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DE RUEHBS #1761/01 3251720
ZNR UUUUU ZZH
R 201720Z NOV 08
FM USEU BRUSSELS
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INFO RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
RUCNMEU/EU INTEREST COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHAK/AMEMBASSY ANKARA
RUEHKB/AMEMBASSY BAKU
RUEHAH/AMEMBASSY ASHGABAT
RUEHIT/AMCONSUL ISTANBUL

UNCLAS SECTION 01 OF 04 BRUSSELS 001761 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EPET EUN
SUBJECT: EU STRATEGIC ENERGY REVIEW 
 
REF: BRUSSELS 1670 
 
¶1.  (SBU) Summary.  On November 13, EU Energy Commissioner 
Andris Piebalgs presented the Commission's 2nd Strategic 
Energy Review (SER) to the Parliament.  The SER contains a 
new five-point "EU Energy Security and Solidarity Action 
Plan,"  focused on: infrastructure needs and diversification 
of energy supplies (including interconnections and new supply 
corridors), external energy relations, oil and gas stocks and 
crisis response mechanisms, energy efficiency, and the best 
use of the EU's indigenous energy resources (including 
renewables, coal, and nuclear energy).  The plan charts the 
policy priorities for the next Commission, due to take office 
in November 2009 and includes a "vision for 2050" 
characterized by a carbon-free energy production, the end of 
oil dependence in transport, low energy buildings and 'smart' 
interconnected electricity grids.  However, sorting out the 
details on how this structural shift will be realized has 
been left to the next Commission.  End Summary. 
 
¶2.  (U) On November 13, EU Energy Commissioner Andris 
Piebalgs presented the Commission's 2nd Strategic Energy 
Review (SER) to the Parliament.  The SER focuses on security 
of supply and is intended by the Commission to complete the 
picture in developing a new "Energy Policy for Europe". The 
first SER concentrated on climate change, introducing the 
20-20-20 targets, leading to the proposed new Renewables 
Directive and the revision of the Emissions Trading Scheme 
Directive, as well as the 3rd Energy Package.  The 2nd SER 
contains a wide-ranging energy package which is intended to 
give a new boost to energy security in Europe by: 
 
-- Putting forward a new strategy to build up energy 
solidarity among Member States and a new policy on energy 
networks to stimulate investment in more efficient, 
low-carbon energy networks. 
 
-- Proposing an Energy Security and Solidarity Action Plan to 
secure sustainable energy supplies in the EU and looking at 
the challenges that Europe will face between 2020 and 2050. 
 
-- Adopting a package of energy efficiency proposals aiming 
to make energy savings in key areas, such as reinforcing 
energy efficiency legislation on buildings and energy-using 
products. 
 
The EU Approach to Energy Security 
---------------------------------- 
¶3.  (U) Energy security is an issue of common EU concern. 
With the integration of energy markets and infrastructures 
within the EU, the Commission views specific national 
solutions as often insufficient.  And while each Member State 
is responsible for its own security, the Commission views 
solidarity between Member States as a basic feature of EU 
membership. The Commission argues that strategies to share 
and spread risk, and to make the best use of the combined 
weight of the EU in world affairs can be more effective than 
dispersed national actions. 
 
¶4.  (U) There is a close link between the EU's approach to 
energy security and its initiatives on climate change.  To 
meet the EU's 20-20-20 climate goals, the Commission 
envisages an energy system with a diversity of non-fossil 
fuel supplies, flexible infrastructures and capacities for 
demand management that will be very different in energy 
security terms than today's system.  In the short to medium 
term, the Commission recognizes that Europe's dependence on 
imports means that effective provisions for preventing and 
dealing with supply crises must be in place.   Europe 
therefore seeks to diminish its vulnerability to energy 
supply shocks. 
 
Energy Security and Solidarity Action Plan 
------------------------------------------ 
¶5.  (U) The SER contains a new five-point "EU Energy Security 
and Solidarity Action Plan," focused on: 
 
1.) Infrastructure needs and diversification of energy 
supplies (including interconnections and new supply corridors) 
 
2.) External energy relations 
 
3.) Oil and gas stocks and crisis response mechanisms 
 
4.) Energy efficiency 
 
BRUSSELS 00001761  002 OF 004 
 
 
 
5.) Making the best use of the EU's indigenous energy 
resources (including renewables, coal, and nuclear energy). 
 
¶6.  (U) The plan charts the policy priorities for the next 
Commission, due to take office in November 2009. 
 
Infrastructure Needs and Diversification of Energy Supplies 
--------------------------------------------- -------------- 
¶7.  (U) The 3rd internal energy market legislative package 
(currently under consideration in the Parliament and Council) 
encourages investments in infrastructures, notably 
cross-border infrastructures.    The Commission argues that 
"Europe's energy networks are no longer up to the task of 
providing secure energy supplies in the foreseeable future." 
It therefore urged member states to ease their reliance on 
Russia for gas by building an EU-wide distribution network so 
that import cuts -- like those of 2006, when Russia stopped 
deliveries to Ukraine -- can be offset by getting gas from 
somewhere else. "A major benefit of a European network is 
that everyone can help each other ... in a crisis."   It said 
by 2030, 1 trillion euros ($1.25 trillion) must be spent 
improving the EU's power grids and production capacity and 
about 150 billion euros ($188 billion) on gas networks. 
 
