European Energy Union Proposed To Transform Energy System

Security of supply, sustainability and competitiveness underpin Europe’s proposed Energy Union.
Published: Mon 02 Mar 2015

The development of an internal energy market in Europe has been a longheld goal, and this would now seem to be consolidated and expanded in the proposed new Energy Union, for which a strategy has now been adopted by the European Commission.

According to an EU fact sheet, the European energy system faces an ever more pressing need to ensure secure, sustainable, affordable and competitive energy for all citizens. Excessive dependence on a limited number of supply sources, especially for natural gas (i.e. Russia, although not directly stated), leaves countries vulnerable to supply disruptions. Dependence on fossil fuels and greenhouse gas emissions must both be reduced. The affordability of energy and the competitiveness of energy prices are of increasing concern to households and businesses. However, persistent obstacles to real market integration, uncoordinated national policies and the absence of a common stance vis-à-vis non-EU countries impede progress.

European Energy Union framework strategy

The framework strategy for the Energy Union is the EC’s response, “integrating a series of policy areas into one cohesive strategy.” Its basis is the three objectives of EU energy policy: security of supply, sustainability and competitiveness. To reach these objectives, there is focus on five “dimensions”: Energy security; the internal energy market; energy efficiency; decarbonization of the economy; and research – all said to require more integration and coordination.

The framework strategy details steps to achieving the Energy Union, which will include new legislation to redesign and overhaul the electricity market, ensuring more transparency in gas contracts, substantially developing regional cooperation, new legislation to ensure the supply for electricity and gas, increased EU funding for energy efficiency and a new renewables energy package.

European Energy Union proposals

Specific proposals include:

• Insisting that member states fully implement and enforce the 3rd Internal Energy Market Package

• Reinforcing the powers of the Agency for the Cooperation of Energy Regulators (ACER) to give it EU-wide regulatory powers.

• Upgrading of ENTSO-E and ENTSOG to more closely integrate transmission system operation

• A redesign of the electricity market and linking wholesale and retail and expanding the possibilities for distributed generation and demand-side management,

• Establishing a range of acceptable risk levels for electricity supply interruptions

• A continued push for standardization and support for the national roll-out of smart meters, and promotion of the further development of smart appliances and smart grids

• Rethinking of energy efficiency to treat it as an energy source in its own right, representing the value of energy saved

• Greater transparency in the composition of energy costs and prices, and phasing-out of below cost regulated electricity prices

• Intensification of work on the Southern Gas Corridor to enable Central Asian countries to export their gas to Europe

• Establishment of strategic energy partnerships with increasingly important producing and transit countries or regions such as Algeria and Turkey; Azerbaijan and Turkmenistan; the Middle East; Africa and other potential suppliers.

• Tightening of CO2 emission standards and other actions to reduce emissions in the transport sector.

Interconnection of EU’s installed electricity

Clearly interconnection will also be a key and to this end, an Interconnection Communication has also been approved calling for member states to achieve interconnection of at least 10% of their installed electricity production capacity by 2020. To achieve this target will cost an estimated €40 billion, out of a total of some €200 billion required by 2020 to build the necessary infrastructure to adequately interconnect all the member states.

Energy projects of common interest

The main tool for reaching the interconnection target is seen as the list of ‘projects of common interest’ (PCIs) contributing to market integration of at least two European member states. [Engerati-Europe’s Supergrid Gets €734m Boost] The first list adopted in 2013 contained 248 projects, the majority electricity and gas transmission lines. The proposal is to update the list every two years.

Already 16 countries exceed the 10% interconnection target, leaving 12, mostly on the periphery of the EU, below it. However, through the foreseen projects, all of the member states except Spain and Cyprus should achieve the 2020 target.

According to the EU, fully integrated energy markets could save consumers €12-40 billion per year.

Further reading

EC: European Energy Union