A bright new future? Welcome to the energy union

Discussing the European Commission's adoption of the Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy.

The document is wide ranging, recognising the significance of energy reliance and policy in relation to foreign policy and also promoting the goal of making Europe the world leader in renewable energy technologies. Andrew Symms, Head of Energy, DWF, discusses this in detail

What proposals are made in the Framework?

The Commission has divided the Framework into five so-called dimensions:

Energy security, solidarity and trust

This dimension centres on the diversification of energy sources and suppliers. The document looks particularly at the alternative gas routes through southern Europe, promising significant funding support. Liquefied Natural Gas imports are also considered important, with the European Commission considering both these and the new gas routes to be key to increasing resilience to disruptions in supply.  

A fully integrated European energy market

The European Commission is critical of the energy market, specifically complaining that the current arrangements do not encourage investment, are fragmented and continue to have problems with market concentration and weak competition. The Commission have placed great importance on the proper implementation and enforcement of existing legislation and policy instruments, particularly focussing on the Third Internal Energy Market Package (adopted in 2009).

Financially, the Commission has also promised that access to large scale investment will be available for implementing major infrastructure projects with this investment aimed at reaching a target of 10% of installed electricity production capacity in each Member State being interconnected with other Member States by 2020. The Commission estimates that an annual investment to the tune of €200 billion will be necessary to achieve this target. With the majority of this capital to come from private investors, the Framework views the upcoming Investment Portal from the European Fund for Strategic Investments as a vital tool in encouraging investor confidence.

Energy efficiency contributing to moderation of demand

The Framework takes particular interest in two areas with huge potential for energy efficiency improvements – namely the buildings and transport sectors. Strategies for large scale investment in these areas are promised by the Commission. Focus lies on the heating and cooling of buildings, with the Commission favouring so-called ‘off-the-shelf’ financing template to simplify access to small-scale finance for the improvement in energy efficiency of buildings. In the Transport sector the aim is to remove barriers to less polluting modes of transport and the promotion of electric vehicles and the integration of these into the urban environment and electricity grids. 

Decarbonising the economy

The Framework emphasizes the importance of the Emissions Trading System in reducing greenhouse gas emissions and meeting the 2030 target of a 40% reduction as compared with emissions from 1990. The commitment to renewable energy sources is also reiterated with the target being that 27% of the energy consumed will be produced from renewable sources by 2030.

Research, Innovation and Competitiveness

The framework identifies a lack of coordination and focus between EU and individual Member State research programmes as a key stumbling block to be overcome if the Energy Union is to achieve its stated aim of being the world leader in renewable energies. Four core actions have been identified in the Framework to which the Member States and the Commission should commit:

  • Being the world leader in developing the next generation of renewable energy technologies
  • Facilitating the participation of consumers in the transition to renewable energy through smart technologies
  • Efficient energy systems in buildings
  • Increase in sustainable transport systems

The Commission has suggested that public procurement can be the driver to promote the industrial and business innovation necessary to achieve the Commission’s goals.

Will it work?

Clearly this is an ambitious statement by the Commission. Many of the proposals appear sensible and give rise to optimism as to the future development of the renewable energy sector in Europe. Nevertheless this ambitious approach has not been universally well received. The Centre for European Reform for one considers many of the proposals in the Framework to be far too broadly defined, unoriginal or simply unworkable. However, there is still room for optimism. Promises of both direct European investment and schemes to stimulate private investment in achieving the targets set out in the Framework can only bring positive results for the sector. 

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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Andrew Symms

Partner - Head of Energy & Industrials

I am a partner in our Construction, Infrastructure and Projects Group as well as Head of Nuclear and Biomass and Head of Energy and Industrials.