EU energy governance
Chapter 1: Introduction
1.As a society, we are more dependent on a secure energy supply now than at any other point in history. The ‘energy trilemma’ of security of supply, sustainability and competitiveness is an ever-present challenge for policy makers.1 The European Commission’s Energy Union policy, proposed in 2014, seeks to address this challenge. It has five closely related and mutually reinforcing aims:
- energy security;
- the completion of the internal energy market;
- energy efficiency;
- emissions reduction; and
- research and innovation.
2.The Energy Union is a strategic priority for the Commission and thoughts are now turning to the governance framework that will underpin it. As a shared competence between the EU and Member States, co-ordinating EU energy policies will always be a demanding task. At a time when geopolitical security concerns are heightened, pressure to decarbonise is increasing and consumers are facing higher energy bills, agreeing a common approach to energy governance will present fresh political challenges.
3.Policy makers should be drawing on other areas of EU policy when considering the future of Europe’s energy system. The Digital Single Market2, with its strategy for better access for consumers across Europe, has the potential to give more power to energy consumers and stimulate innovation and investment in new technologies such as smart meters. The Commission’s Capital Markets Strategy can help to open up new sources of funding for cross-border energy projects such as interconnectors, as this investment and the mobilising of capital are critical if new energy infrastructure is to be realised. To upgrade Europe’s infrastructure, the European Commission has estimated that around €200 billion is needed during the current decade for transmission grids and gas pipelines.3
4.An EU energy governance framework will always seek to balance Member State priorities and their right to determine their own national energy mix on the one hand, with the wider energy and climate goals of the EU on the other. The Energy Union builds on and widens the scope of existing policy objectives. The Commission has an important role in judging a politically acceptable balance for Member States and in securing EU-wide agreement on governance arrangements. Its proposals need to be specific and well defined.
Background
5.Significant developments have been made in EU energy policy over the last few years. There has been important infrastructure and regulatory progress towards the completion of the internal energy market. The aspiration is to create a genuine single market for energy goods and services that seek to benefit end-users and to increase energy security. The development of common network codes, greater interconnection, the push for common rules on gas security of supply, and Liquefied Natural Gas developments, are all leading towards greater electricity and gas market integration. The 2020 climate and energy package was agreed by EU leaders in 2007 and enacted in 2009. It contains binding legislation to ensure the EU meets its climate and energy targets for the year 2020, and sets three key targets:
- 20% cut in greenhouse gas emissions (from 1990 levels);
- 20% of EU energy from renewables; and
- 20% improvement in energy efficiency.
Crucially, the 20% greenhouse gas and renewables targets were broken down into individual Member State targets. The agreement was hailed as a significant step towards common long-term energy and climate goals.
6.In January 2014 the Commission published a Communication setting out a policy framework for energy and climate policy until 2030, making explicit mention of governance. The Communication said:
“The increased flexibility for Member States will be combined with a strong European governance framework to deliver EU objectives for renewable energy and energy savings in a manner that is consistent with attainment of national and European greenhouse gas targets and coherent with the wider principles of European energy policy, including the operation and further integration of the internal energy market and the delivery of a competitive, secure and sustainable energy system.”4
7.Later that year, at the October 2014 European Council, the targets for 2030 were adopted. They included:
- a binding target to reduce greenhouse gas emissions by at least 40% by 2030 (from 1990 levels);
- an EU-wide binding target for renewable energy of at least 27%; and
- an indicative energy efficiency target of at least 27%.
8.A key difference from the 2020 targets is that the 27% renewable energy target is binding at EU level but is not broken down into individual Member State targets. The October 2014 Council conclusions also said that the target “will be fulfilled through Member States’ contributions guided by the need to deliver collectively the EU target.”5
9.As part of its international commitments to climate change mitigation, the EU has proposed that greenhouse gas emissions be reduced by ‘at least’ 40% by 2030 (from 1990 levels). The use of the term ‘at least’ allows for the target to be increased following the December 2015 United Nations Climate Change Conference6, although this would be resisted by a number of Member States. The EU has also set an objective to continue reducing emissions so that by 2050 they are 80–95% below 1990 levels. This decarbonisation pathway will have a transformative impact on the energy sector, requiring significant infrastructure investment, the deployment of new technologies on a large scale and the adaptation of many existing business models.
10.In February 2015 the Commission published a Communication setting out its vision for an Energy Union, taking account of targets, which had already been agreed, and seeking to integrate them with wider policy goals. In June 2015 the Energy Council called on the Commission to:
“rapidly present initiatives on the governance system of the Energy Union in line with the … March 2015 and … October 2014 European Council conclusions, including guidelines on regional co-operation, to be developed swiftly and endorsed by the TTE (Energy) Council and reported to the European Council in December 2015.”7
It is clear that energy governance is high on the European political agenda.
11.In November 2015 Commissioner Šefčovič, Vice President and Commissioner for Energy Union, launched the Communication on the State of the Energy Union 2015.8 This detailed the progress made by the EU as a whole and by individual Member States in meeting agreed objectives and targets. On governance, it noted that “the Energy Union needs a reliable and transparent governance process, anchored in legislation, to make sure that energy-related actions at European, regional, national and local level all contribute to the Energy Union’s objectives”. It also proposed a comprehensive timetable for the development of National Energy and Climate Plans, which is to conclude in 2018.
