FSR

The Euratom Treaty, signed in Rome on 25 March 1957, established the European Atomic Energy Community, alongside the European Economic Community (EEC). Its function is to provide a regulatory and cooperative framework which governs the development of nuclear energy and its trade across Europe, a kind of ‘nuclear common market’, which also funds cross-border research and development projects, upholds safety standards and procedures, notifies the potential impact of activities on other Member States, and ensures that nuclear materials are not deployed for military use. Euratom has established nuclear cooperation agreements with third countries, including Canada, Japan, and the USA, and sets out provisions for international compliance with nuclear safeguards. Euratom also reports to the International Atomic Energy Agency (IAEA). While a separate legal entity from the EU, it is tied to its laws and institutions, and subject to the jurisdiction of the European Court of Justice (ECJ). No country is a full member of Euratom without being a full member of the EU. On 29 March 2017, the triggering of Article 50, signalling the UK’s departure from the EU, also incorporated the UK’s withdrawal from the Euratom Treaty of which they had been members since they joined the EEC in 1973. While legal opinion is divided as to whether exiting the EU also forced an exit from Euratom, as a concomitant requirement of leaving the bloc, Theresa May argued for its inclusion on the grounds of ending the supremacy of EU law over domestic law. What are the possible repercussions of exiting the treaty for both the UK and the EU? Given the UK’s commitment to a nuclear future, as evident by the recent investment in Hinkley Point, and the UK’s deep-seated integration in the EU nuclear energy market, how might the UK attempt to establish itself independent of the legislation, regulatory expectations and terms of compliance set out by Euratom? During the European Union (withdrawal) bill debate on 13 December 2017, the Minister of State for Courts and Justice, said that the UK government intended to retain a close association with Euratom. Could associate membership, à la Switzerland and Ukraine, be an option? How would that be reconciled with an absolutist position on ECJ interference? What does it mean for the research projects dependent on funding from Euratom members, such as that at Culham Oxfordshire? Could the UK be sidelined from lucrative nuclear trade agreements with third parties? With replacement provisions yet to be determined, industry warnings suggest that the UK’s exit from Euratom could cause a major disruption to the entire nuclear fuel cycle. In this podcast, Silke Goldberg from Herbert Smith Freehills discusses the UK’s position, the legal terms of their exit, and the potential consequences of their withdrawal.

Competitiveness of wholesale energy markets is a fundamental goal of the EU since more than 20 years. Recently, specific pieces of legislation like REMIT have been introduced to foster market transparency and integrity. According to Clara Poletti – Head of the Energy Division at the Italian energy regulator ARERA (formerly known as AEEGSI) – national energy regulators are used to cooperate with national competition authorities and the European Commission to promote competition both ex-ante and ex-post. They are now obliged to adapt their procedures and praxis to the new rules. Beside traditional issues like abuse of market power and market foreclosure, they need to consider further cases of market abuse, not necessarily implemented by dominant players. Harmonised implementation across Europe is vital.

A relevant example is represented by excessive pricing. Unfortunately, due to the current deployment of more capital intensive electricity generation technologies, it is more and more difficult to assess whether a price is excessive or not. In other words: are the high prices recorded from time to time on wholesale markets the result of scarcity or the consequence of market power and other unfair conducts by market players? Academics are invited to contribute to the discussion.

At the margins of the residential part of the Annual Training on the Regulation of Energy Utilities, Maria Olczak (FSR) talks with Aad Correljé (Clingendael, TU Delft) about LNG markets. In February 2016, the European Commission has published an EU strategy for liquefied natural gas and gas storage as a part of its sustainable energy security package. The LNG is perceived as an important element for ensuring energy security, especially in regions currently dependent on a single gas supplier, and hence vulnerable to any supply disruptions. Nevertheless, European countries need to compete with other markets, especially the Asiatic ones for the delivery of LNG. So far Europe has been perceived as a “market of last resort”, since LNG exporters have been targeting the premium consumers in Asia. Given that domestic gas production in Europe is declining faster than expected, competition for access to energy supplies will likely increase in the future.. Aad addresses two main questions - what will be the role for Europe in global LNG markets? And what will be the role of LNG in the European energy mix?

At the margins of the residential part of the Annual Training on the Regulation of Energy Utilities, Maria Olczak (FSR) discusses with Sergio Ascari (FSR; REF, Ricerche per l’Economia e la Finanza) current developments in Ukrainian gas market. In June 2017, at the latest meeting of the Eastern Partnership Platform 3 on Energy Security, the FSR has presented its recent study on Ukrainian gas market reforms. Sergio Ascari, who is one of the authors of the report, explains the main findings of the study.

In the second part of the interview, Sergio Ascari explains the situation in Central and Eastern European countries, which was one of the regions that suffered the most during the 2009 gas crisis, but also invested heavily in the development of new infrastructure. However, security is not just a matter of hardware: infrastructures need to be complemented by the adoption of efficient market arrangements, i.e. a proper software.

