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COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANK State of the Energy Union 2015

COM/2015/0572 final
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Brussels, 18.11.2015

COM(2015) 572 final

COMMUNICATION FROM THE COMMISSION

State of the Energy Union 2015

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1.    Introduction

The European Commission's “Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy” 1 has created a new momentum to bring about the transition to a low-carbon, secure and competitive economy. To keep this momentum, this first State of the Energy Union 2 looks at progress over the last nine months and identifies key issues that require specific political attention in 2016, a key year for implementation of the Energy Union. 3  

In a few days, world leaders will gather in Paris to agree how to tackle one of mankind’s greatest challenges: climate change. The State of the Energy Union highlights Europe’s contribution to the Paris negotiations and focuses on the follow-up. Europe’s leadership in the transition to a low-carbon economy needs to continue after Paris, both through the implementation of the 2030 climate and energy targets and a coherent energy and climate diplomacy, ensuring that all countries follow-up on their commitments.

There is a strong business case for this transition. Leading European companies are changing their business models. Renewable energy and energy efficiency are creating jobs in Europe, requiring new skills and investments. Many of the changes linked to this transition will take place in cities and municipalities; when our cities become smarter, they become key enablers of the EU’s sustainable energy policies.

The electricity and gas markets are still not performing as they should. For the transition towards a low-carbon economy and society to be successful and socially fair, citizens should take more ownership, benefit from new technologies and more competition to reduce their bills, and participate more actively in the market.

In 2015, geopolitical events in our immediate vicinity kept energy high on the agenda. To deal with these challenges, energy security, efficiency, infrastructure development, the completion of the internal energy market and sustainability are intrinsically linked. The 2nd list of Projects of Common Interest sets out the infrastructure projects which are urgently needed to meet our energy policy targets and objectives.

The State of the Energy Union presents key building blocks for an implementation mechanism leading to more predictable, transparent and stable policies. The guidance on integrated national energy and climate plans provides the basis for Member States to start developing their integrated national energy and climate plans for the period from 2021 to 2030. The proposed methodology on key indicators is the first step towards measuring and monitoring the delivery of the Energy Union.

In recent months, the Commission has visited many Member States to discuss the Energy Union with a wide range of stakeholders. In addition, technical discussions have taken place with all Member States. These contacts have enabled the Commission to produce an Energy Union assessment for each Member State and to identify policy conclusions for all five dimensions of the Energy Union.

2.    Decarbonisation of the economy

Progress made

The EU economy is currently the most carbon-efficient major economy in the world. It has been particularly successful in decoupling economic growth and greenhouse gas emissions. Between 1990 and 2014, the combined gross domestic product of the EU grew by 46%, while total greenhouse gas emissions decreased by 23%. The EU is one of only three major economies 4 that generate more than half of its electricity without producing greenhouse gases. 5  

One objective of the Energy Union Strategy is to move further away from an economy driven by fossil fuels. In 2015, progress was made in three fields that lie at the heart of this transition: emissions trading, renewables, and further investments in low carbon technologies and energy efficiency.

The agreement on the introduction of the Market Stability Reserve, in place from 2019, will strengthen the EU Emissions Trading System (ETS). In July 2015, the Commission presented a proposal to revise the EU Emissions Trading System. This is the final step to make the EU Emissions Trading System fit to play its full strength as the main European instrument to achieve the 2030 greenhouse gas emissions target. The Commission urges the European Parliament and the Council to take the proposal forward with priority.

Supporting the ambition to become the number one in renewables, the Commission came forward with a consultative Communication on a new electricity market design in July 2015, a central objective of which is to make the market fit for an increasing share of renewables. Renewables are becoming a mainstream source of energy. They already cater for the needs of 78 million Europeans, and the EU as such is on track to meet its target of 20% final energy consumption from renewable sources by 2020.

