Energy and Climate Change

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energy and climate change
21 Jun.2017 ,

Unlock demand side flexibility for European consumers, innovation and the climate

Signatories of this letter welcome the Clean Energy Package as the means to set in place new rules for a consumer-centred European energy system, by implementing the three stated EU objectives: putting energy efficiency first, achieving global leadership in renewable energies and providing a fair deal for consumers.

Demand side flexibility is a resource that not only benefits and empowers individual consumers, both private and professional, but also reduces total system costs, facilitates renewables integration and contributes to building Europe’s smart energy leadership.
This remarkable resource however suffers from important market failures that the ‘Clean energy for all Europeans’ package attempts to address. Signatories of this letter, all strong advocates for demand side flexibility, urge you to include the necessary proposals to develop demand side flexibility in the final legislation, and ensure consistent enforcement through thorough planning and reporting obligations in the Governance regulation report.

The stakes are high. Not delivering Europe’s demand side flexibility potential risks affecting Europe’s competitiveness, undermining its decarbonisation efforts, undermining its benefits for consumers and jobs and growth opportunities for Europe as a whole.
The following points highlight key steps necessary to develop demand side flexibility by creating functioning wholesale energy markets; opening markets to consumers and third parties; and remunerating demand side flexibility fairly.

1. Creating functioning wholesale energy markets
The electricity directive and regulation can significantly contribute to establishing well-functioning energy markets that reflect the availability or scarcity of supply and the adequacy of the network. In particular,
• Reform short-term markets functioning to help increase the overall flexibility of the power system (Electricity Regulation Chapter 2).

• Harmonise features of intraday and balancing markets to encourage trading of energy across borders, and as close as possible to the time of delivery (Electricity Regulation, Articles 5 and 7).

• Tackle overcapacity of generation to re-establish long term price signals for investors and minimise the risks that capacity mechanisms create for the development of efficient wholesale markets, as well as consumer empowerment, demand response and the deployment of innovative low carbon and energy efficiency technologies. The best way to minimise such risks is to:

o Only implement capacity mechanisms as a last resort, when proven strictly necessary by a European adequacy assessment which factors in the contribution of renewables, self-consumption and on-site generation (including cogeneration) and assesses flexibility needs (Electricity Regulation, Article 18).
o Ensure capacity mechanisms are open to all resources such as energy efficiency, demand response, storage, all generation technologies, and cross border capacity (to add to Electricity Regulation, Article 23).
o Review the need for capacity mechanisms regularly:
- So as to ensure consistency between procurement of capacity and the size of the adequacy concerns (to add to Electricity Regulation, Article 23) on the basis of the latest European resource adequacy assessment
- So as to ensure consistency with the overall competitiveness and decarbonisation objectives
o Ensure that the duration of the capacity contract is short enough to correspond to the regular reviews.
o Require Transmission System Operators (TSOs) to report on redispatch and countertrading measures they undertake, including underlying costs, and the level of effectiveness and openness of market-based curtailment or re-dispatching mechanisms to all energy resources. In turn, the creation of liquid and efficient markets and the deployment of demand side flexibility resources will reduce the need for additional measures to guarantee system adequacy.

2. Ensuring market access for consumers and third parties

Rules must be established and enforced so that demand-side resources have unhindered access to all energy markets (wholesale, balancing, ancillary services) in all timeframes, including through product requirements fit for supply and demand-side resources alike. This also means direct market access for consumers and new market entrants, including third party aggregators and ESCOs.
In particular:

• Give consumers the right to participate in energy markets with dynamic price contracts. This includes providing customers information on actual time of use at near real time and the right to respond to price signals, as well giving consumers the right to sell flexibility independently of any contractual arrangements to procure energy, directly or through an (independent) aggregator. Smart metering is a pre-requisite as the certified basis for billing consumer using multiple tariffs for market-based pricing. It also forms the foundation for the development of additional consumer services (Electricity Directive, Articles 11, 17, 20, 21).

• Enable fair market access for Demand Response and service providers. Deployment of demand side flexibility has so far been impeded by outdated market rules, insufficient market access for service providers and ineffective price signals. Demand response should have non-discriminatory access to all markets (Electricity Regulation, Articles 1, 3, 4, 5, 6, 7, 11, 12, Electricity Directive, Articles: 3, 15, 16, 17) and Demand Response Aggregators should be enabled to access the market without prior agreement of other market parties who are often competitors (Electricity Directive Article 17).

