21st Session of the Committee on , UNECE “Managing Change: Enabling the Shift to Sustainable Energy” The fundamental role of Mediterranean Energy Regulators in shaping a harmonized electricity market in the Mediterranean Region

Mediterranean Regulators for Electricity and Gas (MEDREG)

Isabella Alloisio, Ph.D. Geneva, 28 November 2012 1 1. Mediterranean Energy Regulators: Objectives and Structure

2 Mission and Objectives

¾ The main objective of MEDREG is to create a stable and transparent regulatory framework in the Mediterranean region 9 that facilitates investments in infrastructures and interconnections 9 in order to support the integration of regional energy markets into a single Mediterranean Energy Community ¾ sources represent the future of the energy system in the Mediterranean region

3 23 Members from 20 Countries

4 A New Governance (as approved by MEDREG General Assembly in November 2012)

5 (This chart is to be considered as a draft) A Strong Regional Multilateral Network

6 Four Main Axes of Cooperation

¾MEDREG strongly believes in the cooperation with all stakeholders involved in the energy sector in the Region, all along 4 axes of cooperation:

¾ IOs: UNECE, EU (EC & EP), PAM, UfM ¾ IFIs: WB, EIB, ADB, INFRAMED, EBRD (i.e. MoU between ICER and EBRD: first step in the cooperation between regulators and financial institutions that is pivotal to RES deployment) ¾ Industrial Associations: RES4MED, OME, , ¾ TSOs: MED-TSO (i.e. a reinforced cooperation among MEDREG and MED-TSO is key to RES development in the ) Excerpt from Günther Oettinger Keynote speech at the 3rd Dii Energy Conference - Berlin, 8 November 2012

“EU co-funding enables the operation of important regional cooperation structures such as MEDREG, the Euro- Mediterranean association of the energy regulators, and MED-TSO, the Euro- Mediterranean association of TSO.”

They are the two key actors for the creation of a Mediterranean Energy Community by 2020

8 2. Challenges and Possible Solutions for Enabling the Shift to Sustainable Energy

9 Major Challenges to RES Deployment

¾ Geopolitical: energy is a key political issue although it is usually regarded as a national issue

¾ Regulatory: setting up an adequate support scheme in different countries is a complex task without an integrated institutional and regulatory framework at the regional and supra-national level

¾ Financial: difficult credit access and the risk of higher final price of electricity for consumers

¾ Technical: need for investments in new energy infrastructures

¾ Know-how: insufficient know-how exchange and technology transfer 10 Potential Obstacles and Risks

¾ Problems in designing an adequate supra-national support scheme: different generation costs, different market systems, natural resources, environmental policies, etc.

¾ Increased subsidies to fossil fuels (fossil-fuel subsidies worldwide amounted to $523 billion in 2011, IEA World Energy Outlook 2012)

¾ Increase in electric energy prices without an adequate investment plan

¾ Difficulty in managing cost allocation processes represent a major obstacle to the development of network infrastructures

11 Proposed Regulatory Solutions

¾ Foster the application of article 9 of EU RES Directive 2009/28/CE on flexibility mechanisms: focus on joint projects between Member States and non-EU Countries

¾ Define non-discriminatory access rules and priority of dispatch

¾ Identify a national contact or coordination authorities on cross- border trade and transit mechanisms

¾ Set an internationally recognized renewable energy certification system

12 Possible Financial Solutions

¾ Non-refundable subsidies (grants and concessional loans) should be accompained by private initiatives (e.g. private equity): Public co- investment financing aiming to attract private finance

¾ Innovative financial instruments targeted at specific projects of North-South and South-South cooperation (e.g. sophisticated hedging instruments and derivatives trading to promote liquidity)

¾ Closer coordination among International Financial Institutions to avoid overlapping projects

13 Potential Technical Solutions

¾ Development of distributed generation systems ¾ Implementation of interconnected grid development plans and common rules for the access and the use of interconnected grids ¾ Efficient congestion management rules and removal of capacity constraints ¾ Functional load balancing techniques for intermittent RES ¾ Coordination on cost allocation and tariff procedures ¾ Day-by-day exchange of information on the state of the grids

14 Benefits of Clean Technology Transfer

• Improve effectiveness: higher when investments goes where best natural resources are located • Improve efficiency: to make the system more cost effective for consumers • Improve the economic and social development of Southern Mediterranean countries: 9 industry creation 9 employment benefits 9 security of supply 9 energy sources diversification 9 improvement in environmental quality

15 Social and economic benefits to install RES plants in the Southern Mediterranean basin

Thanks to the key instrument of regulatory convergence

Will progressively attract long-term public and private investments in RES generation, transmission, and distribution

16 Thank you

Isabella Alloisio Manager, MEDREG Secretariat Tel: +39 0265565 554 [email protected] [email protected] www.medreg-regulators.org

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