European Commission vice-president Maroš Šefčovič discusses the TAP pipeline project, Greece’s state-run Public Power Corp. and Independent Power Transmission Operator (IPTO or ADMIE) as well as the Energy Union, which he heads, in a recent interview with “N”. Šefčovič reiterates the Commission’s push for reforms aimed to open up Greece’s entire energy sector, in a bid to lower costs, boost productivity and increase effectiveness.
By Vassilis Kostoulas
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What is practically the role of the Southern Gas Corridor as part of the EU energy plan? Ηas the Commission estimated the benefits?
The Southern Gas Corridor is a strategic initiative to bring the Caspian gas resources to the European markets. The EU will accelerate efforts to open the South Eastern European markets also to the Southern Gas Corridor. These efforts are directly linked to the Energy Union framework, as one of its crucial objectives is that each Member State in the region, including Greece, would have access to at least three different sources of gas.
The approval of the TAP agreement and the subsequent ground-breaking ceremony are an important step towards completing the Southern Gas Corridor. The project has been identified by the European Commission as a Project of Common Interest and we closely monitor the progress of this project in the three countries involved (Greece, Albania and Italy). The recent second Southern Gas Corridor Advisory Council ministerial meeting confirmed the determination of all participating countries and consortia to complete this key infrastructure project in time. Progress has been achieved on all the projects along the Southern Gas Corridor (Shah Deniz II field development, the South Caucasus Pipeline, Trans-Anatolian pipeline and the Trans-Adriatic pipeline) and it is expected that gas will flow by 2019 to Turkey and by 2020 to the EU.
What would you say finally determined the choice of TAP over other projects, such as Nabucco and ITGI?
Trans-Adriatic Pipeline is an important project for the European Union, recognised as one of the Projects of Common Interest as well as a key security of supply project under the European Energy Security Strategy. This pipeline is an important gas transmission project between Italy, Greece and Albania, as part of the Southern Gas corridor. The project has a strong political support, as well as backing from investors, which was lacking with regards to Nabucco and ITGI. The Commission remains committed to the close cooperation with the stakeholders and to support the timely implementation of this important project.
Does the Commission support the cooperation between Greece, Cyprus and Israel for the creation of the East Med; To what extent does the imponderable factor of Turkey, whose role has incidentally been upgraded after the agreement with the EU regarding the refugee’s issue, cause concern?
Stability on the eastern edge of the Mediterranean is of crucial importance. Current and future discoveries in the region may significantly change the energy picture, providing for a win-win situation for the whole region and even beyond. Energy cooperation can create trust, prosperity, stability and neighbourly relations among countries and communities. This was also conveyed in the Trilateral Declaration which was made in January by the leaders of Cyprus, Greece, and Israel. We have also launched a "Euromed Gas Platform" which is a policy dialogue instrument that brings together policymakers, industry representatives, regulators, energy stakeholders and representatives from financing institutions.
TAP has a strong political support, as well as backing from investors, which was lacking with regards to Nabucco and ITGI.
Moreover, the East Mediterranean gas findings could play a very important role in helping both producing and neighbouring countries to address their energy security problems. They could also have a growing role in the EU’s diversification strategy, although it is too early to assess the impact these finds could have on the EU gas market. For all those reasons, the EU stands ready to help the countries in the region to exploit their natural energy resources to the full use of their national interest, according to the most optimal gas-export option.
The European Union sees Turkey as a strategic partner and one of the main countries in the Southern Gas Corridor, and the energy dialogue with Turkey is particularly important. Turkey is a key transit country for natural gas. The EU closely cooperates with Turkey to enable the integration of the Turkish gas and electricity markets into its internal energy market
What is the nature of the environment regarding energy relations between the EU and Russia following the Ukrainian crisis?
The EU has continued its efforts in the trilateral processes with Ukraine and Russia on the gas winter package. Continuing the trilateral energy talks would help to rebuild trust between the parties, and we will continue on trying to engaging both parties.
Ukraine is in the process of an ambitious energy reform, aiming to pave the way for investments. Reforms address also important issues such as energy efficiency and unbundling.
How is the implementation of the Energy Union progressing?
2016 is the Year of delivery for the Energy Union. Last year we proposed the reform of the EU Emissions Trading System and earlier this year we put forward the Security of Gas Supply Package. Meanwhile, we are moving ahead, addressing the sectors which are not covered by the ETS, with the so-called Effort Sharing Decision. Together, the Commission will present a proposal to ratify the historic Paris Agreement.
After summer, the Commission will present an Energy Efficiency package including the revision of the Energy Efficiency Directive, the Energy Performance of Buildings Directive and introduce a new instrument - a Smart Financing for Smart Buildings.
Towards the end the year, we will follow up on last year's consultation with a legislative proposal to redesign the electricity market; a move which is crucial in order to empower citizens to generate their own renewable energies. That is why we will also put forward a Renewable Energy Package, to provide the right framework to achieve the binding EU-level target of at least 27% renewable energy by 2030 in a timely and cost-effective manner.
Is there a link between the project of the Energy Union and the investment Juncker package? What about Greece at this level?
The Energy Union Project, as well as the Investment Plan for Europe, is one of the ten priorities of Juncker's Commission. The EU budget for 2014-2020 already increased the energy sector allocation and the EFSI should complement it to give EU consumers access to secure, sustainable and competitive energy. So far, one third of 64 approved transactions, which trigger more than 100 billion of Euros in less than one year of the existence of the fund, are in the energy sector. The EFSI can be combined with other sources of funding in the EU budget, in particular Connecting Europe Facility (CEF) financing (both grants and financial instruments) and European Structural and Investment Funds.
