September 10, 2003 SVSE 2003 - Praha 1

EU Single market for energy

Expectations of the European industrial consumers

Peter CLAESPresident Ifiec Europe

September 10, 2003 SVSE 2003 - Praha 2

What is IFIEC Europe ?

European federation of national federations of industrial energy consumers

Issues :• Market liberalisation (electricity – natural gas)• Environmental aspects of energy policy

• European Climate Change Policy• Renewables / nuclear energy / CHP / …• Energy taxation …

September 10, 2003 SVSE 2003 - Praha 3

IFIEC Members

EU-membersEU-members Future EU-Future EU-membersmembers

MembersMembers D – F – GB D – F – GB

B - NL – IRLB - NL – IRL

I – GR – SFI – GR – SF

A – PA – P

HH

Non-membersNon-members S – DK – LUXS – DK – LUX

E (?)E (?)

CZ – EST – LV CZ – EST – LV

LT – PL – SLOLT – PL – SLO

SK – M – CYSK – M – CY

September 10, 2003 SVSE 2003 - Praha 4

1. Does the single market work ?

Performance indicators:

How many users changed suppliers? Did prices fall or (at least) converge ?

September 10, 2003 SVSE 2003 - Praha 5

How many users changed suppliers ? (1998-2001, Source: DG Tren, Eurostat)

ElectricityElectricity

IndustrialIndustrial

ElectricityElectricity

DomesticDomestic

GasGas

IndustrialIndustrial

GasGas

DomesticDomestic

AustriaAustria 20-30%20-30% 5-10%5-10% <2%<2% Not eligibleNot eligible

BelgiumBelgium 2-5%2-5% Not eligibleNot eligible ?????? Not eligibleNot eligible

FranceFrance 10-20%10-20% Not eligibleNot eligible 20-30%20-30% Not eligibleNot eligible

GermanyGermany 20-30%20-30% 5-10%5-10% <2%<2% <2%<2%

ItalyItaly >50%>50% Not eligibleNot eligible 10-20%10-20% 2-5%2-5%

NetherlandsNetherlands 20-30%20-30% Not eligibleNot eligible 30-50%30-50% Not eligibleNot eligible

SpainSpain 10-20% 10-20% Not eligibleNot eligible 20-30%20-30% Not eligibleNot eligible

UKUK >50%>50% 30-50%30-50% >50%>50% >50%>50%

September 10, 2003 SVSE 2003 - Praha 6

Did prices fall or (at least) converge ?

September 10, 2003 SVSE 2003 - Praha 7

Did prices fall or (at least) converge ?

September 10, 2003 SVSE 2003 - Praha 8

Did prices fall or (at least) converge ?

September 10, 2003 SVSE 2003 - Praha 9

Did prices fall or (at least) converge ?

September 10, 2003 SVSE 2003 - Praha 10

2. What went wrong ?

2.1. Does unbundling work ?

• Accounting unbundling (“Japanese Walls”)

• Management unbundling

• Legal unbundling

• Ownership unbundling (“Chinese Walls”)

September 10, 2003 SVSE 2003 - Praha 11

2. What went wrong ?

2.1. Does unbundling work ?

2.2. The impact of subsidiarity

September 10, 2003 SVSE 2003 - Praha 12

The impactof subsidiarity

Source : Second benchmarking report DG Tren

September 10, 2003 SVSE 2003 - Praha 13

Source : Second benchmarking report DG Tren

September 10, 2003 SVSE 2003 - Praha 14

2. What went wrong ?

2.1. Does unbundling work ?

2.2. The impact of subsidiarity

2.3. Cross-border Transmission

September 10, 2003 SVSE 2003 - Praha 15

Cross-border Transmission

2.3.1. Suboptimal use of existing capacity

• e.g. Belgian-French border (electricity)

• available capacity : app. 4.000 MW• available for market : 350-500 MW• ULF : peaks of > 2.000 MW

September 10, 2003 SVSE 2003 - Praha 16

Cross-border Transmission

2.3.2. Lack of cross-border transmission capacity

September 10, 2003 SVSE 2003 - Praha 17

Cross-border Capacity ElectricityIn % of installed production capacity (Source: DG Tren)

Potential Potential competition competition from importsfrom imports

Market share Market share of Top 3 of Top 3 producersproducers

AustriaAustria 21%21% 45%45%

BelgiumBelgium 25%25% 96%96%

FranceFrance 12%12% 92%92%

GermanyGermany 11%11% 64%64%

ItalyItaly 14%14% 69%69%

NetherlandsNetherlands 19%19% 59%59%

SpainSpain 4% 4% 83%83%

UKUK 3%3% 36%36%

September 10, 2003 SVSE 2003 - Praha 18

Cross-border Transmission

2.3.3. No efficient congestion management system

• no agreement within ETSO• no efficient exchange of information between TSOs• no single European CM-system

• re-dispatching• auctioning• rationing• market splitting

September 10, 2003 SVSE 2003 - Praha 19

2. What went wrong ?

2.1. Does unbundling work ?

2.2. The impact of subsidiarity

2.3. Cross-border Transmission

2.4. Complexity of energy policy

September 10, 2003 SVSE 2003 - Praha 20

Complexity of energy policy

• European Climate Change Programme• renewables• CHP• CO2-emissions• nuclear energy ?

• financing of other policies (public services, local entities, …)

• security of supply

• + NIMBY-syndrome !

September 10, 2003 SVSE 2003 - Praha 21

3. Recommendations of Ifiec

• full ownership unbundling (Chinese walls)

• full market opening for all users

• publication of all relevant information by TSOs and regulators

September 10, 2003 SVSE 2003 - Praha 22

3. Recommendations of Ifiec

Electricity

• cost-based, fair CBT financing mechanism(non-distance related, fair share to be paid by producer)

• non-discriminatory, transparent and efficient congestion management system (no auctioning)

September 10, 2003 SVSE 2003 - Praha 23

3. Recommendations of Ifiec

Gas (gas-to-gas competition)

• cost-reflective and simple tariff structure

• non-discriminatory, cost-reflective access to gas infrastructures (incl. Storage, off-shore facilities)

• clear, non-discriminatory, transparent balancing rules (preferably daily balancing)

• capacity rights subject to “use-it-or-loose-it”