Clean Energy Technologies at the Heart of the U.S.-China Trade Negotiations

Along December 2010 and a few weeks before the official visit of President Hu Jintao to the United States on 19 January, clean energy technologies have been raised several times as a core trade issue between the two countries. The most dramatic event was the complaint made by the U.S. government against China's subsidies to wind energy technologies. The most positive aspects of the bilateral trade negotiations relates to smart grid technologies.

Wind Power Equipments: The United States contests the legality of China's subsidies to wind energy technologies under WTO rules

On 22 December, the United States came with a new claim against China's subidy policy in favour of its national wind energy industry. The U.S. government accuses China of subsidising manufacturers of wind turbines equipments and related components in a manner that goes against WTO rules. Chinese manufaturers would have benefited from government grants since 2008 under the national Special Fund for Wind Power Manufacturing (between $6.7 million and $22.5 million of individual grants). The grants awarded under the Special Fund seem to be contingent on Chinese manufacturers using parts and components made in China. By this way, Chinese manufacturers would have been required to only use Chinese-made parts and components. For the U.S. government, this amounts to import substitution subsidies prohibited under the WTO rules, hindering foreign exports to China. The US government has also raised claims as China's failure to comply with the notification procedures under the Agreement on Subsidies and Countervailing Measures (SCM Agreement), and the absence of translation available in one of the language of the WTO. If the two governments do not find an agreement through the consultation procedure within two months, a formal dispute settlement procedure can be open before the WTO. (See summary of claims by U.S. Trade Representative Office, USTR.)

The case builds on a petition filed by the United Steelworkers union (USW) in September 2010 in the U.S. and a follow-up investigation by U.S. trade office launched in October (See USW press release). It also adds to previous claims of illegal barriers to trade made by the U.S. against China's restrictions on exports of rare earth minerals used in the production of wind turbines, electric vehicles, solar panel cells and energy efficient lighting.

The Chinese wind energy sector is recognised to be one of the fastest growing ones, and the U.S. officials expect the market to attain $100 billion by 2020. Meanwhile, international partners do not want to miss trade opportunities with reverse consequences for their own clean energy market. Summarising U.S. fears, U.S. Senator Sherrod Brown said lately: "The United States cannot replace its dependence on foreign oil with a dependence on clean energy technology made in China."

Smart Grid: Positive Trade Negotiation Results on Smart Grid Technologies

Just a few days before the official claims made by the U.S., representatives from the two governments met in Washington DC for the 21st annual U.S.-China Joint Commission on Commerce and Trade (JCCT) (picture) (15 December 2010). Among the notable results of the JCCT counts the commitment made by China on intellectural property rights enforcement. Another key result is the commitment to not discriminate in government procurement decisions based on the origin of the intellectual property component of the products imported; this goes together with China's commitment to rapidly adhere to the WTO's Government Procurement Agreement.

Smart grid technologies were discussed along the JCCT. According to U.S. figures, China is planning to invest $10 billion per year along the period 2011-2020 in order to build its national smart grid. It will also invest $590 billion in the development of its electric power grid. This makes China's electric infrastructures an attractive market where standards development, technical regulations and conformity assessment procedures will become key criteria for imports. The U.S. government was satisfied from the "pledge" made by China "to adhere to openness, non-discrimination, and transparency in its smart grid market, and to cooperate with the United States on smart grid standards," for a market estimated at $600 billion (quotes by U.S. Secretary of Commerce G. Locke). Compliance with WTO TBT Agreement rules will be instrumental here. China announced a collaboration with the U.S. National Institute of Standards and Technology in the development of smart grid standards. It also committed that "all enterprises in China, including state-owned enterprises and state-invested enterprises, will make purchases and sales based solely on commercial considerations" providing "equal treatment to foreign, foreign-invested, and Chinese domestic enterprises." The U.S. obtained another commitment from China on technology neutrality for 3G and future technologies, ensure a better market access for U.S. technologies. The U.S. Trade Development Agency signed grants for State Grid Smart Grid Standards Development.

The JCCT also discussed wind energy equipment trade on the background of the previous claims reported above. However, the results appear much more limited, with some "confirmations" made by China as regards:

• the recognition of the experience of foreign companies outside China for the purposes of meeting experience requirements to supply equipment for large scale wind power projects;
• the possible submission by foreign companies of documentation based on existing installed wind power projects overseas in order to demonstrate technical requirements for eligibility to supply Chinese large-scale wind power projects.

Finally, the U.S. government obtained from China the confirmation that two subsidy programmes mentioned in the petition filed by the USW union had ended, namely the Export Research and Development Fund, and the Ride the Wind programme. Those two programmes are supposed to have also granted prohibited subsidies to national manufacturers and to have discriminated against foreign imports into China.

References:

• US Department of Commerce website;
• 21st U.S.-China Joint Commission on Commerce and Trade (press release and fact sheet);
• Summary of U.S. claims in NY Times and presentation of previous clean energy trade issues in another NY Times article.

