I Principles of the EU external energy policy
The external dimension of the EU energy policy has been built over time by the EU Council, the EU Commission and the High Representative of the EU for Foreign Affairs on a combination of objectives in the field of energy security, the fight against climate change and sustainable development. The overarching principles of EU energy and climate diplomacy may be summarised in securing energy supply and global energy markets in the context of energy transition and of the sustainable development agenda. From the perspective of partner countries, the EU external energy action, among others, contributes to energy and climate resilience through public and private investments in sustainable energy mobilised by comprehensive reform of energy governance structures towards energy transition and climate action.
1 Energy security, climate action and sustainable development
The current external dimension of the EU energy policy has its foundation in the 2011 and 2013 Council conclusions responding to the main challenges of diversifying Europe’s energy supply and reducing external energy dependency by means of enhanced cooperation between member states.Footnote 1
As a matter of fact, security of energy supply has long been a traditional component of the EU energy policy. Back in 2000, the Commission’s Green Paper answered concerns on energy security with demand policy and the promotion of renewable energy.Footnote 2 Between 2006,Footnote 3 2011Footnote 4 and 2014,Footnote 5 the document was gradually translated into a coherent “energy security strategy” where securing supplies and crisis management were accompanied by energy partnerships with third countries, by global energy governance in the framework of international energy organisations as well as by climate, trade and development policies.Footnote 6
In 2015 the Commission channelled energy security into the new energy resilience strategy called the Energy Union.Footnote 7 As a comprehensive energy policy framework aiming at secure, sustainable, competitive and affordable energy in Europe, the Energy Union holds a forward-looking emphasis on the fight against climate change. The external dimension is evident across its five dimensions (security, market integration, energy efficiency, decarbonisation and technology) and includes coordinating energy and climate diplomacy, securing international supply routes and energy crisis, strengthening global energy markets and ensuring transparency on gas supply. Global energy governance, energy cooperation with third countries and external trade and development policy are the instruments to promote competitive and transparent low carbon energy markets and to secure access to energy resources.Footnote 8
The EU Global Strategy of June 2016 confirms climate and energy security as one of the priority areas for the European External Action Service in the immediate neighbourhood as well as in regional and global orders. The strategy anticipates an important energy security dimension to the EU external action across all regions and international orders. Development cooperation is devised as a key instrument for EU action in response to security and in leading by example on sustainable development, climate change and global governance.Footnote 9
Based on the premises of the Energy Union and of the Global Strategy, the EU Council expressly realigned between 2015 and 2017 the priorities for a coordinated energy and climate diplomacy as well as for development cooperation: diversification of energy sources, energy partnerships and dialogues, global energy architecture and multilateral initiatives, climate action and implementation of the Paris Agreement as well as promotion of private sector engagement to achieve universal access to sustainable energy.Footnote 10 With the 2017 New Consensus on Development, the EU Council and the EU member states highlighted the potential for development cooperation to promote a circular economy, to support conservation of natural resources and to integrate environment and climate change. In order to harvest the potential of sustainable energy as a development enabler, the Council and the member states aim at addressing energy poverty, increasing energy efficiency and renewable energy and contributing to the fight against climate change in developing countries.Footnote 11
The strategic visions by the EU Council, the EU Commission and the High Representative denote a common ambition for global leadership by the EU in the transition towards a low carbon economy and in implementing the sustainable development agenda.
2 Reinforcing energy governance structures (institutional and normative frameworks)
Of course, the instruments of energy and climate diplomacy as well as of development cooperation create per se governance structures (partnerships, agreements, organisations) that regulate the relations between the EU on one side and partner countries on the other side.
Some of these energy and climate diplomacy instruments, in addition, aim at reinforcing energy governance structures in partner countries and namely at improving (institutional and normative) energy frameworks. In this sense, the EU Global Strategy clearly seeks to enhance energy and environmental resilience in third countries by means of energy sector reform policies towards energy transition and climate action. Reform principles include energy liberalisation, expansion of renewables, better regulation and technological transfers.Footnote 12
More in detail and in relation to development cooperation, the EU Council devised the importance of reinforced energy governance for promoting an appropriate and transparent regulatory framework for the energy sector. The regulatory framework is considered an essential component of the enabling environment that allows private sector engagement and removes market distortions, financing obstacles and regulatory barriers. Technical assistance under the available development cooperation programs should contribute to reforming energy policy and institutional and legal frameworks.Footnote 13
The global strategy recognises the need to mobilise investments in Africa to achieve sustainable development goals by means of joined-up action among others in trade, development, energy and climate.Footnote 14 Especially in Africa (and in the EU’s neighbourhood), the EU Council finds that energy transition towards a competitive and sustainable energy sector should be supported by the improvement of regulatory frameworks which enable private investments and leverage private finance.Footnote 15
The insistence by the EU Council on technical assistance and capacity building is consistent with the principle of common but differentiated responsibilities, enshrined in the Paris Agreement and reflected in the UN sustainable development agenda. Developed countries are encouraged to support developing countries with capacity-building in climate and sustainable development action.Footnote 16
II EU governance on energy, climate and development
It is said that the ambitious goals of the EU energy and climate diplomacy would be best delivered if the EU could speak with one voice in its external relations. Early on, the EU Council insisted that only “a strong and united EU can constructively engage with its partners” on energy and climate. The issue has a bearing on internal EU energy governance structures and on coordination between the EU and its member states on energy and climate.
