Presentation at GIOGIE 2014 (Georgian International Oil, Infrastructure and Energy Conference) on Energy community: scope, functioning and implications for Georgia. By Federico Tarantini, International Relations Officer, DG Energy, European Commission

1. Energy
27 March 2014
13th Georgian International Oil, Gas,
Infrastructure & Energy Conference
F. Tarantini, DG Energy, European Commission
Energy Community
Scope, functioning and implications for Georgia

2. Energy
Rationale of the Energy Community (EnC)
International Treaty signed in 10/2005 between the EU and
nine contracting parties (South-East Europe). Entered into
force in 7/2006.
Ambitions:
A) Political: convert energy from a source of tensions into
an instrument of pacification (note similarities with ESCS)
B) Economic:
• - national/short term  open and transparent national energy
markets
• - regional/mid-term  integrated regional market allowing for cross-
border energy trade
• - pan-European/long term  full integration with the EU internal
energy market

3. Energy
Objectives of the EnC
(Art. 2 of the Energy Community Treaty)
• Create a stable regulatory and market environment
• Attract investments in gas networks, power generation and
transmission networks
• Enhance the security of supply of all parties
• Improve the environmental situation
• Developing energy market competition in a broader scale and
exploit economies of scale

4. Energy
January 2007 – Bulgaria and Romania join the EU
May 2010 – Moldova joins the EnC
February 2011 – Ukraine joins the EnC
January 2014 – Croatia joins the EU
Observers: Armenia (2011), Georgia (2007), Norway and
Turkey (2006)
•
Geographical Scope
2006
2014

5. Energy

6. Energy
Contracting parties commitments under
Energy Community Treaty
• Adoption of EU rules on:
• Internal market for electricity and gas
• Selected environmental rules
• Directive on environmental impact assessment
• Large combustion plants directive
• Sulphur in fuels directive
• Competition (antitrust and state aid)
• Renewable Energy Sources (RES)
• Energy efficiency (EE)
• Energy statistics
• Oil stocks

7. Energy
MINISTERIAL COUNCIL
PERMANENT HIGH LEVEL GROUP
REGULATORY BOARD (ECRB)
ELECTRICITY
FORUM
GAS
FORUM
SOCIAL
FORUM
SECRETARIAT (VIENNA)
OIL
FORUM
Political decisions
Advisory body
Working groups
Monitoring,
coordination, support
Stakeholder involvement
Institutions

8. Energy
EnC: implications for Georgia's accession (1)
EnC strong driver for energy market reforms
A sound adoption, implementation and enforcement of the EnC acquis
would result in a modern and competitive energy sector for Georgia
(strong independent regulator, transparent and cost-reflecting tariffs,
unbundling and access to the network)
Benefits:
- Stable and transparent market environment
- Financial sustainability
- Improve resiliency to external and internal influences
- Empowering consumers

9. Energy
EnC: implications for Georgia's accession (2)
Steer transition towards a low-carbon energy system
A sound adoption, implementation and enforcement of the EnC
legislation in the areas of renewable energy, energy efficiency and
environment would spur the transition towards a "green" energy
system.
Benefits:
- Improve environmental sustainability
- Increase security of supply (RES – indigenous energy production)
- Limit energy consumption growth (through EE)

10. Energy
EnC: implications for Georgia's accession (3)
Foster investments in the energy sector
The sound and complete absorption of internal market and sustainable
energy legislation would in turn create the right incentives for
European and foreign investments in the Georgia's energy sector.
Increased investments would entail important job creation in the
country, especially in the field of RES and EE which have and
endogenous local dimension.
In the long run, Georgia can play a major role in contributing to the
security of supply of the EU and the EnC Contracting Parties. This
would also require significant investments in infrastructures.

11. Energy
EnC: implications for Georgia's accession (4)
The timely adoption, complete implementation and sound
enforcement of the EnC acquis is in itself a major challenge.
In the case of Georgia, this means undertaking significant efforts
across the energy board (e.g. in the areas of electricity market –
ongoing - and energy efficiency)
True reforms are also primordial to grasp benefits and opportunities
that the EnC accession can bring to the Georgian energy sector.
Technical support (EnC Secretariat, INOGATE programme)
Facilitating investments (NIF, E5P)
- In addition…

12. Energy
EnC: implications for Georgia's accession (5)
The accession of Georgia to the Energy Community is deeply inter-
related with the EU-Georgia Association Agreement (AA)
A substantial share of the EnC acquis is part and parcel of the energy
chapter of the EU-Georgia AA, initialled in Vilnius in November 2013
and meant to be signed by this summer.
Hence, progresses in the implementation of EnC commitments would
also mean progresses in the implementation of the AA.
In this respect, EU assistance to Georgia for the period 2014-2017 will
include assistance for the implementation of the AA.
As a reference, overall EU financial assistance to Georgia in 2011-2013
was worth 230m EUR.

13. Energy
EnC: implications for Georgia's accession (6)
Georgia would be the first Contracting Party not directly interconnected
to any EU or EnC member.
This specificity has some important implications:
- On the one hand, this would hamper the swift move towards a
regional market based on common rules and high standards.
- On the other hand, it also entails a more gradual absorption of the full
EnC acquis, given that provisions regulating energy cross-border
exchanges with a EU or EnC member would not be relevant in the
current situation.

14. Energy
Implications for Georgia's accession: wrap-up
• All in all, regulatory convergence towards EU standards would:
• - push for internal market reforms ensuring a modern, competitive
and sustainable energy sector in Georgia
• - allow Georgia to be ready for regional/pan-European market
integration in a long run perspective
• - in turn, create the right conditions and signals for attracting foreign
investment in the energy sector
• Ambitious reforms are by definition challenging and complex, and
need to be undertaken within a realistic timeframe. The specific
situation of Georgia facilitates a gradual absorption of EnC
legislation.

15. Energy
Additional information
Energy Community website:
www.energy-community.org/
European Commission Report on the Energy Community:
http://ec.europa.eu/energy/gas_electricity/community/community_en.htm
European Commission Communication and implementation report
on security of energy supply and international cooperation:
http://ec.europa.eu/energy/international/security_of_supply/coo
peration_en.htm
Thank you!
federico.tarantini@ec.europa.eu