Q+A-Will the EU's new energy network law meet policy goals?

BRUSSELS Mon Oct 17, 2011 11:00am BST

BRUSSELS Oct 17 (Reuters) - The European Commission is expected this week to publish its latest legislation on how to improve EU energy grids and pipelines to ensure secure, sustainable supplies and move towards a single, efficient market.

Energy is for the first time a part of the multi-year budget for 2014-2020 and, subject to lengthy debate, 9.1 billion euros ($12 billion) could be allocated to infrastructure of strategic EU importance.

It is less than 1 percent of the overall EU budget, but EU sources say it could help to draw further finance from private sources and national governments.

The European Commission has estimated total investment needed for energy infrastructure of Europe-wide importance stands at more than 200 billion euros for the rest of the decade.

Of this, 140 billion euros would be for high voltage electricity transmission, 70 billion for gas pipelines and 2.5 billion for carbon dioxide infrastructure.

The following addresses some of the questions surrounding the new law.

WHAT'S NEW?

The energy infrastructure regulation seeks to speed up processes.

Permit granting, which in the most extreme scenarios has taken decades, will require no more than three years.

If projects of "common interest" are subject to delays or other implementation difficulties, the European Commission will be able to designate a European coordinator to find a solution.

IS IT PROGRESS?

Most parties argue the new legislation is an improvement on the previous Trans-European Networks for Energy, known as TEN-E.

In broad terms, industry and green groups welcome what they see as a more streamlined approach, although industry has voiced reservations about whether it could distort competition and some environmentalists and local residents could object to increased powers to sweep aside planning objections.

The European Wind Energy Association (EWEA) saw the law as a step in the right direction, but questioned the inclusion of carbon capture and storage in its list of projects of common interest.

"We don't know whether CCS is viable in the near future at all, while the infrastructure package talks about today's available technology and related investments," said Paul Wilczek, senior regulatory affairs adviser at EWEA.

HOW DOES THIS TIE IN WITH EU POLICY?

Apart from the overall policy goal of secure and sustainable supplies, the EU has set targets of cutting its carbon emissions by 20 percent compared with its 1990 levels, deriving 20 percent of its energy from renewable sources and improving efficiency by 20 percent.

It is broadly on track so far on the first two targets, which are binding, but only about half-way towards meeting the non-binding efficiency goal.

Analysts say the new law will probably not address the efficiency issue, which is largely dependent on national measures on, for instance, insulation.

It could advance the other two targets and help to lay the groundwork for over-achievement in line with the Commission's 2050 low carbon road map, which sees the need for much deeper carbon cuts by the middle of the century.

By the end of this year, the Commission will also publish a 2050 energy road map on how longer term targets can reached.

The EU has, meanwhile, aimed to achieve a single energy market by 2014, although the Commission has said this deadline could be missed.

The new law should encourage the shift towards a single market after that date and add to security of supply as outages in one country could be compensated for more effectively by surpluses elsewhere.

COULD THERE BE A CLASH OF GOALS?

Analysts say the paradox of achieving greater energy efficiency is that it could depress an already weakened carbon market and take away incentives to produce clean energy.

One solution raised in the low carbon road map is to set aside -- remove either permanently or temporarily from the system -- some carbon allowances to support the carbon price.

Introducing more ambitious carbon reduction targets could be an even better solution, green groups say.

"Moving to 30 percent emissions reduction is the most effective way to tighten the emissions cap and establish the high and stable carbon price necessary to make the shift to a renewable energy economy," EWEA has said.

WHAT ARE THE PRIORITY PROJECTS?

The draft law grants priority to 12 strategic trans-European infrastructure corridors and areas, which it says are vital for achieving the EU's energy and climate policy objectives:

-- Northern seas offshore grid in the North Sea, the Irish Sea, the English Channel and the Baltic Sea to transport electricity from renewable offshore energy sources to centres of consumption and storage.

-- North-south electricity connections in southwestern Europe between member states from the region and third countries, notably to integrate renewable electricity.

-- North-south gas interconnections in western Europe.

-- North-south electricity interconnections in central-eastern and southeastern Europe to complete the internal European market and integrate renewable power.

-- North-south gas interconnections in central-eastern and southeastern Europe -- between the Baltic Sea region, the Adriatic and Aegean and the Black Sea, to enhance diversification and security of gas supply.

-- Oil supply connections in central eastern Europe to increase security of supply and reduce environmental risks.

-- Baltic energy market interconnection plan in electricity to end the isolation of the Baltic states and help market integration.

-- Baltic energy market interconnection plan in gas to end the isolation of the Baltic states and Finland and their dependency on a single supplier.

-- Southern gas corridor to carry gas from the Caspian Basin, Central Asia and the Middle East to enhance diversification of supply.

The most ambitious and high profile of the projects for this corridor, which could reduce dependence on Russian gas, is Nabucco, but analysts have said rival projects could provide more practical solutions.

-- Adoption of smart grids across the European Union.

-- Aim to establish the first electricity highways by 2020.

-- Cross-border carbon dioxide network and the deployment of carbon dioxide capture and storage.

($1 = 0.721 Euros) (Editing by James Jukwey)

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