Winter package leaves doubts hanging over Europe’s energy future

Northern European countries are more eager to make the energy transition than their southern neighbours. [Alexander Savin/Flickr]

This article is part of our special report Electricity in transition.

The European Commission’s winter package is an awkward attempt at blending diverging national energy strategies and satisfy the advocates of coal, nuclear and renewables. EURACTIV France reports.

Energy industry lobbyists and green activists alike are eagerly awaiting the publication of these 1,000 pages of EU legislation, due on 30 November.

Divided into eight texts, this “jumbo package” should have been slightly slimmer. The revised renewable energies directive was supposed to be presented early in October, but was delayed by divisions between member states.

Diverging views across Europe forced the EU executive to adopt a more imaginative approach, which led to a surprising and somewhat contradictory conclusion: the Commission’s frequent calls for higher targets in international climate negotiations are not matched by its own actions.

A leak seen by last week suggests that the winter package will make priority grid access for renewable energies a thing of the past, while extending subsidies for fossil fuels through new so-called “capacity mechanisms”.

“Our proposals are based on a broad consultation and still have to be finalised and approved by the College of Commissioners,” Climate Commissioner Miguel Arias Cañete said at the COP22 in Marrakesh.

“What is certain is that we will push for the highest ambition in our energy policies, particularly on energy efficiency,” he said, implying the leaked document could still change.

Leaked EU energy package subsidises fossil fuels, undermines renewables

EXCLUSIVE / The EU claims to be promoting an ambitious agenda at the Marrakesh climate conference, but its latest piece of energy legislation could subsidise new coal capacity and undermine market access for renewables. EURACTIV France reports.

Renewable energies coming of age

When it comes to renewable energies like wind, the end of priority grid access is not only bad news but also comes as recognition that the sector has matured and doesn’t need support to stand on its feet.

“Renewables nowadays are typically being produced at zero marginal cost so they will be called in first,” says Georg Zachmann, a senior fellow at Bruegel, an economic think tank based in Brussels. In other words, renewables are now the cheapest option, meaning they would get priority grid access anyway, based on price only.

“Renewables have come from a niche technology to the mainstream. More than half of the capacity additions in Europe have been renewable technologies. So the idea is that they start playing by the same rules as everybody else,” Zachmann explained.

Ending priority grid access for renewables even has virtues because it places more responsibility on producers to place wind turbines where they are most needed. For example, adding more wind capacity on Germany’s northern coast provides less and less value because the turbines all run at the same time, when the wind is blowing, Zachmann pointed out. And it would be extremely costly to build a transmission system that can bring all this electricity to the South where it might be needed.

“So it would be good to have a market signal for building wind turbines also in the Black Forest for example,” Zachmann told EURACTIV, saying new technology allows wind turbines to run efficiently at lower speeds.

The physical nature of renewable energies – more variable, unpredictable and decentralised than traditional generation – also “requires an adaptation of market and grid operation rules to the more flexible nature of the market,” the Commission says in a draft memo accompanying its winter package.

Clean energy for all?

If renewable energies tend to grab headlines, the upcoming winter package also contains revisions to other crucial texts – including the directives on energy efficiency and energy performance of buildings, the internal energy market as well as regulations on Energy Union governance, the internal energy market, security of supply and cooperation of energy regulators (ACER).

But the very size of this package is a source of concern in itself. “It is quite difficult to exercise parliamentary control when you are given so many texts to swallow in one go,” one MEP said.

The European Commission has already driven home its communications message. Baptising the package “Clean Energy For All”, the executive insists that consumers will be placed at the heart of the EU’s energy strategy by enabling them to produce their own energy. Energy efficiency and the energy consumption of buildings will also be major issues, according to Brussels.

“Two third of current European housing does not take energy efficiency into account,” Cañete said at a conference on the energy transition.

“This is a war between watermelons and raspberries. The watermelon is the huge, old fashioned power station and the raspberry is the new means of electricity production. We have to change the way we consume and produce energy,” said Gilles Vermot Desroche from Schneider Electric.

One electricity market, 28 national strategies

Simplifying Europe’s energy landscape is one of the current Commission’s biggest challenges. Originally, the idea of creating an Energy Union was aimed at smoothing the energy transition. But the question of energy independence took precedence following Russian threats to cut gas supply to certain countries.

This context lends more credibility to the arguments put forward by France and Poland that their energy independence should trump environmental concerns over their main energy sources (nuclear for France and coal for Poland).

The package also aims to increase the cross-border exchange of electricity, a goal that requires a certain amount of harmonisation. Here again, this objective has been undermined by differences between northern member states, many of which are eager to transition to renewable energies quickly, and the southern and eastern member states, which demand more time.

But other issues are also at stake in this debate. For example, Spain now has a surplus of renewable energy capacity and is looking for new markets to sell into, but France is dragging its feet on interconnection in order to protect its nuclear power industry.

Heavily criticised by the EU for its fossil fuel-heavy energy mix, Poland continues to defend its use of coal, saying it has managed to cut CO2 emissions by 33% since 1990. And Germany’s plan to eliminate coal from its energy mix by 2023 has disappeared from its 2050 climate plan.

Capacity mechanisms

At the end of the day, EU member states can still subsidise whichever energy project they want, based on the principle that nation-states remain in charge of their energy mix – as long as European targets on renewables and decarbonisation are met.

“There is a common electricity market but member states – almost all of them – do what they want,” said Georg Zachmann of Bruegel, citing the UK’s nuclear project at Hinkley Point and German subsidies for lignite power plants as examples.

“And that is recognition of the fact that member states can strong-arm Brussels on energy policy, whether based on the EU treaty or for other reasons.”

According to Zachmann, the internal electricity market will remain broken, even if the Commission manages to impose strict conditions on the approval of so-called “capacity mechanisms” that currently allow member states to subsidise energy projects for security of supply reasons.

In such a context, Zachmann says EU efforts at curtailing capacity mechanisms via state aid rules “is like window-dressing on the fringes of it”.

“I think we are in a different game, the heads of states and government need to come together at the highest level to discuss the Energy Union setting. They need to discuss whether they really want a European coordination of the power plant park.”

Poland needs capacity market to avoid power shortages, says minister

Poland needs a power capacity market to help coal-fired power plants compete with producers of renewable energy and to avoid power shortages, the energy minister said on Wednesday (18 May).

No targets, no controversy

Of all the divisive issues in the winter package, energy efficiency is the least controversial, “because the EU has not fixed any binding targets on the subject,” an expert source said. Not only do energy efficiency improvements save consumers money, but Brussels also hopes new energy saving technologies will create a large number of jobs.

The full deployment of smart meters are expected to take a central role in this context, enabling households to take control of their energy bills in a decentralised energy system where consumers can also become energy producers.

“Digitalisation and the rapid development of internet-based metering and trading solutions enable industry, businesses and even households to generate and store electricity, as well as participate in electricity markets via so-called ‘demand response’ solutions,” the Commission says in its explanatory memo.

Study maps potential of ‘energy citizens’ in push for renewable power

Half of EU citizens – including local communities, schools and hospitals – could be producing their own renewable electricity by 2050, meeting 45% of the EU’s energy demand, according to new research published on Monday (26 September).

Among the other upheavals expected by the energy industry in the coming months are changes to the EU’s carbon market.

The subject never fails to provoke lively debate in the European Parliament. The weaknesses of the current market are well known, and it is a generally accepted truth that the low price of €6 per tonne of CO2 makes the system inefficient.

But the possibilities for reform are highly contested and there is little prospect of the debate being concluded in the near future.

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