The transition to a low-carbon economy will need significant investments, notably in power grids, generation, energy efficiency and innovation 6 . The EU-budget contributes to deliver this shift through integrating climate objectives in all relevant policy initiatives, ensuring that at least 20% of EU budget 2014-2020 is climate relevant. This represents around EUR 180 billion from 2014 to 2020. More than EUR 110 billion is made available through the European Structural and Investment Funds (ESIF). In addition, sustainable energy projects have been among the first projects approved for the European Fund for Strategic Investments (EFSI) guarantee, in particular in Denmark, Finland, France, Spain and the United Kingdom.  

In March 2015, the EU submitted a binding domestic economy-wide emissions reduction target of at least 40% by 2030 compared to 1990 levels, based on the Commission's 2030 Energy and Climate Framework. In September 2015, the EU agreed its position for the Paris climate conference (COP21) 7 . It confirmed the EU's readiness to negotiate an ambitious, binding and transparent global climate deal that provides a clearly defined pathway to limit rises in global average temperature to below 2°C. At the time of the adoption of this State of the Energy Union, more than 160 countries representing more than 90% of current global emissions have presented their Intended Nationally Determined Contribution (INDC). The scale of these contributions is without precedent and will lead to a significant reduction of emissions around the globe, moving from "action by few" under the Kyoto Protocol to "action by all".

Reaching these targets will require further bold action at the local level. With that goal in mind, the Commission convened on 15 October 2015 the representatives from towns and cities to launch a new Covenant of Mayors, covering both climate change mitigation and adaptation initiatives. By launching a Global Covenant of Mayors, it will encourage action by local authorities worldwide, including in regions not involved so far.

More than 4000 businesses will also make commitments to action by the time of COP21. Delivering these commitments on the ground offers significant business opportunities for innovative EU enterprises and will create jobs and growth in the EU. 

Way forward

Immediately after the Paris climate conference, all countries need to turn their commitments into concrete policy actions. In the first half of 2016, the Commission therefore intends to make proposals on the implementation of the non-ETS emissions reduction target of 30% compared to 2005, by setting national greenhouse gas reduction targets and addressing the integration of the land use, land use change and forestry (LULUCF) sector.

As about one third of the greenhouse gas emissions in the non-ETS sectors come from transport, the Commission foresees a Communication on actions needed to decarbonise all modes of transport. This should be followed by proposals, including on CO2 emission standards for cars and vans, on monitoring for heavy duty vehicles, on fair and efficient pricing and on market access rules for road transport.

Effective enforcement of regulatory standards is a critical element in bringing down road transport emissions. Testing systems have seriously underestimated the emissions of greenhouse gases and certain air pollutants. In this context, the Commission is preparing a proposal to apply the World-harmonised Light-duty vehicle Test Procedure (WLTP) in the EU. 8 Upon its entry into force in 2017, it will provide more accurate information on CO2 emissions and fuel consumption. Furthermore, real driving emissions tests for measuring the air pollutant emissions of diesel cars will become mandatory from 2017 onwards to effectively bring down their emissions of nitrogen oxides (NOx). 9 . Furthermore, the Commission is preparing proposals to strengthen the type approval and market surveillance system and reinforce the independence of vehicle testing.

The new Renewable Energy Directive and the bioenergy sustainability policy for 2030, to be presented in 2016, should provide the right framework to achieve the binding EU-level target of at least 27% renewable energy by 2030. It will lay out EU policies and measures that should, together with Member States' contributions described in their national energy and climate plans, make sure that that target will be achieved. To put the right decarbonisation incentives in place, we will also push for a phase-out of fossil fuel subsidies.

Policy conclusions at Member State, regional and EU levels:

The EU is on track towards meeting its EU 2020 targets in greenhouse gas emissions (i.e. -20% by 2020 compared to 1990). EU emissions were in 2014 23% below 1990 level and, according to the latest projections submitted by the Member States, emissions are expected to be 24% lower in 2020 than in 1990.

