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Joint statement of the US and Germany on support for Ukraine, European energy security and climate goals

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The US and Germany have issued a joint statement following German Chancellor Angela Merkel's recent visit to Washington to meet bilaterally with US President Joe Biden. The statement addresses the controversial Nordstream 2 project, which has divided opinion in the EU.

"The United States and Germany are steadfast in their support for Ukraine’s sovereignty, territorial integrity, independence, and chosen European path. We recommit ourselves today (22 July) to push back against Russian aggression and malign activities in Ukraine and beyond. The United States pledges to support Germany’s and France’s efforts to bring peace to eastern Ukraine via the Normandy Format. Germany will intensify its efforts within the Normandy Format to facilitate the implementation of the Minsk agreements. The United States and Germany affirm their commitment to tackling the climate crisis and taking decisive action to reduce emissions in the 2020s to keep a 1.5-degree Celsius temperature limit within reach.

"The United States and Germany are united in their determination to hold Russia to account for its aggression and malign activities by imposing costs via sanctions and other tools. We commit to working together via the newly established US-EU High Level Dialogue on Russia, and via bilateral channels, to ensure the United States and the EU remain prepared, including with appropriate tools and mechanisms, to respond together to Russian aggression and malign activities, including Russian efforts to use energy as a weapon. Should Russia attempt to use energy as a weapon or commit further aggressive acts against Ukraine, Germany will take action at the national level and press for effective measures at the European level, including sanctions, to limit Russian export capabilities to Europe in the energy sector, including gas, and/or in other economically relevant sectors. This commitment is designed to ensure that Russia will not misuse any pipeline, including Nord Stream 2, to achieve aggressive political ends by using energy as a weapon.

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"We support the energy security of Ukraine and Central and Eastern Europe, including the key principles enshrined in the EU’s Third Energy Package of diversity and security of supply. Germany underscores that it will abide by both the letter and the spirit of the Third Energy Package with respect to Nord Stream 2 under German jurisdiction to ensure unbundling and third-party access. This includes an assessment of any risks posed by certification of the project operator to the security of energy supply of the EU.

"The United States and Germany are united in their belief that it is in Ukraine’s and Europe’s interest for gas transit via Ukraine to continue beyond 2024. In line with this belief, Germany commits to utilize all available leverage to facilitate an extension of up to 10 years to Ukraine’s gas Transit agreement with Russia, including appointing a special envoy to support those negotiations, to begin as soon as possible and no later than September 1. The United States commits to fully support these efforts.

"The United States and Germany are resolute in their commitment to the fight against climate change and ensuring the success of the Paris Agreement by reducing our own emissions in line with net-zero by 2050 at the latest, encouraging the strengthening of climate ambition of other major economies, and collaborating on the policies and technologies to accelerate the global net-zero transition. That is why we have launched the U.S.-Germany Climate and Energy Partnership. The Partnership will foster U.S.-Germany collaboration on developing actionable roadmaps to reach our ambitious emission reduction targets; coordinating our domestic policies and priorities in sectoral decarbonization initiatives and multilateral fora; mobilizing investment in energy transition; and developing, demonstrating, and scaling critical energy technologies such as renewable energy and storage, hydrogen, energy efficiency, and electric mobility.

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"As part of the US-Germany Climate and Energy Partnership, we have decided to establish a pillar to support the energy transitions in emerging economies. This pillar will include a focus on supporting Ukraine and other countries in Central and Eastern Europe. These efforts will not only contribute to the fight against climate change but will support European energy security by reducing demand for Russian energy.

"In line with these efforts, Germany commits to establish and administer a Green Fund for Ukraine to support Ukraine’s energy transition, energy efficiency, and energy security. Germany and the United States will endeavor to promote and support investments of at least $1 billion in the Green Fund for Ukraine, including from third parties such as private-sector entities. Germany will provide an initial donation to the fund of at least $175 million and will work toward extending its commitments in the coming budget years. The fund will promote the use of renewable energy; facilitate the development of hydrogen; increase energy efficiency; accelerate the transition from coal; and foster carbon neutrality. The United States plans to support the initiative via technical assistance and policy support consistent with the objectives of the fund, in addition to programs supporting market integration, regulatory reform, and renewables development in Ukraine’s energy sector.