Development cooperation too, a late addition to EU energy and climate diplomacy, requires complementary action by the EU and its member states. Because of the allocation of shared competences – in energy, climate and development cooperation – close coordination between the EU and its member states is required to engage and to enter into international agreements with partner countries and organisation as well as to implement the common objectives of the Energy Union.
1 The call for a single voice in energy and climate diplomacy
The need for increased efforts in order to ensure a strong and coherent EU position in international energy relations was already highlighted by the EU Council in 2011. Consistent and coordinated messages were encouraged to be delivered by the EU energy dialogues with third countries as well as within the framework of energy-related international organisations.Footnote 17
In 2013, in light of significant changes in the global energy landscape, the EU Council strengthened the case for Europe to speak with “one voice” on key energy issues as a promoter of the global climate and energy goals in order to increase the collective weight and negotiating power of its member states (and reap the benefits related to all three pillars of its energy policy: security of supply, competitiveness and sustainability).Footnote 18
The epochal developments on sustainable development and climate change – such as the adoption in 2015 of the UN 2030 Agenda for Sustainable Development, of the Paris Agreement and of the Addis Ababa Action Agenda on Financing for Development – have further prompted the EU to strengthen the external dimension of its energy policy and to lead by example in implementing its international commitments. In the energy sector, this has been translated into a renewed impetus to claim one voice in implementing the EU energy and climate diplomacy towards decarbonisation and development cooperation.Footnote 19
As a matter of fact, the EU does not speak with one voice in external energy activities and EU actions complement bilateral cooperation established by member states.
2 Sincere cooperation on energy, climate and development
The competence for the adoption by the EU of energy-related external measures crosscuts several policy areas, such as energy, environment, trade and development cooperation, where the EU competence is either shared (energy, environment and development) or exclusive (trade). Given the complex allocation of competence over energy and environment and development cooperation, the EU and its member states shall abide by the principle of sincere cooperation and assist each other in full mutual respect in carrying their respective tasks.Footnote 20
Competence over energy is shared between the EU and its member states.Footnote 21 Article 194 TFEU does not explicitly refer to the external dimension, however, it may be deduced from the aim to ensure the security of energy supplies from third countries. The EU has traditionally based its competence to conclude international agreements on the principle of parallelism between internal and external competences.Footnote 22 Such has been invoked by the EU to conclude the Energy Charter Treaty and the statute of the International Renewable Energy Agency (IRENA), both negotiated in close cooperation with member states and concluded as mixed agreements.Footnote 23 EU competence over energy is significantly limited by a member state’s sovereignty over its energy sources and energy mix, which is not affected by the TFEU.Footnote 24
Environment is an area of shared competence too.Footnote 25 Its external dimension is clearly stated: the environmental policy under Article 191 TFEU includes the promotion of international measures combating climate change. Cooperation between the EU and its member states is expressly required in exercising their respective competence with third countries and international organisations. Accordingly, the United Nations Framework Convention on Climate Change (UNFCCC), signed in June 1992 in Rio de Janeiro, was concluded by both EU and its member states as a mixed agreement,Footnote 26 as well as the subsequent Kyoto ProtocolFootnote 27 and the Paris Agreement.Footnote 28
The area of development cooperation is also one of shared competence under Article 208 TFEU and actions by the EU and by its member states should complement and reinforce each other towards poverty reduction and the UN sustainable development objectives.Footnote 29 The EU competence to conclude international agreements is subject to the same carve-out as for environment policy: without prejudice for member state’s competence to negotiate in international bodies and to conclude international agreements.Footnote 30 Consultation, coordination and joint action in programs and activities is the rule to ensure effectiveness of development cooperation.Footnote 31
On the other hand, the EU has exclusive competence over the common commercial policy (CCP) with third countries (including trade in goods and services, intellectual property and foreign direct investments).Footnote 32 The commercial dimension of certain tools of the energy diplomacy is relevant for instance in the Energy Charter Treaty and in the Energy Community Treaty. The same is true in the chapters on sustainable development and renewable energy provided under recent EU trade agreements, seeking to remove barriers to the transfer of low carbon technologies, to mobilise public and private sector investment in low-emission and climate-resilient development, to eliminate fossil fuel subsidies and to strengthen cooperation on technical regulation (such as in the EU-Canada Comprehensive Economic Trade Agreement (CETA), the EU-Vietnam and the EU-Singapore FTAs).Footnote 33
III Reinforcing energy governance under EU energy diplomacy
