Lignite unit exit ‘must not be influenced’ by EU directives

The implementation of new EU directives concerning state support amid the EU’s Emissions Trading System framework must not affect the rate of progress of the lignite unit withdrawal schedule decided on by the government and power utility PPC, market authorities have noted.

According to latest EU directives, CO2 emission cost recovery levels for eligible energy-intensive industrial producers will not depend on their energy supply sources, be they polluting or green, but, instead, on an independently determined constituent resulting from the national electricity production mix of the previous year.

This effectively means industrial producers will be eligible for CO2 emission cost recovery even if supplied green energy.

The new EU directives are intended to counter industrial facility relocations to territories beyond the EU as a result of increased European electricity production costs, driven higher by costlier CO2 emission rights.

Though EU state members are theoretically free to shape their own CO2 cost offsetting mechanisms as support for energy-intensive producers, these mechanisms must be approved by Brussels ahead of implementation. Ultimately, the European Commission would not endorse any mechanism that does not comply with its EU directives.

The new EU directives concerning state support within the ETS framework were forwarded for public consultation on January 14. They will be applied in 2021 and are expected to remain valid until 2030. The current system expires at the end of this year.

 

EU industry seeking ETS revisions to remain competitive

A transformation plan seeking cost-recovery revisions for a more competitive European industrial sector has been presented to the European Commission by a group established in 2015 and represented by industries, EU member states and various agencies.

The group is pushing for energy cost-recovery revisions that would make European energy-intensive industrial enterprises more competitive against rivals with lower costs and, as a result, repel the need for relocations to non-EU bases.

Revisions requested by the group include ETS (Emissions Trading System) cost recovery adjustments effective all the way through to 2030.

At present the ETS system, operating on a voluntary, short-term basis, is on a downward trajectory. EU member states can opt to not implement this cost recovery system.

RES sector seen dominating electricity generation by 2050

The renewable energy sector is forecast to be in a clearly dominant position by 2050, especially in electricity generation, projections involving various scenarios agree.

The RES sector’s share reaches levels of 82 percent in 2050, driven by favorable policies anticipated for the sector, according to projections.

A reduction of renewable energy investment costs combined with a continual increase in CO2 emission right costs, within the ETS framework, is anticipated in all projections, justifying the spectacularly increased presence of the renewable sector in electricity generation over the coming decades.

Projections for considerably higher CO2 emission right costs between 2030 and 2050 result from the Market Stability Reserve (MSR), implemented automatically until 2050, according to EU law.

The anticipated ascent of the renewable energy sector in electricity generation is also expected to sharply boost other RES domains concerning heating, cooling and transport.

 

 

Industrial sector updated on forthcoming ETS revisions

EVIKEN, the Association of Industrial Energy Consumers, and counterpart associations from all over Europe, have met with Directorate-General for Climate Change (DG CLIMA) officials to be updated on forthcoming EU Emission Trading System (ETS) revisions.

Organized by IFIEC Europe, the International Federation of Industrial Energy Consumers, the meeting involved the participation of over 20 national and sector representatives, including representatives from EVIKEN, Alliance, Eurofer, Eurometaux, EU Lime, EU Fertilizers and EU Salt.

Particpants were informed that the ten-year period to cover 2021 to 2030 has been divided into two five-stages for most matters, the objective being to faciliate corrective interventions.

A finalized ETS directive is expected in March, while a preliminary Carbon Leakage List is planned to be published in May, the DG CLIMA officials informed, timed to allow for national-level reactions concerning sectors that could be marginally beyond the limits. Any reactions will need to be officially forwarded by June 30.

The European Commission is working on an arrangement that would free emission rights for a variety of industrial activities without undermining energy efficiency efforts.

Three-way ETS talks, stagnant, to be suspended until autumn

Problems encountered over the past few days in three-way negotiations involving the European Commission, EU member states and European Parliament, looking to make revisions to the ETS (Emissions Trading Scheme), appear set to suspend the ongoing talks until autumn.

The future, beyond 2020, of the ETS, a cornerstone of the EU’s policy to combat climate change and its key tool for reducing greenhouse gas emissions cost-effectively, is at the core of these negotiations.

Officials are seeking to restrict excess emission rights currently available in the market.

Also being discussed is an emission rights offer for EU member states with smaller GDPs, as well as the establishment of emission limits for new power stations. Both the GDP and emission limit issues concern Greece.

An understanding of the interconnectivity of all these matters has been gained during the ETS talks, while thorough analyses of all related tangents have been carried out and positions adopted, one participant informed. “The difficulties faced have to do with revisions of one issue prompting the need to make changes to others,” the official informed.

As a result, the European Commission appears to have requested further data and technical processing before the three-way negotiations resume.

The ultimate objective of these ETS talks is to have adopted a single European position ahead of an upcoming UN climate change conference scheduled for November. At present, this objective appears to be out of reach.

 

Greece backed by Eurelectric for ETS, modernization fund

Eurelectric, the European electricity industry association, has backed Greece’s positions concerning revisions to the EU ETS, a cornerstone of the EU’s policy to combat climate change and its key tool for reducing greenhouse gas emissions cost-effectively.