24 Member States are expected to meet their EU 2020 national target in the non-ETS with existing policies and measures. Four Member States (Ireland, Luxembourg, Belgium and Austria) will need additional efforts to meet domestically their 2020 targets for the non-ETS sectors or make use of the existing flexibilities foreseen in the Effort Sharing Decision 10 . 

With regard to renewable energy, the EU as such is on track to meet the 2020 target. All but three Member States (Luxembourg, the Netherlands and the United Kingdom) met their 2013/14 interim target based on 2013 data. 11  Some Member States, i.e. France, Luxembourg, Malta, the Netherlands and the United Kingdom and to a lesser extent Belgium and Spain, need to assess whether their policies and tools are sufficient and effective in meeting their renewable energy objectives. Achievement of the 2020 renewable energy targets is also not certain in the case of Hungary and Poland. The other nineteen Member States may exceed – some even considerably – their 2020 renewable energy targets. The increasing share of renewable energy helps to enhance Europe's energy security.

Moreover, further efforts are needed in the vast majority of Member States to ensure that renewable energy is better integrated into the market and to ensure consistency between support schemes and the functioning of the electricity markets in particular. All Member States must ensure that the new State Aid Guidelines for environment and energy are respected, including the basic requirement to grant aid in a competitive bidding process on the basis of clear, transparent and non-discriminatory criteria and to bring renewables closer to the market.

Sweden is the only Member State that so far has engaged in a renewable energy cooperation mechanism with another country (Norway). The enhancement of the scope of regional fora such as the Baltic Energy Market Interconnection Plan (BEMIP) to include Member State cooperation on renewable energy is encouraging. More such regional initiatives are needed e.g. with regard to the Northern Seas and Mediterranean region.

3.    Energy efficiency as a contribution to the moderation of energy demand

Progress made

To reach an ambitious level of energy efficiency by 2030, the Commission has started to put in place tools and instruments treating energy efficiency as a source in its own right. As a first step, in July 2015, the Commission proposed a revision of the Energy Labelling Directive 12 . This proposal makes the existing acquis on energy labelling more efficient and will strengthen enforcement. Also in 2015, a number of eco-design and energy labelling measures entered into force, with the potential to further reduce household's energy consumption and thereby bills. Later this year, the Commission intends to come forward with a new Ecodesign working plan that - in addition to improving energy efficiency - will in the future support the circular economy.

Energy efficiency plays an important part in the European Fund for Strategic Investments. The fund already supports strategic energy efficiency projects, for example in France and Italy. Many more projects are in the approval pipeline. This will be complementary to investments from the European Structural and Investment Funds.

The report on progress in implementing the 2020 energy efficiency target of 20% by 2020 13 , accompanying this Communication, shows that despite significant progress made, collective efforts of Member States correspond to only 17.6% primary energy savings compared to projections for 2020. 14  However, the Commission remains optimistic that the 20% target can be achieved if existing EU legislation is correctly and fully implemented. Member States should increase ambition and investment conditions so that energy efficiency continues to improve in Europe.

Way forward

There are still numerous barriers to reaping the full potential of energy efficiency, such as information failures and a shortage of dedicated financial tools. This leads to a limited uptake of energy efficiency opportunities, products and technologies.

In 2016, the Commission foresees legislative proposals to align the Energy Efficiency Directive to the 2030 indicative EU-level target of at least 27% (to be reviewed by 2020, having in mind an EU level of 30%). Equally important is a particular focus on buildings, whose energy use represents about 40% of the EU's total final energy consumption and about a quarter of non-ETS direct greenhouse gas emissions. A thorough evaluation of the Energy Performance of Buildings Directive is being carried out in view of its revision.