In practice and as further described below, the EU energy and climate diplomacy exercises sincere cooperation between the EU and its member states across diplomatic dialogues (bilateral partnerships, G7, G20), collective diplomacy (IEA, IRENA, UNFCCC) public outreach diplomacy (Sustainable Energy for All, Global Climate Change Alliance +) and external policy instruments (such as development, neighbourhood, humanitarian, trade policies). As the EU Council restated in 2016, common action by the EU and its member states aims at advocating climate change as a strategic priority, supports implementation of the Paris Agreement and addresses the nexus between climate, natural resources, prosperity and stability.Footnote 34
Among the existing tools of the EU energy diplomacy, many provide for instruments and initiatives to reinforce energy governance structures in partner countries. Once again, the fundamental assumption lies on the importance of solid institutions and stable frameworks as an essential component of the enabling environment for the private sector to engage in universal energy access and energy transition. Certain patterns are to be recognised: (1) regulatory cooperation platforms in bilateral partnerships; (2) energy policy guidance in multilateral initiatives; (3) energy policy reform and regulatory cooperation in regional orders; (4) regulatory cooperation under energy chapters of trade agreements; (5) international cooperation among energy regulators.
1 Regulatory cooperation platforms in bilateral energy partnerships
Bilateral partnerships between the EU and its key supplier or transit countries are at the core of the EU energy diplomacy ensuring the security of energy supplies. The focus on energy governance and regulatory frameworks is stronger in certain cases which are described more in detail below, without prejudice to similar initiatives in the large number of bilateral energy partnership with key energy producer countries (Algeria, Brazil, Gulf Cooperation Council, Norway, OPEC, South Africa, with countries of Central Asia and the Caspian Basin such as Kazakhstan, Turkmenistan, Azerbaijan), with key transit countries like Turkey, as well as with major consumers such as India and Japan.Footnote 35
The EU-Russia Energy Dialogue launched in 2000Footnote 36 has provided the basis for a long-term bilateral energy partnership grounded in the interdependence of energy markets. Since 2014 the bilateral thematic cooperation councils are suspended,Footnote 37 however ad hoc meetings are held to secure uninterrupted supply of gas. In 2013, the 2050 Roadmap of EU-Russia Energy Cooperation proposed to reinforce the cooperation between the system operators and regulators. When the energy dialogue is actively resumed, there will be opportunities for the Federal Tariff Service of Russia and the EU regulatory bodies, including the Agency for the Cooperation of Energy Regulators, to meet and exchange on regulatory and market design issues.Footnote 38
Bilateral relations with Ukraine, a key transit country for gas supplies,Footnote 39 are based on the Strategic Energy Partnership launched in 2005 and renewed in 2016Footnote 40 and on the Association AgreementFootnote 41 in force since 2017.Footnote 42 Energy partnership aims at full integration of the EU’s and Ukraine’s energy markets, and at reforming Ukraine’s energy sectors, especially the gas market and energy efficiency, towards energy security and environmental sustainability.Footnote 43 Between 2007 and 2010, Ukraine benefited from EU-funded (TwinningFootnote 44 ) bilateral institutional cooperation between the Italian, Austrian and Czech regulators and the NERC (National Energy Regulatory Commission of Ukraine) aimed at strengthening energy regulation and facilitating legislative reform.Footnote 45
Since 1981, the EU-China energy relations have intensified to the level of strategic partnership in the EU China Energy Dialogue where the partners pursue a common interest in energy security through transparent, well-regulated and open energy markets and transition to low carbon energy.Footnote 46 In 2016, the signature of the EU-China Energy Cooperation Roadmap for the period 2016–2020 boosted cooperation on energy markets reform and on engagement in international energy institutions. The Roadmap anticipates establishment of a cooperation platform on energy regulation as well as enhanced coordination of regulatory policies on grid development including dispatching, oil and gas pipeline infrastructure, energy supply prices and subsidies.Footnote 47
Since 2009, the EU-US Energy Council meets annually and reports to the EU-US summit on energy markets, policy and regulatory cooperation, joint research and development.Footnote 48 The last energy council held in 2016 recognised the importance of regulatory cooperation to ensure effective market functioning and to realise key infrastructure projects. Informal regulatory cooperation between the US Federal Energy Regulatory Commission and the Agency for the Cooperation of Energy Regulators focuses on wholesale energy markets regulation.Footnote 49 The meetings of the EC-US High-Level Regulatory Cooperation Forum (HLRCF) have resulted among other a Common Understanding on Regulatory Principles and Best Practices adopted in 2011.Footnote 50 The HLRCF has been suspended due to the comprehensive nature of the Transatlantic Trade and Investment Partnership (TTIP) negotiations.Footnote 51
2 Energy policy guidance under multilateral initiatives
The call for financing the 2030 sustainable development agenda by mobilising public and private investment has affected the agenda of multilateral organisations in the energy field. Energy governance and frameworks become useful instruments in the toolbox to achieve universal energy access and transition to renewable energy and energy efficiency. Below is a brief description of certain remarkable international initiatives with a focus on energy regulation.
