Electric cars: Commission does not give up yet on electric cars
Renewables: Berlin turns to EU court over renewables
Renewables: Renewables do have a positive impact on the reduction of carbon emissions in Europe
ETS: ETS/Stability reserve: Riga presents draft compromise
ETS: Unused allowances will thwart ETS reform
ETS: EU court rules against Czech ETS tax
Energy Union: Most EP groups have faith in energy union
Energy Union: Energy union in fifteen steps: Leaked document
Energy Union: Electricity transition at heart of energy union
1. Commission does give up yet on electric cars
Transport accounts for more than 30% of the EU’s final energy consumption. It is therefore quite normal that the energy union strategy, unveiled on 25 February by the European Commission, devoted a few (small) paragraphs to it. In the strategy, the EU executive confirms its willingness to work towards the deployment of alternative fuels and announces new measures to promote the accompanying infrastructure. It is the same old story of the chicken and the egg: vehicles running on alternative fuels - electricity, liquefied or compressed natural gas, hydrogen - are struggling to find a place due to their cost and the lack of charging points and refuelling stations, and not enough refuelling stations are being built due to an insufficient number of vehicles. An action plan on alternative fuels is therefore scheduled for 2017, at the same time as a press release on the decarbonisation of transport. The Commission is focusing in particular on electric cars and clearly states its desire to speed up the electrification of its fleet of vehicles. “Europe," it says, "needs to become a leader in electro-mobility”.
Automobile manufacturers will be particularly delighted by this announcement. More recently, the Secretary-General of the European Automobile Manufacturers' Association (ACEA), Erik Jonnaerts, drew attention to the urgent need for “an expansion of charging infrastructures” as well as more coherent and consistent incentives at EU level. But while there is no question with regard to the Commission’s ambitions, it remains to be seen what the Member States will do about it. When the Commission wanted to impose quantified binding targets with regard to charging points and refuelling stations for alternative fuels - especially for electric cars -, the Member States clearly made it known that it was up to them to define these objectives and that they could only be indicative. It is only "indications" that are to be found in a new regulation adopted in 2014, which specifies, for example, that, ideally, there should be at least one charging station for ten electric vehicles by 2020.
Reviewing road tolls
The Commission also reflects on the need to further internalise external transport costs. First to be targeted from this perspective is road. It is a familiar story: the Commission wants to promote a system of road user charges based on the 'polluter pays' and 'user pays' principles. In other words, tolls based on the distance travelled and the emission class of the vehicles. It certainly had the opportunity to repeat this several times over the past few months, in the context of the German toll saga. This will go via a revision of the European Directive 1999/62/EC as of next year. It will thus be the third draft of this text which, little by little, is attempting to impose the user/polluter/payer concept. New CO2 emission standards for passenger cars and vans should also be proposed by the Commission by 2016 or 2017, to be applicable after 2020.
2. Berlin turns to EU court over renewables
The German government is challenging the European Commission before the European Court of Justice (ECJ) in the hopes of achieving clarity once and for all over Germany’s 2012 Renewable Energies Act (EEG), which Brussels still considers to be state aid. The dispute was generally settled by a 25 November 2014 decision, in which the Commission approved the “majority of reductions” on the surcharge granted under the (old) 2012 EEG. But Brussels said it considered “a limited portion of the reductions exceed what is permitted under EU state aid rules”. As a result, Germany announced, on 17 February, an action before the EU Court of Justice for annulment of the executive's ruling on its renewable energy law (Erneuerbare-Energien-Gesetz - EEG) of 2012. The law introduces a scheme in which final consumers pay a surcharge on their energy bill, which is then allocated to green energy producers. Certain energy-intensive industries were given reductions on the charge, which sparked the disagreement between the Commission and Berlin. After an in-depth investigation, the EU executive found that the scheme, established in 2012, constituted state aid, but that it is compatible with the Union's new guidelines on state aid in the field of environment and energy, applicable since 1 July 2014. On the other hand, it invalidated a limited part of the EEG rebates in 2013 and 2014, amounts that must be recovered to remedy the distortion of competition.The action for annulment concerns the 2012 EEG law. Even though the Commission ruled that it is compatible, Germany is making the case a matter of principle: this law cannot be regarded as state aid. The German state considers this a "fundamental legal problem". The funds collected from the surcharge on users' bills are not allocated to the state budget but to public agencies that oversee the mechanism, insists the Energy Ministry. The issue to be clarified is significant, says the ministry, because prospects for future versions of the EEC may be affected.
