European Commission outlines plans for ‘Energy Union’

Strategy built on five key pillars aims to address energy security through a more connected EU

The highly anticipated, much talked about, and in some senses anticlimactic Energy Union strategy was unveiled by President Juncker’s European Commission (EC) towards the end of February. The headline aim of the strategy: the realisation of a resilient Energy Union with a forward-looking climate change policy. 

Energy Union was conceived as a means of coordinating moves towards a single European energy market, and to address common European energy issues around ageing infrastructure, uncoordinated policies and a reliance on Russian gas.

The Energy Union concept is built around five pillars: a solidarity clause to reduce dependence on single suppliers, especially when confronted with energy supply disruptions, and more transparency when EU countries make deals to buy energy or gas from countries outside the EU. 

Second, the free flow of energy across borders, enforcing current rules in areas such as energy unbundling and the independence of regulators. The EC proposes to redesign the electricity market to be ‘more interconnected, more renewable, and more responsive’. This will involve seriously overhauling state interventions in the internal market, and phasing out environmentally harmful subsidies, it says. 

Supply will take a second seat to energy efficiency first, with efficiency being treated as an energy source in its own right to compete on equal terms with generation capacity, according to the EC.

Finally, the Energy Union will help transition to a low carbon society that is built to last, says the EC. This will ensure that locally produced energy – including from renewables – can be absorbed easily and efficiently into the grid. EU technological leadership will be promoted through developing the next generation of renewables technology and becoming a leader in electromobility as part of a research and innovation strategy. 

A communication from the EC says that citizens and affordable energy prices are at the core of the Energy Union, Energy should be secure and sustainable, with more competition and choice for every consumer.

Maroš Šefčovič, the Commission Vice-President responsible for the Energy Union, described it as ‘a project that will integrate our 28 European energy markets into one Energy Union, make Europe less energy dependent and give the predictability that investors so badly need to create jobs and growth.’

The Commission estimates that an appropriately connected European electricity grid could save consumers around $40bn a year. One of the concrete elements of the proposals was a strategy for each EU Member State to have an interconnection target of 10% of their capacity to facilitate a more efficient pan-European grid (see story on page *).

Legislation will be developed to facilitate regional energy cooperation, to increase funding for energy efficiency and to redesign the electricity market. A total of 27 actions are outlined in the framework, 14 of which are new.

Every man and his dog had something to say about the announcements. The strategy was welcomed by European electricity trade organisation EURELECTRIC which said it should be seen as a renewed opportunity for Member States to coordinate their national policies and pool resources, while advocating a market-based, technology neutral approach.

Dr Frederik Dahlmann, Assistant Professor of Global Energy at Warwick Business School, said: ‘The process of further market integration will inevitably challenge established companies and their business strategies, but it also opens up the possibilities for innovation and new competitors. These are sorely needed to translate the high-level policy efforts into tangible benefits for European consumers, economies and the environment.’

The EU currently imports 53% of its energy, at an annual cost of around €400bn, and six EU Member States are solely reliant on Russia for all their gas imports.