Documents considered by the Committee on 15 December 2010 - European Scrutiny Committee Contents

2 Energy 2020



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COM(10) 639

Commission Communication: Energy 2020 — A strategy for competitive, sustainable and secure energy
Legal base
Document originated10 November 2020
Deposited in Parliament12 November 2010
DepartmentEnergy & Climate Change
Basis of considerationEM of 24 November 2010
Previous Committee ReportNone, but see footnotes
To be discussed in CouncilSee paragraph 2.20
Committee's assessmentPolitically important
Committee's decisionFor debate in European Committee A


2.1 Not surprisingly, the EU's aim of achieving a safe, secure, sustainable and affordable energy supply has been the subject of a number of initiatives from the Commission. In particular, it put forward in January 2007 a Strategic Energy Review,[1] which was followed in November 2008 by a second such review,[2] the two documents being debated on 24 July 2007 and 3 March 2009 respectively. However, the Commission says that energy remains a crucial element of overall EU policy, and that decisions are required urgently if more secure and sustainable systems are to be achieved, with investments of around €1 trillion needed over the next ten years to diversify existing resources and cater for new requirements. It states that this requires an ambitious policy framework, and it has sought in this Communication to outline what such a strategy would entail. The Communication is accompanied by a Commission Staff Working Document, which evaluates EU policy initiatives in relation to energy efficiency and savings, the internal energy market (including consumers' rights), securing a sustainable and competitive supply, and external supply and worldwide promotion of sustainable use.

The current document

2.2 The Commission says that a common energy policy has evolved around the aim of ensuring the uninterrupted availability of energy products and services at an affordable price, whilst contributing to the EU's social and climate goals, and it points out that the central goals — security of supply, competitiveness and sustainability — are now set out in Article 194 of the Treaty on the Functioning of the EU. However, it notes that, although some progress has been made, energy systems are adapting too slowly, whilst the scale of the challenge grows, and that the situation will be exacerbated by forthcoming enlargements. In particular, the Commission recalls the objectives for 2020 adopted by the European Council in 2007, under which greenhouse gas emissions would be reduced by 20% (rising to 30%, if other countries are prepared to make commensurate reductions), the share of renewable energy increased to 20%, and energy efficiency improved by 20%, and it also notes the European Council's long term commitment to emission cuts of 80-95% by 2050. However, it says that the existing strategy is unlikely to achieve all the 2020 targets and is wholly inadequate to meet the longer term challenges, and that the EU must agree as a matter of urgency the tools which enable the necessary shift to take place.

2.3 In the meantime, it highlights what is sees as a number of shortcomings:

  • the continuing fragmentation of the internal energy market, meaning that there is still sub-optimal consumer choice;
  • the need to replace existing low-carbon energy sources, particularly nuclear and hydropower, if the EU is not to lose one-third of its generation capacity by 2020;
  • the poor quality of Member States' National Energy Efficiency Plans, resulting in the EU being well short of achieving its 2020 target;
  • the insufficient heed paid at international level to warnings about future tight oil supply, and the need to realise the potential for developing the EU's indigenous fossil fuel reserves;
  • the role which a continental market can play in obtaining the optimum energy mix;
  • the need for the EU to remain an attractive market at a time of increasing worldwide competition for energy resources;
  • the need for it to adopt its common interest and ambition in international energy affairs.

2.4 The Commission suggests the adoption of a new energy strategy focusing on the following five priorities:

  • achieving an energy efficient Europe;
  • building a truly pan-European integrated energy market;
  • empowering consumers and achieving the highest level of safety and security;
  • extending Europe's leadership in energy technology and innovation;
  • strengthening the external dimension of the EU energy market.

These are then spelt out in more detail in the remainder of the Communication.