"In addition, Germany will continue to support bilateral energy projects with Ukraine, especially in the field of renewables and energy efficiency, as well as coal transition support, including the appointment of a special envoy with dedicated funding of $70 million. Germany is also ready to launch a Ukraine Resilience Package to support Ukraine’s energy security. This will include efforts to safeguard and increase the capacity for reverse flows of gas to Ukraine, with the aim of shielding Ukraine completely from potential future attempts by Russia to cut gas supplies to the country. It will also include technical assistance for Ukraine’s integration into the European electricity grid, building on and in coordination with the ongoing work by the EU and the U.S. Agency for International Development. In addition, Germany will facilitate Ukraine’s inclusion in Germany’s Cyber Capacity Building Facility, support efforts to reform Ukraine’s energy sector, and assist with identifying options to modernize Ukraine’s gas transmission systems.

"The United States and Germany express their strong support for the Three Seas Initiative and its efforts to strengthen infrastructure connectivity and energy security in Central and Eastern Europe. Germany commits to expand its engagement with the initiative with an eye toward financially supporting projects of the Three Seas Initiative in the fields of regional energy security and renewable energy. In addition, Germany will support projects of common interest in the energy sector via the EU budget, with contributions of up to $1.77 billion in 2021-2027. The United States remains committed to investing in the Three Seas Initiative and continues to encourage concrete investments by members and others."

Robert Pszczel, senior officer for Russia and the Western Balkans, Public Diplomacy Division (PDD), NATO HQ, was not overly impressed with the agreement:

Electricity interconnectivity

Commission approves Greek measures to increase access to electricity for PPC's competitors

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The European Commission has made legally binding, under EU antitrust rules, measures proposed by Greece to allow the competitors of Public Power Corporation (PPC), the Greek state-owned electricity incumbent, to purchase more electricity on a longer-term basis. Greece submitted these measures to remove the distortion created by PPC's exclusive access to lignite-fired generation, which the Commission and Union courts had found to create an inequality of opportunity in Greek electricity markets. The proposed remedies will lapse when existing lignite plants stop operating commercially (which is currently expected by 2023) or, at the latest, by 31 December 2024.

In its decision of March 2008, the Commission found that Greece had infringed competition rules by giving PPC privileged access rights to lignite. The Commission called on Greece to propose measures to correct the anti-competitive effects of that infringement. Due to appeals at both the General Court and European Court of Justice, and difficulties with the implementation of a previous remedies submission, such corrective measures have not been implemented so far. On 1 September 2021, Greece submitted an amended version of the remedies.

The Commission has concluded that the proposed measures fully address the infringement identified by the Commission in its 2008 Decision, in light of the Greek plan to decommission all existing lignite-fired generation by 2023 in line with Greece's and the EU's environmental objectives. Executive Vice President Margrethe Vestager, in charge of competition policy, said: “The decision and the measures proposed by Greece will enable PPC's competitors to better hedge against price volatility, which is a vital element for them to compete in the market for retail electricity and offer stable prices to consumers. The measures work hand in hand with the Greek plan to decommission its highly polluting lignite-fired power plants by discouraging the usage of these plants, fully in line with the European Green Deal and the EU's climate objectives.”

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A full press release is available online.

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Biofuels

Commission approves one-year prolongation of tax exemption for biofuels in Sweden

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The European Commission has approved, under EU state aid rules, the prolongation of the tax exemption measure for biofuels in Sweden. Sweden has exempted liquid biofuels from energy and CO₂ taxation since 2002. The measure has already been prolonged several times, the last time in October 2020 (SA.55695). By today's decision, the Commission approves an additional one-year prolongation of the tax exemption (from 1 January to 31 December 2022). The objective of the tax exemption measure is to increase the use of biofuels and to reduce the use of fossil fuels in transport. The Commission assessed the measure under EU State aid rules, in particular the Guidelines on State Aid for environmental protection and energy.

