Blog Post

Clean Energy for all Europeans

Speech by the European Commissioner for Climate Action and Energy, Miguel Arias Cañete, at Bruegel on 24 November 2016

By: Date: November 24, 2016 Topic: Energy & Climate


It is a great pleasure to be back at Bruegel to share with you a preview of the Commission’s upcoming energy package. Not even a year has passed since I last visited Bruegel, and yet so much has changed since then.

Thanks to the EU’s quick ratification, the Paris Agreement has entered into force earlier than expected. And with it, we have further cemented the transition towards a clean and sustainable energy system.

Our success has not gone unnoticed by the markets: investment in clean energies has kept growing. And for the first time, renewables have surpassed coal as the main source of capacity generation.

But at a time where global energy markets are changing at a very fast pace, electricity markets are being challenged by the need to decarbonise. And with current wholesale electricity prices in Europe at the lowest levels in a decade and declining, attracting investment to modernise our electricity system poses a real challenge.

Now, it is in these circumstances where ambition and determination can make change possible. And for us, the decarbonisation challenge offers a unique opportunity for the modernization of our economy and for the provision of Clean Energy for all Europeans.

Investing in the clean energy transition

Let me assure you: this is not just wishful thinking. Over the period 1990-2014, our GDP increased by 48%, while our emissions intensity was reduced by almost half. And in 2015 alone, the EU saved around 25bn EUR in energy imports thanks solely to energy efficiencies.

But this is just the tip of the iceberg: we can add 70bn EUR more to our economy and create 400,000 new jobs if we achieve the 30% target in energy efficiency. Now, as an institution that has followed developments so closely, you know all too well that this won’t be enough.

It won’t be enough to leverage the additional 177bn EUR per year that we will need just to meet our 2030 objectives. And it won’t be enough to make investments flow into sustainable and innovative solutions.

We will need to do much more and go much faster if we want to trigger the necessary investment to make the clean energy transition happen. And that is why our Clean Energy package has been designed in a way as to unlock our green growth potential across the board:

  • The new Renewables Directive will create the right conditions for clean energies to thrive and make the EU number one in renewables again.
  • The new market design, on which I will elaborate in a minute, will improve market integration and competition, reinforce investment signals and empower consumers.
  • And the review of the Energy Efficiency legislation will tap into the energy savings that can kick-start our economy.

If we get this right, we could unlock a 1% increase in GDP by 2030, pumping up to 190bn EUR into the European economy and creating as many as 900,000 jobs.

Making the market work for everyone

Now, the market has to work for everyone. And to ensure this, we will need to adapt some rules first.

In an electricity market that will be increasingly dominated by variable renewables and by a more flexible demand, this means that we need to generate the right incentives to foster investment. We have already done part of our homework by making proposals on how to strengthen the carbon price signal by revising the ETS. But these efforts will fall short if prices do not react quicker to reflect changes in variable generation and shifting demand. And of course, this can only happen if prices are able to rise when demand is high or generation scarce, and if constraints on pricing are removed. But it also means that demand needs to react to changes in the generation if we want to avoid enormous costs for back-up generation.

We need a system that rewards flexibility and brings tangible benefits to EU consumers by allowing active participation and demand-response. This is why we will promote better integrated short-term markets, notably, EU-wide intraday and cross-border balancing markets.

And we won’t stop there.

We will further remove roadblocks to innovation in order to enable the natural development of new energy services and to open the door to non-traditional actors to the market. This, in turn, will help us respond to the need for growth and investment, and create value in a market that has in the past been closed to new business models.

But in the end, the deep transformation of the energy system that we are witnessing calls for a wider re-thinking of the way we engage with our energy system. And we cannot ignore anymore the new developments that have led consumers to play an increasingly important role in the market. Because ultimately, consumers should be able to make the most of the energy transition and reduce their electricity bills.

Empowering consumers

Thanks to technological developments and cost reductions, consumers are becoming the real drivers of this energy transition. And every year, more consumers become active participants in the market, generating renewable electricity onsite to consume it, store it, or sell it to the grid.