Greece has so far two projects signed under this new funding scheme in the agro sector and the sector of small and medium-sized enterprises. The EFSI is a very flexible instrument and it can be combined with other EU funding sources. The best advice for any project promoter is to contact the European Investment Bank to find out whether they are eligible for EFSI financing; governments are not gatekeepers in the process. The projects are entirely assessed by the independent Investment Committee which works within the European Investment Bank. We therefore encourage Greek promoters to put more innovative projects on the table to get the most out of the EFSI, boosting economy and growth in the country.
What is the European Commission's assessment concerning the evolution of oil prices and how does this affect the Commission energy planning?
Oil prices are based on market development. The total EU import bill for fossil fuels has dropped from 400 billion € in 2013 to well below 300 billion € in 2015.This has been driven by increases in supply such as US shale oil and falling demand, slower global growth, but also structural changes on the demand side, such as growing energy efficiency in the transport sector. Under current circumstances, market analysts do not expect that these factors would change significantly over the next year. Indeed, the prospect of Iran re-joining the oil market suggests supply could increase further.
The European Union sees Turkey as a strategic partner and one of the main countries in the Southern Gas Corridor. Turkey is a key transit country for natural gas.
Our Joint Research Centre issued a report that describes the importance of oil for the EU economy and analyses the potential economic effects that current low oil prices since mid-2014 may have in the EU28 economy.
Further it assesses how the current oil price decrease may evolve up to 2020 and the consequences for global oil consumption. The analysis shows that a decrease of the oil price from US$100 to US$50 may lead to a GDP gain of about 0.7%, both on a global level and in the EU, driven by private consumption and investment.
To what extent will the EU targets for drastic reduction of the emissions affect the competitiveness of the European production?
I visited all EU Member States and can confirm, that transition of the energy system goes beyond the traditional understanding of the production, transmission and consumption of the energy; today people are demanding to live in a healthier and cleaner environment, therefore the Energy Union embraces not only energy and climate, but also transport, competitiveness, protection of the environment, regional cooperation and many other sectors.
The European Union is committed to achieving its 2030 climate and energy goals. We have proved that we are successful in reducing greenhouse gas emission at the same time as ensuring economic growth. Transition to low carbon economy is possible and Europe has all to take this momentum as an opportunity by developing and deploying innovative solutions, attracting investors and creating job opportunities.
How is the liberalization of the energy market in Greece progressing, and how do you widely evaluate the course of reforms in the Greek energy sector?
I visited Greece as part of the Energy Union tour and welcome the progress which has been achieved. Progress is being made in the reform of the energy sector. Constituting an important part of Greece's commitments under the Memorandum of Understanding, several reforms measures aiming at making energy markets more efficient and competitive have recently been adopted and will now have to be fully implemented.
Regarding electricity, there is no true level playing field with the incumbent (PPC) still having a dominant position. The Greek government had already committed to lower the incumbent's market share by 25% in the short-run and to 50% by 2020. Now an agreement on the access – through auctions - by alternative suppliers to the lower-cost electricity production base of PPC has been found and legislated, and will lead to a reduction of the retail market share of the quasi-monopolist by 8% in 2016, 20% by 2017, and ultimately 50% by 2020. Furthermore, a plan for the ownership unbundling of the transmission system operator ADMIE has been agreed between the institutions and the Greek authorities and legislated and will lead to the sale by end-2016 of at least 20% of the company to a strategic investor, having joint control of the company with the State, which will own 51% of it. PPC itself will no longer hold any share in ADMIE in order to attenuate any conflict of interest in the construction and operation of important internal and external interconnections. The focus should now be on implementation of these reforms for them to translate into actual benefits to consumers, including the completion of the EU target model for the electricity markets in order to introduce a more modern market design in line with the principles of the internal energy market.
Regarding electricity, there is no true level playing field with the incumbent (PPC) still having a dominant position. The Greek government had already committed to lower the incumbent's market share by 25% in the short-run and to 50% by 2020.
Greece's gas retail markets are still legal monopolies and most customers are not yet eligible. Nevertheless, the existing gas release programme will now be improved in light of past experience. Moreover, already in August 2015, a gas law was adopted with a view to fully liberalise by 2018 the gas retail markets. Once implemented fully, this will be an important prerequisite for Greek end-consumers to benefit from the potential increased gas-to-gas competition from LNG and the Trans-Adriatic Pipeline.
Greece, on top of having a small market, buys almost the most expensive gas in Europe. How can the country overcome this problem?
In terms of gas, import dependency in Greece remains above EU average. A full integration of Greece into the EU's electricity and gas markets will increase competition, boost innovations and growth. As one of the objectives of the Energy Union is to diversify energy sources, the gas-to-gas competition will evolve when gas sources become more diversified. Moreover, the Energy Union strategy has set out to ensure greater transparency in the composition of energy costs and prices by developing regular and detailed monitoring and reporting, both for wholesale and retail prices of electricity and gas, with the report to be delivered in 2016.
Despite the favourable international environment that the low cost of oil shapes, the Greek production units face very high energy prices. A main cause is the fact that high taxes are incorporated in the prices. What does the Commission recommend, since Greece needs more than any other country in the EU to improve the competitiveness of its economy?
In Greece, particularly in the transport and buildings sector, investments in energy efficiency can reduce energy bills of customers and enterprises. Recently adopted EU Heating and Colling Strategy addresses situation where only heating and cooling in our buildings and industry accounts for half of the EU’s energy consumption and 84% of heating and cooling is still generated from fossil fuels.
These are very warning figures. Therefore the strategy offers solutions how we can cut energy consumption through intelligent thermostats, upgrading heating and cooling equipment, use of advanced construction, design techniques, energy efficient technologies or high-performance insulation materials when renovating buildings. Greece presents formidable investment opportunities in energy efficiency, especially in the residential sector, where heating is still largely dependent from oil and there is great need for better insulation.
