EU Energy Union – New Packaging for Old Projects

The European Union summit held on March 19-20, 2015, solemnly declared “the need to build the Energy Union.” Has the dream expressed a few years ago by legendary former European Commission President Jacques Delors come true? Have the Europeans managed to shape a new strategy for dealing with large-scale modern challenges in the energy sector?

The European Union summit held on March 19-20, 2015, solemnly declared “the need to build the Energy Union.” Has the dream expressed a few years ago by legendary former European Commission President Jacques Delors come true? Have the Europeans managed to shape a new strategy for dealing with large-scale modern challenges in the energy sector?

In the document submitted shortly before the summit, the European Commission described the situation in the EU energy sector as follows. The EU imports 53 per cent of its consumed energy at a cost of around EUR 400 billion annually. Six member-states are entirely dependent on a single external supplier for their entire gas imports, making them extremely vulnerable to supply shocks (and it is common knowledge that this supplier is Russia, although the document of the European Commission diplomatically passes it over in silence). Roughly 94 per cent of transport relies on oil products, of which 90 per cent is imported. Collectively, the EU spends EUR 120 billion per year on direct or indirect energy subsidies. Over EUR 1 trillion (!) needs to be invested in the energy sector by 2020 to attain the set energy saving goals, to develop renewable energy and to reduce greenhouse gas emissions. Wholesale prices for electric power in the EU are 30 per cent higher than in the US, while wholesale gas prices are twice as high as in the US. High energy prices reduce the competitiveness of European industry, particularly in power-intensive industries.

Summarizing, we can say that today as 15 years ago, the European Union is working within the classical triangle of energy policy objectives, namely security of energy supplies – reasonable prices – environmental sustainability. However, the environmental objectives in recent years have been clearly overshadowed by concerns about the security of energy supplies and high energy prices.

The future Energy Union will develop along five dimensions:

1. Energy security, solidarity and trust. The Energy Union builds on the Energy Security Strategy, set out in May 2014. The key activities are the diversification of supplies and more transparent gas imports.
2. A fully integrated European energy market, the completion of which requires the development of cross-border interconnections among EU countries and compliance with existing legislation.
3. Energy efficiency contributing to the moderation of energy demand. The proposed package of measures is aimed at reaching the indicative target set in October 2014 - to improve energy efficiency by 27% before 2030.
4. Decarbonization of the economy. The objective set in October 2014 is a 40% domestic reduction in greenhouse gas emissions compared to 1990.
5. Research, innovation and competitiveness: a set of measures to stimulate research and development, primarily in the fields of smart grids, smart home appliances, clean transport, “clean fossil fuels” and “the most secure nuclear power in the world.”

The first thing that leaps to the eyes after an analysis of the proposals of the European Commission [1] and the European Council [2] is that most activities, goals, and even concrete actions have long been declared and implemented. For example, all provisions relating to energy efficiency and decarbonization are abbreviated renderings of Strategy 2030, approved six months ago, while the aims of the Strategy could hardly be called ambitious, as they were rather a “cosmetic improvement of the current movement pattern.” [3]

The internal energy market is the oldest project of EU energy policy, initiated in the late 1980s. Over the past five years, the thesis concerning the need to complete the implementation of the Third Energy Package has migrated from one document to another. This thesis is repeated today, although in a new and sterner wording: “the full implementation and rigorous enforcement of existing energy legislation” [4] that reflects the difficulties that the implementation of the Third Energy Package faces in many EU countries. The idea that the development of cross-border interconnectors is crucial for the formation of a full-fledged EU energy market has been reiterated since 2009; the last large-scale program in this area was adopted in 2013 and is being successfully implemented. R&D promotion is one of the favorite areas of the EU activity. Priorities, mechanisms, and the degree of effectiveness of the programs do change, but the set goals in this area could be called a principal novelty by a stretch of imagination only.