Consumers will play a key role in achieving the flexibility that we need to integrate abundant renewables and to provide quick and efficient demand response. But this won’t happen if consumers don’t trust the system in which they operate.

And right now, they still face huge barriers to fully engage in today’s energy system, and in many ways we are not letting them get a fair deal from our energy improvements.

This is why, as part of our new electricity market design we will promote measures that empower consumers and that facilitate their active participation in the electricity market:

  • First, we will increase retail competition to improve consumer engagement, keep consumer costs low and ensure all consumers have access to these new services.
  • Second, we will make the grid flexible at both the generation and the consumer ends to foster self-generation and demand-response so that consumers can adjust their consumption to price fluctuations resulting from variable wind and sun, and can benefit from lower electricity prices.
  • And third, we will allow consumers to switch providers more easily, get clearer billing and comparison tools, and reduce restrictions and switching fees.

Altogether, these measures will incentivise consumer engagement with the market, help consumers save money in their bills, and allow them to benefit from new services that add value.

Better integrated markets

But in the end, empowering consumers will mean nothing if energy cannot flow quickly and unimpeded to those places where it’s most needed. This is why we will promote better regional and cross-border cooperation on energy policies and support schemes to ensure a secure supply of energy to all Europeans.

Now, full market integration will require more than simply building new interconnectors. It will also require making a more efficient use of the existing infrastructure.

And let me be clear:

  • we will no longer tolerate a situation where bottlenecks are artificially pushed to the border;
  • and we will not accept the existence of fragmented and uncoordinated national measures to remunerate generation capacity.

This is not a viable approach anymore. In fact, it could seriously jeopardise the market and the security of millions of Europeans. An effective market requires a shift in focus from the national to the European level.

That is why we will propose a European framework for capacity remuneration mechanisms to ensure coherence, cross-border participation and avoid market distortions.

And let me also be clear about one thing: such capacity mechanisms mustn’t serve as an excuse to subsidise high-polluting generation assets that would counteract our decarbonisation objectives. It might therefore be necessary to include strict environmental criteria in such mechanisms to avoid giving wrong incentives that might lead to stranded assets as our emission cap gets tighter.

And we will also develop a new Risk Preparedness proposal to guarantee that all Member States duly prepare for crisis situations and co-operate with one another to prevent electricity crisis situations.

In this way, we will make sure that a secure supply of electricity can reach those that need it most during a crisis.

Conclusion

Reforming our electricity market should not be seen as an isolated action, but as a cornerstone of our climate and energy strategy.

As the clean energy transition unfolds before our eyes, we need to be ready to lead and shape it in a way so that all Europeans can reap its benefits.

And in this context, I am confident that the legislative package that we will launch in a week’s time will help us to provide smart and clean energy for all Europeans.

 


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint. Anyone is free to republish and/or quote this post without prior consent. Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post.

View comments
Read about event

Upcoming Event

Oct
11-12
20:00

Policy responses for an EU-MENA shared future

In the third edition of the "Platform for Advanced & Emerging Economies Policy Dialogue" we will discuss trade flows and trade policy between Europe and MENA, integration of developing economies into global value chains, and regional energy relations.

Speakers: Karim El Aynaoui and Guntram B. Wolff Location: Rome
Read article More on this topic More by this author

Blog Post

Ukraine: The struggle for reforms continues

The modernisation of the Ukrainian economy and state continues to develop at an unsatisfactory pace due to a lack of pro-reform political consensus. The two upcoming election campaigns in 2019 (presidential and parliamentary) make the reform process even slower and additionally put its effectiveness and sustainability under risk. The international community has a limited toolkit to overcome this stalemate.

By: Marek Dabrowski Topic: Global Economics & Governance Date: July 4, 2018
Read article More on this topic More by this author

Opinion

« Mieux vaudrait laisser les gouvernements libres de tenter les politiques de leur choix »

Les peuples ont le droit de faire des erreurs: Selon l’économiste Jean Pisani-Ferry, l’Union européenne doit accepter les aspirations légitimes à des politiques disparates, tout se prémunissant contre la contagion de leur corollaire : la possibilité d’une faillite souveraine.

