MEPs approve Energy Union plan for 2016 and 20171 January 2016
The European Parliament has given its political support for strong action by the European Commission in the coming year to propose and implement concrete actions to create an ambitious Energy Union. Its goal is the free trading of power among the European Union’s (EU) 28 member states.
In detailed non-binding resolutions approved just before the Christmas break, the parliament's plenary welcomed the Energy Union plan. But it called on the Commission to be more ambitious in how it rolls out the principle of a united single energy market for the EU.
It also laid down markers, in that it expects member states to be given the freedom to work together to resist being exploited by a strong external energy supplier, and also that the Energy Union complies with EU commitments to resist climate change while promoting security of supply. Evžen Tosenovsky, the Czech MEP co-ordinating the debate that led to the primary Energy Union resolution, said: "Parliament agreed today that the common energy market must be the cornerstone of the energy union. However, market rules must be supported by solidarity mechanisms when member states face a dominant energy supplier."
As for the environment and security, the resolution said: "All EU infrastructure projects must be fully in line with EU climate and energy legislation and long- term objectives and priorities, including EU energy security." It added that "more sustainable and competitive prices and costs of imported energy" should be "actively pursued through the diversification of supply (energy sources, suppliers and routes)".
A separate resolution on interconnections indicated that MEPs would support EU investment on reducing power supply pinch points between member states, stressing that the proposed Energy Union target of 10% capacity interconnection by 2020 "needs to be supplemented by other, more ambitious and evidence-based targets, to be achieved by 2030". The resolution argued that should this be achieved, "a fully integrated internal electricity market could save EU consumers €12 to €40 billion a year."
The key issue for the parliament is avoiding a situation where some borders have more than 10% interconnection and others have much less. The current EU target of 10% by 2020 target is "valuable", but "does not always reflect the market situation, as "12 member states...remain below (the 10% target) and are thus largely isolated from the internal electricity market", added the resolution. It highlighted problematic zones that the parliament thinks the Commission should give special attention in promoting investment for interconnectors:
- The Baltic States: MEPs are concerned that "networks are still synchronised with, and dependent on, the Russian electricity system," which impedes creating a "truly integrated and properly functioning European electricity market". Significant investment in interconnectors with neighbouring member states could promote "a rapid synchronisation of their electricity networks with the continental European network".
- The North Sea region: here MEPs want Energy Union reforms to co-ordinate, plan and build regional offshore grid infrastructure, market access and reserve sharing, estimating this could generate cost savings of €5-13 bn per year by 2030 through a better integrated.
- Central-western Europe: MEPs are encouraged by the success of the shared electricity market between Austria and Germany, suggesting that other neighbouring countries join, making for an enlargement of the bidding zone.
- Central and south-eastern Europe: taking account of the EU Energy Community, the resolution suggests that co-operation and co-ordination on long-term planning and building grid infrastructure includes non- EU western Balkan countries and Turkey.
- Iberian peninsula: highlighting western Europe's pinch point, notorious despite efforts to improve interconnectivity between France and Spain, the resolution says current capacity is too low and that potential investments addressing the problem included in the first Energy Union Projects of Common Interest list were not sufficient to achieve the interconnection target in 2020. MEPs called on the European Commission to carry out a study of the benefits of the interconnection with France, the UK, Italy and countries on the south bank of the Mediterranean.
The European Parliament said that EU countries need to invest €150 billion to better interconnect their national grids. "A better interconnected EU electricity grid is key, both for more renewables and thus achieving climate goals, but also to make Europe more competitive through cheaper electricity prices", said the interconnection resolution's co-ordinator Peter Eriksson, a Swedish green MEP.
So what actions can be expected in concrete terms in the next two years, in the light of this political push and the grand Energy Union plan released by the Commission last February? A state of the Energy Union report released in November highlights a few planned deliverables impacting on the electricity sector.
For 2016, these include a review* of the directive concerning measures to safeguard security of electricity supply, a policy statement on waste-to-energy; a review of the often criticised energy efficiency directive; and a review of the EU directive on energy performance of buildings. For 2017, there is planned an important review of the EU guidelines on state aid for environmental protection and energy, which could perhaps loosen member states' purse strings when they want to invest in interconnectors and new generating capacity.
Will all this be enough to create the power supply, interconnections and underlying market rules that will be needed to forge an Energy Union that amounts to more than windy policy promises? The Commission is certainly saying so, and to some extent the current team lead by Jean-Claude Juncker will be judged by the success or failure with this key project.
Maroš Šefcovic, the Commission's vice-president for the Energy Union, has again gone on record stressing his commitment. He described the Energy Union as: "the most ambitious European energy project since the Coal and Steel Community - a project that will integrate our 28 European members, make Europe less energy-dependent and give the predictability that investors ... need to create jobs and growth. I am determined to now turn this Energy Union into reality."
What does the power sector think at this still nascent stage of the Energy Union project? The European Federation of Energy Traders (EFET) supports the goals of Energy Union, without necessarily supporting further primary legislation to achieve them. Spokesperson Irina Nikolova told Modern Power Systems that the EFET "agrees with the Commission that the electricity system in Europe is at a turning point", adding: "Collectively, we have reached an unprecedented level of sophistication and integration of the electricity markets in Europe. "Regulatory hurdles to trading are gradually disappearing, and markets are being coupled throughout the continent." The organisation also wants less burdensome financial regulation impeding electricity trades. But she added: "We do not believe that further primary legislation is necessary. The focus of the Commission should rather be on ensuring the implementation of existing codes, directives and guidelines, which should be modified as necessary.
She stressed: "The objective, transparent and non-discriminatory management of congestion and capacity allocation at interconnection points remains paramount, as well as the timely publication of fundamental data or variations of such data, especially concerning the availability and use of transmission capacity."
Eurelectric secretary general Hans ten Berge said: "We support the development of a holistic governance system for the Energy Union which provides a coherent, EU-wide approach to the achievement of the EU's 2030 Climate and Energy Framework targets and in light of the broader Energy Union policy objectives." He added: "The Energy Union should be viewed as a [new] opportunity for member states to co-ordinate their national policies and pool resources, delivering secure, competitively priced and sustainable energy for citizens and businesses in an integrated energy market."
The extent to which it happens will certainly depend on goodwill, and member states will play a critical part. They have, through the EU Council of Ministers and European Council (the heads of government), also given their blessing to the Energy Union project, but there will inevitably be tensions between EU institutions - and between the EU and member states - on the pace of progress and the level of co-operation from various countries.
There has been movement though. In December the Council of Ministers clarified its position on the Energy Union-associated target of ensuring that by 2030 27% of energy used in the EU comes from renewable sources. A Council statement reitertaing the 27% figure confirmed that this target will be binding at EU level.
The Council also called on the European Commission to follow up swiftly on the proposals and to work to simplify red tape. It also wants templates drawn up to help governments to complete national plans explaining how they will comply with Energy Union principles.
The statement, however, stressed that member states will remain free to pursue their own "energy mix" so long as they obey the 27% stipulation, looking ahead to future guidance on how member states should draft green energy policies.
Authors: Keith Nuthall, Andrew Burnyeat
Further information: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32005L0089
(Originally published in MPS January 2016)