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The Energy Union gets simplified, robust and transparent governance

MD Staff

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An ambitious political agreement on the governance of the Energy Union was reached today between negotiators from the Commission, the European Parliament and the Council.

With today’s deal the Member States of the European Union will be equipped to govern the Energy Union – this common project aimed at ensuring that all Europeans have access to secure, affordable and climate-friendly energy. This new governance system will enable the European Union to realise its goals of becoming world leader on renewables, putting energy efficiency first, provide a fair deal for consumers and set the course for the EU’s strategy long-term greenhouse gas reduction.

By building trust and consensus between the Member States on energy and climate matters the governance will set the best way to achieve the energy transition and the modernisation of the EU economy and industry. The governance of the Energy Union will be instrumental to enable the political process required to deliver what 73% of EU citizens want: a common energy policy for all EU Member States.

Today’s deal means that four out of the eight legislative proposals in the 2016 Clean Energy for All Europeans package have been agreed by the co-legislators, after yesterday’s agreement on Energy Efficiency (see STATEMEMT/18/3997) and the agreements on 14 June and 14 May on the revised Renewable Energy Directive and the Energy Performance in Buildings Directive respectively. These four pieces of legislation complement the revision of the Emissions Trading System, the Effort Sharing Regulation and the Land Use Change and Forestry Regulation that were also adopted earlier this year. Thus, progress and momentum towards completing the Energy Union and combatting climate change are well under way. The Juncker Commission, working under its political priority “a resilient Energy Union and a forward-looking climate change policy“, is delivering.

This regulation will ensure that the objectives of the Energy Union, especially the EU’s 2030 energy and climate targets – reduction of 40% of greenhouse gas emissions, a minimum of 32 % renewables in the EU energy mix and the 32.5 % goal of energy efficiency savings – are achieved by setting out a political process defining how EU countries and the Commission work together, and how individual countries should cooperate, to achieve the Energy Union’s goals. This will be done by making sure that national objectives and policies are coherent with EU goals, while at the same time allowing individual countries flexibility to adapt to national conditions and needs. The regulation will equally promote long-term certainty and predictability for investors. The new rules stress the importance of regional cooperation in the development and implementation of energy and climate policies. EU countries are also called on to encourage their citizens to participate in the preparation of the plans. This will ensure that the views of citizens and businesses as well as regional and local authorities are heard. This will set a new relationship between European citizens and decision makers so that the governance and its national energy and climate plans all Member States of the EU to build further consensus on the best way to achieve the energy transition and move from a situation of decision by a few to a situation of action by all. This will contribute to have all Member States making the best and most cost-efficient choices and the right investments so that their energy decisions climate-consistent and avoid costly lock-ins.

Commission Vice-President for the Energy Union Maroš Šefčovič said: “With this ambitious agreement on the Energy Union’s governance, we put in place its cornerstone. It will enhance transparency for the benefit of all actors and investors, in particular. It will simplify monitoring and reporting of obligations under the Energy Union, prioritizing quality over quantity. And it will help us deliver on promises in the field of energy, climate and beyond. Now I am looking forward to the Member States’ draft energy and climate plans by the end of this year, as they send a strong signal to investors who need clarity and predictability. The Energy Union is on track, going from strength to strength.”

Commissioner for Climate Action and Energy Miguel Arias Cañete said: After agreeing on renewable energy last week, and on energy efficiency yesterday, today’s deal is another major delivery in our transition to clean energy. For the first time we will have an Energy Union Governance, fixed in the European Union rule book, encompassing all sectors of the energy policy and integrating climate policy in line with the Paris Agreement. When finalised by the Member States in their national plans, this will translate into the right investments to modernise the EU economy and energy systems, creating new jobs, lower energy bills for Europeans and reduce costly energy imports to the EU. One thing is certain, with the Energy Union governance we have the necessary stepping stone for the preparation of Long-Term Strategy to reduce the emissions of greenhouse gases that are warming up the planet and changing the climate.”