a The International Energy Agency (IEA)
The IEA was established in 1974 to strengthen energy security of OECD Member States in the wake of the OPEC oil embargo and energy crisis of 1973 by promoting self-sufficiency in oil supplies and systems for coping with oil disruptions.Footnote 52 Over decades, the IEA has expanded to significantly affect global energy dialogue through statistics and analysis of energy outlooks. The IEA promotes reliable, affordable and sustainable energy in member countries and non-member counties. Though the EU is not a party to the IEA, the EU Commission regularly participates to its activities since the founding of the agency.Footnote 53
Against the backdrop of the Paris Agreement, the IEA actively supports transition to a low carbon economy and clean energy. The Clean Energy Transitions Programme launched in 2017 supports clean energy transition around the world and focuses among others on policy guidance building on technical cooperation, training and capacity building that is likely to engage energy regulators.Footnote 54
b The International Renewable Energy Agency (IRENA)
The IRENA was established in 2009 as the international platform facilitating transition to renewable energy, including bioenergy, geothermal, hydropower, ocean, solar and wind energy in the pursuit of sustainable development, energy access, energy security and low-carbon economic growth and prosperity. The Agency provides practical tools and policy advice to accelerate renewable energy deployment, and facilitates knowledge sharing and technology transfer. The EU and its member states are parties to the IRENA.Footnote 55
The IRENA Africa Clean Energy Corridor, launched in 2014, promotes investment and cross-border trade of renewable power in East and Southern Africa.Footnote 56 The regional associations of energy regulators and their national members are engaged in assessment of the energy sectors, planning, enabling investment frameworks, capacity building and public information. The initiative was replicated in 2015 by the Clean Energy Corridor for Central AmericaFootnote 57 and in 2016 by the West Africa Clean Energy Corridor.Footnote 58
3 Energy policy reform and regulatory cooperation under regional orders
The same call for mobilising public and private investment is being heard and implemented by regional organisations. Again, energy governance and regulatory frameworks are spelled out to achieve universal energy access and energy transition. The description below covers the most developed regional initiatives on energy regulation and is therefore non-exhaustive with respect to ongoing developments.
a The Energy Charter Treaty
Concluded in 1994 as a mixed agreement between the EU and its member states on one side and countries in Eastern Europe, Central Asia, South Caucasus and East Asia on the other side, the Energy Charter Treaty (ECT) and its related protocols cover investment, trade, and transit in energy goods and services, taking into account environmental protection and energy efficiency.Footnote 59 In particular, the ECT engages governments to provide investors with transparent, predictable and stable, equitable and favourable frameworks in the energy sector and with solid energy governance.Footnote 60
The Secretariat regularly offers its technical assistance to contracting parties, observer and third states inter alia by means of policy recommendations on energy investments and energy efficiency. In 2017, the Secretariat published an Investment Facilitation Toolbox identifying barriers to the establishment of energy investments and policy practices to remove them. Regulatory instability and weak governance are listed among the non-discriminatory de facto barriers that may deter investors from engaging in a host country. Policy options to facilitate the establishment of energy investments include efficient energy governance and transparent regulatory regimes.Footnote 61 It is reasonable to expect that the implementation of the toolbox may engage energy sector reform.
b The Energy Community
The Energy Community Treaty was concluded in 2005 and gathers the EU and its member states on one side and 11 countries from South East Europe on the other side.Footnote 62 The Energy Community Treaty extends to partner countries the principles and rules of the internal EU energy market, including all instruments of institutional and normative governance.