12.On 26 November 2015, the Energy Council adopted conclusions on energy governance which included a number of key recommendations (see Box 1).
Box 1: Energy Council, November 2015
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The Energy Council confirmed that the governance system “will be an essential tool for the efficient and effective construction of the Energy Union and the achievement of its objectives”. The Council also concluded that the National Energy and Climate Plans “will serve as the reference points for monitoring the achievement of all EU energy policy objectives and targets”. In order to achieve this the governance system will:
The Council noted that “The governance system will take into account the different nature and scope of binding, EU-binding or indicative 2030 climate and energy targets”, and that “it will be accompanied by reviewing and developing legislation related to emissions reduction, energy efficiency and renewables to underpin the agreed 2030 targets”. The Council conclusions also noted that regional co-operation had proved a key instrument for meeting existing policy objectives and that it needed to be incentivised. |
Source: Transport, Telecommunications and Energy Council conclusions: The Governance System of the Energy Union, November 2015: http://data.consilium.europa.eu/doc/document/ST-14459–2015-INIT/en/pdf [Accessed 3 December 2015]
The inquiry and the Committee’s work
13.In this inquiry we have sought to cast light on energy governance by considering two case studies: capacity markets and renewable energy targets. We have also looked ahead to define the characteristics of a healthy governance framework, making recommendations to both the UK Government and European Commission. In our 2013 report, No Country is an Energy Island: Securing Investment for the EU’s Future9, we argued for longer term policy making, increased interconnection and a much more ambitious investment strategy for the EU’s energy framework. Earlier this year, our report The North Sea under pressure: is regional marine co-operation the answer?10 argued for renewed efforts to overcome the regulatory barriers preventing greater cross-border energy co-operation in the North Sea. This report on EU energy governance continues these themes and calls for clear stakeholder and regional engagement, greater clarity over the enforcement of EU targets and longer term efforts to meet energy and climate energy goals. It also aims to bring the question of governance to wider public attention and to give a challenging reality check to policy makers who champion high-level agreements which gather political momentum, but who fail to consider their full implications.
14.The inquiry did not address the content of National Energy and Climate Plans, nor did it reflect on the merits of the various national energy mixes of Member States. Instead, we offer modest and discrete conclusions and recommendations to the European Commission and Member States, including the UK Government, as energy governance policy continues to take shape.
15.While this report is made to the House, it is also aimed at a wide range of policymakers and others, within the UK and across the EU as a whole. We trust that the Commission and the European Council will take note of our report, and we look forward to the Commission’s response in the context of the ongoing political dialogue between the Commission and national parliaments. It is particularly pleasing to be able to send our findings to Commissioner Maroš Šefčovič, who met members of the Energy and Environment Sub-Committee in July 2015 to discuss the inquiry and the wider Energy Union Package.
16.We issued our Call for Evidence in September 2015 and held a stakeholder seminar in November 2015. A note of this seminar is given in Appendix 4. We received 23 pieces of written evidence and heard oral evidence from Andrea Leadsom MP, Minister of State at the Department of Energy and Climate Change and Tim Abraham, Head of European Policy at the same department.
17.The members of the Energy and Environment Sub-Committee who carried out the inquiry are listed in Appendix 1; their declared interests are also listed. The Call for Evidence is given in Appendix 3. We are grateful for the written evidence that was submitted to the inquiry; the respondents are shown in Appendix 2. All evidence is published online.
18.We are also grateful to Antony Froggatt, who acted as Specialist Adviser to the inquiry.
19.We make this report to the House for debate.
1 HM Government, Delivering UK Energy Investment (July 2014), p4: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/331071/DECC_Energy_Investment_Report.pdf [Accessed 1 December 2015]
2 Communication from the Commission: A Digital Single Market Strategy for Europe, COM (2015) 192
3 European Commission, ‘Infrastructure: Connecting energy markets and regions’: https://ec.europa.eu/energy/en/topics/infrastructure[Accessed 3 December 2015]
4 Communication from the Commission: A policy framework for climate and energy in the period from 2020 to 2030, COM (2014) 15
5 European Council conclusions: On 2030 Climate and Energy Policy Framework, October 2014: http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/145397.pdf [Accessed 3 December 2015]
6 The content of this report does not reflect the developments of the December 2015 United Nations Climate Change Conference.
7 Transport, Telecommunications and Energy Council conclusions: On the implementation of the Energy Union: empowering consumers and attracting investments in the energy sector, June 2015: http://data.consilium.europa.eu/doc/document/ST-9073-2015-INIT/en/pdf [Accessed 3 December 2015]
8 Communication from the Commission: State of the Energy Union 2015, COM (2015) 572
9 European Union Committee, No Country is an Energy Island: Securing Investment for the EU’s Future, (14th Report, Session 2012–13, HL Paper 161)
10 European Union Committee, The North Sea under pressure: is regional marine co-operation the answer?, (10th Report, Session 2014–15, HL Paper 137)