Main achievements:

  • Calls for each Member State to prepare a national energy and climate plan for the period 2021 to 2030, covering all the five dimension of the Energy Union and taking into account the longer-term perspective. These national plans would be comparable throughout the EU. Assessments of the draft plans, and recommendations by the Commission, will result in final plans that ensure that the 2030 climate and energy targets will be reached in a coherent, collaborative and least-cost way across the EU.
  • Aligns the frequency and timing of reporting obligations across the five dimensions of the Energy Union and with the Paris Climate Agreement, significantly enhancing transparency and delivering a reduction of the administrative burden for the Member States, the Commission and other EU Institutions.
  • Ensures that EU and Member States can work together towards further enhancing the ambition set up in the Paris Climate agreement and strengthens regional cooperation across the Energy Union dimensions.
  • Introduces the necessary flexibility for Member States to reflect national specificities and fully respects their freedom to determine their energy mix.
  • Ensures the follow-up of the progress made at Member State level to the collective achievement of the binding EU renewables target, the EU energy efficiency target and the 15% interconnection target.
  • Introduces a robust mechanism to ensure the collective attainment of the EU renewable and energy efficiency targets.
  • Establishes a clear and transparent regulatory framework for the dialogue with civil society in Energy Union matters and enhances regional cooperation.

Next steps

Following this political agreement, the text of the Regulation will have to be formally approved by the European Parliament and the Council. Once formally adopted by both co-legislators in the coming months, the Regulation on the Governance of the Energy Union will be published in the Official Journal of the Union and will enter into force 20 days after publication.

Background

The Regulation on the Governance of the Energy Union is part and parcel of the implementation of the Juncker Commission priorities to build “a resilient Energy Union and a forward-looking climate change policy”. The Commission wants the EU to lead the clean energy transition. For this reason the EU has committed to cut greenhouse gas emissions by at least 40% by 2030, while modernising the EU’s economy and delivering on jobs and growth for all European citizens. In doing so, it is guided by four main goals: putting energy efficiency first, achieving global leadership in renewable energies, providing a fair deal for consumers and being a leader in the fight against climate change. To put these goals into action, a robust governance system of the Energy Union is needed.

To that effect, the Commission presented on 30 November 2016, as part of the Clean Energy for All Europeans, package, its proposal for a Regulation on the Governance of the Energy Union. The Regulation as provisionally approved emphasises the importance of meeting the EU’s 2030 energy and climate targets, sets out how EU countries and the Commission should work together through an iterative process and how individual countries should cooperate to achieve the Energy Union’s goals. It takes into account the fact that different countries can contribute to the Energy Union in different ways. It also puts obligations on Member States to plan for the low carbon development in the longer run, at least 30 years from now.

If an individual country’s draft integrated National Energy and Climate Plan does not sufficiently contribute to reaching the Energy Union’s objectives, or if the EU collectively does not make sufficient progress towards these objectives, the Commission may issue recommendations to countries. The provisionally agreed Regulation also includes other ways of ensuring that the new plans are fully developed and implemented: in the area of renewable energy, these could include additional national measures (ranging from contributions to a financing platform to measures in the heating and cooling and transport sectors) and EU-level measures. In the area of energy efficiency, additional measures could in particular aim to improve the energy efficiency of products, buildings and transport.

The Regulation also foresees a more streamlined electronic reporting system, to ensure robust and transparent information in this area. The Regulation will from 2021 replace the Climate Monitoring Mechanism Regulation EU 525/2013, which governs EU’s and Member States reporting obligations towards the UN.

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CPEC and Pakistan’s energy crises

Qura tul ain Hafeez

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An adequate amount of electricity is primarily a way towards the industrial growth, transportation, infrastructural improvement, sustainable development, education, agricultural advancement, research and development and almost all aspects of a developed and advanced economy. It also facilitates the provision of jobs and hence better living standards. But unfortunately for the past couple of years Pakistan finds itself stuck in the web of electricity shortfalls and energy crises.