The Energy Community Regulatory Board established under the Treaty is the independent body gathering the national energy regulators from the contracting parties. The Regulatory Board provides regulatory advice, proposes regulatory convergence, and shares regulatory practices in order to ensure a harmonised and reliable regulatory framework trusted by investors and customers.Footnote 63
Since 2014, the Western Balkan 6 Initiative supports the six South-eastern partners of the Energy Community (Albania, Bosnia and Herzegovina, Kosovo, former Yugoslav Republic of Macedonia, Montenegro and Serbia) in strengthening regional cooperation. The Energy Community implements the “WB6” initiative for the development of a regional electricity market and engages national energy authorities to ensure the required reforms, including strengthening regulatory authorities, reducing barriers to permitting and licensing for new energy infrastructure, regulatory measures for cross-border energy infrastructure.Footnote 64
In the field of gas, the Energy Community has contributed to the establishment of Central and South-Eastern European Gas Connectivity (CESEC),Footnote 65 a joint action to achieve natural gas diversification and security of supply – later extended to achieve electricity market, energy efficiency and renewable development. The CESEC action plan consists of regulatory actions to implement harmonised EU rules in the natural gas sector. Energy regulators play an important part in setting the rules and monitoring the gas network codes.Footnote 66
c The Eastern Partnership
Energy cooperation with the six countries along the Eastern EU border and in Southern Caucasus (Armenia, Azerbaijan, Belarus, Georgia, the Republic of Moldova and Ukraine) was framed by the EU in 2009 within the joint policy initiative called the Eastern Partnership. Priority areas for the partnership are regional energy connectivity, energy efficiency, environment and climate change.Footnote 67
The EU4Energy initiative gathers the six Eastern Partnership countries and five Central Asian countries (Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan) to support energy policy reform towards reducing energy dependence and energy intensity and opening up to low-carbon economies. The EU4Energy Governance project, providing technical assistance to strengthen regulatory frameworks and energy regulators, is implemented in Armenia, Azerbaijan and Belarus by the Energy Charter SecretariatFootnote 68 and in Georgia, Moldova and Ukraine by the Energy Community Secretariat.Footnote 69 The IEA is in charge of improving energy statistics and data management with a view to policy-making, regional discussions and public dissemination.Footnote 70
d The Union for Mediterranean
The Union for Mediterranean (UfM) is an intergovernmental organisation established in 2008 bringing together the EU and its member states with 15 countries from the Southern and Eastern shores of the Mediterranean.Footnote 71 The UfM serves as a platform for regional dialogue in relation to energy security, energy transit, energy access and fight against climate change.Footnote 72
Since 2016, the Euro-Mediterranean energy cooperation on gas, electricity, energy efficiency and renewables is carried out under three Energy Platforms respectively for electricity, renewables and energy efficiency and gas. The three platforms promote regulatory cooperation and regulatory frameworks to facilitate the development of gas and electricity exchanges.Footnote 73
4 Regulatory cooperation under energy chapters of trade agreements
Provisions for appropriate energy frameworks in international trade and investment agreements have a strong potential to advance the objectives of EU energy and climate diplomacy and development cooperation. Access to foreign resources and markets, transfer of low carbon energy technology and services, protection against environmentally harmful practices, contribute to energy security and universal energy access and promote transition to sustainable energy in the EU as well as in partner countries.Footnote 74
Chapter 24 of the CETA, on trade and environment, signed by the EU, its member states and Canada in 2016 and provisionally in force since September 2017, aims at facilitating and removing obstacles to the bilateral trade and investment in renewable energy and energy efficiency (environmental goods and services).Footnote 75 Regulatory cooperation and the regulatory cooperation forum established under the Chapter 21 aims to prevent and eliminate unnecessary barriers, enhance competitiveness and promote transparent regulation on, among others, trade and environment, without prejudice to the principle for the parties to ensure high levels of protection for the environment.
