ENERGY ROADMAP 2050 Georgette Lalis – Director General Policy Directorate General for ENERGY Meeting Thematic Group Strategy 23 May 2011

Outline 1 EU Energy Policy context and background 2 Low-Carbon Economy Roadmap (DG CLIMA) of 8/3/2011 3 Results Public Consultation Energy Roadmap 2050 4 Energy Roadmap 2050 preparation 5 Summary Energy Roadmap 2050 and EU-Russia

1 EU Energy Policy context and background Competitiveness Security of supply Sustainable Development

1 EU Energy Policy context and background (energy competences of the Lisbon Treaty) Article 194.1 identifies the triangle of fundamental principles of EU energy policy: security of supply, competitiveness and sustainable development and set the following priorities: internal market, security of supply, energy efficiency & renewables interconnection of the energy network (including to third countries), Article 194.2 Member States retain the right to decide their energy mix, Article 194.3 measures of fiscal nature (taxation) require unanimity So, at this stage of our strategy, what can we expect for the future? To answer this, let me explain what happened at the European Council Summit on Energy on 4 February. One of the main achievements was to demonstrate a more “European” and less nationalistic approach to energy policy.

1 EU Energy Policy context and background European Energy Summit (February 2011) confirms energy at top of political agenda Top political endorsement for key points of Commission's Energy 2020 strategy: Achieving an energy efficient Europe, Building a pan-European integrated energy market, Empowering consumer and achieving the highest level of safety and security, EU leadership in technology and innovation, Strenghtening the external dimension of EU energy policy So, at this stage of our strategy, what can we expect for the future? To answer this, let me explain what happened at the European Council Summit on Energy on 4 February. One of the main achievements was to demonstrate a more “European” and less nationalistic approach to energy policy.

1 EU Energy Policy context and background Outcomes from European Council Commitment to GHG emissions reductions by 2050 – 80-95% below 1990 level Will require an evolution in energy systems which must start now Looks forward to elaboration of low-carbon 2050 strategy – framework for longer-term action in energy and related sectors (roadmaps) Will keep developments under regular review So, at this stage of our strategy, what can we expect for the future? To answer this, let me explain what happened at the European Council Summit on Energy on 4 February. One of the main achievements was to demonstrate a more “European” and less nationalistic approach to energy policy.

2 Low Carbon Economy Roadmap (CLIMA) adopted on 8 March 2011 With current policies “reference scenario” the modeling shows approx 40% GHG emissions reductions by 2050 Achieving 80% reduction in GHG by 2050 implies: Power sector almost fully decarbonised but it will require substantial investment in network, smart grid and CCS), High potential reduction in residential approximately 90´%, Transport less decarbonisation 60% (Described in the Roadmap European Transport Area adopted 28/3/2011) Agriculture reductions less than 50% (but by 2050 agriculture will represent almost 1/3 of EU emissions) 7

3 Public Consultation Energy Roadmap 2050 On 20 December 2010 DG ENER launched a public consultation on the 2050 Energy Roadmap, 400 replies received, half organisations and half from citizens http://ec.europa.eu/energy/strategies/consultations/20110307_roadmap_2050_en.htm Report public consultation published on EUROPA Beside the replies to the public consultation other contributions received: position papers, reports, scenarios and contribution from Member States

3 Public Consultation Energy Roadmap 2050 Broad agreement on: Need for intermediate (and flexible) milestones. Flexibility is needed to allow “route to be changed along the way” Progress on decarbonisation to be verified regularly. Some advocating for compulsory targets other for checkpoints Stable, clear and predictable legislative framework is needed to encourage investments Energy efficiency & renewables important areas Global fossil fuel price and long term security of supply were considered key drivers on future EU energy mix

3 Public Consultation Energy Roadmap 2050 Different opinions expressed on: Potential for different options: energy efficiency, renawables, CCS, more natural gas, nuclear …… pure market-based approach with minimal intervention versus additional sector-specific targets and policies the role of international offsetting (Clean Development Mechanisms and Join Implementation) potential for electrification of transport and heat feasibility of high share of intermittent renewables in the power sector

4 Energy Roadmap 2050 preparation Roadmap is a useful tool for policy decision (bearing in mind all three objectives of security of supply, decarbonisation and sustainable development) Roadmap exercise will be supported by extensive modelling scenarios Beside modelling scenarios input stakeholders (public consultation, position papers and scenarios) Some EU Member States are developing similar roadmaps which provide useful input. EU-Russia roadmap should contribute to the discussion

4 Energy Roadmap 2050 preparation-challenges Aim at decarbonisation but need to meet also the other policy objectives of energy security and competitiveness We need to have an appreciation of cost of our decisions and investments required We need to look beyond our 2020 targets as clarity long term is needed to encourage investments in energy Global context is important (risk of carbon leakage) Massive investment will be required particularly in infrastructure projects We need to assess the impact of Fukushima on the energy mix

5 Summary Energy Roadmap 2050 Low Carbon Economy Roadmap adopted 8/3/2011 Roadmap for a single European Transport Area 28/3/2011 Report on Public consultation Energy Roadmap published On going review stakeholder scenarios and position papers Discussion Roadmap informal Energy Council of 2/3 May Discussion Roadmap with Member States and third countries Report of the ad-hoc Expert Advisory Group Modelling and scenario analyses underway – Peer review Roadmap adoption end 2011

