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25th September 2015
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25th September 2015

A new European Energy Union

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Kilian Gross, of the European Commission, summarises what Brussels wants from energy policy.

Energy policy “must be holistic,” that’s the view of the European Commission.

Kilian Gross, acting head of unit for Energy Policy at the Commission, cannot be any clearer – every measure of energy policy must respect all three key objectives of competitiveness, security of supply and sustainability.

“For us, it’s really key that we don’t enact or embark on a policy that is mainly following one objective and not the other.
“We think things belong together – a good strategy for sustainable energy is a good strategy for security of supply,” he adds. “If it is well balanced then we believe it can be a successful energy approach.”

The 20/20/20 targets on greenhouse gas reductions, and renewable energy and energy efficiency improvements are “well on track.” Continued efforts are required, “but we are optimistic that we will make it.”

Market pricing
Europe is not “doing too well” regarding the competitive situation, Gross admits. The two main concerns are price pressures and the completion of the internal market.

“Prices cannot just rise – we need to find policy solutions which allow us to achieve objectives while we keep prices in balance.
“We need to keep prices in check for our industries so we have to have competitive prices.” He adds: “For energy intensive industry, the competitive pressure in Europe has risen in recent years.”

While in the US, due to the shale gas and oil revolution, the prices went down. “Our energy prices in comparison to the US are higher. So we need to keep prices in balance in order to keep our industry competitive,” he continues.

Although shale gas is not expected to enter the market to the same extent as in the US, “the European Union is open.”

“But we ask for the highest environmental standards. We certainly support all attempts to use all indigenous energy sources,” Gross highlights.
He describes the internal market as “a key instrument” for achieving the EU objectives as it will “allow us to allocate best our resources.”

“It will as well allow us, in the most economic way, to increase our security of supply level.”

Gross emphasises: “Without interconnection, of course, we cannot reap the full benefits of the market and in particular, with regard to renewables, this is crucial.

“Our member states have different potential and different challenges and interconnection can bring this into balance.

“Together, we can find a cheaper solution for an energy market with a high share of renewables.”

Addressing supply concerns
With the aim of ensuring a stable, plentiful energy supply, the European Commission released its Energy Security Strategy in May 2014.
A comprehensive strategy was needed covering areas such as the diversification of supply routes, LNG and energy efficiency measures due to the predicted rise of oil and gas imports between 2020 and 2035.

“This is due to the fact that our internal fossil fuel sources are not going to be depleted, but reduced, as is true for the Urengoy gas field but as well for the North sea oil and gas production sites.”

Stress tests were carried out by 38 European countries, simulating two energy supply disruption scenarios for a period of one or six months. It was found out that, in particular, where the market functions well, the security of supply situation is “very satisfactory.”

But resilience to supply disruptions remains high on the agenda, with six member states of Europe depending on Russia as the single external supplier for gas imports. Gross describes this as “a very significant concern.” It exposes Europe to political pressure and a risk of supply disruption caused by political crisis, so work must be done on the diversification of supply routes.

Regulatory progress is needed with market design currently being looked at, he continues. “We had an objective from Barcelona of 10 per cent interconnectivity by 2020 and we are still not there. Ireland is below this 10 per cent target.”

Solutions to problems
Under the 2030 Climate and Energy Framework, the interconnection target has been raised to 15 per cent. Gross describes this as “crucial”. To use the best sites in Europe for renewables much more interconnection is needed, he says.

“Some member states have possibility for storage, some member states have possibility for renewable generation.

“Ireland has huge potential which should be explored and exploited,” he adds, before saying that it could be viewed as an economic growth factor. “Often interconnectors are cheaper solutions than having backup capacity duplicating the infrastructure in one given member state.”

The target set to lower carbon emissions by 40 per cent “brings us on the path of decarbonisation” he continues, before adding that if the 2050 target is 80 per cent, this “keeps us on track.”

Both the renewable energy and energy efficiency targets are at 27 per cent or higher, with Gross admitting that the latter is the biggest concern.

“We just adopted an Energy Efficiency Directive rather recently. The problem is that everyone thinks that energy efficiency is key – and we fully subscribe to that.”

However, he says it is certainly a complex issue. Touching on a number of different policies, it concerns areas including transport, buildings and products and involves many stakeholders.
Gross adds that it needs to addressed in a “very horizontal way” throughout the different policies. “That is why it is probably the most difficult one to live up to.”

The energy union
The formation of the energy union is Europe’s response to its challenges. It aims to achieve secure, sustainable, competitive, affordable energy for every European.

He says that Jean-Claude Juncker, the head of the European Commission, is keen to bring energy policy to a “new level.”

“Energy has been identified by President Juncker as one of the ten priorities for his mandate.”

Gross explains that the energy union goes beyond policy, but also to transport, climate external policies, as there cannot be just a sectorial answer to challenges.

The union is built on the five mutually supportive and interlinked dimensions of:
• energy security, solidarity and trust;
• a fully integrated internal EU-wide energy market;
• energy efficiency as an energy source in its own right;
• transition to a low carbon society; and
• research, innovation and competitiveness.

An “innovative and important element” is the new governance process for the union. Gross says it allows for better co-ordination while respecting that member states have choices which will be respected. Member states will co-operate through improved data intelligence and there will be annual reporting to the European parliament and council.

What has been learned from the past, he concludes, is that “a better and more integrated planning process” is needed for energy and climate governance, with streamlined planning and reporting. He adds: “We will see if these plans allow us to achieve our common objectives for 2030.”