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Rome , 11-15 November 2007

20 th WEC - Rome 2007. Rome , 11-15 November 2007. Does energy sector reform need reforming?. THE ENERGY FUTURE IN AN INTERDEPENDENT WORLD. Goran Granic, PhD Energy Institute Hrvoje Pozar Zagreb, Croatia. THE ENERGY FUTURE IN AN INTERDEPENDENT WORLD. EMPHASIS PUT ON….

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Rome , 11-15 November 2007

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  1. 20th WEC - Rome 2007 Rome, 11-15 November 2007 • Does energy sector reform • need reforming? THE ENERGY FUTURE IN AN INTERDEPENDENT WORLD Goran Granic, PhD Energy Institute Hrvoje Pozar Zagreb, Croatia

  2. THE ENERGY FUTURE IN AN INTERDEPENDENT WORLD EMPHASIS PUT ON… • Creation of the open energy market is a process • Aim: promotion of economic growth & competitiveness • Energy market: objective per se or only an instrument? • Situation: favourable when the reform was initiated • Two opposite standpoints now: • Fully functioning internal energy market will enable freedom of choice and solve the problems it is facing • Opening up the market does not bring anything new, except reduction of security of supply • Does energy sector reformneed reforming? Goran Granic, PhD

  3. THE ENERGY FUTURE IN AN INTERDEPENDENT WORLD DISCUSSIONS CONDUCTED ON… • The course of the energy sector reforms in Europe • Objectives, achievements, issues, and dilemmas • Long term sustainability and security aspects of energy • Legislative changes relating to the energy market • Institutional framework changes due to EU enlargement • Responsibility chain: EU – State – Regulatory Authority – System Operator – Trader – Buyer • The chain is not closed up in case of disruptions and the market is not able to deliver a solution • Does energy sector reformneed reforming? Goran Granic, PhD

  4. THE ENERGY FUTURE IN AN INTERDEPENDENT WORLD PROBLEMS EXHIBITED IN… • Common energy market to be created at EU level But, institutional relations between the MSs are not solved • Internal energy market promoted in multiple steps But, steps are not fully implemented and new ones are coming • EU neutral to ownership relations But, ownership issue results in negative effects on the market • The security of supply considered through Directives But, national approaches appeared due to lack of coordination • Energy surplus created an unrealistic market picture But, long term interests and open market rules not considered • Does energy sector reformneed reforming? Goran Granic, PhD

  5. THE ENERGY FUTURE IN AN INTERDEPENDENT WORLD CHALLENGES RECOGNISED IN… • Monopolies appear in a new form as they are only redistributed due to legislative changes and privatisation • Integrations of energy companies (mergers & acquisitions) to be checked against competition acquis • Creation of energy mega-undertakings to be looked at • Upgrade of legal and functional unbundling to include the ownership one as well • Influence on further energy market development • Measures needed for institutional influence on further market development – social aspects to be included • Does energy sector reformneed reforming? Goran Granic, PhD

  6. THE ENERGY FUTURE IN AN INTERDEPENDENT WORLD PRIORITIES DEFINED FOR… • Natural gas market: • TEN-E to make Europe less dependent on a single supplier • Priority gas pipelines of European character from the Caspian shelf and LNG facilities – storage to be added • Competing projects may in effect discourage one another • EU not only to identify potential corridors, but to provide institutional, organisational, financial, and political support • Market mechanisms only do not generate needed construction dynamics • Harmonisation needed in the rules of market play in EU (open the market), Russia (enable free investments) and transit countries (apply transit tariffs) • Does energy sector reformneed reforming? Goran Granic, PhD

  7. THE ENERGY FUTURE IN AN INTERDEPENDENT WORLD PRIORITIES DEFINED FOR… • Electricity market: • Competition limited by generation & transmission infrastructure • Cross-border facilities still inadequate at many places and insufficient for purposes of the open market • Prioritised development of interconnections – bilateral and regional • Synchronisation of activities and harmonisation of legal, procedural, ownership and business aspects • For both, system operators and regulatory authorities • Electricity network interconnections to be a part of obligations • Does energy sector reformneed reforming? Goran Granic, PhD

  8. THE ENERGY FUTURE IN AN INTERDEPENDENT WORLD SUGGESTIONS GIVEN TO… • Take active position of the state and/or EU in: • Energy transport and interconnections • Construction of energy production facilities • Institutionalise the security of supply • Avoid the ongoing privatisation to turn into an obstacle • Avoid replacing state monopoly by private mega one • Find a position for RES in the market (financial support and administrative obligatory targets) • Find a position for Kyoto Protocol and emission trading (position on the nuclear energy) • Does energy sector reformneed reforming? Goran Granic, PhD

  9. THE ENERGY FUTURE IN AN INTERDEPENDENT WORLD CONCLUSIONS AND RECOMMENDATIONS • Key prerequisite: political agreement EU-Russia • Reciprocity between partners in obligations and opportunities • EU to open its market • Russia to allow exploration/production • Transit countries to apply ex-ante transit tariffs • Construction of electricity interconnectors • Currently left to interested countries/investors • Each country to take obligations to ensure transit capacities • EU to support priority projects by all necessary means • Does energy sector reformneed reforming? Goran Granic, PhD

  10. THE ENERGY FUTURE IN AN INTERDEPENDENT WORLD CONCLUSIONS AND RECOMMENDATIONS • Construction of generation capacities abroad • Realistic estimation of security concerns for investments abroad • Obligation: each country to build on its territory certain minimum and obligatory part of electricity generation capacities • But also: each country to secure 100% reserve either on its own territory or through long term agreements from others • National governments to have a possibility to intervene if the capacity construction plans do not effectuate • The price of security to become a component in the electricity pricing (through necessary reserves on the territory) • Does energy sector reformneed reforming? Goran Granic, PhD

  11. THE ENERGY FUTURE IN AN INTERDEPENDENT WORLD CONCLUSIONS AND RECOMMENDATIONS • Development of gas market and security of gas supply • Enforcement of security and quality of supply standards • Obligations: • to ensure a part of transit for unknown users • to connect gas systems with the neighbouring ones • to construct new supply routes • to develop sufficient storage capacities • The vulnerability assessment studies: • to become mandatory • to be the basis for measures at EU level • Does energy sector reformneed reforming? Goran Granic, PhD

  12. THE ENERGY FUTURE IN AN INTERDEPENDENT WORLD CONCLUSIONS AND RECOMMENDATIONS • Prevention of market power and ownership concentration to avoid market monopolisation • Set out criteria for dominance prevention • But, take into account specifics of each country and EU as single market and administrative space • Implement Kyoto Protocol and enhance use of RES • Needed: single legal and financial framework is to be developed • Basis: derive from the value of energy and cost of environmental protection regardless of technology • But, always take into account the effects they generate • Does energy sector reformneed reforming? Goran Granic, PhD

  13. THE ENERGY FUTURE IN AN INTERDEPENDENT WORLD CONCLUSIONS AND RECOMMENDATIONS • Explore and develop new technologies • A common European project • Synergic effort of all countries in scientific and financial terms • Does energy sector reformneed reforming? Goran Granic, PhD

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