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 More on this topic

Upcoming Event

Jun
22
13:00

Renewing the 2050 Roadmap

The objective of this brainstorm session is to explore how we can improve the quality and the impact of the revisited 2050 Roadmap, set the agenda for revising it, increase ownership of it and analyze the methodological basis of the 2050 Roadmap.

Speakers: Georg Zachmann Topic: Energy & Climate Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read article More by this author

Opinion

simone

Is the EastMed gas pipeline just another EU pipe dream?

Is the EastMed pipeline really a feasible project? The answer to this question is not simple, but the EastMed plan sounds unconvincing.

By: Simone Tagliapietra Topic: Energy & Climate Date: May 10, 2017
Read article More on this topic More by this author

Blog Post

simone

Global decarbonisation: a wake-up call for the Middle East and North Africa

Many countries in the MENA region are heavily dependent on oil and gas for exports and taxes. But global decarbonisation could undermine revenues, even though MENA exports are globally competitive. This threatens the MENA region's social contract, so economic diversification needs to start now.

By: Simone Tagliapietra Topic: Energy & Climate Date: April 11, 2017
Read article Download PDF More on this topic More by this author

Working Paper

WP 2017_05 cover

The political economy of Middle East and North Africa oil exporters in times of global decarbonisation

Middle East and North Africa (MENA) oil exporting countries are still not adequately equipped to prosper in a decarbonising world. Decarbonisation should therefore represent an incentive for MENA oil exporters to pursue structural processes of transition from rentier to production states.

By: Simone Tagliapietra Topic: Energy & Climate Date: April 11, 2017
Read about event More on this topic

Past Event

Past Event

Towards EU-MENA shared prosperity

The second edition of the "Platform for Advanced & Emerging Economies Policy Dialogue" will discuss global supply chains, energy and security.

Speakers: Abdelhak Bassou, Jean-Francois Dauphin, Maria Demertzis, Karim El Aynaoui, Larbi Jaidi, Marion Jansen, Giacomo Luciani, Rania Al-Mashat, Iverna McGowan, Jolana Mungengová, Francis Perrin, Francesco Presicce, Simone Tagliapietra, Valeria Talbot and Guntram B. Wolff Topic: Global Economics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: April 10, 2017
Read article Download PDF More on this topic More by this author

Policy Brief

PB 2017_03 cover

The carbon buyers’ club: international emissions trading beyond Paris

The effort to define rules for international emissions trading faces the strong desire of nation states to develop their own climate policies, which collides with the need for tradable units in one country to be equivalent to tradable units in another country. To overcome this dilemma Georg Zachmann proposes a club of carbon-buying countries that would regulate only imported mitigation outcomes.

By: Georg Zachmann Topic: Energy & Climate Date: April 4, 2017
Read article More on this topic More by this author

External Publication

securing the energy union

Securing the Energy Union: five pillars and five regions - Southern Europe

As a part of a publication on energy security, Simone Tagliapietra looks at the countries of southern Europe: Cyprus, France, Greece, Italy, Malta, Portugal and Spain.

By: Simone Tagliapietra Topic: Energy & Climate Date: March 30, 2017
Read article More on this topic

Blog Post

unnamed
simone

Brexit goes nuclear: The consequences of leaving Euratom

The UK Government has confirmed that it will withdraw from Euratom. But what does Euratom actually do? And what will happen when the UK leaves? The authors find major risks, potential costs and open questions.

By: Enrico Nano and Simone Tagliapietra Topic: Energy & Climate Date: February 21, 2017
Read about event More on this topic

Past Event

Past Event

Different perspectives on Nord Stream II

At this event, we bruoght together key-experts that studied the regulatory and economic aspects of Nord Stream II

Speakers: Severin Fischer, Siobhan Hall, Alan Riley, Szymon Polak, Sebastian Sass, Simon Schulte, Borbála Takácsné Tóth and Georg Zachmann Topic: Energy & Climate Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: February 21, 2017
Read article More on this topic More by this author

External Publication

tagliapietra_pass-2

Energy Relations in the Euro-Mediterranean: A Political Economy Perspective

This book provides a detailed overview of the current status and future prospects of Euro-Mediterranean energy relations through analysis of those relations and pertinent case studies.

By: Simone Tagliapietra Topic: Energy & Climate Date: December 13, 2016
Read article More on this topic

Blog Post

simone
Georg Zachmann

How to put cities at the heart of EU clean energy plans

As the European Commission releases its new energy package, “Clean Energy for all Europeans”, our authors argue that cities are the key to success. They propose a new governance mechanism where cities develop and implement ambitious City Climate Plans – with direct monitoring and financial support from the EU.

By: Simone Tagliapietra and Georg Zachmann Topic: Energy & Climate Date: November 30, 2016
Read article More on this topic More by this author

Opinion

simone

Più energia alla cooperazione

L'attuale crisi migratoria e gli altri devastanti postumi delle cosiddette “Primavere arabe” illustrano in modo tragico, ma chiaro, la necessità di un nuovo approccio di cooperazione da parte dell’Europa nell’area del Mediterraneo. L’Europa deve urgentemente ripensare le proprie politiche nell’area, al fine di contribuire in modo concreto e sostenibile allo sviluppo economico dei Paesi sud: l’unico vero rimedio strutturale alle attuali problematiche.

By: Simone Tagliapietra Topic: Energy & Climate Date: November 24, 2016
Load more posts