2.5 The Commission stresses that Europe cannot afford to waste energy, and that its efficient use is thus one of the central objectives for 2020, and a key factor in achieving long-term energy and climate goals. It therefore believes that it should be mainstreamed into all relevant policy areas in order to change current behaviour, with energy efficiency criteria being imposed in all spheres, including the allocation of public funds. It says that efforts should be concentrated on the whole energy chain, with effective compliance monitoring, adequate market surveillance, widespread use of energy audits, as well as material efficiency and recycling, and that this needs to be backed by a reinforced political commitment. It adds that special attention needs to be given to buildings and transport as the sectors with largest potential for efficiency gains, with Member States taking the steps needed to implement the legally binding climate targets which have been set, and it suggests that revision of the energy taxation directive could help to realise long-term efficiency gains. It also notes the important part which information and communication technologies can play, and the role of energy audits, energy management systems, and efficiency benchmarking: and it observes that efficiency must become a profitable business in itself, leading to a robust internal market for energy-saving techniques. In addition, it highlights the need for the public sector to lead by example by setting ambitious consumption objectives, and to address the fact that energy-efficient investments often have short-term up-front costs before the medium and longer-term benefits are felt, suggesting that EU funding can have a high leverage factor in encouraging new investments, as can innovative and carefully considered uses of taxation and pricing.

2.6 The Commission says that it will present an Energy Efficiency Plan in early 2011, which will be followed in the course of the year by concrete regulatory proposals. The Plan will also address financing issues, such as access to finance, innovative financing products, incentives for energy-efficiency investments, and the role of EU funding, in particular the structural funds.


2.7 The Commission comments that the opening up of Europe's energy markets has enabled consumers to benefit from more competitive and sustainable supplies, but that this potential will not be fully realised unless a more integrated, interconnected and competitive market is created. It suggests that the electricity and gas markets are still largely fragmented, with numerous barriers, and remain national in scope, with incumbent companies having a de facto monopoly position, and regulated energy prices further reducing competition. It says that pro-active competition enforcement is therefore needed by both the Commission and Member States, and it adds that, by introducing a legislative framework to achieve the 20% renewable energy target by 2020, Europe has taken the first step in this area, it now being necessary to ensure that the legislation is fully implemented.[3]

2.8 The Commission goes on to say that the further development of renewable energy will continue to rely for some time on support schemes, and that it will have to play its part in ensuring that these are sustainable, consistent with technological progress, and do not hinder innovation or competition. It adds that there must also be a degree of convergence or harmonisation between national schemes as the market for renewables moves towards cross-border supply, and that the requirements for a pan-European trade should be defined on the basis of best practice, with greater use being made of feed-in premiums, technology-specific support, and the mobilisation of financial instruments in accordance with state aid rules.

2.9 The Commission also stresses the need for a proper energy infrastructure across Europe, comparable to those for telecommunications and transport, if the market is to work properly, and it says that further upgrading is needed, particularly in those Member States which joined in 2004, and in less developed regions. In particular, it highlights the lack of a grid infrastructure to enable renewables[4] to compete on an equal footing, adding that today's grid will struggle to absorb the volumes of renewable power implied by the 2020 targets. It suggests that smart meters and power grids are the keys to full exploitation of renewable energy savings, and that a clear policy and common standards are needed in these areas well before 2020: it also believes that solidarity between Member States will be null and void without interconnectors across external borders and maritime areas, noting that, as a major energy importer, the EU is directly affected by the evolution of networks in neighbouring countries.

2.10 The Commission says that an investment of around €1 trillion is needed by 2020 to replace obsolete capacity, modernise and adapt infrastructures, and cater for increasing and changing demand for low-carbon energy: and it adds that, whilst investment decisions lie mainly with energy companies, system operators and consumers, public policy is decisive in creating a stable and transparent framework for such decisions, with a need to utilise fully the new tools[5] created by the Third Internal Energy Market Package, and regional initiatives serving as stepping stones towards a European market. Whilst observing that infrastructure investment will continue to be financed mainly from tariffs paid by users, it says that the market alone will not necessarily deliver the scale of investment needed, and that it proposes to adopt a new strategy on infrastructure development to ensure adequate grid investments in electricity, gas, oil and other energy sectors, notably natural gas. It also states that complex and lengthy administrative procedures can be a major bottleneck, and that existing procedures for projects of European interest will need to be improved and streamlined, whilst respecting the principles of public acceptance and existing environmental legislation, and engaging local, regional and national communities more constructively.