The Commission found that the tax exemptions are necessary and appropriate for stimulating the production and consumption of domestic and imported biofuels, without unduly distorting competition in the Single Market. In addition, the scheme will contribute to the efforts of both Sweden and the EU as a whole to deliver on the Paris agreement and move towards the 2030 renewables and CO₂ targets. The support to food-based biofuels should remain limited, in line with the thresholds imposed by the revised Renewable Energy Directive. Furthermore, the exemption can only be granted when operators demonstrate compliance with sustainability criteria, which will be transposed by Sweden as required by the revised Renewable Energy Directive. On this basis, the Commission concluded that the measure is in line with EU state aid rules. More information will be available on the Commission's competition website, in the State Aid Register under the case number SA.63198.

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Energy

Biden administration aims to cut costs for solar, wind projects on public land

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Solar panels are seen at the Desert Stateline project near Nipton, California, U.S. August 16, 2021. REUTERS/Bridget Bennett
Solar panels are seen at the Desert Stateline project near Nipton, California, U.S. August 16, 2021. Picture taken August 16, 2021.  REUTERS/Bridget Bennett

The Biden administration plans to make federal lands cheaper to access for solar and wind power developers after the clean power industry argued in a lobbying push this year that lease rates and fees are too high to draw investment and could torpedo the president's climate change agenda, write Nichola Groom and Valerie Volcovici.

Washington’s decision to review the federal land policy for renewable power projects is part of a broader effort by the government of President Joe Biden to fight global warming by boosting clean energy development and discouraging drilling and coal mining.

“We recognize the world has changed since the last time we looked at this and updates need to be made,” Janea Scott, senior counselor to the U.S. Interior Department’s assistant secretary for land and minerals, told Reuters.

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She said the administration is studying several reforms to make federal lands easier for solar and wind companies to develop, but did not give specifics.

The push for easier access to vast federal lands also underscores the renewable energy industry’s voracious need for new acreage: Biden has a goal to decarbonize the power sector by 2035, a target that would require an area bigger than the Netherlands for the solar industry alone, according to research firm Rystad Energy.

At issue is a rental rate and fee scheme for federal solar and wind leases designed to keep rates in line with nearby agricultural land values.

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Under that policy, implemented by the administration of President Barack Obama in 2016, somemajor solar projects pay $971 per acre per year in rent, along with over $2,000 annually per megawatt of power capacity.

For a utility-scale project covering 3,000 acres and producing 250 megawatts of power, that is a roughly $3.5 million tab each year.

Wind project rents are generally lower, but the capacity fee is higher at $3,800, according to a federal fee schedule.

The renewable energy industry argues the charges imposed by the Interior Department are out of sync with private land rents, which can be below $100 per acre, and do not come with fees for power produced.

They are also higher than federal rents for oil and gas drilling leases, which run at $1.50 or $2 per year per acre before being replaced by a 12.5% production royalty once petroleum starts to flow.

"Until these overly burdensome costs are resolved, our nation will likely miss out on living up to its potential to deploy homegrown clean energy projects on our public lands — and the jobs and economic development that come with it," said Gene Grace, general counsel for clean energy trade group American Clean Power Association.

The renewable energy industry has historically relied on private acreage to site large projects. But big tracts of unbroken private land are becoming scarce, making federal lands among the best options for future expansion.

To date, the Interior Department has permitted less than 10 GW of solar and wind power on its more than 245 million acres of federal lands, a third of what the two industries were forecast to install nationwide just this year, according to the Energy Information Administration.

The solar industry began lobbying on the issue in April, when the Large Scale Solar Association, a coalition of some of the nation’s top solar developers - including NextEra Energy, Southern Company and EDF Renewables - filed a petition with Interior’s Bureau of Land Management asking for lower rents on utility-scale projects in the nation’s blistering deserts.

A spokesperson for the group said the industry initially focused on California because it is home to some of the most promising solar acreage and because land around major urban areas like Los Angeles had inflated assessments for entire counties, even on desert acreage not suitable for agriculture.

Officials at NextEra (NEE.N), Southern (SO.N), and EDF did not comment when contacted by Reuters.

In June, the Bureau lowered rents in three California counties. But solar representatives called the measure insufficient, arguing the discounts were too small and that the megawatt capacity fee remained in place.

Attorneys for both the solar companies and BLM have discussed the issue in phone calls since, and further talks are scheduled for September, according to Peter Weiner, the attorney representing the solar group.

"We know that the new folks at BLM have had a lot on their plates," Weiner said. "We truly appreciate their consideration."

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