Winter Package 16 November, 2017 11:00 am   
COMMENTS: Teresa Wójcik

Winter package may be illegal (ANALYSIS)

On 30 November 2016, the European Commission published a draft legislative package called “Clean Energy for all Europeans” (popular name in the media: „Winter Package”). The document is more political than economic in nature, because it is primarily the legal implementation of the political guidelines contained in the European Council conclusions (Package 2030 of October 2014) and the European Commission Energy Union Strategy (2015) – writes the editor of the portal, Teresa Wójcik.

The “Clean Energy…” package consists of over 1 thousand pages of legislative documents and about 3 000 pages of the necessary supporting appendices.

The EU’s energy objectives are to be implemented through a strong increase in the role of political instruments and significant restrictions on the freedom of Member States in their national energy policies.

Changes against the Treaty on the Functioning of the European Union?

Especially the freedom to choose energy mix in formally sovereign states would loss its importance. These countries would lose the right to own energy policy despite the treaty guarantees. It is about art. 192 of the Treaty on the Functioning of the European Union, defining the Member States’ environmental policy and art. 194 on energy policy. They entitle Member States to, among others, “choosing between different energy sources” and defining “overall structure to energy supply”. According to these two articles, the Polish draft of the Power Market Law is in line with EU law. However, it is still difficult to adapt it to the currently changing legal status of the Union’s energy policy. So, as it composed with the draft Package. Negotiated notification of amendments to the Polish draft requires compromises, but to what extent?

“Clean Energy for All Europeans” is a part of the general/framework political conception formed within the last 2-3 years by the European Council conclusions of 20 October 2014 and the European Council conclusions of 20 March 2015 adopting the Energy Union Strategy.

The Energy Union Strategy assumes five priorities. One of them is scientific research, innovation and competitiveness (especially the priority in smart grid technology and intelligent homes, clean transport, clean fossil fuels and the world’s most secure nuclear power plant). The term “clean fossil fuels” does not specify the type of fuel.

Major legislative proposals included in the Package require the introduction of many changes or new regulations.

Firstly – in the area of electricity market and recipients. It is about e.g. the Regulation on the internal electricity market, the three basic articles of which are currently being negotiated by the European Parliament’s Committee on Industry, Research and Energy. Also about the change of the Directive on common rules for the internal electricity market, the Regulation establishing the European Union Agency for the Cooperation of Energy Regulators (ACER) and the new Emergency Preparedness Regulation in the electricity sector and repealing the Directive 2005/89/EC.

Secondly – in the area of transition towards a low-carbon economy. Amendments shall be made to: Directive on the promotion of energy from renewable sources, i.e. RED II Directive; Energy Efficiency Directive, Energy Performance of Buildings Directive. Thirdly, a new Regulation on the management of the Energy Union is envisaged.

The changes proposed in the Regulation on the internal electricity market are the most controversial. One of them is to introduce CO2 emission limit for sources that can benefit from the power market. In article 23 para. 5 Market Regulation the EC proposes that only CO2 emission sources below 550 kg/MWh should be available in the power market. Only a five-year transition period for existing sources is proposed. Such a regulation will eliminate all coal-fired power plants from the power market and is clearly in contradiction with the aforementioned Treaty’s freedom of choice of energy mix, as well as with the principle of technological neutrality repeatedly quoted by the European Commission.

Priority of import as a renunciation of energy sovereignty

Emission limit for power market participants, (the most popular in the media), is not the most controversial provision in the Regulation from the energy sovereignty point of view. More questionable are proposals that make the introduction of the power market dependent on the realization of a number of additional conditions; First and foremost, from generation adequacy analysis at European level rather than national level. The analysis would be carried out by the European Network of Transmission System Operators for Electricity – ENTSOE.

The purpose of the analysis would be to see to what extent foreign sources (via interconnectors) can provide generation adequacy to cover future demand without increasing their own generation. This would eliminate the existing principle that each Member State is responsible for the generation adequacy of own resources. In essence, it would mean abandoning the energy sovereignty of the Member States. The consequence is the requirement, stated in art. 21 of the regulation draft, that the foreign entities could participate in the domestic power markets, under the same conditions as national entities. Provided that there is a cross-border network connection between these countries. It is only when all these solutions are not sufficient – a Member State can introduce a power market.

Subordinate role of national operators of transmission systems

Another controversial element enclosed in the Market Regulation is the regulation of regional operational centers. They are to be established by transmission systems operators and include regions formerly designated by the ENTSO-E with the approval of the ACER (Agency for the Cooperation of Energy Regulators). The centers are to be capital companies, have legal personality and a very wide range of tasks. They also have the right to issue decisions to individual/national transmission systems operators. The proposed scope of powers for regional operational centers indicates that they will be a kind of transnational transmission operators. They are to make binding decisions addressed to national transmission systems operators. However, it is not clear whether these powers also imply a consistent responsibility (and against who). Art. 44 includes a suggestion that the centers would have a “commercial insurance cover”.

No implementation into national energy law

Monika Morawiecka, member of the Governing Board of the Polish Electricity Committee, Director of the Strategy Department at PGE, repeatedly emphasized that all these proposals of such importance are to be introduced by a regulation rather than a directive. In the meantime, under European law, the regulation is applied directly in the Member States and does not require the implementation to the national law. This allows for significant restrictions of the powers of Member States in the energy sector. Regarding the sovereign management of power level, as well as reserves and investments. These decisions are to be gradually transposed to transnational level.

The idea presented in Brussels is aimed at ensuring that Member States were not energetically self-sufficient. Especially when it comes to the domestic potential for generation adequacy. Meeting the demand for energy would largely depend on supplies from other countries.

It should be assessed whether the provisions of the Market Regulation for regional operational centers are the further step, aiming at limiting the powers of Member States in their own energy security. According to the draft, the Market Regulation is expected to enter into force from 1 January 2020.

Freedom of choice: only between the imposed technologies?

The European Commission has repeatedly stated that Member States are free to choose their energy mix. The content of some of the provisions of the “Clean Energy for All Europeans” package draft, however, raises the suspicion that this would be the freedom of choice only between pre-imposed technologies. The “Clean Energy…” package will limit the powers of Member States to shape their energy policies. And the freedom of shaping the energy mix will decrease so that it becomes non-existent. The question is – what would happen with the Polish negotiated power market?