This is the second article of our series "Alternative Solutions to the Eurocrisis" in partnership with treffpunkteuropa.de. Read the German version here .
The European Union currently imports more than 50% of the energy it consumes. As a result, we spend more than €1 billion per day or roughly €400 billion per year for our energy imports. Apart from this economic dimension there is also a political one, as some EU member states are fully dependent on one supplier or even just one supply route. This is the case for the natural gas supply of some member states on the eastern border of the EU. These issues have been raised many times during the last decade, both at EU and national level. There is some consensus across the EU that moderating energy demand and increasing the use of domestic energy sources – which includes renewables – would help to improve this situation. From an economic point of view, this would reduce the operational expenditures for fuels like natural gas but would require additional capital expenditures, e.g. for investing in renewables and energy efficiency. First and foremost, such a shift requires a stable political framework with credible long-term objectives in order to attract investments.
Assessments done within the EU-funded project “Towards2030” show that energy efficiency measures could reduce the natural gas demand in 12 member states on the eastern border of the EU by 14% resulting into average net savings of €3.5 billion per year. Increasing the share of renewables would further reduce the gas demand by 6% in those countries. Even in the field of renewables, medium-term benefits typically exceed costs – provided that support payments to renewable energy generators are granted in a competitive and efficient way, which admittedly has not always been the case in the last decade resulting into higher costs than necessary.
In October 2014, the European Council has adopted long-term energy and climate targets for the period from 2020 towards 2030 – albeit without agreeing on the role of individual member states and how to ensure cooperation between national member states in order to reach those targets in a more cost-effective way. Cross-border cooperation is especially advisable in the power sector. Germany is using power lines in the Netherlands, in Belgium and in France to transport wind power from northern to southern Germany already today. In general, the integration costs for renewables can be reduced through cross-border cooperation. The variability of wind and solar power decreases with increased geographical dispersion, simply because weather conditions are not the same across Europe. For example, low wind speeds in northern Germany may coincide with strong wind speeds in southern France and vice versa. Low wind speeds or a calm in both areas would be unlikely. As a result, cross-border cooperation reduces the amount of required back-up capacity (power plants that cover periods of low wind). Unused plants from neighboring states could be used.
In the current policy framework of renewable energies, EU member states are not cooperating. The degree of cooperation is also low in other fields of energy policy, e.g. when it comes to ensuring security of supply. Energy markets remain fragmented limiting cross-border competition, which could reduce prices. Given the physical connections between neighboring countries, cross-border implications of national energy policies become most evident at regional level, e.g. in central-western Europe.
Ever since the new Commission President Jean-Claude Juncker elevated the idea of having an “Energy Union” to a mission statement of the European Commission, the window of opportunity for having a more European approach to energy policy has re-opened. EU energy policy shall no longer be a nice side-effect of an internal market and of climate targets, it shall become a primary objective. In the communication from 25 February 2015, the Commission Vice-President for Energy Union, Maroš Šefčovič, affirmed that the current situation with 28 national policy frameworks cannot continue. Weak cross-border competition persists. Moreover, there is a risk that future investments would mainly be triggered by uncoordinated state interventions at national level– at a questionable cost-effectiveness. To reverse this development, the Commission intends to support regional initiatives, e.g. groups of neighboring member states that are willing to align their national policies. This is possibly the most concrete step forward and could lead to the creation of regional energy unions. Such regional approaches could nevertheless become relevant for the EU as whole provided that the EU assumes a strong role in this process, e.g. in actively designing framework guidelines for regional initiatives. It remains to be seen how much political capital the new Commission is willing and able to spend on energy policy matters. But the Commission finally accepting that energy is too important to be ignored is most certainly a welcome development and good news for EU citizens. Since its start in 2008, the European Union has been chiefly preoccupied with managing the economic and financial crisis. So far, the problems involved have not been solved. In its new series, treffpunkteuropa.de presents five alternative ways to overcome the crisis.
About the author:
Dr Fabio Genoese is currently CEPS Fellow at the Centre for European Policy Studies in Brussels and Visiting Professor at "Institut d'études politiques" (SciencesPo) in Paris. His work focus are the internal market for power and gas as well as efficient support policies for emerging energy technologies that will be needed to make the energy transition happen.