2.11 The Commission observes that, whilst a well functioning internal market benefits consumers through wider choice and lower prices, many do not perceive that they are better off as a result of greater competition between suppliers, and that individuals need to exercise their rights under EU legislation and to be aware of the potential for reducing energy bills through savings, noting also the importance of competitive energy for important European industries. It says that, since the international market for oil supplies could become very tight before 2020, EU consumers need to step up their efforts to reduce demand, and that, although this can be achieved through user-friendly smart grids, smart meters and billing, consumers also need to become more pro-active. However, although the Commission regards the provision of affordable and reliable supplies as primarily the task of the market, it says that safety nets are necessary for vulnerable consumers or at times of supply crisis, and that the internal market is also hampered when Member States are not fully interlinked: and it points to the importance of the Gas Security Regulation,[6] to the need for further interconnection between Member States, and for active competition enforcement. Finally, it comments on the need to ensure that European citizens are protected from the risks of energy production, and that the EU must continue to be a world leader in developing systems for safe nuclear power, the transport of radioactive substances, and the management of nuclear waste, with international collaboration on nuclear safeguards playing a major role.


2.12 The Commission says that, without a technological shift, the EU will fail in its 2050 ambitions to decarbonise electricity and transport, and that, given the timescale for developing and disseminating new low-carbon technologies, it is more urgent than ever to bring these to European markets. It observes that the Emissions Trading Scheme is an important demand-side driver, but that new technologies will reach markets more quickly and economically if they are developed through collaboration at the EU level. It points out that the Strategic Energy Technology (SET) Plan sets out a medium term strategy for all sectors, but that development and demonstration projects for the main technologies must be speeded up, noting also the crucial role of innovation highlighted in the Europe 2020 flagship on "Innovation Union".[7]

2.13 The Commission points out that the resources required over the next two decades for the development of these technologies are very significant, especially in the current economic climate: and it suggests that, as major projects — such as offshore wind power — affect several Member States, the Europe-wide coordination needed should include the pooling of different funding sources, with all stakeholders being expected to contribute, and leverage by the EU budget raising further the overall level of funding. The Commission also stresses the fierce competition which the EU faces in international technology markets, for example solar, wind and nuclear energy, and the need for its researchers and companies to increase their efforts, including stepping up cooperation with third countries where this is mutually beneficial.


2.14 The Commission notes that the EU is the world's largest regional energy market and importer, but that the same collaboration and common purpose is not yet evident in external energy policy, even though several of the challenges it faces are common to most countries and rely on international collaboration. It adds that international energy policy must be based on security of supply, competitiveness and sustainability, and that, whilst relations with producing and transit countries are important, those with large energy-consuming nations, not least emerging and developing countries, are of growing significance, with sustainable needs being at the core of both energy and development policy, as proposed in the Green Paper on Development Policy. It also observes that new patterns of global supply and demand, and increasing competition for resources, make it essential for the EU to apply its combined weight effectively in relation to its third country suppliers, and to push its agenda for decarbonisation and energy efficiency. It notes that the Emissions Trading Scheme is a driver of international carbon markets, and can further their development, and that the EU already has a series of complementary and targeted frameworks ranging from specific energy provisions in bilateral agreements to multilateral arrangements, such as the Energy Community Treaty and the Energy Charter Treaty, with negotiations for new agreements currently taking place with several countries.

2.15 The Commission says that the EU must now formalise the principle that Member States should act for the benefit of the EU as a whole in bilateral relations, and that, building on the legal basis in the Lisbon Treaty, its external energy policy must be based on effective solidarity, responsibility and transparency among all Member States, ensuring the security of the internal energy market, and involving more effective coordination. It suggests that international cooperation has produced good results in the nuclear field, and that the EU should now encourage partner states to make international nuclear safety and security standards and procedures legally binding and effectively implemented worldwide. It adds that, as well as being vital for its security of supply, the external dimension of EU energy policy must be consistent with its other external activities on development, trade, climate and biodiversity, enlargement, and Common Foreign and Security Policy: and it says that energy security is closely intertwined with the EU's foreign and security priorities, with diversification of fuels, sources of supply and transit routes being essential. It says that it will present in 2011 concrete proposals to reinforce the overall consistency and efficiency of EU external energy policy.