• Network tariffs should be fully transparent and allow the development of self-consumption and self-generation. They should be based on the marginal costs of the use of the system and take into account the avoided capital (e.g. grid investments) and operational expenditures due to flexible generation and flexible load embedded at the local level, as well as avoided CO2 emissions. (Electricity Regulation Article 16; Electricity Directive Article 15).

• Accelerate the cost-efficient decarbonisation of the existing building stock, notably through reaping the flexibility benefits of technical building systems and other appliances to support consumer empowerment: set in place a proper framework for the deployment of infrastructures (i.e. on-site renewable electricity generation, high efficiency cogeneration, smart metering or electro-mobility) and of demand-responsive devices that will facilitate the buildings’ integration into a wider energy ‘eco-system’ where active prosumers self-generate, self-consume, aggregate, trade and sell surplus electricity to the grid. In this new setting, buildings will no longer be a load but a micro-energy hub contributing to consumer empowerment and cost-efficiency of the energy system. The smartness indicator of buildings should support consumer empowerment and the development of buildings as part of the energy system.

• Create a comprehensive framework for grid monitoring, so as to increase the visibility of flexibility, including demand-side flexibility. It should be based on information that TSOs and DSOs would publish regularly as regards to the performance of their networks , in particular the volumes and sources of curtailed energy (Electricity Directive, Article 59). Comprehensive reporting on grid evolution, together with appropriate tariff structure, will be an essential basis for cost-effective network management and enable the targeted acquisition of flexibility services from the market by system operators instead of CAPEX only investments (Electricity Directive, Article 32).

• Ensure enforceability of the right for citizens and businesses to self-generate, self-consume, and valorise their flexibility; (Electricity regulation Article 16; Electricity directive Article 15).

• Establish a constructive framework for energy storage which takes into account the specificity of the energy storage technologies, and recognizes that TSOs and DSOs should not own, develop, manage or operate storage assets, unless a market based procurement based on an open and transparent tendering procedure is proven of not being possible and is regularly reviewed. (Electricity Directive, Articles 36 and 54)

Signatories of this letter are convinced that such a way forward will provide consumers with the satisfaction of managing their own energy consumption while optimising their overall carbon and environmental performance.
 

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01 Jun.2017

European paper industry reaction to the US administration's withdrawal from Paris Agreement on climate change

"The US administration’s decision to step down from the Paris Agreement sadly puts at risk the global efforts needed to address climate change. It also regrettably reflects a view that climate action would undermine industry competitiveness. To make the case for action - and win back the US, Europe must decisively demonstrate that decarbonisation can go hand in hand with industrial competitiveness and investments. The European paper industry has a vision through its Investment Roadmap to decarbonise by 80%, create 50% more added value and increase its investment by 40% by 2050. This should be done in the background of a Paris Climate Change Agreement which provides a solid framework for climate action and fosters a global level playing field" says Sylvain Lhote, Director General at CEPI

 

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19 May.2017 ,

Statement from the alliance of energy intensive industries on the clean energy for all Europeans package

We, the Alliance of Energy Intensive Industries representing more than 30,000 companies that are Europe’s largest energy consumers and together, directly employ more than 2.8 Million people, want to make a success of the Energy Union. We see it as a potential enabler of European industry’s competitiveness and a unique opportunity to deliver on Europe’s ambitious transition to a low-carbon energy system. Energy Intensive Industries make a series of recommendations to reach this ambition in an effective, secure and cost-conscious way that delivers value for investment to European economic contributors such as industry. The Alliance would welcome a new energy framework that:

- ENABLES INNOVATION IN INDUSTRY SECTORS THAT DEVELOP PRODUCTS AND TECHNOLOGIES leading to lower greenhouse gas emissions (GHGs) across value chains. Our industries offer low-carbon solutions to help Europe transitioning to a low-carbon, energy efficient region. Our products and innovative processes have a strong potential to enable greater energy efficiency or help the wider deployment of renewables;

- PUTS THE GLOBAL COMPETITIVENESS DIMENSION HIGH Our industries will be key in delivering several elements of the Clean Energy Package. The Governance of the Energy Union must acknowledge this and not relegate the competitiveness dimension as secondary to other aspects, but increase its prominence;

- SECURES INDUSTRY’S ACCESS TO COMPETITIVE, RELIABLE, AND SUSTAINABLE ENERGY through a fully liberalised European electricity market. The growing share of variable renewable energy production in the grid represents both a challenge and an opportunity for industry. Negative impact of system changes on industry and on security of energy supply must be avoided. Policy framework conditions should be nondiscriminatory, technology-neutral and predictable over the longer term to enable sustainable investment decisions;

