The Energy Union dream


In order to face energetic, environmental and climate current challenges, a common strategy is the only feasible solution for our countries to play a significant role worldwide. This is the reason why policymakers are increasingly talking about an Energy Union.

We should acknowledge that the European electricity sector is already a world leader in sustainability on the basis of its RES (renewable energy sources) portfolio and greenhouse gas emissions. Europeans generally believe that in order to drive the energy transition in the incoming years, we need an ambitious, European approach to energy, and we therefore call for a strong Energy Union. A greater share of renewable energy means an increased need for trade in electricity in both day-ahead and short-term markets, and calls for a reinforcement of power networks, reflecting the importance of the single European energy market. A European vision to energy enhances investors with the long term stability that helps mobilize financing for the investments in low carbon technologies.

However, the energy market in the EU is not uniform, yet. The implementation of the internal electricity market is at different stages: while most Member States are working to integrate the short-term markets and reserves, which also facilitate the market integration of RES, others are working on the more basic aspects of implementation of agreed legislation and market structuring. The Energy Union should bring new impetus and political commitment to proceed in both pathways.

The integration of forward, day-ahead, intraday and balancing markets optimizes the use of assets, including flexibility sources, across the whole of Europe. This leads to more efficient market participation by all agents and, ultimately, to more cost-efficient delivery of energy to consumers. On the gas side, the picture is more or less the same. Further progress should also be made liberalizing the gas markets to ensure that cost-effective and reliable supplies be available throughout Europe. As it is for electricity, this liberalization will require both a convergence of market rules and a strengthening of infrastructure.

Back to the electricity side, the governance of the internal market, including the role of ACER (agency for the cooperation of energy regulators), must be developed with a European mind-set, safeguarding the interests of European customers. The first step should be the development of a shared vision for the role of ACER: Transmission System Operators (TSO) should evolve from national to at least regional system operation. ACER should first and foremost implement the mandate it received in the Third Energy Package to its full extent, acting more proactively and firmly as a facilitator among National Regulatory Authorities (NRAs) for cross-border projects and taking faster decisions in case of disagreement between NRAs. This should particularly apply to the implementation of PCIs (Projects of Common Interest).

In case of NRA disagreement on cross-border issues (related to markets or infrastructure), ACER should be allowed to initiate action and a possibility should be available for parties other than NRAs to call upon ACER’s right to initiate. A proper implementation of network codes and guidelines provisions should be ensured. ACER also needs to focus more on regional projects with multiple Member States involvement, promoting best practices (benchmarking of national systems) among NRAs, including regarding innovation. Cooperation with stakeholders should be reinforced, e.g. developing and monitoring the implementation of network codes (e.g. the Generators Network Code). Member State policies should be consistent with the single market. The Third Energy Package should be implemented, prioritizing the development of robust cross-border intra-day and balancing markets and adequate interconnection capacity, as well as the better use of the existing capacity. The considerable barriers to entry in some Member States should be removed.

The benefits of the internal electricity market will remain partly untapped until we reach a more level playing field that ensures stronger competition. Different taxes and charges on power generation often lead to market distortions. The same applies to taxes on demand response and storage. Definitely, there is still a lot to do to get to the Energy Union.

RES support schemes from recent years have successfully increased the RES capacity in Europe. At the same time, this has resulted in a reduction in the wholesale power prices and has influenced flows in the electricity transmission network beyond the borders of the country in question, thus impacting the profitability of existing generation capacity and potentially also security of supply in other Member States.

The framework for RES should provide policy clarity and market stability to minimize regulatory uncertainty and lower the risks. Europe should implement greater convergence and coordination of RES policies affecting the power sector in order to enhance an easier and more cost-efficient decarburization. The EU ETS, which is a technology-neutral European wide instrument, has the potential to bring an increasingly EU wide approach to low carbon technologies development and investment. However, European carbon prices have been too low in recent years to drive the necessary investments, due to economic crisis, energy efficiency measures and the RES support schemes.

Nonetheless, the approach to foster renewables remains very national. The State aid guidelines that were adopted in 2014 and are valid until 31 December 2020, set requirements on the design of support schemes that constitute State aid. The implementation of these guidelines should produce a gradual convergence of national support schemes.

Diversity in energy policies across European Union Member States is natural, and derives from national and local circumstances. However, market distortions caused by the differences between some key instruments of energy policy leave many benefits of a truly common power market untapped, while increasing the costs of the energy transition. There is room for increased cooperation while taking into account the national circumstances, and recognizing that the energy mix is a national competence. The Energy Union process should lead to an overall energy policy path at the European level, and implementation of this policy path through a combination of EU wide, regional and national measures that are monitored through the development of national plans.

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