On 25th February the European Commission today published its Communication on an Energy Union, together with a Communication on ‘The Road to Paris’ and a Communication on the electricity interconnection target of 10%.
A properly developed Energy Union should enable a cost-efficient and market-based energy transition. To this end, policies should be based on the principle of technology neutrality: generation, storage and demand response are all needed to enable the energy transition. Competition between technologies should be nurtured to keep costs down for consumers.
The Communication includes an action list that will keep the Commission busy for its whole term. Particularly interesting is its plan to issue a paper on a new European electricity market design in 2015, followed by legislative proposals in 2016. It will also propose new legislation on security of electricity supply. The aim is to both integrate renewables in the market and address the currently uncoordinated development of capacity mechanisms in member states. There will also be a new renewables package in 2016-2017. As expected, the Commission also issued a Communication on The Road to Paris - a global deal for climate change, confirming its GHG target for 2030.
Implementation of existing legislation is priority number one, and both implementation of the 3rd market package and enforcement of competition rules will be pursued. To facilitate coordination of policies and cooperation between member states, the Commission will issue guidance on regional cooperation and engage in regional cooperation bodies with member states and stakeholders. The action list also addresses transport, where a comprehensive road package is planned and the Commission aims to create supportive market conditions for procuring clean vehicles. The Commission wants the EU to “become the number one in renewables”, meaning not only an increased share of renewable energy, but also leadership on next generation renewable technologies. To this end, it proposes a new European approach to energy R&D.
Two action points are clearly linked to concerns regarding gas supply from third countries: ensuring that intergovernmental agreements are in compliance with EU legislation and using external policy instruments to ensure a strong, united EU on energy and climate. In addition, the Commission will continue with the revision of the Regulation on security of gas supply. Regarding the much discussed idea of introducing common purchasing of gas, the Communication merely states that “the Commission will assess options for voluntary demand aggregation mechanisms”. Infrastructure development is key for security of supply of electricity and gas and for the integration of renewables, and was addressed in a separate Commission Communication on interconnection issued the same day.
EURELECTRIC offers the following comments on the Commission’s five main dimensions of an Energy Union:
- Security of supply: Security of supply can best be reached by pursuing the Internal Energy Market, relying on market mechanisms, and allowing companies to operate in a stable, credible and predictable regulatory climate. Moreover, security of supply should not be confused with self-sufficiency, in particular at national level. Regional cooperation is an important tool to deliver security of supply and should be further investigated in areas such as regional adequacy and capacity markets.
- Market integration: The Internal Energy Market should be at the core of the Energy Union. Governments should take political leadership to speed up the implementation of the common market and achieve integrated markets that properly value energy, flexibility and capacity.
- Reducing demand: Much of the potential for energy efficiency on the demand side remains untapped. Promoting innovation and market approaches to energy efficiency will allow citizens to become more active and make the most of this potential. As electricity decarbonises further, it is becoming an efficient fuel for buildings and transport.
- Reducing carbon emissions: The Energy Union should build on the EU ETS the cornerstone of the EU’s climate policy. A strengthened EU Emissions Trading System is needed to meet the EU’s greenhouse gas reduction target and drive major investment in renewables (RES) and energy efficiency in the most cost-efficient way. The Energy Union should also encourage member states to cooperate on RES and coordinate their RES policies with a view to meeting the proposed EU-level RES target of 27%. Continued RES growth should go hand in hand with further grid development, in particular at distribution level where most new RES capacity will be connected.
- Promoting research and development: EURELECTRIC welcomes the central role of innovation in today’s Communication, including the expressed commitment to the electrification of transport, and emphasises the importance of all three dimensions of innovation: business model, process and technology innovation.