¶8.  (U) The Commission proposes that the European Council 
endorses the identification of six "priority infrastructure 
actions" as "Community priorities", notably: 
 
-- Development of a Baltic interconnection plan, better 
linking the region with the rest of the EU, improving the 
security and diversity of its energy supply, enabling 
solidarity; 
 
-- Development of a Southern Gas Corridor for supply from 
Caspian and Middle Eastern sources and possibly other 
countries in the longer term, improving security of supply; 
 
-- Development of an LNG Action Plan.  As liquefied natural 
gas (LNG) is now contributing to diversity of gas supply, 
sufficient capacity should be available to all Member States, 
either directly or through other Member States on the basis 
of solidarity arrangements;  particularly important for the 
Member States which are currently overwhelmingly dependent on 
a single gas supplier. 
 
-- Completion of a Mediterranean energy ring, linking Europe 
with the Southern Mediterranean through electricity and gas 
interconnections to improve energy security and to help 
develop the vast solar and wind energy potential; 
 
-- Development of North-South gas and electricity 
interconnections within Central and South-East Europe; 
 
-- Development of a blueprint for a North Sea offshore grid, 
interconnecting national electricity grids and plugging in 
planned offshore wind projects. 
 
¶9.  (U) The Commission then proposes a three step approach to 
ensuring that these projects become reality.   First, it 
invites the next European Council (December 11-12) to agree 
that these are indeed the EU's key infrastructure priorities. 
  Second, by 2010, the Commission will set out a concrete 
plan for each priority project through six public 
Communications, identifying specifically what needs to be 
done.  Third, the Commission now starts the process to ensure 
that the tools and instruments at Community level will be 
available to then implement these concrete plans. 
 
¶10. (U) Two main issues are identified in this latter 
respect.  First, the Commission underlines the importance of 
speaking with one voice on these issues (which "does not mean 
a single Community representative for external issues, but 
effective planning and co-ordination to ensure a commonality 
of both action and message at Community and Member State 
level. To put this into practice, in 2009 the Commission will 
identify the concrete mechanisms necessary for ensuring 
transparency between Member States and the EU"). 
 
¶11. (U) Second, the Commission has announced its intention to 
revise the Trans-European Energy Networks (TEN-E).  TEN-E and 
its budget were conceived and developed when the EU was 
considerably smaller and faced energy challenges of a 
completely different dimension compared to today. The 
Commission has tabled a Green Paper on how the existing TEN-E 
 
BRUSSELS 00001761  003 OF 004 
 
 
instrument could be replaced by a new "EU Energy Security and 
Infrastructure Instrument" with the possible objectives of 
completing the Internal Energy Market, ensuring the 
development of the grid to permit the achievement of the EU's 
renewable energy objectives and guaranteeing EU security of 
energy supply, through infrastructure projects within and 
outside the EU. In addition, the Green Paper launches a 
reflection on how best to ensure the effective use and 
evolution of the EU's external policy and financial 
instruments to contribute to achieving these objectives. 
 
External Energy Relations 
------------------------- 
¶12. (U) On external energy policy, the SER identifies a 
number of key priorities for the Community, notably, Russia, 
the Energy Community of South-East Europe, the Caspian, OPEC, 
and Africa. It also identifies where progress needs to be 
made in moving to more formal, legally-binding relations on 
energy with our suppliers, notably with Russia.  Confidence 
in Russia has been shaken by its war with Georgia in August. 
  "Today eight member states are reliant on just one supplier 
for 100 percent of their gas needs," Commission President 
Jose Manuel Barroso told reporters as he released the SER 
proposals on the eve of the EU summit with Russia.  "This is 
a problem we must address. We must shield European citizens 
from the risks that external suppliers cannot honor their 
commitments," he said. 
 
¶13. (U) With producer countries outside Europe the Commission 
argues the EU should develop a new generation of "energy 
interdependence" provisions in its broad-based agreements. 
The Commission believes that as much as Europe seeks security 
of supply, external suppliers and industry seek security of 
demand.  There is little new, however, in terms of concrete 
initiatives, aside from those mentioned above regarding 
infrastructure. 
 
Oil and Gas Stocks and Crisis Response Mechanism 
--------------------------------------------- --- 
¶14.  (U) The Commission proposes a revision in the EU's 
strategic oil stocks legislation, improving coherence with 
the International Energy Agency regime, reliability and 
transparency on available stocks and clarifying emergency 
procedures. To improve oil market transparency, the 
Commission proposes that the EU publish weekly, on an 
aggregated basis, the level of commercial oil stocks held by 
EU oil companies. 
 