- AVOIDS COSTLY AND UNNECESSARY OVERLAPPING LEGISLATION: The EU ETS and the Market Stability Reserve will lead to a higher price of carbon under the 2030 framework. It is therefore important that new measures do not overlap with ETS, adding an additional layer of obligations for industry, but rather target untapped potential laying in e.g. buildings or mobility sectors. Enabling better energy performance in those sectors would stimulate our economy and create new jobs and growth opportunities;

- CLEARLY DIFFERENTIATES ENERGY EFFICIENCY AND REDUCTIONS IN INDUSTRIAL ACTIVITY: looking at levels of energy consumptions in the different sectors of our economy, it is clear that so far the 2020 objective is being partly met through reduced levels of production. Our industries wish to contribute to growth in Europe while, at the same time, improving their energy efficiency performance; in this framework, it is relevant to assess reduction of energy consumption in relative terms;

- INTEGRATES RENEWABLE ENERGY SOURCES IN A COST-EFFICIENT MANNER: as long as it is in place, support to renewable energies must become cost-efficient and must focus on technology-neutral innovation. Support
schemes should be market-based and market responsive. They should only benefit technologies that are not yet mature, on a temporary basis.

As key players in the transition to a low-carbon economy, energy intensive industries and value-chain partners will provide constructive input into the decision-making process.


 

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17 May.2017 ,

European paper industry reaction to Fertilizers Europe “alternative facts” in “Allowances balance calculation in the EU ETS” Ecofys report

On 15 May 2017 Ecofys published the report “Allowances balance calculation in the EU ETS”, commissioned by Fertilizers Europe.

The document is full of omissions in data collection and analysis. Although the authors acknowledge such shortcomings throughout the whole report, they still conclude that, even with improved accuracy “by performing an extensive data collection […] it is expected that the main conclusions of this study would remain the same”. In other words: the results would be the same, regardless of facts and figures.

Such a statement would be sufficient to disregard this alleged “objective study”.

Yet in CEPI we are strongly convinced that facts and figures are essential to developing informed decisions. CEPI facts and figures are backed by our in-house statistical team and are third-party verified. We believe this ethos should equally apply to others.

As the Ecofys document is built on an impressive amount of misleading or “adjusted” information, we believe it is imperative to rectify the claims against the pulp and paper industry:

1. Sector definition and cross-boundary heat flows


A whopping 20% of additional carbon emissions for our industry are not accounted for in the Ecofys report.

In the ETS, emissions from heat are allocated to the heat consumer, not the heat producer (where emissions effectively take place). Heat-related emissions are thus not counted under the ETS registry codes “pulp and paper” but under “combustion installation”, even if these emissions happen within the perimeter of the industrial site.

The impact of these emissions is massive: the sector actually moves from having a surplus to having a shortage of allocations[1].

Ecofys is well aware of the impact heat flows calculations has on industry allocation, particularly for the pulp and paper industry. Yet, it decides to disregard them, concluding that “indicatively” the pulp and paper industry has “an allowance surplus that carries long into phase IV”.

Clearly, by using “alternative facts”, anything can be “indicatively assumed”. 


2. Emission levels in Phase III

Despite concrete achievements, our sector’s emission reductions have not matched the allocation reductions induced by the cross-sectoral correction factor. For example, in 2016 only our sector was 4% under-allocated.

Our sector is under-allocated and, unless major disruptions happen, will remain so until at least 2020. The regulatory impact post-2020 is still unknown.

Any increase in allocation surplus for our sector, as illustrated in the Ecofys report from 2014 to 2020, is unreal and unrealistic.

3. Emissions carried over from Phase II

First and foremost, the above-mentioned cross-border heat flow applies also here. The figures lack data on emissions from combustion installations in the paper industry. Had these figures been taken into consideration, they would have shown a cumulative surplus in line with other industrial sectors. This comes to no surprise as the pulp and paper industry, like all industries, was heavily hit by the economic and financial crisis.

Moreover, at the beginning of Phase II, in 2008, the pulp and paper industry had 872 open permits in the ETS. In 2013, at the beginning of phase III the open permits were reduced to 825.

Many of the installations that closed were small and medium enterprises, often family-owned. When an installation closes those allowances are gone: either released to the market or cancelled. There is no intra-company transfer.

Unused allowances released to the market could be in anyone’s account, including in fertilizer companies.
Assuming that all those allowances remained at the disposal of the pulp and paper industry for future use, painting the image that the sector is sitting on an immense amount of unused credits, is purely fictional.

4. Carbon intensity improvements (past, present, future)

The pulp and paper industry is proud of the achievements reached in reducing carbon emissions over the past years. Since 2005, when the ETS began, we have reduced our carbon intensity by around 21%.