In Pakistan the electricity and power generation is one of the most imminent challenges in the way of economic uplift and Industrial advancement. During2017 the electricity production declined to 7976 Gigawatt-hours in December, from the higher rate of 8052 Gigawatt-hours in November. Considering the electricity production in the past 4-5 years the average production of electricity is 7877.29 Gigawatt-hour from 2003 until 2017. It attained a high level of production of 14419 Gigawatt-hours in August, 2017 from much lesser production of 4195Gigawatt-hours in December of 2010.

The national power policy 2013 describes three major policy plans of energy production-short term plan, midterm plan and long term plan for acquiring the sustainable energy.   As far as the short term policy objectives are concerned one of the constraints is how to improve the faulty recovery system and how to effectively control the transmission losses of electricity.   The recovery was94.40 % in July and March of the FY-2017, the highest for the past 10 years. |However, the rate of the transmission and distribution damages were equal to 16.3%.

The electricity shortfall hampers the economic and industrial growth of the country.  Therefore, in order to enhance the industrialization and economic growth, for which provision of sufficient electricity is very important. Hence, since CPEC includes the construction of many power production projects, the agreement signed with China to construct the CPEC will bring many dividends to Pakistan. The construction of CPEC related power projects in Pakistan is getting priority because electricity is also required for the construction of the CPEC. The electricity, thus produced will also help in addressing energy shortfalls in the country as energy will be used to achieve the vital policy objectives of economic advancement and poverty alleviation.

To overcome the electricity shortfall the government of Pakistan and Peoples Republic of China joined hands in 2013 to formulate the first committee for joint cooperation -Joint Cooperation Committee (JCC) of China Pakistan Economic Corridor (CPEC). The committee stated its apprehension on the prevailing energy crises and shortfall of electricity. Therefore, in order to address the above mentioned energy challenges the early harvest program of CPEC specially focuses on the energy sector development to maximize the production power of electricity. Out of 21 early harvests energy projects of 10,400 MWs, nine are coal power plants, seven wind power plants, 3 hydropower,   and remaining two are HVDC Transmission Line Projects.

Most of the early harvest energy projects are to be completed by 2018-19. Some of the projects which have touched their final phase or have been completed also include two Port Qasim Coal-fired Power Plants with the production power of 660 MW each. These coal power plants are commercially operating since April, 2018. The Sahiwal Coal-Fired Power Plants of 1320 MW each have been completed and both of the units have been inaugurated on May 25, 2017.  The Dadu 50MW wind power plant has attained its commercial status on April 5th, 2017. While 100MW Jhimpir Wind Farm and 50MW Sachal Wind Farm started commercially operating since 16thJune, 2017 and  11thApril, 2017 respectively. There are other energy projects which are under construction and soon will start operating commercially thus playing a vital role in achieving the sustainable growth in the energy sector.

Eventually, these energy projects under CPEC will produce almost 10, 000 MW of electricity between 2018 and 2020. However, these projects are largely based on coal power plants. Although it is a good step in this regard, but there is a need to focus on other means of renewable energy projects also. As discussed above the CPEC early harvest energy projects contain only three hydropower projects and 1 solar energy power projects. Like the wind power projects CPEC should also include more Hydro power projects because they are cheaper and more sustainable.

Hydroelectric power plants produced the energy through natural means by using water resources, thus it requires each state to produce their own energy without being dependent on the international fuel resource. Moreover, they provide a clean and non-pollutant energy sources.  However, for taking the advantage of hydropower the country must have dams and huge water reserves. Moreover, keeping in mind the effects of climate change and the issue of water scarcity dams is becoming more necessary for electricity production. Also, solar energy plants are a good option for the renewable energy projects with no environmental degradation and carbon emission.

In view of the above mentioned details , it can be concluded that signing of the CPEC agreement with China by Pakistan is a good decision as the project will help Pakistan in ending its energy crises and thus help it in increasing industrialization, and achieving high growth rates that will bring prosperity to Pakistan and its people.