3. Renewables do have a positive impact on the reduction of carbon emissions in Europe
Without the deployment of renewable energy since 2005, greenhouse gas emissions in 2012 could have been 7% higher than actual emissions, according to the EEA report 'Renewable energy in Europe – approximated recent growth and knock-on effects'. In addition, according to the report, renewable technologies also increase energy security. Without the additional use of renewable energy since 2005, the EU's consumption of fossil fuels would have been about 7% higher in 2012. The most substituted fuel was coal, where consumption would have been 13% higher, while natural gas use would have been 7% higher, at a time when European gas reserves are dwindling. Hans Bruyninckx, EEA Executive Director, said: "Renewable energy is quickly becoming one of Europe's great success stories. We can go even further: if we support innovation in this area it could become a major motor of Europe's economy, bringing down emissions while creating jobs." Renewable energy has not been the only factor reducing Europe's greenhouse gas emissions. Policies and measures designed to reduce emissions, improve energy efficiency and stimulate the deployment of renewable energy have all played a role. There were also other drivers for this reduction, including changing economic factors and shifts to less-polluting types of fuels.
Other interesting findings
Final consumption of renewable energy increased in all Member States in 2013, according to EEA estimates. At EU level, the share of renewables increased to almost 15% by 2013, so the EU was ahead of its 12% target set by the Renewable Energy Directive. By 2020, the EU aims to generate at least 20% of its energy using renewable sources, rising to 27% by 2030.
In Sweden, Latvia, Finland and Austria renewable energy made up more than a third of final energy consumption in 2013. At the other end of the scale, Malta, Luxembourg, Netherlands and the UK were all below 5%.
The renewable heating and cooling market sector contributed most towards overall renewable energy in the EU in 2013. However, renewable electricity is growing faster. In contrast, the use of renewable energy sources in transport fell in 2013 in about half of the EU Member States and also at EU level.
Coal, oil, gas and other fossil fuels still make up around three quarters of final energy consumption. Fossil fuels are the main cause of climate change, air pollution and several other environmental pressures.
For Europe to meet ambitious decarbonisation targets, renewable energy sources are expected to increase to between 55 to 75% of final energy consumption by mid-century, according to the European Commission's Energy Roadmap 2050.
4. ETS/Stability reserve: Riga presents draft compromise
The European Parliament is working very hard on the draft decision establishing a market stability reserve (MSR) as part of the EU's Emissions Trading System (ETS) – the European Parliament's Committee on the Environment (ENVI) committee put the matter to the vote on 24 February. The next day found ENVI having adopted a report by Ivo Belet (EPP, Belgium) on the creation of a stability reserve within the EU's Emissions Trading System (ETS) with 58 votes in favour, ten against and one abstention. Two dates were proposed for the entry into force of the reserve: 2017 for the creation and entry into force of the reserve (instead of 2021, as proposed by the Commission); and 2018 for its creation, with the reserve being fully operational by 31 December 2018. The second option has been retained. MEPs also had to choose between a simple deletion of frozen quotas and unused quotas reserved for 'new entrants', or putting them into an immediate reserve. In both cases, they opted for an immediate reserve, and granted a mandate to negotiate with the Council.
In the meantime, the Council is not standing idly. On 16 February the Latvian EU Presidency tabled a draft text (not available yet) to be discussed by Member States' Permanent Representatives (COREPER). It seems that the Presidency does not take a stand at this point on the date of the MSR's entry into force and deletes the date proposed by the Commission (1 January 2021). This gap will be closed, of course, but not until later, since there is heated debate among Member States and MEPs alike – in the industry as well, incidentally – with many calling for early entry into force. The earliest date being considered is 1 January 2017. On the second point under discussion, the fate of the 900 million allowances taken off the market in 2014, the text is clear: there is no question of their being placed back on the market in two tranches (300 million in 2019 and 600 million in 2020), as provided for in Decision EU 176/2014, because this "would undermine the objective of correcting the structural surplus of allowances". The draft compromise therefore makes provision for the full and immediate transfer of these 900 million allowances into the reserve.
On the question of the reserve triggering thresholds (transfer of allowances into the reserve or placing on the market), the Commission will have to publish annually, on 15 May, the total of all allowances in circulation for the year in progress. Such a report would be published for the first time on 15 May 2017 (date to be confirmed). The text asks the Commission to manage the MRS with "flexibility" on this basis and suggests as a reference that, each year, a number equivalent to 12% of the total allowances in circulation the previous year be taken off the market and placed in the reserve unless this number is less than 100 million. Conversely, if the number of allowances in circulation is less than 400 million, the reserve will place 100 million allowances on the market. If the reserve contains less than 100 million allowances, the total volume available would be released. Lastly, volumes will be taken off or put back on the market for a period of 12 months. Please note that the Commission will assess and report on the functioning of the MSR three years after its entry into force and every five years thereafter. Based on this analysis and market developments, it will propose any adaptations that may be necessary to ensure the smooth running of the MSR, devoting special attention to the mechanism triggering thresholds (percentages and volumes).
