In its recently published review of the EU energy policy the International Energy Agency encouraged the European Union to “strengthen the internal energy market to enhance both its energy security and the competitiveness of its industry.” The report continues that “important interconnections are missing, and, despite the opening of the wholesale market and decreasing prices, concentrated and regulated retail markets do not deliver benefits to consumers.” The IEA supports the concept of an Energy Union “with effective energy market rules and policies that support the development of low-carbon technologies, within the new energy and climate policy framework for 2030 (…) as member states adopt different decarbonisation pathways and energy policy choices.”
Since the IEA’s last in-depth review six years ago EU energy policy has been driving energy market integration, cross-border trade and the implementation of energy and climate targets by 2020. The report takes stock of Europe’s unprecedented renewable energy boom, its action on energy efficiency and the economic downturn that have all contributed to a drop in greenhouse gas emissions. However, energy security concerns have increased, the report argues. Ageing nuclear and coal plants will be shut, and EU energy systems and markets must accommodate growing shares of variable renewable energy. The EU is seeking to foster access to diversified gas and oil supplies to reduce dependence on single suppliers.
To re-confirm the commitment to a fully functioning EU internal energy market the IEA recommends to (i) further integrate EU electricity markets across borders (in particular intra-day and balancing markets) in order to accommodate variable renewable energy more effectively and to enhance generation adequacy; (ii) enlarge co-ordination of system operation and adequacy assessments to the level of regionally interconnected systems; (iii) ensure that under market rules the value to the system of the time and location of the electricity generated is reflected in the level at which it is remunerated; (iv) boost the level of interconnectivity of the EU energy network through Projects of Common Interest; and (v) phase out regulated retail prices and create more competitive retail markets, with stronger consumer engagement in energy markets through demand-side response, smart meters and grids, and greater choice of products and tariffs.
The IEA recommends setting out the legal and governance structures for the EU’s 2030 climate and energy framework towards reaching a low-carbon economy by 2050 and giving priority to market-based instruments. In particular to (i) periodically strengthen and expand requirements for cost-effective energy-efficient measures; (ii) track all energy subsidies and reduce distortive impacts of public intervention; (iii) swiftly reform the EU Emissions Trading Scheme (ETS) to reduce the surplus in allowances, enhance its responsiveness, and ensure a consistent carbon price signal; (iv) complement the ETS with policies to attract critical investment in low-carbon technologies, through sector-specific measures to enhance technology innovation and address non-economic barriers; and (v) regularly evaluate social and economic outcomes while tracking the progress of the EU with regard to competitiveness, security and sustainability objectives towards 2020 and beyond. In addition the IEA advocates for adequate energy RD&D funding to meet EU energy policy goals.
Many of the recommendations are in line with EURELECTRIC’s Energy Union messages as laid out in the recent letter to Commission Vice President . The report “IEA Energy Policies of IEA Countries - The European Union” can be obtained via the in an electronic format.