By: Jean Pisani-Ferry Topic: European Macroeconomics & Governance Date: June 12, 2018
Read article

Parliamentary Testimony

European Parliament

Brexit and Energy Policy

Testimony before the European Parliament's Committee on Industry, Research and Energy

By: Simone Tagliapietra and Georg Zachmann Topic: Energy & Climate, European Parliament, Testimonies Date: May 28, 2018
Read article More on this topic

Blog Post

The Commission’s proposal for the next MFF: A glass half-full

The Commission’s proposal for the next Multiannual Financial Framework provides a good basis for subsequent negotiations and includes a number of bold suggestions. But it has a number of deficiencies and some of the proposed tools are conceptually weak. We make proposals as to how to improve them.

By: Grégory Claeys and Zsolt Darvas Topic: European Macroeconomics & Governance Date: May 25, 2018
Read about event More on this topic

Past Event

Past Event

EU budget post 2020: the next MFF

This is a closed-door event where we will discuss the EU budget post-2020.

Speakers: Barbara Balke, Giacomo Benedetto, Grégory Claeys, Zsolt Darvas, Marcin Kwasowski, Stefan Lehner, Antoine Quero-Mussot, Esperanza Samblas Quintana, Salvatore Serravalle and Laurent Zylberberg Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: May 16, 2018
Read article More on this topic

Blog Post

How large is the proposed decline in EU agricultural and cohesion spending?

Cohesion spending is proposed by the Commission to increase by 6% in the next MFF, but inflation is expected to reduce the real value of such spending by 7%. The gradual convergence of the least developed regions to the EU average reduces the need for cohesion spending. Common agricultural spending is proposed to be cut by 4%, while if we consider inflation too, the reduction in real value is 15%.

By: Zsolt Darvas and Nicolas Moës Topic: European Macroeconomics & Governance Date: May 4, 2018
Read about event More on this topic

Past Event

Past Event

Cleaning up Europe's transport sector: which strategies?

Over the last decade, EU’s greenhouse gas emissions have decreased significantly in all sectors with the only exception of transport. This sector is thus becoming a key obstacle to EU decarbonisation and more aggressive policies are needed to decarbonise it. This event discussed the potential strategies to structurally address this issue, also on the basis of Bruegel’s new policy proposal in the field.

Speakers: Maria Demertzis, Francesco Starace and Simone Tagliapietra Topic: Energy & Climate Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: May 3, 2018
Read article Download PDF More on this topic

Book/Special report

Developing the EU long term climate strategy

To ensure that EU climate policy is in line with the goals of the Paris Agreement, and takes into account substantial recent shifts in the technical and political framework, the EU needs a new long-term climate strategy that will supersede the 2050 Roadmap that was issued in 2011.

By: Georg Zachmann and Andrei Marcu Topic: Energy & Climate Date: April 18, 2018
Read article More on this topic More by this author

Blog Post

EU budget, Common Agricultural Policy and Regional Policy – en route to reform?

As the debate on the EU 2021-2027 Multiannual Financial Framework gains momentum, we look at the major budget items and their effectiveness. The challenge for the future budget is to design spending programmes that are more efficient, effective and fair.

By: Nicolas Moës Topic: European Macroeconomics & Governance Date: February 22, 2018
Read article More on this topic More by this author

Podcast

Podcast

The new EU budget and the future of the Spitzenkandidaten process

Bruegel director Guntram Wolff frames the two debates that will dominate the upcoming meeting of the European Council – the shape of the next EU budget, and the method by which a new European Commission president will be appointed.

By: The Sound of Economics Topic: European Macroeconomics & Governance Date: February 21, 2018
Read article More on this topic More by this author

Podcast

Podcast

Brexit consequences for EU climate and energy policy

Bruegel fellow Georg Zachmann joins Richard Tol, professor in the Department of Economics at the University of Sussex, and Pieter-Willem Lemmens, head of analysis at the climate policy think-tank Sandbag, for this episode of 'The Sound of Economics', to discuss the impact of Brexit on climate and energy policy in the European Union.

By: The Sound of Economics Topic: Energy & Climate Date: February 15, 2018
Load more posts