5. Unused allowances will thwart ETS reform
Some 750 million unused EU emissions trading scheme (ETS) allowances are set to be auctioned in 2020, delaying the impact of the ongoing market reform by over a decade, the Environmental NGO Sandbag has claimed. The European Commission has underestimated the number of unallocated emission allowances that will not be used due to a lower than anticipated use of the reserve for new entrants. It has also underestimated the number of allowances that will be handed back by factories due to closures or reduced activity, according to Sandbag.
The unused allowances, set to be released for auctioning at the end of the current trading period in 2020, will lead to an “acute increase in the supply”, Sandbag said. This will be exacerbated by the release of 900 million allowances that were temporarily backloaded to reduce oversupply. In addition, according to Sandbag, this will undermine the effectiveness of the planned Market Stability Reserve (MSR), which could take a decade to cut back supply to lower than current levels.
When the MSR was tabled, the Commission proposed to mitigate the impact of unused allowances by spreading some of the excess auction volumes in the final year of each trading phase over three years. But Sandbag argues that a more effective solution would be to adapt the MSR to absorb the influx by starting it earlier than 2021 and preventing the unused and backloaded allowances from entering the market.
6. ECJ rules against Czech ETS tax
The EU Court has ruled that a Czech tax on free emissions allowances breaches Europe’s emissions trading system (ETS) law. The 32% gift tax was introduced in 2011 for firms receiving free emissions allowances. The tax brought in around €268,000 over 2011-12, which was used to fund solar energy subsidies.
But Czech energy producers questioned the legality of the tax and took the government to court to claim the money back. In a case brought by electricity producer Ško-Energo, the Czech supreme court asked the EU court whether the tax was compatible with the ETS Directive. The European Court of Justice ruled on Thursday that for the emissions trading period 2008-12, only 10% of allowances were supposed to be distributed at a cost to firms. In that respect, the Czech law did comply with the EU rules. The tax “cannot be justified by the aim of generating additional revenue for certain producers of green energy” because “that is not one of the aims of the [emissions trading] directive”, the court added. It is now up to the Czech court to make a final decision. The Czech Republic’s main energy company, ČEZ, has also filed for a return of the taxes it paid. The Court has previously ruled in favour of a levy on windfall profits made by electricity producers that passed on to consumers the cost of emission allowances they had received for free in Spain.
7. Most EP groups have faith in energy union
The main political groups in the European Parliament reacted positively to the European Commission’s flagship energy union strategy on 25 February, adopting nevertheless a ‘wait and see’ approach. Others, however, either called for more ambition or warned against interfering with the Member States’ energy priorities. Maros Sefcovic, the Commission’s Vice-President in charge of the energy union, addressed MEPs in Brussels just hours after the official launch of the strategy. The energy union was at the top of the EP mini plenary's agenda, allowing for the first parliamentary debate on the topic.
The strategy consists of a number of proposals and cross-sectoral legislative actions, which be launched over the next years. “This is a step forward" in light of the current challenges, "such as a lack of integration and too high gas prices,” said Francoise Grossetete (EPP, France) speaking on behalf of her group. “However, we need to make sure that the existing rules are applied before we create new ones and we need the Member States to work with us.” Kathleen Van Brempt (S&D, Netherlands) said she expects the energy union to become a “solar and wind community,” also praising the attention energy efficiency received in the strategy. The energy union is a necessary and urgent initiative, said EP President Martin Schulz in a statement. “The five dimensions and fifteen actions outlined today in the European Parliament touch upon issues the European Union has been struggling with for years,” he said. “This is the right moment to work together at European, national, regional and local level to make the energy union a reality.”
ALDE welcomed the proposal, but group President Guy Verhofstadt also said he is concerned about "the lack of a credible governance plan”. The EU executive has yet to unveil the energy union's governance structure, which it said it will do later this year. ALDE proposed, on 24 February, an “energy pack,” a governance mechanism modelled on the 'European semester'. The group would like to see the Commission become more involved in breaking down the 28 national 'energy silos'. But this is not sitting well with all political groups. Neoklis Sylikiotis (GUE-NGL, Cyprus) said that “the Commission should not be involved in national energy deals - each country should have the freedom to enter into agreements,” referring to the EU executive’s proposal for it to have a greater say in how the Member States negotiate with third countries.