Picture: (c) commerce.gov

Mapping EU Member States' Renewable Energy Projections - ECN Assesses the Renewable Energy Action Plans

The Energy Research Center of The Netherlands (ECN) has just published an interesting report mapping the renewable energy projects of 26 Member States of the European Union (EU), based on the National Renewable Energy Action Plans published in June.

The study is available HERE.

References: ECN, for the European Environment Agency, Renewable Energy Projections as Published in the National Renewable Energy Action Plans of the European Member States, Doc. ECN-E--10-069, 13 December 2010.

ESA Clears State Aids to Five Wind Energy Projects in Norway

The EFTA Surveillance Authority (ESA) has adopted today five individual decisions in favour of wind energy power projects in Norway. The state aid element originates from the public support granted to the projects through the national Energy Fund Scheme, managed by Enova. The latter has been first approved by ESA for a period running from 2006 to 2010. Today, the Energy Fund Scheme got also a prolongation period of one year until end of 2011, date of the entry into function of the green certificates scheme (see previous post). The legality of the aids has been assessed on the background of the State Aid Guidelines for Environmental Protection.

The beneficiaries are: Kvalheim Kraft DA (8 turbines, NOK 92.8 mill.); Jæren Energi AS (32 turbines, NOK 511 mill.); Nordkraft Vind AS (11 turbines, NOK 200.1 mill.); Nord-Trøndelag Elektrisitetsverk Energi AS (16 turbines, NOK 228 mill.); Norsk Miljø Energi Sør AS (31 turbines, NOK 388 mill.)

In the press release, the Authority reports that: 'In all five cases the Authority has found that the positive effect of increasing renewable energy production outweighs the limited effect of the aid on competition. The aid is proportional as it is limited to the aid necessary to trigger investments in the respective wind power projects. The aid also provides an incentive effect since in all cases the projects would not be commercially viable without the aid. Finally, the market power of the aid recipients are in all cases less than 1% and hence the structure of the market for elctricity production is unlikely to be altered by the grant of the aid.'

The formulation provided in the press release is standard and needs to refer to the full text of the decision once it will be made available.

References: press release, ESA, 15.12.2010.

Reflection Time for Energy Policy in Norway

The Norwegian Ministry for Petroleum and Energy has announced today the establishment of an Energy Committee (Energiutvalget) that will prepare a general review of the country's energy policy towards 2030 and 2050. The committee's work and the related consultations will result in a communication from the government to the Parliament (so-called Melding til Stortinget Meld.St.).

Energy challenges ahead

The setting up of the Energy Committee is motivated by a series of challenges as regards the national energy policy, and in particular the balance in the long-term development of the electric and energy system. The development and regulation of the different components of the energy chain will need to be assessed: production, transport capacity with the reinforcement and expansion of the grid, and consumption. This also includes the relation to neighouring countries, the development of EU energy policy having deep impoacts for Norway, and of the international energy markets.

Based on the different directions taken by the EU and Norwegian energy policy along 2010, a reflection time is timely. The European Commission proceeded lately to the same excercise, but at a lower scale, with the publication of the EU Energy 2020 Strategy and the Communication on the Energy Infrastructure Priorities for 2020 and Beyond. A national review is also timely to draw some conclusions for the country of the direction taken by the EU policy.

The mandate

The committee will receive the following tasks:

• evaluate the balance of the electric and energy system, including power generation conditions, size of the grid connection to Europe, electricity consumption reviewed by sector and including offshore petroleum activities and transport;
• assess national and regional grid capacity, as starting point for further investments;
• define the effects of the energy needs and further grid developments on the environment, including greenhouse gases emissions and environmental protection. On this particular point, an adaptation of the procedures for the construction of electric power lines might avoid a new Hardanger case. The regime application to hrydropower must also be assessed;
• evaluate the relationship to EU legislation implemented in Norway after negotiation via the EEA Agreement;
• adapt the development of the national energy policy to the proper development of economic activities, adaptation of knowledge and share of technological innovation at all levels of consumption;
• assess the different instruments to be applied in the implementation of the strategy to be defined;
• determine the best solution as regards electricity prices. The ministry already received in November this year a full report on this issue.
• focus on measures aimed to reduce energy consumption.

Timeframe

The Energy Committee should be ready with its assessment and recommendations for winter 2012.

Reference: Press release, OED, 13.12.2010.

Transparency in Wholesale Energy Markets: The EU Commission Publishes its Proposal

The European Commission adopted yesterday a proposal for a regulation on market transparency requirements in the wholesale energy markets (so-called regulation on energy market integrity and transparency). The measures have been announced for a long time (see previous post).

The full text of the proposal is available HERE. A summary of the proposed rules will be posted on this blog in the coming days.

