The Interplay Between Liberalization and Decarbonization in the European Internal Energy Market for Electricity

European Commission 2017, ‘A Fully Integrated Internal Energy Market’.

Ownership unbundling is taken up in Article 9(1) of the Electricity (2009/72/EC) and Gas Directives (2009/73/EC); Third Party Access is taken up in Article 32 of the Directives.

EU 2020 Climate and Energy Package 2017.

COP21 Paris Agreement: United Framework Convention on Climate Change (UNFCCC), UN Doc FCCC/CP/2015/L.9/Rev. 1 ‘Adoption of the Paris Agreement’ (12 December 2015).

European Commission, Guidelines on State aid for environmental protection and energy 2014–2020 (2014/C 200/01) C 200/1. 28 June 2014 and European Commission, Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty Text with EEA relevance; OJ L 187, 26 June 2014, pp. 1–78.

DG Energy, ‘Commission Proposes New Rules for a Consumer Centered Clean Energy Transition’, 30 November 2016.

European Commission, ‘Energy Union Package – A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy’, 25 February 2015, and DG Energy, ‘Commission Proposes New Rules for a Consumer Centered Clean Energy Transition’, 30 November 2016.

The EU in its energy security strategy in so many words confirms that there is no legal definition of energy security on the European level, see European Commission (2014), p. 166; European Commission, ‘European Energy Security Strategy’, COM(2014) 330 final, Brussels, 28 May 2014.

Despite a lacking legal definition on EU level, the Union believed the concept of energy security was clear an important enough to put forward a European Energy Security Strategy, preceding its Energy Union Package, European Commission, European Energy Security Strategy, Brussels, 28 May 2014, COM (2014)330; This strategy was accompanied by an in-depth study of Europe’s energy security European Commission (2014), p. 3.

European Commission, European Energy Security Strategy, Brussels, 28.5.2014, COM (2014)330; European Commission (2014), p. 3.

Energy Charter Secretariat (2015), p. 10 et seq.; The Council of European Energy Regulators (CEER) (2010), Dreyer and Stang (2013), p. 1 et seq.; and generally, Lilliestam and Patt (2012) and Metais (2013).

International Energy Agency, ‘What is Energy Security?’.

Energy Charter Secretariat (2015), p. 113 et seq.

Energy Charter Secretariat (2015), p. 113 et seq.; International Energy Agency (2016), p. 86 et seq.

See e.g. on this generally Marhold (2011).

European Commission (2014).

European Commission (2014), p. 3.

Pollitt in a brief paper provides a historical overview of the ‘liberalization era’ and its effects: Liberalization is characterized by its attention for competition, and unbundling is one of the tools. Privatization is often an effect of liberalization but not always, and part of the reason liberalization is not yet complete is that governments are afraid to lose the control or the power to cross-subsidize, see Pollitt (2012), p. 128 et seq.

DG Competition 2017, ‘Why is Competition Policy Important for Consumers?’.

See for an overview Marhold (2016), pp. 250–254; Also see European Commission (DG Energy) 2017, ‘Markets and Consumers – Integrated Energy Markets for European Households and Business’.

Consolidated Version of the Treaty on the Functioning of the European Union, 2008 O.J. C 115/47 (hereafter: TFEU).

Consolidated Version of the Treaty on European Union, 2010 O.J. C 83/01 (hereafter: TEU).

Article 194 TFEU.

Article 194(2) TFEU.

Article 194(2) TFEU.

See on this e.g. Sveen (2014), p. 157 et seq.

European Commission, Proposal for a Directive of the European Parliament and of the Council on the promotion of the use of energy from renewable sources (recast), COM/2016/0767 final/2 - 2016/0382 (COD), 23 February 2017, under 1.1.

Daintith and Hancher (1986).

Directives 2003/54/EC for electricity and 2003/55/EC for gas, OJ 2003 L 176.

European Commission, Communication on ‘Clean Energy For All Europeans’ Brussels, 30 November 2016 COM(2016) 860 final, 8.

Johnston and Block (2012), p. 73; ECJ, C-439/06 Citiworks AG (22 May 2008) and Article 9 of the Electricity Directive 2009/72/EC.

In fact, none of Member States has managed to fully transpose the Electricity and Gas Directives (due date for transposition of the Directive was 2011). Note in this respect that while ‘full ownership unbundling’ remains the basic model and target for EU MS, vertically integrated energy companies can resort to two other alternatives: the independent system operator (ISO) and independent transmission operator (ITO) model. Under the former model, the transmission network can remain in the ownership of the energy company. Nevertheless, the transmission network itself must be managed by an ISO, which must perform all day-to-day network operator functions and must be completely separated from the energy company. In the ITO scenario, the transmission networks can also remain under the ownership of an energy consortium, but the transmission subsidiaries would be set up as independent joint stock companies carrying their own brand name and subject to stringent regulatory control. Most EU Member States whose transmission systems are controlled by vertically integrated undertakings prefer this last scheme of unbundling to comply with the Third Energy Package.