Financing the required upfront energy efficiency investments remains a substantial challenge. Energy efficiency investments need to increase five-fold by 2030 15 . As a matter of priority, the Commission will work with its partners towards establishing, in 2016, schemes to aggregate smaller energy efficiency projects. These schemes should provide investors with better investment opportunities in energy efficiency and make capital better accessible for national, regional or local energy efficiency platforms and programmes, especially in those Member States that need them most. They will include strengthening technical and project development assistance in the context of the European Investment Advisory Hub (EIAH) set up by the Commission and the European Investment Bank to help public promoters to structure their projects and to promote financing schemes with standard terms and conditions, notably in the area of buildings. The Commission will launch the European Investment Project Portal (EIPP) in early 2016. Its purpose is to attract investors to good investment projects in Europe. Energy stakeholders are encouraged to send their projects to building a critical mass of pre-launch projects.

Heating and cooling represents the biggest energy use in the EU. A dedicated strategy for heating and cooling is planned for early 2016, aiming for a smart transformation of this sector. The strategy should, inter alia, identify solutions and measures to reduce demand for heating and cooling in the residential, tertiary and industrial sectors, while at least monitoring the quality of the services and comfort, and reduce dependence on fossil fuels.

Policy conclusions at Member State, regional and EU levels:

Most Member States should take the additional measures to accelerate their ambition levels and efforts in order to achieve their national energy efficiency targets for 2020.

Several Member States (Austria, Bulgaria, Croatia, Cyprus, France, Greece, Hungary, Italy, Malta, Spain and Sweden) have notified more ambitious national 2020 targets expressed in either primary or final energy consumption, which is encouraging. At same time five Member States lowered their ambition level for one of the two targets. In general, the levels of the indicative national targets for 2020 set by e.g. Croatia, Finland, Greece, and Romania – as well as Cyprus, Italy and Portugal when expressed in final energy consumption – are not ambitious enough with regard to expected economic growth.

Belgium, Estonia, France, Germany, the Netherlands, Poland and Sweden will all need to reduce their primary energy consumption at a higher rate in 2014-2020 than in the period 2005-2013 to meet their indicative primary energy consumption targets by 2020. Austria, Belgium, Estonia, France, Germany, Lithuania, Malta and Slovakia have set themselves final energy consumption targets in 2020 which requires rates of final energy consumption reduction from 2014-2020 which are higher than the reduction rate in 2005-2013.

With regard to energy intensity, there is a large difference between the Member State with the highest (Bulgaria) and lowest (Denmark and Ireland) energy intensity in industry. To a large extent, this is linked to structural differences between the Member States. However, all Member States but Greece, Hungary, Ireland and Latvia decreased energy intensity in the industry and construction sector from 2005 to 2013.

For the generation sector, the analysed performance indicators showed a worsening trend in most countries. In particular, the share of heat produced from high-efficiency combined heat and power (CHP) as well as high-efficiency district heating and cooling needs to be further promoted by Member States.

4.    A fully-integrated internal energy market

Progress made

Electricity lines and gas pipelines form the backbone of an integrated energy market. Since the presentation of the Energy Union Framework Strategy, much has happened. The inauguration of the electricity cable between Italy and Malta in April 2015 ended the energy isolation of the Maltese electricity grid. The completion of Eastlink between Finland and Estonia, and Nordbalt between Lithuania and Sweden enabled the Baltic States to participate in the NordPool electricity market this year. Another example of good cooperation is the LitPolLink interconnection initiative between Lithuania and Poland which will be inaugurated in December 2015. 2015 also saw the inauguration of a new France-Spain electricity interconnector, doubling the transmission capacity between the two countries. In gas, the new Liquefied Natural Gas (LNG) terminal in Klaipeda (Lithuania) brought for the first time supply diversification into the Baltic gas market, while the recent agreement on the gas interconnector between Poland and Lithuania will put an end to the isolation of the Baltic States from the internal gas market. The interconnector between Hungary and Slovakia is also an important milestone, while important reverse flow equipment was installed within the EU as well as on its borders to Ukraine facilitating bi-directional trade. In addition, the Baltic States agreed on the common strategic goal to synchronise their power systems with the Continental European Network.

