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The Time is Ripe for a Mediterranean Energy Union

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Apr 15, 2015 / 0 Comments
   

By Silvia Pariente-David

 

As the European Commission launches its new Energy Union Package -  a set of three Communications setting the strategy for a secure, sustainable, competitive and affordable energy - , it is the perfect time for the Mediterranean countries to seize the moment, join the “energy transition” movement and commit to the creation of a Mediterranean Energy Union to stimulate jobs, growth and competiveness. The first Communication, “A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy” sets out the goals of a European Energy Union, as well as the detailed steps to achieve it, including new legislation to redesign the electricity market, ensure more gas contract transparency and improve security of supply, stronger regional cooperation as an important step towards an integrated market and increased EU funding for energy efficiency and renewable energy, to name just a few.

 

Regional market integration is key to a secure, low-carbon and competitive energy future and energy is a vector of regional integration. The benefits of regional energy market integration are multiple: security of supply, energy mix diversification, reduction in investment and operating costs (as infrastructure is optimised across countries), lower consumer prices, cost-effective transition to a low-carbon energy system, etc. For example, regional market integration facilitates the large-scale development of renewable energy, by improving power system flexibility. Power systems need flexibility to cope with the stress resulting from sudden and unpredictable variations in availability characteristic of renewable energy. Large interconnected electricity markets are more flexible, as they take advantage of geographically diverse renewable generation (making it unlikely that unavailability will occur simultaneously), differences in power generation structure across countries and different demand structures.

 

Energy efficiency programs are also enhanced by regional coordination and cooperation, as countries can share experience and have access to more efficient and competitive equipment and services thanks to harmonisation of norms and standards. Overall, in summary, regional energy market integration contributes to CO2 emission reductions, through a more efficient development of low-carbon solutions.

 

Achieving regional integration requires strongly interconnected networks, to support increasing trade and exchanges of energy services. This is acknowledged through the second EU Communication “Achieving the 10% electricity interconnection target—Making Europe’s electricity grid fit for 2020”. A more integrated market through interconnections reduces the need for investment in power generation capacity and optimises the use of renewable energy capacity (for instance making better use of excess wind in Spain or hydro in Nordic countries). Lower generation costs and lower investments in power plants translate into more competitive electricity prices to businesses and households. Well-connected European energy grids will translate into direct savings for EU consumers, estimated in a recent study at €40 billion per year.

 

The European Commission estimates that half of the required €200 billion to better integrate European markets by 2020 would be for electricity, out of which some €35 billion would be for the interconnections necessary to reach the 10% target across the EU. The Connecting Europe Facility (CEF) was established in December 2013 to identify and ensure the timely implementation of the key projects, with an allocation of €5.35 billion for energy infrastructure for the period of 2014-2020. In addition, the recently created European Fund for Strategic Investment (EFSI), with the objective of mobilising €350 billion in private and public investment, is likely to emerge as an important tool in the development of EU energy cross-border infrastructure.

 

If the market integration is broadened to include the Mediterranean region, then the savings would be even larger, with an additional €30 billion accruing to European consumers (Dii estimate). Developing a Euro-Mediterranean electrical grid would provide the opportunity to make the best use of the energy resources, to exploit the potential of renewable energy, more particularly solar energy, in the southern Mediterranean countries, and to enhance security of electricity supply both for northern and southern countries. Several initiatives to connect the two shores of the Mediterranean have estimated the required investment at €35-55 billion, making it well worthwhile based on the European consumer savings alone. Moreover, regional cooperation facilitates the development of a local industry to support the development of national renewable energy sources, therefore helping countries of the Southern Mediterranean reap the social and economic benefits of their renewable energy programmes.

 

A first step toward the creation of a Mediterranean energy hub was taken, in Rome in November 2014, with the conference on "Building a Euro-Mediterranean energy bridge: the strategic importance of Euro-Med gas and electricity networks in the context of energy security". The conference reaffirmed the importance of regional energy cooperation for ensuring secure, affordable and sustainable energy supply, which is a key factor for underpinning stability and shared prosperity in the Mediterranean area. One outcome of the conference is the creation of three platforms—one each for natural gas, electricity and renewable energy and energy efficiency-- to provide a permanent forum to support a systematic dialogue of all concerned stakeholders and discuss energy policy objectives and implementation, with a view to identifying concrete cooperation actions and projects to implement regional market integration.

 

Some countries on the Northern shore of the Mediterranean have already transformed their energy system to a low carbon structure, with Spain becoming in 2013 the first country around the world to generate more electricity from wind than from any other source, Portugal generating nearly 50% of its electricity from renewables in 2012 and Italy having reached its EU renewable objective three years ahead of schedule. Several countries of the Southern Mediterranean shores are also embarking on the “energy transition”, with the large-scale development of their vast renewable energy potential to serve markets at home and abroad. Morocco—the only MENA country with an electrical interconnection to Europe-- has taken the lead with several wind farms now in operation and close to 1000 MW of solar capacity in operation, construction or development. The ambitious Moroccan Solar Plan not only contributes to energy and climate objectives, but also to job creation through local manufacturing and the provision of related services, firmly positioning Morocco on the green growth path. The leading role played by Morocco in the fight against climate change, and the development of the required technologies, has been recognized in the nomination of Morocco to host COP 22 in 2016. Tunisia has inscribed climate change in its new constitution, is developing several wind farms and large scale solar plants and is planning an interconnection with Europe, to optimize its energy supply and the development of its renewable energy potential. Egypt has just launched an ambitious program for 12000 MW of renewable energy capacity by 2020—the largest target in MENA—to address the power shortages that have disastrous social and political effects.

 

The “energy transition” process, with a shift in energy policy to steer the economies onto a sustainable development path, would be more efficient and successful if the Mediterranean countries cooperate and coordinate their efforts, in addition to integrating their markets. Several EU cooperation mechanisms already exist, not only to help EU countries achieve their own energy and climate objectives at affordable cost, but also contribute to political stability in MENA countries, while contributing to their objectives of energy access, competitive energy supply and sustainability. The Center for Mediterranean Integration (CMI) stands to help as well, as a platform for dialogue, knowledge sharing, capacity building, access to finance and other activities that fit its mission for Mediterranean integration. The CMI is a partner in MEDCOP21, an event organized in Marseille in June ahead of the Paris COP21 in December 2015, to present a common position of the Mediterranean countries and strengthen their cooperation to address climate change issues and steer the economies onto a green growth path.

 

Silvia Pariente-David

Silvia Pariente-David was the first Task Team Leader of the Noor-Ouarzazate World Bank solar power project in Morocco. Having now retired from the World Bank, she continues, as an advisor, to help with the development of Morocco’s solar plants. She is also involved in several interconnector projects to help create a Euro-Med energy market and advises occasionally the Center for Mediterranean Integration on climate and Mediterranean integration issues.

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