely modest by comparison with what was previously proposed. Finally, the approach chosen to take into account the greenhouse gas emissions due to ILUC appears more than cautious. The Energy Council agreed that the European Commission will carry out a reporting of ILUC emissions by using provisional estimated factors. A review clause will permit the later adjustment of these ILUC factors. With such legislative orientations made by the Energy Council, one cannot consider yet that there is a major shift in the EU biofuels policy. Bolder changes would have probably meant risking the collapse of the high-emission conventional biodiesel industry which currently makes up the majority of Europe’s biofuel production. The interests of EU farmers would have also been affected. There is nevertheless a tension between these legislative orientations and the new Commission’s proposals beyond 2020. In any case, many uncertainties remain on this issue. As long as solutions have not been found to minimize the important collateral damages provoked by the first generation biofuels, more scientific studies and caution are needed. Meanwhile, it would be wise to improve alternative paths towards a sustainable transport sector, i.e., stringent emission and energy standards for all vehicles, better public transport systems, automobiles that run on renewable energy other than biofuels, or other alternatives beyond the present imagination.

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.

Low-cost batteries will not disrupt (all) energy utilities. CEPS Commentary, 5 October 2015

With the launch last April of an affordable lithium-ion home battery – the Powerwall – Tesla’s CEO Elon Musk is betting that batteries are going to become a mass market. This may very well become reality, but this commentary argues that one should not jump to the conclusion that this is the end of energy utilities. Similar to solar panels, batteries have high upfront costs. The massive deployment of solar was driven by dedicated policy support, in many cases without any kind of cost or volume control. There is no such thing for batteries. In the absence of financing programmes, the author finds that high upfront costs provide an unfavourable starting point for a disruptive development. But he notes that the fact that self-consumption of stored solar energy will soon pay for consumers represents a paradigm shift in the power industry, which should be seen as an opportunity, at least for first-movers.