Policy Framework
The European Union’s energy and climate policy has recently been reviewed, following the publication in January 2007 of the Commission paper “An energy policy for Europe”.
The paper sets out three core energy policy objectives;
- Competitiveness – “a competitive market will cut costs for citizens and companies and stimulate energy efficiency and investment”;
- Sustainability – “a competitive market is vital to allow for the effective application of economic instruments, including the emissions trading mechanism to work properly. Furthermore, transmission system operators must have an interest in promoting connection by renewable, combined heat and power and micro generation, stimulating innovation and encouraging smaller companies and individuals to consider non-conventional supply”; and
- Security of supply – “a competitive internal energy market can provide major advantages in terms of security of supply and high standards of public service. The effective separation of networks from the competitive parts of the electricity and gas business results in real incentives for companies to invest in new infrastructure, inter-connection capacity and new generation capacity, thereby avoiding black-outs and unnecessary price surges. A true single market promotes diversity.”
European electricity and gas market liberalisation aims to deliver competitiveness, a common energy policy in external relations should ensure security of supply, and the EU Emissions Trading Scheme (EU ETS) is the main tool for achieving sustainability.
Directives and Legislative Documents
The EU has passed a number of energy and climate related directives that have had a significant impact upon the power industry:
- Carbon Trading (EU ETS) – was introduced in 2005 as the key policy measure for meeting Europe’s Kyoto targets. Member States are obliged to develop National Allocation Plans for carbon emission allowances, many of which treat CHP favourably. The EU has also announced that it will work towards a carbon reduction target of 20% on 1990 levels by 2020;
- Large Combustion Plant Directive (LCPD) – set limits on the rate of SOx, NOx and particulates emissions. The Directive has led to a spate of investment in emissions abatement equipment at coal plants;
- Renewables Directive – put targets on the amount of electricity from renewable sources of 22% by 2010. The EU has also announced a mandatory renewable energy target of 20% of all energy by 2020. However, the Directive has not yet been updated with details of the mechanisms to achieve this, or the targets for each Member State;
- EU CHP Directive – came into force in February 2004 with the objective of increasing energy efficiency and improving security of supply by creating a framework for the promotion and development of high efficiency cogeneration. It is described in more detail below;
- Energy End-use Efficiency and Energy Services Directive – aims to reduce the energy used to provide businesses and consumers with energy services. It requires Member States to set indicative energy saving targets, and prepare national Energy Efficiency Action Plans. Implementation of the Directive is expected to support CHP, being one of the most cost-effective energy-efficiency measures;
- Energy Performance of Buildings Directive – created a common framework for establishing the energy performance of buildings and set minimum performance standards. CHP is specified as one option for meeting these, so small-scale CHP systems in commercial or domestic buildings could benefit.
Other EU relavant legislation includes:
- Electricity and Gas Directives (2003/54/EC and 2003/55/EC);
- Energy Labelling Directive (92/75 revision);
- Energy Taxation Directive (2003/96/EC);
- Competitiveness and Innovation Programme (COM(05)121);
- Green Paper on Energy Efficiency (COM(2005)265).
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Energy Policy