Commission to unveil €1trln energy strategy for 2020

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The European Commission will present on Wednesday (10 November) its energy strategy for the coming decade, calling for investment of around €1 trillion to secure the bloc's energy needs in a sustainable way.

The new strategy will set out priorities for 2020 in order to deliver on the EU's energy and climate goals.

This will require the EU to spend €1 trillion over the next decade on infrastructure, new technologies and electricity storage, according to a draft, seen by EURACTIV.

"In the next decade, investment in energy, both to replace existing resources and in order to meet increasing energy requirements, will oblige European economies to arbitrate among energy products which, given the inertia of energy systems, will condition the next 30 years," it says.

Energy savings top priority

The draft strategy identifies energy efficiency as its first priority, arguing that it needs to be mainstreamed into all relevant policy areas. The details will be set out in the new energy efficiency plan, which is scheduled to be presented next spring.

The EU has set itself a 20% energy savings objective for 2020, but measuring progress will require the establishment of "a set of fair and measurable objectives," according to the document. The national energy efficiency action plans drawn up by member states will become the annual reporting tool, it explains.

Until now, national efficiency plans have failed to exert the same influence as similar plans on renewable energy, mainly because the targets are not legally binding.

The Commission seeks to tap into the energy savings potential of Europe's existing building stock. Renovation rate should be accelerated by investment incentives and innovative financial instruments like revolving funds, it argues, promising to address the problem of split incentives between tenants and owners.

Energy savings in transport, a sector that emits a fifth of Europe's greenhouse gas emissions, will be harnessed by introducing energy efficiency standards for all vehicles and a "robust car labelling system," the draft states. 

The public sector will play a crucial role as energy efficiency criteria should "become conditionality obligations in all spheres, notably for allocating public funds," according to the paper.

Industrial companies, on the other hand, should be encouraged to make use of energy audits. A dedicated support mechanism should be created for SMEs, it adds.

"Efficiency must become a profitable business in itself, leading to a robust internal market for energy saving techniques and practices and commercial opportunities internationally," the paper says.

A European energy market

Another priority for the next decade will be to build an integrated pan-European energy market, as both electricity and gas markets remain fragmented by national boundaries.

"The new challenge to 2020 is, however, to provide the backbone for electricity and gas to flow where it is needed," it argues.

New infrastructure will also be key to integrating renewable electricity to the grid and will therefore be addressed in a separate infrastructure package that the Commission is planning to present later this month.

The Commission has also set its sights on establishing a long-term plan for infrastructure. It will authorise European regulators and transmission system operators to develop a blueprint for European electricity and gas grids between 2020 and 2050, the paper says. The map, to be presented in mid-2011, will be based on the Commission's 2050 roadmap, due next year, which will present a long-term strategy for the energy market.   

"What's important now is that all these different projects from the Commission are harmonised, which means that the Energy Infrastructure Package must be in line with the roadmap 2050 and also this short-term strategy," commented Susanne Nies, head of energy policy at EU industry association Eurelectric.

She warned that a single European energy market would require the Commission to condemn developments like the emergence of new national energy taxes which she says are "going in the wrong direction".

Clear finance still missing

The urgency of building new interconnections and developing smart grids to avoid locking Europe into high-polluting imported fossil fuels requires a "broad view of new funding instruments," the Commission states. It also refers to the possibility of getting more money from the EU budget, calling for "the mobilisation of additional resources under the next multi-annual financial framework".

Money will also have to be found to finance the development of innovative technologies. This is another priority as concerns are being raised that China and the US are now pulling ahead of Europe in the solar and wind power markets.

Major planned projects like offshore wind farms in the North Sea or the Desertec initiative to supply Europe with solar power from North Africa will require Europe-wide coordination and different funding sources, the strategy points out.

But it is short on concrete ideas beyond saying that the technologies supported in the EU's Strategic Energy Technology (SET) Plan will "be the cornerstone for the preparation of the next financial framework as regards energy research".

"As the real questions here have always been setting the ambition and finding funding, here as elsewhere we are still waiting for specifics," said Jason Anderson, head of European climate and energy policy at the WWF.

External policy

The strategy also focuses on creating a common EU external energy policy so that the bloc can "effectively project its combined market weight in relations with key third country partners".

Consequently, the draft announces that the Commission will present a communication on the external dimension of energy policy next year, which will identify ways to reinforce the efficiency of EU policies in this regard.

The idea is to diversify supply sources and routes in order to avoid crises like the Russia-Ukraine gas dispute, which disrupted supplies to Eastern Europe in January 2009.

To this end, the EU will sign energy framework agreements with key suppliers and transit countries, covering for instance market access issues like network development, the draft strategy states.

Luxembourg Green MEP Claude Turmes described Commissioner Oettinger's first major strategy as "deceiving and biased" and said it had a "shocking pro-nuclear bias".

"Proposals on energy efficiency - which must be central to EU energy policy - are vague or delayed. As for renewable energy, despite being set to account for 65% of all power investments in the EU of the next 10 years, this crucial power source is largely dismissed and will not get any support in the area of export markets," he said.

