Is Europe ready for clean energy?

Clean energy should be an easy sell. It is not just about phasing out dirty and impactful fuels, while meeting climate change goals. It is also about being smarter with energy, so the electricity we use is efficiently resourced and distributed. Clean energy technology has an obvious economic appeal, with countries increasingly recognising that it will help spur job creation and growth for years to come. And it is well-suited for common European action, with costs of renewables softened if they are shared widely and connected across the continent.

The European Commission has now come forth with its legislative proposals aimed at overhauling the EU’s electricity market. The measures in the so-called Winter Package were unveiled with fanfare on November 30, but there are already concerns that they will sink when national interests start to unpick them.

The Commission’s scheme, laid out in some 1,000 pages of proposals, is laudable. It wants to cut energy use across the bloc by 30% by 2030. It wants to make over the electricity market, setting common rules and integrating disparate markets. This would help bring the growing share of renewables into the power mix, empower consumers and boost energy efficiency. No matter how much attention they receive, these targets are ultimately only means to achieve the overall objective: the EU’s commitments under the Paris climate change agreement to cut carbon emissions by 40% by 2030.

The Commission claims the proposals could lift the EU’s GDP by up to 1% by 2030, pumping an additional €190 billion into the EU’s economy and creating up to 900,000 new jobs. The 30% energy efficiency target alone can create benefits in the real economy up to an additional €70 billion euros and 400,000 jobs compared to a 27% target. But some €177 billion in investment will be needed annually from 2021 to meet the targets. “What we are proposing is a truly historic transformation of the energy system in Europe,” said Maroš Šefčovič, the Commission Vice President in charge of the Energy Union.

The package includes eight pieces of legislation covering issues from electricity markets to biofuels, and from energy security to construction.

Perhaps the most tantalising element concerns energy efficiency, dubbed ‘the fifth fuel’, after coal, petroleum, nuclear power, and renewables. It is seen as a cost-free tool for speeding the transition to a green energy economy: as long ago as 2007, the United Nations Foundation declared efficiency improvements “the largest, the most evenly geographically distributed, and least expensive energy resource.”

The Commission proposal is to raise EU energy efficiency savings by 30% by 2030, higher than the minimum 27% target EU leaders had set in October 2014. This is where the billions in new funding is needed to speed up the renovation of Europe’s aging and high-energy-consumption building stock, which accounts for 40% of Europe’s energy consumption.

Commission officials have hailed energy efficiency as a vast and growing business opportunity with a huge untapped potential. The existing ecodesign framework alone could add an extra €55 billion in yearly revenues for European businesses by 2020. There are new incentives for smart metering and innovative design. The measures also urge governments to end regulated prices in the retail and wholesale sector, giving them the right to have a smart meter and generate their own electricity.

The push for renewables continues in the package: half of the EU’s electricity should come from renewables by 2030, and it should be completely carbon-free by 2050. The proposals call for the phasing out of coal subsidies, barring coal-fired plants from access to the ‘capacity mechanisms’ that provide back-up power reserves.

It aims to simultaneously reduce dependence on imports of fossil fuel from Russia, thereby reinforcing energy security. And there are key measures aimed at shifting transport systems away from crop-based biofuels towards more climate-friendly agriculture or forestry waste, although it only lowers down a cap on such biofuels from 7% in 2020 to 3.8% in 2030.

Business groups have been largely supportive of the package, with Eurochambres saying the package brings more market principles more European coordination into the free flow of electricity. But environmental groups were begrudging, with many saying more was needed to end subsidies for fossil fuels and the “planet-wrecking” biofuels.

Attention now shifts to the member states and MEPs, who will spend the next two years filleting the plans. Many governments, particularly in eastern Europe, will fight the proposals to phase out fossil fuels, but there was reassuring praise from Germany’s Economy Ministry on the moves to strengthen markets and cross-border cooperation. The incoming Maltese Presidency has already prioritised work on energy efficiency and buildings.

The European Parliament, meanwhile, is likely to demand more: it has already had called on the EU to raise its 30% energy savings goal to 40%. The Industry, Research and Energy (ITRE) Committee will take the lead while other committees, like Environment, will want to have their say.

Industry, unions, NGOs and other lobbies are expected to pile in too, as they try to shape the deal. The Commission will try to be the referee and the guardian of the package, but might well be daunted by challenge of managing all these competing interests. So will the Commission’s proposals help to deliver a reliable, clean and affordable energy system or are there simply too many strategic and political interests at play for the package to emerge unscathed?

Words Leo Cendrowicz & Diederik Peereboom (Burson-Marsteller Brussels)
Photos CC/janie.hernandez55

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