¶15.  (U) Regarding gas the SER is accompanied by a 
Communication that reviews the implementation and 
effectiveness of the existing Security of Gas Supply 
Directive. It finds that the Directive needs to be improved. 
In particular, it finds that greater harmonization of 
security of supply standards and predefined emergency 
measures on regional and EU levels are needed. However, it 
does not go so far as to propose obligatory strategic gas 
stocks, on the grounds that "strategic gas stocks cost at 
least five times more than oil stocks.  A more effective 
approach is to promote the development and effective 
transparent operation of commercial storages, diverse supply 
connections enabling flexible sourcing from LNG or 
neighboring providers within the EU internal market, and 
rapid demand reduction through interruptible contracts and 
fuel switching especially in electricity generation". A 
revised Security of Gas Supply Directive has been announced 
for 2010. 
 
Energy Efficiency 
----------------- 
¶16.  (U) Regarding energy efficiency, the SER underlines that 
this is one of the most important European energy polices 
regarding energy security, in addition to its role in 
combating climate change.   The Commission tabled a new 
energy efficiency package, comprising a number of measures, 
the most important of which are a revision of the Energy 
Performance of Buildings Directive to extend its scope, 
simplify its implementation and develop energy performance 
certificates of buildings into a real market instrument; and 
a revision of the Energy Libeling Directive to apply labeling 
to a broader range of energy-using products (thus including 
industrial rather than just household products). Under a 
separate legal instrument, a new energy label is proposed for 
car tires.  In addition the Commission announced a green tax 
package that will "include a proposal to review the Energy 
Tax Directive to make it fully compatible with the energy and 
 
BRUSSELS 00001761  004 OF 004 
 
 
climate change goals and an examination of how VAT and other 
fiscal instruments can be used to promote energy efficiency." 
 
Making the Best use of the EU's Indigenous Energy Resources 
--------------------------------------------- -------------- 
¶17.  (U) Indigenous production currently provides 46% of the 
energy used in Europe. The Commission believes the EU's 
greatest potential source of indigenous energy is renewable 
energy. Today it accounts for about 9% of final EU energy 
consumption and the agreement is to raise this to 20% by 
¶2020.  To encourage indigenous energy production the 
Commission has proposed a new "Sustainable Energy Financing 
Initiative", which is a joint initiative of the Commission, 
European Investment Bank and European Bank for Reconstruction 
and Development 
 
¶18.  (U) The Commission views technology as crucial in 
developing and using resources in a cost-effective and 
environmentally-sustainable way.  As such, its next step in 
the Strategic Energy Technology Plan will be a Communication 
on Financing Low Carbon Technologies, which is expected next 
Spring.  This will propose ways to support large scale 
demonstrations at EU level, including up to twelve Carbon 
Capture and Storage (CCS) demonstration plants. 
 
¶19.  (U) On nuclear energy the Commission continues to send 
cautious, but positive messages on the importance of nuclear 
in the EU's energy mix for its climate change commitments and 
energy security objectives, whilst however stressing that the 
choice whether or not to use nuclear is up to each Member 
State. However, as it believes the nuclear safety and 
security framework applied everywhere in the EU is of common 
interest the Commission is tabling a revised proposal for a 
Directive on Nuclear Safety because it believes a common 
legislative framework on the safety of nuclear installations 
and the management of nuclear waste is needed. 
 
Towards a vision for 2050 
------------------------ 
¶20.  (U) The final element of the SER is a rather 
forward-looking chapter, asking what needs to be done to 
prepare for the energy challenges towards 2050, rather than 
the 2020 timescale which the Commission, and EU, has focused 
upon until now. The SER announces that "the Commission will 
therefore propose to renew the Energy Policy for Europe in 
2010 with a view to charting a policy agenda for 2030 and a 
vision for 2050".  In particular the Commission highlights a 
number of issues that will be the focus of this longer term 
"Roadmap towards a 2050 Energy Policy", notably: a low or 
zero carbon electricity industry by 2050, ending oil 
dependency in transport, leading on low and then positive 
energy buildings, and a smart electric grid. 
 
¶21.  (U) The Commission believes that the EU needs to go 
beyond its 20-20-20 goals and develop a vision for 2050 and a 
policy agenda for 2030. It argues that the fundamental 
technological shifts involved in decarbonizing the EU 
electricity supply, ending oil dependence in transport, low 
energy and positive power buildings, a smart interconnected 
electricity network will only happen with a coordinated 
agenda for research and technological development, 
regulation, investment and infrastructure development. The 
Commission also believes that the transition to a 
high-efficiency, low-carbon energy system needs to be 
promoted not only in Europe but worldwide. As such, the 
Commission plans to prepare a roadmap towards a 2050 Energy 
Policy, in dialogue with Member State officials, academics 
and industry experts. 
 
¶22.  (SBU) Comment.  The recommendations included in the SER 
could be adopted by the March 2009 European Council.  The 
Council would then call on the Commission to draft 
legislation to carry out these proposals.  Some of the 
recommendations could be implemented without new legislation, 
but for those requiring legislation we are unlikely to see a 
package submitted to the Parliament until some time next 
fall.  We see no immediate red flags in the proposals 
outlined above, and indeed we are encouraged by the 
initiatives to increase Europe's energy security.  If these 
packages do go forward, they will no doubt be heavily debated 
and amended by the Parliament and Council and as always, the 
devil will be in the details.  End Comment. 
 
Silverberg. 
.