See e.g. European Parliament Briefing, Understanding the Electricity Markets in the EU (Brussels, November 2016) and Glachant et al. (2014).

Article 32 of Electricity Directive 2009/72/EC.

Article 32 of Electricity Directive 2009/72/EC; See also Article 37(6) on the regulation of tariffs. The European Court of Justice (ECJ) in Citiworks confirmed that TPA is paramount and essential for both competition to function in the market, as well as completing the internal electricity market, ECJ, C-439/06 Citiworks AG (22 May 2008), paras 40 and 44.

Article 32(1) Electricity Directive 2009/72/EC.

Johnston and Block (2012), p. 75 et seq. However, since a right balance must be attained between competition policy and attracting sufficient investments in energy infrastructure, the EU maintains an exemption policy to TPA. In the electricity sector, for instance, there is currently an emphasis on building more cross-border capacity by direct current interconnectors (Article 17 of Regulation 714/2009), meaning that these can qualify if it meets certain conditions). Article 17, Regulation 714/2009/EC. See for a more in-depth analysis Van der Vijver (2012), p. 336 et seq.

Article 17 Regulation 714/2009/EC.

OECD, International Energy Agency and Eurostat (2005), p. 18 et seqq.

This distinction is widely used in economics literature.

Jamasb and Pollitt (2011), p. 309.

Jamasb and Pollitt (2011), p. 309.

Jamasb and Pollitt (2011), p. 309.

Nemet and Kammen (2007), p. 746.

See generally Jamasb and Pollitt (2011, 2015).

Nesta et al. (2014), p. 396.

Nesta et al. (2014), p. 409.

Cambini et al. (2016), p. 734.

Cambini et al. (2016), p. 734.

Cambini et al. (2016), p. 734.

Nicolli and Vona (2016), p. 190.

Nicolli and Vona (2016), p. 190.

Nicolli and Vona (2016), p. 190.

Johnston and Block (2012), p. 303.

Johnston and Block (2012), p. 306.

See also generally Petropoulos and Willems (2017).

Johnston and Block (2012), p. 304.

Johnston and Block (2012), p. 320.

Paris Agreement 2015.

EU Renewable Energy Directive 2009/28/EC.

Article 3, EU Renewable Energy Directive 2009/28/EC.

Article 3, EU Renewable Energy Directive 2009/28/EC.; Johnston and Block (2012), pp. 307–308.

EU Renewable Energy Directive, Preamble para 17.

EU Renewable Energy Directive 2009/28/EC, Preamble para 25.

See EU Renewable Energy Directive, Annex I, ‘National overall targets for the share of energy from renewable sources in gross final consumption of energy in 2020’.

Articles 22 and 23, EU Renewable Energy Directive.

See Eurostat news release, ‘Renewable energy in the EU: Share of renewables in energy consumption in the EU still on the rise to almost 17 per cent in 2015’ (14 March 2014).

Eurostat news release, ‘Renewable energy in the EU: Share of renewables in energy consumption in the EU still on the rise to almost 17 per cent in 2015’ (14 March 2014).

Johnston and Block (2012), p. 332 et seq.; the EU wants to move away from FIT schemes towards Feed in premia.

One could think of the FIT scheme in Germany, that was constructed as an add-on to the consumer’s bill. At the other spectrum there is Spain, where after initial subsidization of the renewable energy sector, the country had to cut back on support and incurred large amounts of debt because of, inter alia, the financial crisis and the design of the scheme.

Johnston and Block (2012), pp. 339–340.

The most comprehensive effort is the Beyond 2020 project, researching the design and impact of a harmonized policy for renewable electricity in Europe. Their comprehensive final report discusses pathways and possibilities for the harmonization of renewable energy across Europe, see Beyond 2020 (2014).

Articles 107–109 TFEU.

Article 107(1) TFEU.

Article 108(2) TFEU.

Article 107(3)(e) TFEU.

Article 109 TFEU.

EU Renewable Energy Directive 2009/28/EC, Annex 1, footnote 1.

EC, Commission Regulation No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty, OJ L187/1 (26 June 2014) (hereafter: Block Exemption Regulation) and Guidelines on State aid for environmental protection and energy 2014–2020, 2014/C OJ C200/1 (28 June 2014).

General Block Exemption Regulation, Section 7, Articles 36–43.

Guidelines on State Aid for Environmental Protection and Energy, Preamble, under (3).

See supra Sect. 2.

See on this specifically Struckmann and Sapi (2017), p. 663 et seqq.

EU Renewable Energy Directive 2009/28/EC.

Eurostat, ‘Energy from Renewable Sources’.

European Commission, Guidelines on State aid for environmental protection and energy 2014–2020 (2014/C 200/01) C 200/1. 28 June 2014 and European Commission, Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty Text with EEA relevance; OJ L 187, 26 June 2014, pp. 1–78.