May the Energy Union begin!

Today, 12 European Council Energy Ministers signed a joint declaration for closer collaboration in the electricity sector. Craig Morris says it may help assuage criticism that Germany is “going it alone” with its Energiewende.

Renewable Energy Union

Germany has signed a joint declaration on electricity with its neighbors today. (© European Union, 2015)

Over the past week, there have been numerous reports about Germany paving the way for a “mini Energy Union.” This Union has become the umbrella term for EU energy policy on the internal market over the next few years. And last week, a top German energy official announced the upcoming signing of an agreement covering nearly half of the EU under his leadership.

Under the leadership of Energy Undersecretary Rainer Baake, Germany managed to get an agreement signed with all 11 of its neighbors with which it trades electricity. Baake is a tactician; he played a crucial role in engineering the agreement with German power companies for the nuclear phaseout of 2002, for instance.

The news began trickling in with the announcement that the 12 countries had agreed not to put a price ceiling on electricity spot markets. It is quite a technical matter – the German government opposes capacity markets, which are generally rolled out on markets with price ceilings (although generally the justification is that renewable electricity, not price ceilings, brings about the need for capacity markets).

If that just went over your head, don’t worry – we can come back to it in a future post. You have to read between the lines to get the real importance of the news anyway. The list consists of “no-regret” items that Baake got neighboring countries to sign off on. Taken together, the agreement constitutes the first real progress towards an Energy Union. (“No regret” means that these countries have written down everything they definitely agree on as a starting point.)

The agreement includes acknowledgment of “the right of each European state to determine its own energy mix” – in other words, every EU member states as always gone its own way to a large extent. The declaration starts off with numerous such statements underscoring common ground between EU member states, which actually don’t agree very much on energy policy. Having highlighted commonalities, the declaration then moves on to “no regrets” for regional cooperation and flexibility on the power market. Here, we once again find a number of unsurprising items, but a few new steps were taken. The commitment to do without price ceilings is one.

Then there is the specification that “we will not restrict cross-border trade of electricity in times of high prices reflecting market scarcity and we will follow EU-regulations on cross-border trade also with respect to ensuring secure system operation.” The wording here is interesting because the member states themselves do not agree on interconnection levels; some member states called for 15 percent of demand, but that proposal was blocked last year (primarily by France). In recent weeks, we have seen examples of more an agreement is needed. Germany and Norway have added new interconnection capacity, whereas the Czech Republic has added a new transformer station to block power flows from Germany (report in German).

Likewise, the declaration specifies that “market parties, including producers of variable renewable energy, should react to market price signals,” meaning that Baake wishes to rule out old-school feed-in tariffs not only in Germany, but throughout Europe. It remains to be seen, however, how the agreement will get the sun to shine and the wind to blow based on price signals.

We probably shouldn’t be surprised that the momentum comes from Germany. The Germans have faced criticism for “going it alone” with their Energiewende, a charge that never made sense – but if repeated enough, any nonsense can begin to sound like a fact. Rather than rebut the charge (like I do as a journalist), the German government decided instead to spearhead regional cooperation.

Other member states are invited to join the declaration, as is Switzerland, with which negotiations for an electricity agreement are currently being held. The result of Baake’s successful campaign should be fewer complaints about Germany not working with its neighbors. Here’s hoping I won’t have to rebut the “Germany is going it alone” claim so much from now on.

Craig Morris (@PPchef) is the lead author of German Energy Transition. He directs Petite Planète and writes every workday for Renewables International.


Craig Morris (@PPchef) is co-author of Energy Democracy, the first history of Germany’s Energiewende.

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