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Andrea Leadsom - Department for Energy and Climate Change

I am writing to report discussions at the Energy Council held under the Luxembourg Presidency which I attended in Brussels on 26 November 2015.


Speaking for the Commission Vice-President Sefcovic outlined the first annual report on the State of the Energy Union, arguing that 2016 would be the year of delivery, with legislation on gas security of supply, renewables, governance, energy efficiency and market design. On governance in particular the Commission urged Member States to make early progress on their integrated climate and energy plans (National Plans), so that final plans could be agreed in 2018. I and a number of other Member States highlighted the need for a flexible governance framework while another Member State called on the Commission to introduce an EU-level instrument to address any anticipated shortfall against the 2030 renewable energy target. Another group of Member States used the opportunity to call for further discussions on the proposed extension of the Nordstream gas pipeline (Nordstream II) and urged the Commission to conduct a rigorous cost benefit analysis of the project against the objectives of the Energy Union.


The Council then agreed a General Approach on the proposed Energy Labelling Regulation which would establish a revised and improved legal framework for the energy efficiency labelling of energy-related products. The Commission thanked the Council for its efforts but retained its position that existing labels must be removed from the market sooner than the Council provided for; defeat devices must be dealt with by the Regulation; and that durability should be included in the definitions. Several Member States voiced strong support for the approach agreed while others objected, arguing in particular that the proposed product database was too burdensome on economic operators.


The Council later discussed electricity market design focussing on the future role of Distribution System Operators (DSOs) and consumer empowerment. There was widespread agreement on the growing importance of the role of DSOs, the need for better coordination with Transmission System Operators and how they should act as neutral market players. However, there were differing views on whether a new EU regulatory framework setting out clear roles and responsibilities was required. Along with a number of other Ministers, the UK emphasised the need to avoid a one size fits all approach while others called for greater harmonisation.


There was a broad consensus on the need for consumers to play a more active role in the market. Some Member States highlighted the important role of smart meters in facilitating this while others stressed the need for more affordable retail prices, calling for a rigorous cost benefit analysis to drive the introduction of smart meters. A small number of Member States argued for the abolition of price regulation and greater scarcity pricing to incentivise investment while others, including the UK, argued that the EU should take a framework approach to market design, establishing the broad principles but allowing for different models of national implementation (e.g. on capacity mechanisms).


In the afternoon the Commission provided an update on external energy relations, noting the Russia/Ukraine gas agreement as the key achievement over the past six months, while acknowledging that further gas reforms were still needed in Ukraine. Finally, the Dutch delegation presented their work programme ahead of their forthcoming EU Presidency, announcing that they would prioritise the internal energy market and regional cooperation. They set out the legislative agenda which will include the start of negotiations with the European Parliament on energy labelling and in the Council on the Gas Security of Supply Regulation and revised Inter-Government Agreements Decision.

 


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