Similarly, the chapter on energy and raw materials under the TTIP proposed to the USA by the EU and its member states during the 2013–2016 negotiations aims to remove barrier to trade and investment in energy and raw materials and promote research and development in energy efficiency and sustainable renewable energy.Footnote 76 The textual proposal for the chapter on regulatory cooperation aims at promoting a transparent and effective regulatory environment and possibly regulatory compatibility, without reducing the national level of protection.Footnote 77
The free trade agreements (FTAs) negotiated by the EU and its member states respectively with Singapore and with Vietnam both include a chapter on trade and investment in renewable energy where they seek to remove barriers. Both agreements include provisions fostering convergence of technical regulation and regulatory cooperation on renewable energy and energy efficiency.Footnote 78
5 International cooperation among energy regulators
Cooperation among regulators from EU member states is mandated by the EU energy legislation. When EU member states liberalised their energy markets, they designated a regulatory authority at national level. The second EU energy package required member states to guarantee those authorities with full independence in their task to regulate and to ensure competition in the energy markets.Footnote 79 With the third energy package, regulatory cooperation within the EU internal energy market was mandated via the Agency for Cooperation of Energy Regulators (ACER) and the European Network of Transmission System Operators for Electricity and Gas. The ACER complements and coordinates the work of national energy regulators in EU member states and monitors the functioning of the internal gas and electricity markets.Footnote 80
Cooperation among the energy regulators from EU member states with national regulators from third countries is facilitated by the Council of European Energy Regulators (CEER).Footnote 81 Established dialogues engage national regulators from the West Balkans, the Eastern Partnership, Southern Mediterranean countries, the Federal Tariff Service of Russia, the Energy Regulators Regional Association, the USA National Association of Regulatory Utility Commissioners and the Association of Ibero-American Energy Regulators.Footnote 82 In the context of EU development assistance, CEER supports institution-building in emerging markets, notably in Africa within the African Forum for Utility Regulators.Footnote 83
At the global level, cooperation among energy regulators is facilitated by the International Confederation of Energy Regulators (ICER). It brings together 11 regional energy regulatory associations, representing over 250 regulatory authorities and covers 6 continents. As a global platform for cooperation between energy regulators, ICER contributes to the exchange of experiences with managing the transition to renewable energy generation (connecting to the grid, impact on conventional generation, legal, financial and socio-economic implications, promotion of distributed generation, large-scale renewable generation deployment).Footnote 84 In this perspective, the forthcoming ICER global conference World Forum on Energy Regulation is dedicated to innovation (empowered consumers, dynamic markets and sustainable infrastructure).Footnote 85
At the regional level, other associations take responsibility to promote dialogue, including: the Nordic Energy Regulators, among Island, Denmark, Sweden, Norway and Finland; the Energy Regulators Regional Association, among 30 European, Asian, African, Middle East and USA regulatory authorities; the African Forum for Utility Regulation; the Latin American Association of Energy Regulators; the Organisation of Caribbean Utility Regulators; the East Asia and Pacific Infrastructure Regulatory Forum; the South Asian Association for Regional Cooperation.
MEDREG is the primary platform for cooperation between energy regulators from the UfM, with the aim to promote harmonisation; foster sustainable development; support infrastructure investment and development; provide capacity building; providing a cooperation network.Footnote 86 In 2016, MEDREG supported the Moroccan Energy Ministry in the establishment of the Moroccan National Authority for the Regulation of Electricity, supported Natural Gas Authority of Israel in its effort to create an appropriate regulatory framework and assisted the Egyptian gas regulator through training and capacity building in the drafting of Egyptian secondary legislation for the gas sector.Footnote 87
The Clean Energy Regulator Initiative (CERI), launched by the Clean Energy Ministerial (CEM)’s Clean Energy Solutions Center, has significant potential for enhanced regulatory cooperation.Footnote 88 It serves as a platform to facilitate information sharing and to disseminate relevant topical knowledge and expertise. With a leverage on the resources of existing networks, such as ICER and other regional association of regulators, CERI aims to develop a knowledge-sharing and peer learning mechanism providing technical resources, training and expert assistance.Footnote 89 CEM’s initiatives include action towards reinforcing energy governance such as the platforms involving regulators and system operators for the promotion of smart grids and energy transition: International Smart Grid Action NetworkFootnote 90 and the 21st Century Power Partnership.Footnote 91
IV Strengthening energy governance in African countries
Enhanced coordination between the EU and its member states on energy and climate diplomacy and development cooperation should result in additional capacity-building, technology transfer and financial resources to improve energy frameworks conducive to investments in a competitive and sustainable energy sector integrated with climate change and universal energy access.Footnote 92 After a cursory overview of existing EU initiatives in Africa, below is a policy proposal to accelerate the results and multiply opportunities for sustainable energy investments.
