The Energy Union

The Commission has set out a strategy for creating an “Energy Union” in the EU. How it can be achieved, and how it will benefit Europe, is argued in a new Communication which also announces upcoming legislation.

The Communication points out that the EU’s current energy framework is outdated. Some 28 national energy systems continue to coexist, while new technological requirements mean that a great deal of infrastructure must be overhauled.

The Communication therefore sets out a framework strategy and lays down 15 specific actions for implementation. It proposes that these actions be taken in five mutually-reinforcing and closely interrelated dimensions: 
• Energy security, solidarity and trust
• The internal energy market
• Energy efficiency as a contribution to the moderation of energy demand
• Decarbonisation of the economy 
• Research, innovation and competitiveness
Finally, the Communication is part of an energy package that also includes two specific Communications on electricity interconnection and on the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP21).

Energy Security, Solidarity and Trust

The Commission aims to complete the internal energy market and achieve efficient consumption. These are seen as key drivers to fostering greater transparency and more solidarity and trust between Member States.

Energy security should be strengthened through diversification of supply. In this regard, the Commission calls for further work on the Southern Gas corridor, liquefied natural gas (LNG) terminals and intra-EU infrastructure. This will help reduce external dependence and improve the energy mix.

The Commission will make sure that stronger solidarity is applied across Member States in cases of supply disruption of oil, through the revision of the Security of Gas Supply Regulation and the feasibility assessment of voluntary demand aggregation mechanisms for collective purchasing of gas.

The Commission also calls for a stronger European role in global energy markets through improved global governance for energy and the use of trade and foreign policy instruments to foster strategic energy partnerships.

Efforts should be targeted at developing relations with Norway, the United States, Canada and Ukraine in particular and strengthening the Energy Community. As regards Russia, a reframed energy relationship could be considered.

Finally, the Commission will make sure it gets more involved in the negotiation of intergovernmental agreements related to the buying of energy from third countries.

Fully Integrated Energy Market

The Commission has identified a number of flaws that prevent the internal energy market from being completed, namely insufficient investments, market concentration, weak competition and a fragmented energy landscape.

As these so-called energy islands still remain, the Communication recalls the Council objective for every EU Member State to achieve a minimum interconnection target of 10% by 2020 and 15% by 2030. The Commission intends to monitor infrastructure improvement through the Projects of Common Interest (PCIs) follow-up, an annual report on the achievement of the 10% interconnection target and a dedicated energy infrastructure forum.

As regards the internal energy market’s software, the Commission notes that existing energy-related legislation such as the 3rd Internal Energy Market Package and competition rules should be implemented first. The role of transmission system operators and the energy regulator (ACER) should be strengthened in order to oversee the functioning of an increasingly integrated energy market.

The Communication also highlights the need to meet current challenges facing the electricity market. In particular, the Commission will propose rules for cross-border electricity trade as well as measures for better integration of renewable electricity in the market. The Commission will closely monitor energy costs to ensure transparency.

The Commission emphasises the need to build on existing regional partnerships such as the Baltic Energy Market Interconnection Plan (BEMIP). Particular focus should be given to Central and South-Eastern States due to their vulnerability and Northern and Baltic Seas due to the cost of specific energy systems.

Improving market signals is a paramount issue that needs to be addressed through competition and economic governance frameworks. Action at Member State, regional and local levels may foster better consumer access to information and greater freedom of choice.

Synergies between the Energy Union and the Digital Single Market may accelerate the development of smart and standardised technologies to help them take control of their energy consumption.

Finally, the Commission encourages Member State welfare measures to tackle energy poverty issues, though it does not rule out market-based measures such as solidarity tariffs or discounts on energy bills.

Energy Efficiency

According to the Communication, energy efficiency should be considered an energy source in its own right, representing the value of energy saved. The Commission recommends that focus should be mostly on sectors with huge energy efficiency potential, namely transport and buildings.

With regards to buildings, the Communication notes that efficiency gains can be captured in particular with regards to district heating and cooling. The Commission would support the promotion and development of new financing schemes and conduct a review of the Energy Efficiency and Energy Performance of Buildings Directives.

With regards to transport, the Commission will seek to better exploit the single market and internalise external costs through road-charging schemes based on the polluter-pays and user-pays principles, less greenhouse gas intensive modes of transport, increased development of alternative fuels and further electrification of car fleets and other means of transport.

To implement its energy efficiency agenda, the Commission will seek to establish synergies between energy efficiency policies, resource efficiency policies and the circular economy.

Decarbonising the Economy

The Energy Union package includes a Communication on the Road to Paris, which builds on the EU’s contribution to the 2015 Paris Summit. This is based on a 40% domestic reduction in greenhouse gas emissions compared to 1990, agreed as part of the 2030 climate and energy framework.

In addition, the Commission establishes the revision of the Emissions Trading System (ETS) Directive and proposals on the Effort-Sharing Decision and the inclusion of Land Use, Land Use Change and Forestry (LULUCF) into the 2030 Climate and Energy Framework as cornerstones of its climate policy.

To ensure that its targets are met, the Commission insists on energy markets and grids being compatible with renewable energies. Also, the Commission encourages the development of biofuels.

Innovation and Competitiveness

The Commission’s new European energy research and innovation (R&I) approach builds on Horizon 2020 to encourage actions aimed at making the EU the world leader in developing the next generation of renewable energy, fostering the participation of consumers, building efficient energy systems for buildings and sustainable transport systems. In this capacity, it will develop an updated Strategic Energy Technology Plan and a strategic transport R&I agenda.

With regards to collaborative research across Member States, the Commission puts Carbon Capture and Storage (CCS) and nuclear safety and technology development at the top of the research agenda.

Finally, the Commission highlights the need to make sound use of public procurement, trade instruments and employment policies to the benefit of industrial and business innovation.

Next Steps

The Commission Communication has been sent to the European Parliament and the Council. Council Conclusions may be adopted at the Energy Council of 8 June 2015. 

The European Parliament is expected to respond through the adoption of an Own-Initiative Resolution.