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Global energy investment in 2017 fails to keep up with energy security and sustainability goals

MD Staff

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The electricity sector attracted the largest share of energy investments in 2017, sustained by robust spending on grids, exceeding the oil and gas industry for the second year in row, as the energy sector moves toward greater electrification, according to the International Energy Agency’s latest review of global energy spending.

Global energy investment totalled USD 1.8 trillion in 2017, a 2% decline in real terms from the previous year, according to the World Energy Investment 2018 report. More than USD 750 billion went to the electricity sector while USD 715 billion was spent on oil and gas supply globally.

State-backed investments are accounting for a rising share of global energy investment, as state-owned enterprises have remained more resilient in oil and gas and thermal power compared with private actors. The share of global energy investment driven by state-owned enterprises increased over the past five years to over 40% in 2017.

Meanwhile, government policies are playing a growing role in driving private spending. Across all power sector investments, more than 95% of investment is now based on regulation or contracts for remuneration, with a dwindling role for new projects based solely on revenues from variable pricing in competitive wholesale markets. Investment in energy efficiency is particularly linked to government policy, often through energy performance standards.

The report also finds that after several years of growth, combined global investment in renewables and energy efficiency declined by 3% in 2017 and there is a risk that it will slow further this year. For instance, investment in renewable power, which accounted for two-thirds of power generation spending, dropped 7% in 2017. Recent policy changes in China linked to support for the deployment of solar PV raise the risk of a slowdown in investment this year.

As China accounts for more than 40% of global investment in solar PV, its policy changes have global implications. This confirms past IEA reports that have highlighted the critical importance of policies in driving investment in renewable energy.

While energy efficiency showed some of the strongest expansion in 2017, it was not enough to offset the decline in renewables. Moreover, efficiency investment growth has weakened in the past year as policy activity showed signs of slowing down.

“Such a decline in global investment for renewables and energy efficiency combined is worrying,” said Dr Fatih Birol, the IEA’s Executive Director. “This could threaten the expansion of clean energy needed to meet energy security, climate and clean-air goals. While we would need this investment to go up rapidly, it is disappointing to find that it might be falling this year.”

The share of fossil fuels in energy supply investment rose last year for the first time since 2014, as spending in oil and gas increased modestly. Meanwhile, retirements of nuclear power plants exceeded new construction starts as investment in the sector declined to its lowest level in five years in 2017.

The share of national oil companies in total oil and gas upstream investment remained near record highs, a trend expected to persist in 2018. Though still a small part of the market, electric vehicles now account for much of the growth in global passenger vehicle sales, spurred by government purchase incentives. For electric cars, nearly one quarter of the global value of EV sales in 2017 came from the budgets of governments, who are allocating more capital to support the sector each year.

Final investment decisions for coal power plants to be built in the coming years declined for a second straight year, reaching a third of their 2010 level. However, despite declining global capacity additions, and an elevated level of retirements of existing plants, the global coal fleet continued to expand in 2017, mostly due to markets in Asia. And while there was a shift towards more efficient plants, 60% of currently operating capacity uses inefficient subcritical technology.

The report finds that the prospects of the US shale industry are improving. Between 2010 and 2014, companies spent up to USD 1.8 for each dollar of revenue. However, the industry has almost halved its breakeven price, providing a more sustainable basis for future expansion. This underpins a record increase in US light tight oil production of 1.3 million barrels a day in 2018.

“The United States shale industry is at turning point after a long period of operating on a fragile financial basis,” said Dr Birol. “The industry appears on track to achieve positive free cash flow for the first time ever this year, turning into a more mature and financially solid industry while production is growing at its fastest pace ever.”

The improved prospects for the US shale sector contrast with the rest of the upstream oil and gas industry. Investment in conventional oil projects, which are responsible for the bulk of global supply, remains subdued. Investment in new conventional capacity is set to plunge in 2018 to about one-third of the total, a multi-year low raising concerns about the long-term adequacy of supply.