Africa is a central focus of EU external action between trade, development, energy and climate change policies. As anticipated, EU global strategy recognises the need to mobilise investments in Africa to achieve sustainable development goals.Footnote 93 Especially in Africa, the EU Council finds that a competitive and sustainable energy sector should be supported by the improvement of regulatory frameworks which leverage private finance.Footnote 94
Many of the instruments of regulatory cooperation, energy policy guidance, energy policy reform, international cooperation among energy regulators, described more in detail in section II above, offer suitable models to build the capacity in African countries to reform energy frameworks so as to mobilise sustainable energy investments for universal energy access, low carbon energy transition and greenhouse gas emission reduction.Footnote 95
1 EU cooperation towards reinforced energy governance in Africa
Energy and climate cooperation with African countries currently occurs in the framework of different financial instruments for development cooperation, such as the External Investment Plan, the African Investment Facility, the ACP-EU I Investment Facility, the Africa Europe Energy Partnership, the Africa-EU Renewable Energy Cooperation Programme. In addition, the EU directly engages budget support on policy dialogue and energy sector reform with partner countries to help them to develop an open investment climate and support infrastructure development – most recently in Egypt, Jordan, Morocco, Rwanda and Tonga.Footnote 96
Below is a brief description of the existing initiatives which have a bearing in relation to reinforcing energy governance structures in African partner countries.
a The EU External Investment Plan
The most recent EU initiative financing development cooperation and boosting public and private investment in partner countries in Africa and the European Neighbourhood, the External Investment Plan (EIP) was launched in 2016 by the EU Commission. One year later the European Fund for Sustainable Development (EFSD), a €3.35 billion fund financed by the EIB and by the EU, was established and started its activities.Footnote 97 It is likely that the EIP Africa investment platform will include ad hoc action on reinforcing energy governance in partner countries.Footnote 98
The EIP aims at delivering development assistance (financial pillar) accompanied by structural reforms (technical assistance pillar) and investment promotion (investment climate dialogue pillar).Footnote 99 In practice, sustainable energy investments will be accompanied by sector policy dialogue with the partner countries and by in-country reform processes (normative frameworks, planning, tariff, restructuring, subsidies) in order to foster an enabling investment environment including alignment with climate change objectives.Footnote 100
b The Africa Investment Facility
The Africa Investment Facility (AfIF) was set-up by the EU Commission in 2015 as one of EU’s regional blending facilities that use EU development grants to leverage additional funding from financial institutions and the private sector. They help implement key infrastructure and private sector support projects that are critical to sustainable development in partner countries worldwide. The AfIF provides, among other things, technical assistance on aspects related to the project enabling environment or other aspects that are key for a project’s successful implementation, for instance vocational training in the power sector of Nigeria and building power interconnection between Guinea and Mali.Footnote 101
c African hub of the Sustainable Energy for All
In line with the 2011 Agenda for Change, the EU supports the African hub of the UN initiative Sustainable Energy for All (SEforALL) to achieve the three critical objectives of universal energy access, doubling renewable energy and improvement in energy efficiency in Sub-Saharan Africa.Footnote 102
d Financial and technical assistance initiatives reinforcing energy governance in Africa
Besides financial tools to support energy infrastructure projects and renewable and energy efficiency technologies, such as the EU-Africa Infrastructure Trust Fund, the Global Energy Efficiency and Renewable Energy Fund, and the European Development Finance Institutions, the EU deploys its development package with technical assistance dimension through the Technical Assistance Facility,Footnote 103 the ACP-EU Energy FacilityFootnote 104 and the Africa-EU Renewable Energy Cooperation Programme (RECP).
The ACP-EU Energy Facility
The ACP-EU Energy Facility is a multi-donor initiative, established in 2004 within the framework of the Cotonou agreement, which supports projects aiming to increase and improve access to modern, affordable and sustainable energy services for the rural poor in African, Caribbean and Pacific (ACP) countries. The ACP-EU Energy Facility also assists countries to improve their institutional and regulatory energy framework to attract public and private financial resources. Among others, it supports the African Forum for Utility Regulation, the West African Power Pool, the Central Africa Power Pool, the East Africa Power Pool and the Southern Africa Power Pool on reinforcing energy governance.Footnote 105
The EU Technical Assistance Facility
The EU Technical Assistance Facility (TAF) is an instrument by the EU Commission to assist partner countries in fine tuning their energy policies and regulatory frameworks to allow for increased investments in the energy sector. A total budget of €65 million is devoted to set up country energy action plans and to carry out the regulatory reforms needed to mobilise private investments to implement them.Footnote 106
The EU Energy Initiative Partnership Dialogue Facility
The EU Energy Initiative Partnership Dialogue Facility (EUEI-PDF) is a multi-donor facility founded in 2004 with a special focus on promoting sustainable energy for equitable development in Africa, Latin America and Asia. The EUEI-PDF provides complementary funding to several programmes such as the Africa Europe Energy Partnership and the Africa-EU Renewable Energy Cooperation Programme.Footnote 107
e The Africa-EU Energy Partnership
The Africa-EU Energy Partnership (AEEP) is also a multi-donor facility established in 2007 within the Joint Africa-EU Strategy as a long-term framework for strategic dialogue on energy access with a special focus on mobilising energy investment.Footnote 108 The AEEP Secretariat also provides African partners with policy advise on strengthening energy governance, in partnership with the African Union Commission, Department of Infrastructure and Energy, the NEPAD Planning and Coordinating Agency, the African Energy Commission, the Sustainable Energy for All, Africa hub at the African Development Bank and Africa’s Regional Economic Communities.