Marek Józef Grobarczyk, (ECR, Poland) said that “this is an historic time for energy policy,” but described the Commission’s proposal as “just a façade, not a real response to the situation”. The Commission’s energy union is also raising eyebrows among the Greens. The project could be “the vector for the future,” said Rebecca Harms (Germany), but “my fear is that the EU is missing out on some of the opportunities available. Too much of the plan is related to yesterday's instead of tomorrow's technologies. There is no strategy to move away from gas consumption, just ideas for changing the source of the gas.” Dario Tamburrano (EFDD, Italy) said there is a danger for the EU to become dependent on new gas suppliers. Instead, he said, the focus should be on indigenous resources.
8. Energy union in fifteen steps: Leaked document
The European Commission will use all the tools at its disposal to ensure that the Member States implement the existing energy rules, including conditioning the use of EU funds for national energy investments, according to a draft energy union proposal. This is one of the main action points the EU executive unveiled on 25 February as part of its wider efforts to formulate a holistic approach to Europe’s energy transition. “Full implementation and strict enforcement of existing energy and related legislation is the first priority to establish the energy union,” according to the document. “There is no point in developing new policies and approaches on weak foundations.”
The Commission will access all relevant policy instruments to see this happen, and will insist on the full implementation of the third energy package, particularly as regards unbundling and the independence of regulators, according to the document. It also aims to be stricter with the dispersion of EU money. “Certain ex ante conditions must be met before EU Structural Funds can be used for co-financing energy investments,” it states. “This will help ensure compliance with EU energy legislation.” The text, is a draft communication highlighting the so-called framework strategy for building the energy union. It was unveiled as part of a larger package, which also contained a timeline for completing the project’s main goals, as well as a plan for EU climate diplomacy ahead of the UN climate conference in Paris in December 2015 and a communication for meeting the 10 per cent interconnection target. The draft communication contains a total of 15 action points (see below), which the Commission sees as the main priorities for building the energy union. The text largely reflects an internal Commission paper leaked in early February ahead of the first College of Commissioners’ debate on the topic.
The EU’s energy policy chief, Maros Sefcovic, has hinted several times that the Juncker Commission will take a much stricter approach to the implementation of energy rules than the previous Commission. Speaking at the end of January to members of the European Parliament’s Committee on Industry and Energy (ITRE), Sefcovic said that “we have to be much harsher on what we monitor, what we insist on”. During a press conference on 4 February, he said that “we will be very tough” on pushing Member States to transpose EU energy rules into law. The approach also closely reflects the recommendations of a recent report from the Jacques Delors Institute, which states that the EU needs to first “put the house in order” by fixing existing shortcomings of EU energy policy in the short term.
The Commission’s separation of the outstanding “homework” from the future EU energy policy initiatives is also meant to help deflect concerns that the energy union project is largely a repackaging of already existing priorities. Furthermore, it is also highlighting the Commission’s efforts to achieve better harmonisation of EU-wide energy policy, by also increasing cooperation, solidarity and trust among the Member States.
The EU treaties make a direct reference to “the spirit of solidarity,” but the final decision on energy mix and energy choice remains in the hands of the Member States. While no treaty changes are envisioned for building the energy union, the Commission does want to see significant changes in dealing with energy matters. It wants to see more powers given to the Agency for Cooperation of Energy Regulators (ACER), a move contingent on the Member States’ political will. It also aims to increase the regional cooperation of European networks of transmission system operators for electricity and gas (ENTSO-E/G). Furthermore, despite opposition from industry players and several Member States, the EU executive is still envisioning a role for common purchasing of gas in the EU energy market.
However, its proposal has been scaled down from its original ambitions. It is calling for a voluntary collective gas purchasing mechanism for Member States dependent on a single gas supplier, and which could be activated in case of a crisis. This appears to be a compromise position that would appeal to the interested member states (mostly Central and Eastern European) but would leave the interests of Western countries unaffected.
