EU winter package met with mixed green business reception
As the European Commission (EC) today (30 November) unveils its energy winter package aimed at helping to reduce carbon emissions by 40% by 2030, edie analyses the major talking points of the document's key proposals.
The EC’s 1,000 page document is a series of legislative proposals designed to achieve three objectives; putting energy efficiency first, achieving global leadership in renewable energy and providing a fair deal for consumers.
The 10-year package sought to underpin commitments made in the Paris Agreement, where the EU pledged to cut emissions by 40% on 1990 levels by 2030. Proposals include plans to increase energy efficiency levels by 30% by 2030, accelerate clean energy innovation, renovate Europe’s buildings and step-up the coal phase-out.
EU climate chief Miguel Arias Cañete said: “Our proposals provide a strong market pull for new technologies, set the right conditions for investors, empower consumers, make energy markets work better and help us meet our climate targets.
“And just as we did in Paris, we can only get this right if we work together. With these proposals, the Commission has cleared the way to a more competitive, modern and cleaner energy system. Now we count on European Parliament and our Member States to make it a reality.”
In the build-up to the document’s release, a host of multi-sector businesses warned that the EC’s current proposals were insufficiently ambitious to deliver policy clarity. Today’s document, which still faces a lengthy review by the European Parliament and member states, has been met with varied response from industry experts.
So what does the paper mean for the future of the EU’s energy security? Does the document encourage private sector stakeholders to engage more fully in the clean energy transition? And how will the legislative proposals affect the UK’s post-Brexit energy relationship with its continental neighbours?
EU winter package: Seven key points
Europe set for decentralised, community energy supply
The EC proposes to reform the energy market to provide consumers across Europe with a better choice of supply, and empower businesses to gain greater competitiveness.
The package looks to create a level-playing field for clean technologies in the market, allocating more than €2bn for research into energy storage and demand response measures through the Horizon 2020 programme for 2018-20. A separate €5-10m fund will reward advances in nearly-zero energy building design, community-based energy trading and social innovation in energy or transport for cities.
The paper read: “The transition to a low-carbon and climate-resilient economy will require a more decentralised, open system with the involvement of all society.
“The energy system has traditionally been marked by the dominance of large companies, incumbents and large-scale, centralised technological projects. But in future the consumer has to be at the centre of the energy system.”
Market reforms facilitate fossil fuel phase-out
The package will end subsidies for fossil fuels and market distortions by setting stricter limits on support schemes for reserve power, known as capacity mechanisms. A benchmark of 550 grams of CO2 per KWh will be introduced, in line with the European Investment Bank’s (EIB) emissions performance standard.
EU Commissioner Margrethe Vestager said: “Capacity mechanisms need to match a problem in the market and be open to all technologies and to operators from other EU countries. They must not be backdoor subsidies for a specific technology, such as fossil fuels, or come at too high a price for electricity consumers.”
The new regulatory framework could ensure that renewables participate fully in the electricity market, and that the market related provisions do not discriminate against renewables.
Aldersgate Group chief executive Nick Molho commented: “Market reforms to provide more of a level playing field for renewable technologies are encouraging and so is the clear recognition that the EU’s energy system needs to change to a smarter, more efficient and low-carbon one in line with the growing global momentum to tackle climate change.
“Going forward, the EU will need to work closely with Member States to ensure that the right market arrangements are in place to accelerate the roll out and cost reductions of clean technologies to ensure it can meet its climate targets and gain a substantial share of the growing global market for low-carbon goods and services.”
E3G director Jonathan Gaventa said: “Clean energy needs space to compete in the market but the EU electricity market is currently saturated with overcapacity as a result of legacy coal investments. The EU must not privilege the interests of unreformed incumbents ahead of clean energy competitors and consumers. This legislative package needs to block off unfair policies and subsidies that favour highly-polluting generation.”
Transport biofuels continue to play a role
The electrification of transport is earmarked for strengthening by provisions related to retail electricity markets. Additionally, the development of advanced alternative fuels for transport will be encouraged through a blending mandate on fuel suppliers, while food-based biofuels will progressively reduce their contribution to the EU’s renewables target.
The reluctance to completely remove biofuels from the fuel mix has vexed green group Transport & Environment (T&E), which states the move could add 219 million tonnes to the European transport sector
T&E clean energy director Jelena Simjanovic said: “Despite all its promises four months ago about electrifying transport and stopping bad biofuels, this proposal means our cars and trucks will be burning almost as much palm oil and other food-based biodiesel in 2030 as they do today.
