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Commission adopts Energy Union Package

On 25 February 2015, the European Commission (EC) adopted the Energy Union package. The package had been explicitly identified by incoming Commission President Jean-Claude Juncker as a key priority of his administration. It consists of three core pillars:

  • “Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy,”

  • Interconnection communication reporting on the electricity interconnection target of ten percent by 2020, and

  • A climate communication “Road to Paris” setting out a vision for a global climate agreement at the UN Climate Change Conference in Paris in November-December 2015.

The communication brings much-needed clarity after a great deal of speculation on the concept. The Energy Union officially aims to “ensure secure, affordable and climate-friendly energy for citizens and businesses.”

The EC sets out five mutually supportive “dimensions” of the Energy Union:

(1) Energy security, solidarity and trust;

(2) A fully integrated internal energy market;

(3) Energy efficiency as a contribution to the moderation of energy demand;

(4) Decarbonisation of the economy; and

(5) Research, innovation and competitiveness. The strategy paper ends with a section called “The Energy Union in 15 Action Points”, which are briefly summarised below.

Energy security, solidarity, trust: This pillar entails inter alia such action points as the review of the existing Security of Gas Supply Regulation 994/2010 (currently ongoing); development of alternative suppliers and routes, including the Southern Gas Corridor, the Mediterranean and Algeria; preparation of a comprehensive strategy for LNG and its storage; and a revision of the Decision on Intergovernmental Agreements to ensure more effective transparency and cooperation in full compliance with EU law.

A fully integrated internal energy market: The second dimension includes a Commission proposal on security of supply for electricity in 2016, and a new European electricity market design in 2015; enforcement of third energy package rules alongside EU competition rules; greater powers delegated to the Agency for Cooperation of Energy Regulators (ACER); implementation of critical infrastructure projects, particularly Projects of Common Interest (PCIs); fostering coordination between Member States and the development of regional approaches to market integration; biannual reports on energy prices including the phasing-out of below-cost regulated prices by 2016; and protection of vulnerable customers through social policies.

Energy efficiency: The Commission will propose new legislation to meet the 2030 energy efficiency target based on a revision of the Directives on energy efficiency and performance of buildings, and will provide greater access to financing instruments for energy efficiency in the transport and buildings sectors. Particular attention will be devoted to speeding up the decarbonisation and electrification of the transport sector and integrating the energy and transport systems.

Decarbonisation of the economy: The EC will propose legislation to achieve the agreed greenhouse gas reduction target both within the Emissions Trading System (ETS) and in the sectors outside the scope of the ETS. A legislative proposal to revise the ETS post-2030 is already in preparation, with a public consultation on the subject launched by the Commission that remains open until 16 March 2015. A new Renewable Energy Package will also be proposed in 2016-17.

Research, innovation and competitiveness: the Commission will develop a forward-looking energy- and climate-related research and innovation (R&I) strategy to strengthen European technological leadership and expand export opportunities.

Industry view:

Industry experts are concerned that the EC strategy is in effect a reworking of the Commission’s existing work programme, rebranded as an Energy Union. The full impact of the package may well depend on what steps are taken next to implement the agreement. Nevertheless, it is clear that the Commission intends to centralise and considerably strengthen regulation in the single market, giving ACER greater powers to carry out regulatory functions at the European level. The strategy will be discussed at a meeting at the European Council in March, during which resistance from several national governments should be expected.

Fears have also been raised with respect to a possible common (voluntary) gas purchasing body. The Commission has commissioned a study to analyse the body’s potential workability, which would operate in strict compliance with EU competition law and WTO rules. The voluntary body’s creation could lead to anti-market measures emerging through some of the proposed EC actions (e.g. interventionist powers in inter-governmental agreements/long-terms supply contracts; emergency auctions; regional cooperation centres). The Central and South-Eastern European countries, who would probably need heavily subsidised infrastructure, have received particular focus in the strategy. However, the obvious question remains of where this financing would come from given the wider problem of stranded assets in Europe.

If the Energy Union package is really rather a continuation of existing policies, there remains some room for optimism – in particular, in the areas of reform of RES-E support, a revision of the ETS and revamps of the ENTSOs and ACER. Full implementation of the third energy package and the grid codes remain key steps towards achievement of an integrated European energy market. Time will tell whether the Commission will fulfil its ambitious plan by the conclusion of its mandate in 2020.

Energy Union Strategy

Source: Latvian Presidency of the Council of the European Union

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