This was the result of real investments and it lead to the creation of jobs and growth. In the recent years we have been investing 3.5 bn €/year, including investments in energy efficiency and higher use of renewable energy sources.

In fact, in some countries we have even achieved an impressive 75% emission reduction since 2005, without jeopardising international competitiveness.

The Ecofys report, on the contrary, retroactively assumes no historic emission intensity improvement occurred. Nor future emission intensity improvements are foreseen.

We strongly disagree.

5. The misplaced logic of “improvements are not possible”

The carbon footprint of the pulp and paper industry is already very low (0.7%of EU GHG emissions) and will further reduce.

We see tremendous potential in linking the low-carbon economy to the bioeconomy and the circular economy. Our mills are already producing cost-effective low carbon solutions to replace carbon intensive products.

For instance, looking at fertilisers:
• Bio-based fertilisers → ETS benchmark: 0.02 - 0.12 tCO2/t (pulp)
• Fossil-based fertilisers → ETS benchmark: 1.619 tCO2/t (ammonia)

There is definitely some untapped potential to be exploited!

The Ecofys report, on the contrary, assumes no improvement in carbon-intensity both in the past and the future. Meaning rewarding incumbents and putting up barriers to innovation.

We strongly disagree.

In conclusion

Climate change is a serious threat, and needs to be treated seriously. We need to refocus on investments in the EU economy, driving the transition towards a low-carbon economy where Europe leads by example

Within this context, the ETS needs to promote and reward those investing in low-carbon technologies and solutions.

All sectors are important and should be treated equally. And they all need to contribute.

The clock is ticking and 2021 is just around the corner. We need to close the ETS negotiations as soon as possible, to give industry the regulatory predictability needed to start planning the next wave of low-carbon investments.
 

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02 May.2017 ,

“No trade-off on Fairness”: Recommendations from the Alliance for a fair ETS

The Parliament, the Council and the Commission enter now the trilogue negotiations that will shape the ETS directive after 2020.

We, the 17 signatories of this paper, energy-intensive sectors representing about 2 million jobs in the EU and comprising many SME’s, are fully committed in taking our share of responsibilities and reducing our emissions.
However, we are also very concerned by the impact that some proposed measures would have on our global competitiveness.

We stand by one principle: sufficient free allowances must be available to allocate every carbon leakage installation at the level of the benchmark, as to avoid additional direct and indirect costs, resulting from the implementation of the ETS that are not faced by our non-EU competitors.

This is true more than ever, especially when some measures, which have been proposed without any impact assessment on our sectors, might have a dramatic impact on our competitiveness if adopted without the necessary flexibility in the share of free allocation, like the permanent cancellation of allowances, or the doubling of the intake rate of the MSR.

We therefore ask the trilogue negotiators to acknowledge, in their final compromise, the mutual importance of our sectors for the EU economy, in particular for European jobs, and all our economic value chains by:

1) Ensuring enough free allowances are available to allocate all carbon leakage installations at the level of the benchmark. This is not a free lunch for industry as less than 5% of the installations will receive enough to produce, the remaining 95% will have to buy allowances. We therefore support the Parliament proposal to reduce the auctioning share by max 5% (from 57% to 52%) if the CSCF is necessary.

2) Rejecting any approach which aims at discriminating a few from other sectors exposed to carbon leakage risks, namely the “tiered CSCF” in the event that the 5% reduction mentioned above is not sufficient. This discrimination between industrial sectors goes against the principle set in the October European Council Conclusions that best performing companies in ETS carbon leakage sectors should not bear further carbon costs. Indeed, a tiered CSCF would entail that even best performers in most sectors would bear significant carbon costs.

3) Supporting the proposal from the Parliament by which the Innovation fund is fully financed from the auctioning share.

Signatories:
1. Cefic - European Chemical Industry Council
2. CEMBUREAU – European Cement Association
3. CEPI – Confederation of European Paper Industries
4. Cerame-Unie - European Ceramic Industry Association
5. EDG – European Domestic Glass Association
6. Epmf – European Precious Metals Federation
7. European Copper Institute
8. ESGA – European Special Glass Association
9. EUROALLIAGES - Association of European ferro-Alloy producers
10. EUROGYPSUM - Gypsum Industry
11. EuLA – European Lime Association
12. EXCA - European Expanded Clay Association
13. FEVE – The European Container Glass Association
14. FuelsEurope - European Petroleum Refining Industry
15. Glass Fibre Europe – The European Glass Fibre Producers Association
16. Nickel INSTITUTE
17. International Zinc Association

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