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Good morning POLITICO Pro Morning Energy readers. It’s all about building connections today as we’re looking to Vienna where integrating the Western Balkans into the EU’s energy systems is a top priority, reminding ourselves of the cost of tying up infrastructure, and wondering if Ukraine and Russia will be able to agree on a new winter gas supply package.
— WHAT’S HAPPENING:
WESTERN BALKANS ANYONE? Vienna is hosting the Western Balkans Summit today, part of a five-year process to stress (arguably, fatigued) EU-enlargement commitment towards Southeastern Europe. Which countries are we talking about? Albania, Bosnia and Herzegovina, Kosovo, Macedonia, Montenegro and Serbia. From the EU side, representatives from Germany, Austria, France and Italy will be present. From the Commission, Foreign Affairs Chief Federica Mogherini, Neighborhood Commissioner Johannes Hahn and Energy Union Vice-President Maroš Šefčovič will be looking for ways to revive sluggish EU accession talks. On the agenda: infrastructure and connectivity as well as regional cooperation. More on the conference: http://bit.ly/1EkVpjx.
— BORDERLESS ENERGY: Šefčovič will be there to sell the energy union, stressing the importance of integrating non-EU neighbors. “The energy union does not stop at the Union’s borders. That’s why we spare no effort to better connect the Western Balkans to our own energy systems,” he said. This will be welcomed by climate activists in the region. “Recent lack of tangible progress in the accession talks results in the Western Balkan countries losing appetite for much-needed energy system reforms,” said Dragana Mileusnić, energy policy coordinator for South East Europe at Climate Action Network Europe. Here’s what Western Balkans ministers committed to in July, ahead of today’s meeting: http://bit.ly/1hGA7Tp.
— CONNECTING: But in order to better link them up, you’ve got to build the necessary infrastructure. Parties are due to agree on five priority projects consisting of four electricity and one gas interconnector, we hear, eligible for funding from the Instrument for Pre-Accession. Let’s take a look: electricity projects on the list include: Albania–Macedonia; Serbia–Montenegro–Bosnia; Serbia–Romania; and Transbalkan corridor in Serbia. On the gas front we have the Serbian section of the Serbia-Bulgaria interconnector.
GAS THROUGH UKRAINE: Vienna is also playing host to a meeting between Šefčovič and his Ukrainian counterpart Volodymyr Demchyshyn to sound out the chances of restarting gas talks between Ukraine and Russia. The same issue that caused a breakdown in June — a dispute over prices — is still keeping the two sides apart. However, mounting urgency could help build a compromise: the Ukrainians want to top up their gas storage before the start of winter, while Russia is under growing pressure thanks to falling gas and oil prices. A bilateral meeting between the Commission and the Russian side is scheduled for September 11, according to a Commission official. Here’s our story: http://politi.co/1JjK9As
THE FRENCH CONNECTION: France and Italy are also forging tighter links. French power grid operator RTE has started work on a new power interconnection, with a capacity roughly equivalent to one nuclear reactor, across the Alps to Italy to ease congestion on existing lines, Reuters reports. The link will cost about €1 billion and will be the longest underground high-voltage line when it goes online in 2019. The project is part of an effort to address public opposition to building unsightly above-ground power lines. http://bit.ly/1PyRuA1
CONNECTION COSTS: The Commission’s €315 billion investment scheme aimed at creating jobs and boosting growth will have some juicy bits for the energy sector when it is finalized this fall. The Commission estimates that around €200 billion is needed during the current decade for transmission grids and gas pipelines. Overall, over €1 trillion may have to be invested in the energy sector by 2020.
— CASH FOR EFFICIENCY: Some of that money will be going to energy efficiency projects. Miguel Arias Cañete, climate action and energy commissioner, wants to see efficiency increases even larger than the 27 percent agreed to under the current goal for 2030. He not only confirmed that in a statement yesterday but also called for boosting energy efficiency investments in Europe. And the bloc’s investment plan can be the instrument to help make Europe become “the world’s most energy-efficient economy.”