Fifteen action points:
1. Full implementation of existing energy legislation through all policy instruments
2. New legislation on the security of electricity supply in 2016
3. Gas: review of the gas supply regulation; a comprehensive LNG strategy; access to new gas suppliers
4. Involving the Commission in the negotiations of intergovernmental agreements (IGAs) to ensure they are in line with EU rules
5. Support for major infrastructure projects through available EU financial means
6. New electricity market design in 2015 to tackle the uncoordinated development of capacity mechanisms
7. Reinforcing the EU regulatory framework, with more powers to ACER and ENTSO-G/E
8. Guidance on regional cooperation
9. Biennial reports on energy prices, looking at the role of taxes and subsidies
10. Review of the energy efficiency legislation in 2015 and 2016
11. Energy efficiency: development of ‘Smart financing for smart buildings’ initiative; strategy for facilitating investment in the heating and cooling sector
12. Comprehensive road transport package, focused on infrastructure pricing, energy efficiency and deployment of alternative fuels
13. Legislation to achieve the 2030 greenhouse gas reduction target both in the ETS and non-ETS sectors
14. New renewable energy package in 2016-2017
15. Initiative on global technology and innovation leadership on energy and climate
9. Electricity transition at heart of energy union
What angle will European Commission Vice-President Maros Sefcovic choose when presenting his energy union to the press on 25 February, and subsequently to the European Parliament, to convince them of its innovative if not to say revolutionary nature? The communication, leaked to the press and already analysed ex ante by certain stakeholders, including political groups, is broad based: security of supply, solidarity, completion of the energy single market, moderation of demand, decarbonisation of the EU's energy mix (with its corollary of strengthening of the ETS), research and innovation.
All these ambitions aim to give fresh impetus to an energy policy in the process of being renationalised, counting on greater cooperation between Member States to do so. The one certainty is the Commission's determination to strengthen the rules of governance of the European Agency for the Cooperation of Energy Regulators (ACER), one of the flagship actions proposed in the 15-point action plan contained in the general communication. The agency, which currently only makes non-binding recommendations at the request of national regulators, would become the pan-European regulator of the future energy union.
The central communication comes with two others, the first of which (on electricity grids) is focused on measures to secure grids, demonstrating the importance attached to the EU's electricity security. Although gas has been in the headlines since the start of the crisis in Ukraine, the Commission simply reiterates in its general communication its intention to apply the measures taken or under way to ensure the security of member states' supply, notably strict application of the regulation establishing reverse flows of gas at cross-border interconnections.
Hungarian Prime Minister Viktor Orbán's recent statements to the effect that he would refuse, upon expiry of the new contract signed with Moscow, to deliver Russian gas to Ukraine through reverse flows, demonstrate the complexity and the extremely political dimension of the gas issue, which is not likely to be settled in the coming months. Conversely, the electricity issue is primarily internal to the EU. This policy requires both a regulatory and physical market revision given the massive influx of renewable electricity into European grids. This new source of power is variable and uncertain, creating congestion.
Unidirectional until now, electricity grids will in future have to be designed like a giant spider's web. In other words, decarbonisation of the European energy market will de facto lead to the establishment of smart grids and smart meters (an initiative already strongly to Berlin's disliking), unless fortunes are spent, said Christopher Jones, Deputy Director-Gneral for Energy at the Commission, on 19 February. The communication on electricity grids also details the basic measures to be taken to ensure the still very modest objective of 10% interconnections by 2020 and 15% by 2030, notably through the financing of priority projects. Other measures are also foreseen, such as the initiative on the general design of the market and regional electricity markets.
Headed to Paris
The final element of the package, the communication entitled 'The Paris Protocol – A blueprint for tackling global climate change beyond 2020', presents the EU's vision and ambitions for a new international climate agreement to be negotiated in Paris in December 2015. It reiterates the EU's targets for the reduction of greenhouse gas emissions and the actions and policies it intends to pursue at domestic and international level, through active climate diplomacy, to achieve its targets. An annex details the EU's intended nationally determined contributions (INDC), in other words, its emissions reduction commitments.
The STALLION – STABALID joint final conference is held in Düsseldorf, Germany, on the Deployment of safe Li-ion stationary batteries for large-scale grid applications.
The ARTEMIS Industry Association hosts the Co-summit 2015 on Smart industry and the impact of software innovation in Berlin over two days.
The Centre for European Policy Studies hosts an event on Eco-innovation and maximising resource efficiency throughout the EU economy.
The South-East European Exhibition on Energy Efficiency and Renewable Energy is held in Sofia over three days.
The two-day Citizens’ Energy Forum takes place in London, with participation from Commissioner Arias Cañete and Commissioner Vĕra Jourová.
The Centre for European Policy Studies (CEPS) holds a panel event entitled “Implementing the EU 2030 climate and energy framework: a closer look at renewables”.
The Agency for the Cooperation of Energy Regulators (ACER) hosts a stakeholder workshop on Electricity transmission tariff harmonisation in Ljubljana.