2.16 The Commission concludes by repeating that the EU faces huge challenges in securing the secure energy supplies which are crucial to sustainable growth, and that the new strategy will help to prepare it for those it may have to face by 2020. However, it adds that the long lead-in times needed for changes to energy systems means that the transition to a low-carbon economy by 2020 cannot be guaranteed, and that it therefore proposes to follow up this strategy with a roadmap for 2050.

The Government's view

2.17 In his Explanatory Memorandum of 24 November 2010, the Minister of State for Energy and Climate Change at the Department of Energy & Climate Change (Mr Charles Hendry) says that the Government welcomes the publication of this Communication as an important step towards defining the EU's energy policy over the coming decade. It believes that Member States face common challenges as they try to reduce emissions, increase energy security and improve competitiveness, and that it is vital they work together to address challenges such as the need to drive down energy consumption, incentivise investment in infrastructure, and promote the development and deployment of low carbon technologies.

2.18 The Minister says that the Government agrees with the broad priorities identified by the Commission, and welcomes in particular the strong focus on making the internal market work; the development of low carbon infrastructure; the intention to focus on implementation of the SET Plan; and the commitments to continue the EU's work on standard-setting and labelling regimes to improve energy efficiency. He adds that the Commission has rightly identified the need to ensure that the EU has good relationships with suppliers and other major consumer states, and the importance of working together to achieve this, and that the Government also agrees that the EU needs to tackle issues such as lack of consumer information and freedom to switch suppliers, in particular through implementation of internal market legislation, this being vital if a change in behaviour and a good deal for consumers is to be encouraged.

2.19 The Minister notes the Commission's intention to present a number of legislative actions and proposals over the next eighteen months, and says that the Government will want to ensure that these do not lead to unnecessary increases in regulatory burdens and that any new use of EU funds is focused on areas which provide added value, represent value for money, and reflect the need for fiscal consolidation across the EU. He adds that the Government will monitor closely all proposals to ensure that they respect the divisions of competence between Member States and the EU, and notes that the UK has some concerns about proposals in relation to European external relations policy and references to taxation and planning policy.

2.20 The Minister says that the Communication was due to be discussed at the Energy Council on 3 December, and will in turn inform the energy-themed European Council on 4 February 2011.


2.21 Although this is the third major review of energy strategy produced by the Commission in a little under four years, this is a policy area which is of manifest political, economic, environmental and social importance, given the various commitments which the EU has made, including those to reduce greenhouse gas emissions, increase the uptake of renewables, and improve energy efficiency. We are therefore drawing this document to the attention of the House.

2.22 At the same time, as each of the two previous Communications was debated in the not-too-distant past, we have considered carefully whether another debate at this stage would be appropriate. We have concluded that it would, partly because this is a topical and fast-moving area whose importance, if anything, increases over time, and partly because a debate now would provide the present House with its first opportunity to consider EU policy in this area in some detail. We are therefore recommending that the document should be debated in European Committee.

1   (28276) 5282/07: see HC 41-x (2006-07), chapter 2 (21 February 2007). Back

2   (30198) 15944/08: see HC 19-iii (2008-09), chapter 2 (14 January 2009). Back

3   For example, the Commission says that it will assess from 2011 the effects of the Renewable Energy Directive. Back

4   Such as North Sea wind power and solar facilities in southern Europe. Back

5   These include the Agency for the Cooperation of Energy Regulators and new Networks of Transmission System Operators for Electricity and Gas. Back

6   Regulation (EC) No 994/2010. Back

7   (32042) 14035/10: see HC 428-viii (2010-11), chapter 8 (17 November 2010) Back

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