The Challenges of the Energy Union in the Wake of the Paris Agreement

Politicians and industrials usually have a hard time agreeing on what a successful deal looks like. But Felip-Alexandru Negreanu-Arboreanu, policy advisor to Adina-Ioana Vălean, Vice-President of the European Parliament, and Sylvie Denoble-Mayer, in charge of Institutional and European Affairs at Engie (she also represents Gas Infrastructure Europe) share at least one view: The gas infrastructure projects, especially in Eastern Europe, coming out of the Energy Union framework, are a positive sign for Europe and the industry.

Speaking in the wake of the “historic” deal reached by 195 countries one month ago in Paris, the pair gave their views on how the deal could affect Europe and the Energy Union. European Parliament insider Felip-Alexandru Negreanu-Arboreanu expressed his enthusiasm clearly.

“It's finally happening," he said. "This will be an advantage providing a necessary stability for national policies makers, the industry, and for consumers, to project the future and to be a part of it.”

He also praised the coordination of policies in terms of market, security of supply, and renewable energies that may come out of upcoming legislations. “We have the structures; now we will need the building blocks," he said.

Sylvie Denoble-Mayer said that Eastern Europe was an important region to focus on in the future, given that it does not have enough gas interconnections. “We admit that Eastern Europe must be a priority because they are poorly interconnected. Some of the Projects of Common Interests funded by the European Union have already started." She welcomes the commission assessments that gas emits less CO2 than other fossil fuels and can play a role to fill the variability of renewables.

While applauding the commission investments agenda, Sylvie Denoble-Mayer points out the “paradox of the commission” or “the real problem in the commission speech”--there is no clear statement on what the future of gas would look like after 2030.

“The Commission told us that we need to develop the CCS (Carbon, Capture and Storage) beyond 2030 and at the same time encourages investments to complete the internal energy market," she said. She emphasised that €90 billion will be needed by 2020. She also implies that industry players may think twice before investing in infrastructures which will be amortised in 40 to 50 years, well beyond 2030.

“We must establish a coherent regulatory framework, stable, with visibility so we can invest; otherwise we will not invest,” she said, adding that the current efforts are not sufficient to protect the industry. “We must complete the internal energy market if the conditions are interesting. We need strong signals and initiatives."

Pipeline Projects

Asked about the new pipeline projects both in Turkey and the Baltic Sea, Ms. Denoble-Mayer did not make any comment because of the “divergent interests within GIE” but stressed the importance of investments in Eastern Europe. “Eastern countries are really dependent on a single source, Russia. Gas infrastructures will help them to get other sources of supply. Depending on one source, that gives Russia many leverages.”

Filip-Alexandru Negreanu-Arboreanu addressed the fact that the pipelines have raised questions in Eastern Europe. He pointed particularly to the Nord Stream-2 pipeline expansion project that, if  implemented in its current form, will bypass Ukraine, starving the country from a revenue stream. The solution to the issues raised, he said, is to diversify supply.

“If eastern countries are worried that building Nord Stream-2 might mean that they will rely on the same source of energy, they should just diversify the energy sources. They should build LNG terminals, build access to terminals, and interconnect the small market in the region, so they won't rely on Nord Stream, South Stream or any other streams, but on the global market," he said. The policy adviser adds that Turkish Stream is “probably not going to happen” because of the dispute between Turkey and Russia over Syria and that Nord Stream-2 is now “debated.”

The role of gas in the energy mix

Addressing climate change also means considering the role gas can play in the energy transition by combining gas with renewables while coal is still part of the equation, both said. “Long-term policy making should focus on giving stability to investors, for them to be able to develop gas as a balancing instrument," Mr. Negreanu-Arboreanu said. As a policy advisor, he recognised that this view needs to be translated into real policies.

For him, how gas will be used is not being sufficiently addressed at present. “Gas will be the transition fuel. The problem is nobody is defining how long the transition is; how comprehensive the transition is; and nobody is actually saying that gas is the transition fuel although it will be." It’s a necessity to support the production of renewables which is intermittent, he added. “We will always need gas for a large part of the market, to balance the network."

In Sylvie Denoble-Mayer's view, a 100% renewables world is a dream. Moreover, she regrets that the EU's emissions trading system (ETS) is not working the way it should to remove coal from the energy mix. She says that CO2 price is far too low. 

Paris Agreement

The role of the ETS and CO2 pricing could be argued to be the area where the climate talks failed. The carbon price issue has not been tackled yet. It will certainly be one of the challenges for the Energy Union moving forward.

Still, Filip-Alexandru Negreanu-Arboreanu welcomed the climate deal. “This agreement allows nations to assume their own contributions and should provide the much needed regulatory predictability the industry needs to project their investment in modernisation and innovative upgrades."

He told Natural Gas Europe that a positive outcome allows Europe to be cleaner but also to stay competitive.

For Sylvie Denoble-Mayer, competition remains a concern. 

“If we put all [the responsibility] on Europe, there will be an industrial competitiveness problem," she says. "This is already happening and it will increase. The target of 27% renewable energy is ambitious. It may be reasonable if everyone made a drastic effort, but if you are the only ones to do it in Europe, companies with high emissions will go elsewhere to remain competitive. Then, it could become a social problem.”