This edition of World Energy Investment, which is being released for free this year, provides a wealth of data and analysis for decision making by governments, the energy industry and financial institutions to set policy frameworks, implement business strategies, finance new projects and develop new technologies.

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Off-grid Renewables are Growing, Bringing Socio-economic Benefits to Millions

MD Staff

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Off-grid renewable energy has witnessed spectacular growth over the last decade. Since 2008 capacity has trebled and the number of people in rural communities served by the technology has witnessed six-fold growth. Today, up to 133 million people are receiving life-changing access to low-cost, secure renewable energy and benefit from the socioeconomic impact access delivers. Global off-grid investments in 2017 reached USD 284 million.

These findings feature in a new IRENA brief launched during the UN High-Level Political Forum in New York. The paper, entitled: Off-grid Renewable Energy Solutions, Global and Regional Status and Trends, builds on IRENA’s statistical analysis to offer a global picture of the sector’s trajectory and impact. The data highlights the extent to which off-grid renewables are emerging as a mainstream solution to the expansion of electricity services all over the world, contributing to sustainable development goal 7 (SDG 7) by broadening the reach of electricity beyond existing grid infrastructure.

“Off-grid renewable energy is an important contributor to energy access across the developing world having witnessed widespread, rapid growth in deployment over the last few years,” said Dr. Rabia Ferroukhi, Deputy Director of the Knowledge, Policy and Finance at IRENA.  “Our analysis captures this momentum whilst shedding light on the need to step-up efforts towards 2030 Sustainable Development Goals.”

Africa has emerged as a dynamic, fast-moving hub for off-grid renewables. The development of solar lighting solutions and innovations in deployment and financing models, such as pay as you go options and mobile payment platforms have contributed to Africa’s rapid advances. The continent’s off-grid industry now serves around 53 million people – the equivalent of the entire population of South Africa – up from just over two million in 2011.

The brief identifies Asia as a global leader in off-grid renewables capacity deployment. Today, up to 76 million people across the continent may now benefit from such power sources.

South America, home to some of the highest rates of electricity access in the developing world, has also witnessed off-grid renewable growth the brief suggests, where the technology is considered key to ‘last mile’ electricity access.

Off-grid renewable energy solutions are being deployed to provide electricity services for a wide range of end-uses, including for powering agriculture, telecommunication infrastructure, healthcare centres, schools, and rural enterprises. The paper emphasises that linking delivery of off-grid solutions to energy service delivery can unlock substantial socio-economic benefits, contributing to multiple SDGs.

While dramatic cost reductions have been the primary driver of this acceleration, it is the multifaceted socioeconomic benefits that provide the greatest incentives for its deployment. Renewable energy’s centrality to the SDG 7 goal on universal access to clean, reliable and affordable energy against a backdrop of a billion people who still live without it, is unquestionable. However, beyond energy itself renewables are a key contributor to sustainable development, generating jobs, stimulating growth, ensuring resource security and improving health.

The paper notes that in Bangladesh, around 133 000 jobs have been created through a Solar Home System programme and an off-grid renewables initiative in Rwanda aims to generate 7 000 jobs whilst delivering energy access to almost 80 000 people. Similarly, incomes in rural households benefit from lower cost solar lanterns, and remote health and educational facilities are enhanced through consistent availability of power.

“Renewables are a central pillar of SDG 7 and represent one of the most effective and economicmeans available in the pursuit of universal energy access,” said Rabia Ferroukhi, Deputy-Director of Knowledge Policy and Finance at IRENA. “Yet beyond this, we are now beginning to truly understand the way in which distributed renewable electricity is transforming the lives of those receiving from it, bringing stability and opportunity to millions of people around the world.”

Read the brief on the Off-grid Renewable Energy Solutions and the six case studies developed to showcase the socioeconomic impact of off-grid renewables in South East Asia.

IRENA

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