In this podcast, Szymon Zaręba from the Polish Institute of International Affairs discusses the legislative developments surrounding the controversial Opal gas pipeline. The Opal pipeline was established in 2011 to export natural gas from the Nord Stream 1 pipeline across Germany to the Czech border, with it currently connecting with the JAGAL and STEGAL pipelines in Germany. Given the EU’s long-standing efforts to curtail the export monopoly of the Russian state-owned Gazprom, and with Russian gas still accounting for a third of Europe’s energy supplies, the pipeline remains one of the EU’s central energy disputes with Russia and has become a playing field for the exercise of EU law. Zaręba outlines the history of the pipeline project and details the complex legal developments surrounding its usage.

Did you miss our webinar with Professor Kim Talus on the Baltic Sea Pipelines and EU law? You can catch the recording here:

http://fsr.eui.eu/event/webinar-baltic-sea-pipelines-eu-law/

In 2016, Ukraine proposed for the re-establishment of an independent national energy and utilities regulatory body. The Draft Law No 2966-d, “On the National Commission for State Regulation of Energy and Public Utilities Sector”, was signed into law by the President of Ukraine on 22 November 2016 following a decade-long campaign. This marks a significant step toward creating a competitive energy market in Ukraine, a reliable regulatory environment, and a meaningful reform of the country’s energy sector. The new law was developed in line with the Energy Community Treaty and Ukraine’s obligations to implement the EU’s Third Energy Package. Up until this point, the activities of the National Energy and Utilities Regulatory Commission of Ukraine (NEURC) had been governed by a series of legislative acts and could be dissolved on the basis of a presidential decision. Under the new law, the regulator’s functions shall include the issuing of resolutions, orders and regulatory acts, licensing conditions and the granting of licences in the electricity and gas market and public utilities sector, the setting of tariffs, and the supervision, monitoring and control of market players. The law also introduces extensive transparency obligations, a rotation procedure for commissioners, and seeks to limit political interference by prohibiting governmental officials, municipalities, political parties, and any other legal entities or individuals from giving any instructions, orders or requests to the regulator. In this podcast, Olena Pavlenko, of Ukrainian think tank DiXi Group, traces the backdrop to this development, outlines how the new regulator will function in effect, and discusses the implications of its establishment.

There is no single way to organize the electricity industry at the world level. In the EU the industry is liberalized and the competitive segments are unbundled from those related to the management and planning of the grid. On the contrary, in countries such as Thailand one or few vertically integrated companies are responsible for the whole supply chain, i.e. from the generation to the transmission and distribution of electricity. Nicolò Rossetto (FSR) had the possibility to discuss it with Thanawadee Jaem On and Nicha Saiped, two engineers employed by the Electricity Generating Authority of Thailand (EGAT). During the exchange of view, it came out that EGAT is facing challenges similar to those that utilities and regulators in Europe are trying to cope with (decentralization of power production, development of prosumers, digitalization). Interestingly enough, also in Thailand a change in gender balance is taking place with more and more women working in a sector traditionally populated by men.

Maria Olczak (FSR) and Dr. Niko Bosnjak (Energy Policy Manager at ONTRAS) discuss the integration of Electricity and Gas Networks. The rapid deployment of energy from renewable sources helps to tackle climate change, but at the same time poses new challenges to existing networks and the entire energy industry. One of them is the intermittency of renewables, since their output depends on the available sunlight, wind speeds and wave activity.

How can we manage the intermittency? One of the answers is an integration of electricity and gas networks. Dr. Bosnjak explains how the use of gas grids contributes not only to the reliability and safety of the system, but also helps to save costs, e.g. those related to power grid expansion. This is one of the findings of the study on the German energy market commissioned by the Association of German Gas Transmission System Operators (FNB Gas e.V.). In the final part of the podcast, Dr. Bosnjak discusses the key obstacles preventing the integration of electricity and gas networks.

Recorded on the 1st December 2017.

Related event: Regulatory Gaps For a Future Proof Interaction of Electricity and Gas Networks

Nicolò Rossetto (FSR Energy) and Josh Roberts (REScoop.eu) talk about the role of energy cooperatives in Europe and the role that local energy communities could play in the near future. According to Dr Roberts, citizens are getting more and more active in the energy markets, and they can play, via cooperatives and local communities, an important role in the energy transition. However, an adequate policy and regulatory framework are needed to ensure that both citizens and the whole energy system can benefit from the opportunities that new technological developments bring. The EU is important in this respect since it can promote a change in legislation that allows every European citizen to become a member of these communities, foster the energy transition and benefit from it. The proposal in the Clean Energy Package represents a potential breakthrough. However, energy communities are not a merely technical issue but should be based on the traditional principles of cooperatives, e.g. voluntary and democratic participation, social responsibility and the like. Clarifications on this point by the European co-legislators are needed.

Nicolò Rossetto (FSR Energy) and Andrea Villa (Enel) discuss the proposal on local energy communities by the European Commission. Engaging more citizens and energy customers is an important move to achieve an efficient internal market for energy and foster the transition to a decarbonised economy. At the same time, the multiplication of entities in the electricity system, each of them with specific rights and duties, can create unnecessary hurdles. Citizens should be allowed to invest in renewables and easily access the market, but no artificial and expensive segmentation of the electricity system at the local level should be introduced.

Keywords: local energy communities, Clean Energy Package, electricity markets, energy cooperatives, energy transition.