Eurelectric favors a proposal made by the European Commission and EU member states for the absence of criteria regarding emissions by electricity generating units in order for them to receive emission rights when upgraded, as foreseen in an article for revisions to the ETS.

Three-way negotiations involving the European Commission, European Council and European Parliament are taking place this year on the future of the ETS.

The European Council supports the institutionalization of specific limits that units will need to meet in order to receive carbon emission rights from now on. These standards promise to limit lignite-fired units and, therefore, impact Greece.

Eurelectric is backing both the European Commission and European Council on the matter. The association has also stressed that a “robust structure ensuring full transparency and investment based on the objectives of the directive, without top-down management and control measures. Investments must not affect the functioning of the market, must respect competition and give priority to the modernization of production as well as to networks and energy efficiency.”

Another detail of interest for Greece concerns the country’s inclusion into a category of low GDP member states. Inclusion in this category promises benefits from the EU’s modernization fund in the form of financial support for new projects.

Though an initial proposal did not include Greece in this category, a European Council proposal called for special handling of Greece so that the country could benefit from the fund. Eurelectric noted that EU member states with small GDPs will need to benefit from compensation. The association also wants an increase in compensation levels offered.

ETS rift prompts European Parliament to reset debate

Greece’s Members of European Parliament (MEPs) appear to have adopted opposing views over main power utility PPC’s effort seeking free CO2 emission allowances, one side bonding as a national front in favor of the utility’s request, the other maintaining a more reserved stance.

A crucial debate by the European Parliament’s Committee on the Environment, to focus on EU emissions trading system (ETS) revisions, was originally planned to take place yesterday but has now been rescheduled for December 15 to give various opposing sides more time to bridge differences.

Despite the efforts made by Greek officials, PPC’s quest for free CO2 emission allowances is not a given.

It remains unknown whether Greek MEPs will eventually unite for PPC’s quest. Campaigns pursued by environmental groups have strongly opposed the utility’s objective.

PPC has sought to elevate the issue as one of national significance, and has succeeded to great degree. The utility estimates that implementation of a planned fourth stage of the ETS system will cost roughly 7 billion euros, while the adoption of PPC’s positions would offer Greece benefits worth over 2.5 billion euros for the period covering 2021 to 2030.

According to PPC, the issue is one that directly impacts consumers as the cost of acquiring CO2 emission allowances is factored into the cost of electricity production and passed on to consumer electricity bills.

Greece pushing for inclusion into ETS compensation mechanism

Following the Paris Agreement, the discussion on the next phase of the EU ETS, 2021-2030, compensation mechanism has intensified. Greece is strongly arguing for its inclusion in the provisions of articles 10c and 10d, according to energy analysts from PPC, Greece’s Public Power Corporation.

Is Greece eligible according to the criterion of “low-income member states” (member states with a GDP per capita below 60% of the EU average)? Certainly it is. Greece has lost about 27% of its GDP during the last 7 years – it is the country most stricken by the eurozone crisis. Its GDP per capita was 59% of the EU average in 2014 and further declined to 56% last year.

So why is Greece excluded from the compensation mechanisms? Because of a footnote in the European Council conclusions, with the phrase “all references to GDP in 2013”. 2013 was the latest year for which official GDP data were available back then. Greek per capita GDP in 2013 was slightly above the 60% threshold (61,8%). The failure to foresee GDP developments should be corrected to reflect the actual situation in the EU ETS countries.

Apart from the GDP criteria and the dire economic situation in which Greece finds itself, things are made worse for Greece by the country’s geography in two ways: First, Greece is the southeastern-most country of the EU, with limited access to electricity grid interconnections, and in a region where – apart from Italy – every country is either not bound to the EU ETS (Albania, Serbia, Turkey etc.) or is entitled to compensation (Bulgaria, Croatia, Romania etc.), gaining an important competitive advantage over Greece. Second, Greece has a host of isolated islands that rely on oil for electricity generation. Modernising energy assets, developing renewable generation on the islands and interconnecting them to the mainland grid requires funding that Greece finds hard to raise.

According to the proposed amendments to the regulatory framework, allowing Greece to allocate free emission rights to fund energy projects would not affect other member states, since any such free allocation would be deducted by the country’s own share of emission rights.

Regarding the participation of Greece in the Modernisation Fund (art. 10d), it does not seem right that an increase in the number of beneficiaries would lead to a decrease of individual compensations, given that the purpose of this compensation mechanism is to relieve the eligible member states of part of the cost of climate change policies. This problem could be easily overcome by increasing the quantity of emission rights used for the Modernisation Fund, either by increasing the Modernisation Fund percentage from 2% to 2,32% of the EU-wide quantity, or by drawing 50 million allowances from the Market Stability Reserve, in effect utilizing leftover emission rights from the previous EU ETS phase. The latter method has been employed by the European Commission to secure funding for other schemes, such as the Innovation mechanism.

One should always keep in mind the reason that the compensation mechanisms were created: to support vulnerable member states and enable them to reach the common EU climate targets. For the reasons explained, it seems only fair and reasonable that Greece is provided with such support, enhancing climate policy by enabling the crisis-stricken country to invest in emission curbing projects.