The RECP is a multi-donor programme founded in 2015 under the AEEP providing finance to increase the use of the renewable energy sources in Africa. Its main goal is to catalyse the development of renewable energy markets in Africa. Among others, the RECP supports the development of a policy and regulatory framework favourable to private investment by means of its policy advisory activities.Footnote 109 To date, this resulted in renewable energy market reports on 16 African countries.Footnote 110
2 Spurring sustainable energy investment in Africa: development cooperation for strengthened energy governance
African countries have often complained about the lack of monitoring and about the inconsistent results of a fragmented implementation of the energy legal and regulatory frameworks, which defeats the purposes of the national energy strategies to attract investments in sustainable energy. Regional energy markets lag behind due to the oscillating events and destinies of national energy companies and regulators. National and foreign investors finally bear the costs of covering the risks of non-transparent and unpredictable legal frameworks.
Reinforcing the regulatory governance and mobilising investments in the energy sector is high on the EU agenda for development cooperation and energy and climate diplomacy with African countries. A number of initiatives and financial instruments are in place at different levels, sharing the same interest for inducing on ground reform of the energy sector in partner countries.
The amount of energy investments needed to achieve universal access to energy and energy transition in Africa require coordinated action in order to accelerate the results and multiply opportunities. Indeed, as described above, a certain degree of coordination is already in place between the EU and its member states to carry out and implement the energy and climate diplomacy as well as development cooperation policy.
Looking at the number of existing EU initiatives in Africa aiming at strengthening energy governance in target countries, further coordination among initiatives, instruments and programs may be suggested – even taking into account the vastness of the African continent and the variety among national energy markets. In this respect, interesting lessons could be drawn from the experience of EU energy diplomacy in regulatory cooperation and in policy guidance and reform as to sharing experiences and disseminating results.
Under the multilateral umbrella of SEforAll and of the African Development Bank (AfDB),Footnote 111 in connection with the African Renewable Energy Initiative, the EIP secretariat for the Africa Investment Platform could take the initiative to gather results of existing technical assistance and capacity building programmes, in each relevant area of: energy data mapping and gap assessment, energy planning and strategy making, reforms towards transparent energy markets, transfer of technologies, building of human capacity, regional markets.
From regulatory cooperation under bilateral partnership and trade agreements, one lesson would direct at activating regional and continental associations of energy regulators and institutions such as the Regional Electricity Regulators Association of Southern Africa, the ECOWAS Regional Electricity Regulatory Authority, the AFRENER – an association of national African agencies and institutions launched in 2017 – and the regional power pools.
The strengthened exchanges between regulators at the regional and continental level in order to feed the debate and come to common understanding on (i) energy institutional frameworks (role and independence of the regulator, role and structure of utilities, consumer protection); (ii) principles and best practices in the regulation of renewable energy markets (grids, prices, subsidies); (iii) principles and best practices in the regulation of specific market activation such as mini-grid, self-generation and other off-grid solutions; (iv) fostering convergence of technical regulation on renewable energy and energy efficiency; (v) regionalisation of markets.
From policy guidance and technical assistance under multilateral and regional organisations, one lesson would direct at sharing the scope and the results of policy guidance in order to enhance knowledge dissemination and public information, so as to identify common practices in policy making and monitoring in relation to: (i) transparency, stability and enforceability; (ii) energy sector assessment and data management; (iii) strategy making and monitoring; (iv) investment activation, access to finance; (v) scaling-up technology transfer and job creation; (vi) protection of vulnerable consumers and social responsibility.
In this perspective, lessons learnt from the existing EU energy diplomacy direct at one or more possible EU technical assistance initiative in Africa (for instance within the EIP, the AfIF, the TAF or the EUEI-PDF) building on the role of energy regulators and on cooperation among them towards common knowledge and understanding of energy market regulation in African countries. Cooperation among regulators could focus on managing and mitigating risks associated with uncertainty about market developments and with regulatory stability which affect particularly low carbon energy investments.Footnote 112
Having the EU energy regulators contributing to such an initiative would represent an opportunity for the EU to lead by example also in the area of institutional and normative frameworks in the energy sector, where the EU internal energy market is an example of achieving the interlinked objectives of security, sustainability and universal access by means of transparent and predictable institutions and rules.