5 EU-Russia energy interdependence Russian supplies to EU 36% of the EU’s total gas imports; 23% of the EU total gas consumption; 31% of the EU's total crude oil imports; 30% of the EU's coal imports. For five EU Member States (Finland, Estonia, Latvia, Lithuania, Bulgaria) Russia is the only supplier of gas Energy exports: 40% of budget of Russian Federation 75% of foreign investments in Russia come from EU Infrastructure interdependency Chiffres de 2008

5 Gas imports from Russia and EU gas consumption Les importations de gaz de la Russie dans l’UE ont augmenté en volume depuis 10 ans, mais leur pourcentage par rapport à la consommation est resté stable. A peu près un quart du gaz utilisé dans l’Union vient de la Russie. Par ailleurs, l’augmentation des importations est beaucoup plus forte dans le secteur pétrolier (de 18 à 28% de 200 à 2009). Même si le gaz est beaucoup plus présent dans le public, économiquement, les importations du pétrol et des produits pétroliers sont encore plus importantes pour nos relations. Les importations de gaz de la Russie en 2010 (138 milliards de m³) n'ont pas encore atteint les niveaux d'avant la crise de 2008 (143 milliards de m³). Gazprom prévoit d'exporter 151 milliards de mètres cubes de gaz vers l'Europe en 2011. La Russie était un fournisseur sure et fiable dans le passé pendant 40 ans. Cependant, les conflits avec des pays de transit (Ukraine, Belarus) et les crises de gaz en 2009 et 2010 ont terni cet image, et ont mis en question la fiabilité du gaz en général dans l’opinion publique en Europe. Une tâche importante du dialogue énergétique entre l’UE et la Russie et donc de rétablir la confiance et d’assurer la sécurité d’approvisionnement, par example via le « Early Warning mechanism » signé en 24 fevrier entre le Commissaire et le Ministre Russe.

2009 Commission “baseline” scenario: Gas consumption in EU (Mtoe) Gas imports will increase by 30% in 2020 and 35% in 2030 En orange: la production dans l’UE - fortement en baisse déjà depuis quelques années En vert: les importations – une augmentation forte: 30% en 2020 et +35% en 2030 par rapport à 2009. En volume, si le part des importations russes reste stable autour de 25% de la consommation européenne, la Russie devrait fournir en 2030 appr. 175 bcm de gaz à l’Europe. Selon le plan général de développement du secteur gazier Russe jusqu’en 2030, la Russie pourrait exporter en 2030 autour de 225 bcm vers l’Europe (Turquie et Balkans inclus). L’application du marché intérieur dans l’UE est une opportunité pour la Russie. Il est cependant nécessaire que la Russie accepte les règles de ce marché, y compris le fameux troisième paquet. Les règles ont introduit (depuis l’entrée en vigueur il y a quelques jours) la séparation entre la production et la transmission de gaz avec l’objectif d’introduire d’avantage de concurrence dans les marchés. Dans les marchés régionaux / nationaux où Gazprom a un monopole, d’autres entreprises de l'UE seront présents. En même temps, Gazprom ou d’autres entreprises russes seront en mesure de pénétrer d'autres marchés de l'UE que ne sont pas accessible à ce jour.

Role of gas in the EU mix Gas currently represents around ¼ of the EU primary energy and almost 24% in power generation (significantly up from 14% in 1997). Gas is mainly used in heating of residential and commercial buildings (39%), industry (30%) and power generation (27%). Gas is attractive alternative both from an economic and an environmental point of view: least carbon-intensive of the fossil fuels; technology is available and gas fired power plants are easy and relatively cheap to build After the nuclear accident in Japan, the role of gas in power generation might become more prominent The future role of gas will highly depend on future policies – stringency of decarbonisation targets, support to RES and nuclear development - as well as on the level of gas prices and carbon prices

What future for Russian gas in the EU? Different factors to be considered: where will general EU-Russia relations stand in two or three decades? Will we have a free-trade agreement and open markets based on a level playing field? will the Russian gas producers and suppliers adapt to changing European and world gas markets? What will be the price of natural gas offered to EU consumers? will Russian gas and oil producers reduce their CO2 footprint, increase their efficiency and implement new technologies, including CCS? Development of Russian (gas) market (reforms?) Development of EU market La Russie va rester le partenaire et fournisseur principal de l’UE pour le gaz, mais aussi pour le pétrole dans les années à venir. L’Europe aura besoin du gaz russe aussi dans le futur. Cependant, le role et l’importance du gaz russe dans le futur dépendra d’un certain nombre de facteurs: est-ce que la Russie et l’UE vont continuer à développer leurs relations politique et économique, y compris par la conclusion d’un nouvel accord (Post-PCA)?  création d’un cadre juridique stable est-ce que la Russie (Gazprom) va être suffisamment flexible en tant que producteur pour s’adapter à un marché de gaz qui change: concurrence accrue sur le marché européen suite à la réalisation du marché intérieur, à une offre plus large de GNL (selon l’AIE, en 2035, plus de la moitié du commerce en gaz se fera avec GNL) , gaz de schiste… Est-ce que la Russie va être capable de moderniser son marché et d’augmenter l’efficacité du secteur (attraction des investisseurs européens, libéralisation du marché de gaz, fin du monopole de Gazprom)  harmonisation avec les standards européens ou internationaux Un objectif de l’UE est de diversifier ses sources de gaz. Le projet « Southern Corridor » joue un rôle important dans ce contexte pour assurer l’accès au gaz du bassin caspien. Quel sera l’impact des politiques et décisions internes dans l’UE?  Objectifs 20/20/20 / économie à bas carbone

Thank you for your kind attention DG ENERGY http://ec.europa.eu/dgs/energy/index_en.htm