POUND VS CARBON: European carbon prices have risen markedly so far this year, up nearly 12 percent to €8.30 per ton, but U.K.-based emitters may not have felt it. The reason is a strong pound, Carbon Pulse reports. While the price of emitting a ton of carbon is up, utilities and industries based in the U.K. have been shielded by sterling’s rise against the euro. The trend benefits utilities which have to buy euro-denominated carbon units against their forward power sales, while annoying industries looking to raise some cash by selling their spare permits elsewhere in the EU. Carbon Pulse crunches the numbers: http://bit.ly/1Jhcrf1
YES, WE INVEST (IN GREECE): It’s been in the works for a couple of years, but according to Greece’s privatization agency, Azerbaijan’s SOCAR confirmed its interest in buying a 66 percent stake in the country’s gas grid operator DESFA. The €400 million transaction could be completed by the end of the year. The European Commission has been concerned that the sale could reduce competition on the wholesale supply market — an investigation was suspended earlier this year. Reuters reports that a Greek privatization official said in order to address the EU’s concerns, SOCAR could divest at least 17 percent from its eventual stake either to the Greek state or a third entity. The story: http://reut.rs/1EXaUJh For the legalese fans among you the Commission’s case: http://bit.ly/1UdoxuR
FRANCE SENDS WARNING SIGNALS: French Foreign Affairs Minister Laurent Fabius yesterday warned a Paris audience of the consequences facing countries that ignore the effects of climate change. “Millions are in danger of forced mass migration,” he said, according to our colleague Sofia Melo. UN Secretary General Ban Ki-moon followed with a 17-point plan for sustainable development, which called for transparency, cooperation, and credible financing initiatives between developed and developing countries at the Paris Climate Conference in December.
— CLIMATE BUSINESS: Speaking at the same event, Nicholas Stern, chair of the Grantham Research Institute on Climate Change and the Environment at London School of Economics, warned that the world is in “great danger of high-carbon lock-in.” Countries must recognize that tackling climate change does not mean sacrificing economic growth and development, he told an audience of ambassadors. But much has changed since a failed summit in Copenhagen in 2009. “There is now much greater understanding of how economic growth and climate responsibility can come together,” he said. “To pretend otherwise is diversionary and indeed creates an ‘artificial horse race’ which can cause real damage to the prospects for agreement.”
CLIMATE CRIMINALS: While politicians are working on the preparations for COP21, artists, journalists, scientists and academics are calling for mass action against climate change ahead of the Paris conference, the Guardian reports. Among them are Naomi Klein, Noam Chomsky and Desmond Tutu. They would like to see a mobilization on the scale of the 19th century slavery abolition and the 20th century anti-apartheid movements to trigger “a great historical shift.” Their message is published in a book called “Stop Climate Crimes.” There’s also a petition to sign: http://chn.ge/1MTrcdW Here’s the Guardian article: http://bit.ly/1WS5iet
SUNNY PROMISES: Germany’s E.ON plans to expand its solar and wind business in the U.S., keen to bolster its renewable energy operations ahead of a planned spin-off of its ailing fossil-fuel power plants, Reuters reports. The company announced last year that it would split in two, spinning off its fossil-fuel-based power plants, energy trading unit and oil and gas activities into a separate unit in 2016. The move is a response to the ongoing crisis in Europe’s power sector, which struggling to adapt to the decarbonization drive. In the U.S. just a couple of months ahead of COP21, President Barack Obama is working hard to sell his renewables policy in a bid to fight climate change. While E.ON continues to focus on Europe and North America, an executive also said it is looking at fast-growing renewable markets like India and China, other key players in the upcoming COP21. Reuters reports: http://reut.rs/1NU2Q11
TOO MUCH GAS: Despite the hot weather and air conditioners across the U.S. working full-time, natural gas prices are not about to go up, according to the latest report by Bentek energy, an analysis unit of Platts. U.S. gas prices could actually fall below $2.50 per million British thermal units by the fall, as there’s a lot of gas in storage. “Not much stands in the way of U.S. gas storage inventories reaching record high levels this fall of about 4tn cu ft,” Bentek writes. “And that strong likelihood points to a winter of relatively weak gas prices, perhaps carrying deep into 2016.” You can find the report, entitled “Too much of a good thing” here http://bit.ly/1heys6B. The FT reports: http://on.ft.com/1KN2TZb
— DECLINE IN SHALE REGIONS: The U.S. Energy Information Administration expects near-term decline in natural gas production in major shale regions: Natural gas production across all major shale regions in the EIA’s Drilling Productivity Report is projected to decrease for the first time in September. In each region, production from new wells is not large enough to offset declines from legacy wells, it said. http://1.usa.gov/1hftert
YOU’RE INVITED: Join POLITICO for the launch event of our Pro services in Health, Technology and Energy on September 17 in Brussels for an evening discussion which will get to the heart of TTIP. Featured speakers include European Commissioner for Trade Cecilia Malmström and Roberto Viola, Deputy Director General of DG CNECT.
Thanks to Helena O’Rourke-Potocki and Sofia Melo.