“The Commission again rushes into a huge market for new and unproven biofuels, but it does nothing to reward suppliers of clean electricity in transport. The inconvenient truth is that this proposal will not reduce Europe’s transport emissions to any meaningful extent.”
Untapped energy efficiency potential recognised
The Commission has delivered on its pre-Paris promise to increase ambition on energy efficiency, setting a binding EU-level 2030 target of at least a 30% increase in efficiency compared to 1990 levels. This has been viewed as a step forward, an opportunity worth €70bn of GDP and 400,000 more jobs, as well as a further reduction of the EU’s fossil fuel import bill.
Aldersgate Group’s Nick Molho said: “The EU put forward a set of measures today that finally recognise the still significant untapped potential of energy efficiency in supporting the EU’s transition to an energy efficient and low-carbon economy.”
However, many have suggested that further benefits are within reach if the European Parliament introduces a 40% binding target and eliminates the loopholes in the Energy Efficiency Directive.
Friends of the Earth (FoE) Europe climate and energy campaigner Brook Riley said: “The European Commission’s decision to increase the 2030 energy efficiency target will lift millions of people out of energy poverty, cut greenhouse gas emissions, and create jobs – but why stop at 30%? It’s disappointing that the Commission is so clear on the benefits of efficiency yet fails to come forward with proposals that meet its full potential.”
Renewable energy objectives look unambitious
Today’s package is the first step towards translating targets agreed in October 2014, with the EC including a proposed target of 27% of energy consumption drawn from renewable energy sources by 2030. The EC expects renewable electricity to represent about half of the EU’s electricity generation mix by this time.
Unlike the 2020 goal, the 2030 renewables target will not be binding at national level. The absence of a common framework has raised concerns over the disparity between member states’ engagement with the targets – including a lack of incentives for Spain which has already achieved 40%. Changing to renewables is not top of the list for countries such as Poland, which provides 80% of its power generation through the coal industry.
The business community has suggested the target is likely to discourage investment in the transition to renewable energy, with fears that the focus for investment opportunities in clean technologies will shift to the US and China.
European Environmental Bureau (EEB) climate and energy policy officer Roland Joebstl said: “By proposing a mere 27% by 2030 goal for renewables, the Commission is proposing to slash their roll out by half the current rate in the next decade at a time when the rest of the world is picking up speed. Worse still, no effective measures are proposed to ensure that the bio-energy part of the energy mix is sustainable.”
Sustainable economic and job growth on the horizon
By mobilising up to €177bn of public and private investment per year from 2021, the EC believes the package can generate up to a 1% increase in GDP over the next decade and create 900,000 new jobs.
With €27bn per year devoted to public and private research, development and innovation in Energy Union related areas, the EC predicts industrial production could increase in the construction sector by up to 5%, in the engineering, iron and steel sectors by up to 3.8% and 3.5% respectively, translating into 700,000 additional jobs in construction, 230,000 in engineering and 27,000 in the iron and steel sectors.
Energy Union VP Maroš Šefčovič said: “Today’s package will boost the clean energy transition by modernising our economy. Having led global climate action in recent years, Europe is now showing example by creating the conditions for sustainable jobs, growth and investment.”
UK should be aware of falling behind
A 15% reduction in energy consumption in the UK has spearheaded a continental movement which recently saw the EU surpass a key energy efficiency target six years early. The revised 2030 target could now become a task made more difficult by the UK’s decision to leave.
It remains to be seen whether the UK will pass the new clean energy measures into national law before an anticipated Brexit in 2019, emphasising the need for strong domestic legislation. ECIU energy analyst Dr Jonathan Marshall believes that, while the EU presses ahead, the UK should be aware of falling behind.
“The winter package shows that the EU is committed to increasing integration and cutting waste and emissions, despite events both on its borders and across oceans. Turning the screw on energy efficiency is the lowest-hanging fruit in terms of cutting bills, modernising infrastructure and reducing the greenhouse gas output of Europe’s electricity supply,” he said.
“Simple, cheap and effective policies such as boosting insulation, rolling out smart meters and LED lighting and continuing to improve appliance efficiency will result in lower bills for households and businesses, and these ideas should be pushed into the crosshairs in the UK.”