Key Notes

Liberalisation of the gas and electricity markets

Background: Importance of the subject - European added value

The European Union is in the process of creating the largest competitive market for electricity and gas in the world. This integration of energy markets will both lead to greater efficiency and contribute to security of supply. A truly functioning, integrated electricity market requires significant investment in transmission networks.

Interconnections between Member States are a particular priority in order to allow for a higher level of competition between existing companies. Without additional interconnectors, the principles of market opening may become meaningless as companies consolidate their position in particular regions of the European Union and the market becomes segmented.


I. What does the European Union do?

One of the objectives of the single market in energy is to introduce competition between the suppliers of energy products, in particular to bring down production costs. The Commission has opted for an approach in stages, improving the transparency of gas and electricity prices , arrangements for the transit of gas and electricity and eliminating a number of restrictions on equal access for undertakings in the area of hydrocarbons prospecting. The adoption of the Directive will lay down common rules for the production, transport and distribution of electricity. An agreement on liberalisation in the gas supply sector .The completion of the internal market for energy is accompanied by measures aimed as strengthening economic and social cohesion such as the creation of trans-European energy networks .

The introduction of the trans-European energy networks also has an impact on relations with third countries. Interconnections have been made with certain Mediterranean countries, the countries of Central and Eastern Europe and Norway.

The introduction of competition in electricity and gas markets has progressed as well. The Community Electricity Directive providing for a progressive opening of national markets to competition has been transposed in all the Member States. Most Member States have set themselves ambitious liberalisation targets in terms of market shares and segments open to competition, and price reductions have already been reported in some countries.

With a view to achieving these strategic objectives, the Commission has taken a series of initiatives in the following areas:

• promotion of renewable energy sources
• improvement of energy efficiency
• promotion of the production of combined heat and power
• liberalisation of energy and gas sector
• security of energy supply

The promotion of renewable energy resources in one of the Community's main priorities. The main reasons why renewable energy must be developed are linked to the environment, to the stimulation of the competitiveness of the European RES industry, to the security and the diversity of energy supplies in the Union, and to strengthening social and economic cohesion.

Security of energy supply is one of the most important worries of EU and the internal market needs to ensure that the a balance between supply and demand is maintained. However, Community production is insufficient for the Union's energy requirements. As a result, external dependence for energy is constantly increasing. If no measures are taken, in the next 20 to 30 years, 70% of the Union's energy requirements, as opposed to the current 50%, will be covered by imported products.


II. What has the EPP-ED Group achieved?

The EPP-ED was succeeded in making progress on the liberalisation of the energy market. Liberalisation goes hand in hand with low prices and in the long term the reduction of prices will increase saving for industry and benefit other sectors, leading to competitiveness gains for the whole economy.

However, the dismantling of protective national regulations which have limited competition through price and market entry rules has been replaced by European rules which must not limit competition as well and the EPP-ED Group will be vigilant to the future developments.

The EPP-ED Group has supported the use of renewable energy sources and agrees that any Directive on renewable in the Internal Electricity Market must not only protect the systems which promote the development of renewable electricity generation in the Internal Market in the medium term, but must establish a suitable legal framework for renewable energies to underpin the rapid development of these energy sources.

Subsidies, necessary until the use of renewables is viable on the market, are to be judged differently under the EC Treaty from permanent subsidies and is necessary to make the distinction between start up aid and those subsidies which under the EC Treaty (EU primary legislation) can have a long-term effect on trade between the Member States.


III. Our goals for the next legislative period:

The EPP-ED Group strongly support the obligations to provide universal services. These obligations are the subject of debate regarding the liberalisation of network industries in the EU such as postal services and energy grids. The objective of these obligations is to make sure that everyone has access to essential services at affordable prices. It is still necessary to discuss and agree on which is the best system to achieve this purpose. However, the introduction of competition can also speed up the introduction of technology and efficiency improvements, which lead to cost and price decreases, thus contributing to universal service objectives.

A large proportion of new generation investment is expected to come from generation based on renewable energy sources and distributed generation based on CHP (combined heat and power production). This in turn requires new investment to allow electricity networks to be reconfigured. The spread of, for example, offshore wind generation will require new interconnections and reinforcement of the network to be made at various locations. Distributed generation will require the low voltage networks to be upgraded.

The EPP-ED Group believes that renewable energy sources (RES) are by definition indigenous supplies and we are correct to seek to increase their share of final consumption and electricity generation. However, they cannot be expected to replace any of the other energy sources completely.

Nuclear energy is not popular in some quarters but it supplies the greatest share of electricity in Europe of any energy source, it provides large volume base load power and produces hardly any greenhouse gas emissions so its use has to be supported for several years. Coal is a source of energy that with new technology can became more efficient and less pollutant and EPP-ED Group strongly underlines the importance of research work for future technologies and energy systems.