Commission’s new proposals focus on renewables and connected energy markets

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A successful energy transition is key for the success of climate action at European level, while reducing CO2 emissions is linked to increasing energy efficiency and increasing the use of renewable energy sources, said Benedikt Klauser, on behalf of the European Commission’s DG Energy, at 2017 Energy Strategy Summit, in Bucharest. Mr. Klauser also tackled some very hot topics for the Romanian O&G industry: “Many countries in the region, including Romania, still have a considerable gap to bridge in terms of correctly implementing and living the European Market rules”, he said.

Here it is Mr. Benedikt Klauser’s opening intervention at the 2017 Energy Strategy Summit.

Good morning ladies and gentlemen, I would first like to thank the organizers for this opportunity to discuss some pressing global issues and their implications for energy policy which affect the European land at a national level and I would be happy to provide the perspective of the European Commission in this context and to outline some of the current work on a global scale. The most impactful challenge that we currently face is certainly climate change, a global phenomenon and one that doesn’t wait for politics; it’s one that we need to tackle at a global level. The EU has a long history of championing global climate action and, as we may say, with great success. 2016, the year ago, was marked by considerable political unrest in Europe and also in other parts of the world. The entering into force of the Paris Agreement stood out as very good news. The Paris Agreement, as you know, is the first ever universal and legally binding global climate deal and the EU played a key role in securing this agreement.

Indeed, the EU veers a large and increasing responsibility to ensure the success of global climate action, even more so since the US have announced its withdrawal from the agreement. Energy policy is an important instrument to address climate change given that 2/3 of CO2 emissions are today energy related. From that we can conclude that a successful energy transition is key for the success of climate action at European level. Reducing CO2 emissions is linked to increasing energy efficiency and increasing the use of renewable energy sources. As Radu [Dudău] mentioned, the EU have set ambitious targets in our 2030 climate and energy framework. We aim for at least 40% cuts in total greenhouse gas emissions, a share of at least 27% of renewable energy and at least 27% improvement in energy efficiency.

However the energy transition is not only a good opportunity to decarbonize our economy, it’s also a great opportunity to tender investment and unlock significant potential of work for growth and jobs in innovative and sustainable technologies. So it’s fair to say that sustainability is a key aspect of European energy policy in order to meet the climate and energy targets that we have set for ourselves by 2030.

However, it is also our responsibility at European level that our energy supplies are both competitive and secure for the benefit of 500 million European citizens and over 26 million active businesses in the EU. Well-functioning and crucial well connected energy markets are the best way to deliver energy at competitive prices and also to deliver energy towards the most in time of scarcity and in crisis situations. In order to achieve that we need to create a regulatory environment that will enhance market functioning rather than hamper it, both at European and national level. The creation of a fully integrated internal energy market is a key objective of the Energy Union strategy of the EU and today we can look back at roughly three decades of working towards the integration of European energy markets. The 3rd Energy Package as it stands today and the more detailed market roles that are enshrined in the so called European network codes are the result of these three decades of work and I believe they can be considered a major success story. These rules ensure full market access to all member states to electricity grids and pipeline networks across Europe and, crucially, a market oversighted by independent regulatory authorities in all member states.

However, it is clear that as regulators we can’t afford to rest in our laurels. Technological progress continues, energy markets are evolving and as regulators we need to stay atop of these developments or risk creating inefficiencies and market distortion. That means we need to future approve the regulatory framework for the European energy markets and that is exactly the purpose of the Clean Energy Package which was proposed in November 2016. The objective of these packages to provide a stable and efficient rulebook to make the energy sector not only cleaner, but also more market-oriented, more flexible and thereby more competitive, but also more interconnected and thus more secure and finally more innovative and, in that manner, fit for the future. Allow me to say a few words on energy efficiency first. Energy efficiency is not only the most cost effective way for the energy transition, it is also an effective way to create growth, employment and investment opportunities. With what was proposed in the Energy Efficiency Directive we seek a binding 30% energy efficiency target, up from 27%. We believe that this will create up to 400.000 additional jobs all across Europe, it will reduce the import dependency of Europe by more than 10% and it will cut health damage by up 8 billion euros.

Second, as I said earlier, the EU has the goal to become the world’s number 1 in renewables. We have target share of at least 27% renewables in our generation portfolio by 2030 and to this end we want to maximize the use of renewables in buildings, in transport, and in the industry.

The Commission new proposals on the Renewable Energy Directive will help the EU member states to decide on what schemes to achieve a much more market-oriented, cost effective and Europeanized approach to renewables. Firstly by goofing away from national targets towards a progressive cross-border opening for support schemes, but also by simplifying the administrative procedures that the start-up face in this regard and by putting an end to retroactive changes to existing support schemes which undermine the trust of investors. The increasing share of renewable energy sources also poses a challenge for this ability of energy markets. Providing markets with greater flexibility to ensure competitiveness and crucially secured supplies is what stands at the core of the Commission’s new proposal on an Electricity Market Design. The objectives are to make our power markets fit for renewables while promoting, as I said, flexibility, but also rational decisions and accurate price signals which then provide better signals for further investment. But for the market to send proper price signals we need to create a leveled playfield among technologies. By helping all the technologies gradually shoulder market responsibilities, we will get a clear picture of what the underline value of the technology is and where the investment should go to. That’s why we were inter alia proposing to all technologies for standard dispatching rules and balancing responsibility. The Market Design proposal will also ensure a European dimension to the security of supply. We believe that in an integrated market regional cooperation is crucial. When it comes to generation capacity, a number of member states have introduced capacity systems to ensure generation adequacy and security of supply. In this context, the Commission proposes a European framework for capacity mechanisms to ensure cross-border participation and to avoid market distortion. Clearly, energy crises can never be fully excluded and we closely avoided one during the cold spell in January. Therefore, the Commission also proposes common rules of this preparedness to ensure a cross-border capacity, cross-border cooperation in emergency situations. That’s for electricity, and this will complement the existing and recently revised rules for security of supply in gas.

For our further work, it should be the consumers that stand at the center of energy markets. The Clean Energy Package even the previous legislation puts the consumers in first place. Firstly by strenghtening the rights of consumers to participate in the energy markets and then by giving them the opportunity to benefit directly from the clean energy transition. But the proposal also reinforces consumer rights such as data protection and switching supplyers. The proposal also emphasizes the need to focus on the growing risk of energy poverty. In particular we required the member states to account for the risk of energy poverty when designing their energy efficiency obligations. As you can see, the Clean Energy Package is a challanging task, but it’s an important opportunity to prepare our energy market for the future.

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