"Consumers, as well as the environment, are set to lose out […] the new Commission seems to fawningly accept the market dominance of the big [German] energy oligopolies. Attempting to spin nuclear power as a boon for consumer protection is an insult. This is Europe at its worst!" Turmes lamented.

EU industry association Eurelectric argued that the Commission now has to ensure that the short-term energy strategy is in line with other upcoming initiatives like the Energy Infrastructure Package and the Roadmap 2050.

"In the next years we really need an emphasis on an integrated single European energy market," said Susanne Nies, head of energy policy at Eurelectric. The emergence of national energy taxes such as a tax on spent fuel in Germany and a gift tax on free emissions allowances in the Czech Republic all hamper the move towards a single market, she argued.

"We see the same tendency in the national renewable energy action plans, where joint projects are totally underdeveloped," Nies said.

BusinessEurope, the European employers' association, welcomed the Energy 2020 Strategy as a crucial initiative to start transforming Europe's energy system. But it warned that more attention should be given to the global energy competitiveness of European industry.

"There is a real risk of carbon and job leakage caused by the cumulative cost of all climate and energy policies. On average, electricity in Europe is 21% more expensive than in the USA and 197% more expensive than in China," said Folker Franz, industrial affairs director at BusinessEurope.

EUROPIA, the European Petroleum Industry Association, said "oil and oil refining will be essential in enabling the transition to a resource-efficient society by supporting the economy and mobility. The International Energy Agency's (IEA) most ambitious forecasts are that oil will account for almost one third of energy demand and 80% of transport fuels in the EU in 2030".

"Domestic European refining brings secure, affordable and reliable energy at competitive prices to Europe and underpins the EU's economic growth and competitiveness. The transition to a lower carbon economy will be more difficult if refining, an essential element of the existing supply chain, becomes uncompetitive," said Isabelle Muller, EUROPIA secretary-general.

Christian Dolezal, Spokesperson for Nabucco Gas Pipeline International GmbH, the pipeline’s developers, welcomed the Commission's energy strategy all round.

"The new energy strategy is important, because it addresses Europe's vital and pressing energy needs," he said. "This implies strategic infrastructure investments, interconnecting national networks, diversifying energy sources and supply routes, securing third country supplies and co-ordinating strategic efforts.

That's what the Nabucco gas pipeline, Europe's flagship energy project, stands for. It will make an important contribution to Europe's security of supply, will pave the way for further progress in the energy sector, support interconnectivity and will enable further economic growth.

With the Nabucco project the southern corridor will provide the future gas highway to Europe and will further strengthen the liquidity of the gas markets, ensuring security of supply for European consumers and businesses in the long term."

AEGPL, the European LPG Association, welcomed efforts to clarify the EU's strategy and policy framework with a view to reaching environmental, economic and strategic objectives. It particularly  supported the view that energy efficiency must be a top priority through 2020 and beyond.

"With all the ambition and good will in the world, it is clear that a decarbonised European economy remains a distant prospect, particularly in light of the various technological and economic challenges that the Commission has rightly identified," said Paul Voss, manager for energy and environment policy at AEGPL.

"As regards the arbitration between energy sources, we stress the potential of clean, lower carbon, and immediately available gaseous energies such as LPG and natural gas, as a complement to the emergence of renewable-based solutions, to facilitate the transition towards a more sustainable and competitive EU energy model," he added.

The European Wind Energy Association (EWEA) backed Energy Commissioner Günther Oettinger's plans to make a functional internal market for energy one of the EU's main energy priorities and supported his ambition to link up the whole electricity grid.

"The test will be the strength of these proposals and the willingness of national governments to support them [...] [W]e urge [Oettinger] to be bold in the legislative proposals that should follow," EWEA said. 

Environment group WWF argued that the Commission is "lurching disjointedly on energy policy". While the need for energy's role in decarbonisation is clear and the Commission calls energy saving a "top priority", the EU executive also contradictorily wants to secure cheap fossil fuels to meet what it sees as rising demand, it said.

"There is quite a decent overview of areas like innovation and a nod to new electricity infrastructure, but as the real questions here have always been setting the ambition and finding funding, here as elsewhere we are still waiting for specifics," said Jason Anderson, head of European climate and energy policy at WWF.

Friends of the Earth Europe (FoEE) believe the biggest priority should be fixing a binding energy efficiency target for 2020.

"Rather than coming up with grand strategies for energy networks, the Commission should be discussing how to reduce the amount of oil, gas and electricity we will be using in 2020. Cutting energy use means spending less on new pipelines from Russia and North Africa," said Brook Riley of FoEE.

In March 2007, EU heads of state and government endorsed the first EU energy action plan and called on the European Commission to prepare a new action plan for the post-2010 period.

Some offshoots of the current action plan have included far-reaching energy liberalisation proposals, the climate and energy package and the Strategic Energy Technology Plan (SET Plan).

The 'Europe 2020' strategy proposal, presented by the Commission in March 2010, incorporated the 2020 climate goals in its flagship initiative to promote a resource-efficient Europe.

Last May EU ministers gave their first views on the upcoming EU energy strategy for 2011-2020, agreeing that it should be ready for endorsement by EU leaders in March 2011.

  • 10 Nov. 2010: Commission to present Energy Strategy 2020.

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