References:

• Press release, European Commission, IP/10/1676;
• MEMO/10/655, European Commission;
• Impact Assessment attached to the Proposal for Regulation, SEC(2010) 1510;
• ERGEG and CEER press release commenting the proposal.

Law Proposal for a Green Certificates Scheme in Norway Published: Opens for a Common Market with Sweden

The Norwegian Government has just published the law proposal on a green certificates scheme, enabling a common market with Sweden to enter into function on 1 January 2012. Here is the text of the proposed legislation and some background notes (Norwegian Ministry for Petroleum and Energy).

La Loi NOME Publiée au Journal Officiel

La Loi No. 2010-1488 du 7 décembre 2010 portant nouvelle organisation du marché de l'électricité en France, dite Loi NOME, a été publiée au JORF de ce 8 décembre 2010. Texte disponible ICI.

"Is an oil free future possible?" The STOA Committee of the European Parliament Debates

The Science, Technology Options Assessment (STOA) Committee of the European Parliament is organising today a debate on the possibility to attain an oil free future. The debate will be structured around lectures given by two Nobel Prize winners in Chemistry, Prof. Paul Crutzen (1995) and Prof. George Olah (1994), as well as Shai Agassi (Better Place). Prof. Crutzen will speak on "Atmospheric chemistry and climate in the anthropocene." Prof. Olah will address the issue of "Technological carbon cycle based methanol economy for a sustainable future." S. Agassi will raise the question of "How to run a country without oil?."

The full session can be watched live through this LINK.

A summary of the presentations is available HERE.

References: STOA website and Annual Lecture programme.

North Seas Countries' Offshore Grid Initiative (NSCOGI): Memorandum of Understanding Signed

The 3 of December 2010 has been a fruitful day for EU energy policy. In additional to the Council Energy Meeting, this day has seen the signature in Brussels of the Memorandum of Understanding concerning the North Seas Countries' Offshore Grid Initiative (NSCOGI). The Initiative was formally launched by 9 EU countries that signed on 7 December 2009 a Political Declaration (Belgium, Denmark, Frane, Germany, Ireland, Luxembourg, The Netherlands, Sweden and the United Kingdom). Norway joined them and signed the same Political Declaration on 2 February 2010.

The core objective of the Initiative is to define 'a framework for regional cooperation' and to 'find common solutions to questions related to current and possible future grid infrastructure developments in the North Seas.'

There have been recently many signs reinforcing the Initiative's objective: the Commission's Communication on Energy Infrastructure Priorities for 2020-2030, the EU energy roadmap towards 2050, and the ten-year network development plans of ENTSO-E that includes a working plan for the ENTSO-E regional group North Sea. Other bodies have also confirmed their intention to cooperation to the Initiative: ACER, the energy regulators and ENTSO-E (see letters of intent, 3 December 2010, annexed to the MoU). The EU regulatory environment is consequently favourable to such initatives.

In the MoU, the signatories recognise that the 'ambitious plans for the installation of wind farms offshore' require some major adaptation, including the 'large-scale development of appropriate offshore infrastructure as well as reinforcement of the onshore grid.' Public support will be essential taken into account the 'substantial scale of investment.' Coordination between the signatories may here allow cost-efficiency in the investments to be realised.

The MoU establishes the institutional structure necessary to the functioning of the Initative:

• a rotating chair with a Secretariat based in the Benelux;
• a Steering Committee, composed by representatives of the signing countries and the Commission. Its task is to 'oversee, guide and monitor' the work of the working groups and evaluating the progress made towards the achievement of the MoU's objectives;
• a Programme Board, composed of representatives of the Steering Committee, ENTSO-E, ACER and the energy regulators. It coordinates the working groups ;
• 3 working groups on: grid configuration and integration; market and regulatory issues; planning and authorization procedures. Work in the working groups is led by two governments. Working groups are composed by representatives of the governments, ENTSO-E, ACER, energy regulators and the European Commission. Experts may be invited to join.

The text of the MoU is available HERE.

Safeguard Measures for Increased Security of Gas Supply: Regulation (EU) No 944/2010 Enters into Force

Today, 2 December 2010, enters into force Regulation (EU) No. 994/2010 of the European Parliament and of the Council of 20 October 2010 concerning measures to safeguard security of gas supply and repealing Council Directive 2004/67/EC (OJ L295, 12.11.2010, p.1).

Pursuant to its Article 1, the Regulation aims to:

• safeguard the security of gas supply by ensuring the proper and continuous functioning of the internal market in natural gas, by allowing for exceptional measures to be implemented when the market can no longer deliver the required gas supplies and by providing for a clear definition and attribution of responsibilities among natural gas udnertakings, the Member States and the Union regarding both preventive action and the reaction to concrete disruptions of supply;
• establish transparent mechanisms for the coordination of planning for, and response to, an emergency at Member States, regional and Union levels.

References: MEMO/10/641, European Commission.