During 2015, the Commission has worked intensively with Member States to set up High-Level Groups for gas and electricity interconnectivity of the Iberian Peninsula and the Central East South Europe Gas Connectivity (CESEC), as well as a reform of the High-Level Group for Baltic Sea region (BEMIP). Member States have stepped up cooperation in regional groupings which has started to bear fruit. The Central East South Europe Gas Connectivity High Level Group, for instance, has agreed a list of priority projects 16 , the implementation of which will enable the countries in the region to have access to at least three sources of gas.

The Energy Infrastructure Forum established by the Commission, which held its inaugural meeting in Copenhagen on 9-10 November, will work towards best practices on issues such as regulatory barriers, infrastructure development and public acceptance as well as financing.

The Commission has worked intensively with Member States to remove existing regulatory obstacles to cross-border trade of electricity and gas. In close cooperation with Member States, it has tackled problems with the full implementation of the Third Energy Package in different Member States. The intention of the Commission's market design initiative 17  is to pave the way for a further alignment of the European regulatory framework to the reality of increasingly integrated European energy markets. The Commission has also continued to strictly enforce the Treaty's competition rules.

A fully-integrated internal energy market should first and foremost bring tangible benefits to consumers. This principle is fully reflected in the Communication Delivering a new deal for consumers of July 2015. 18 The Communication acknowledges that consumers are still prevented from playing their full role in the transition of the energy system. From a consumer’s perspective, the electricity and gas markets are still not performing as they should, as is illustrated by the document on energy consumer trends presented together with this State of the Energy Union. 19

Way forward

In 2016, all actors need to step up their work on infrastructure projects. In particular, Projects of Common Interest (PCIs) need an urgent political push. Even though 13 projects from the first list of Projects of Common Interest will be completed by the end of 2015, and slightly more than 100 Projects of Common Interest are in the permitting phase, more than a quarter 20 face delays mainly due to permit granting and/or financing issues. The procedures simply take too long to be effective. Addressing them successfully requires Member States to fully implement the provisions of the Regulation on guidelines for trans-European energy infrastructure (TEN-E), in particular those related to permit granting.

The second list of Projects of Common Interest, 21 adopted alongside this Communication, sets out those projects that are urgently needed to achieve our energy policy goals. The accompanying Staff Working Document 22 sets out the improvements needed to deliver the infrastructure backbone for an integrated European energy market. The first benefits for infrastructure investments of the instruments developed under the European Fund for Strategic Investments are expected to materialise in 2016. Specifically on electricity, the Commission foresees a Communication on the necessary measures to reach the 15% electricity interconnection target for 2030. In addition, the Commission will consider how to fund both sides of projects on the borders of the EU and the Energy Community.

Member States and stakeholders have shown a great interest in cooperating in the Northern Seas region. Almost half of capital expenditure for all electricity Projects of Common Interest will be invested in the Northern Seas region. The Commission therefore intends to create a High-Level-Group for regional cooperation in the North Sea in order to tackle the regulatory, financial and spatial planning issues which impede the implementation of these projects.

Continuing investment in national network infrastructure will also be required to avoid regional constraints. Of particular concern are the distortions which insufficient national infrastructure causes where there are large single bidding zones. The bidding zone review process, carried out by the European Network of Transmission System Operators for Electricity (ENTSO-E), should identify critical network constraints and, where appropriate, separate bidding zones for constrained areas. Such bidding zones could also help highlight the need for greater network investment.

In addition, it is important to ensure that existing gas and electricity infrastructure is fully used for the benefit of market integration. The continued strict enforcement of competition rules will in particular aim at ensuring that markets are not partitioned by artificially restricting the use of existing capacity.

Legislative proposals to implement the new market design are planned for 2016. The key objectives of the legislation are to have better linked wholesale and retail markets; strengthened regional cooperation and increased cross-border trade; and developing short-term and long-term markets to send the right investment signals for modern technologies to both producers and consumers of electricity. The impact of a revised EU Emissions Trading System should also provide better long-term investment signals for low carbon investments. The Commission is ensuring that where Member States support increased investment in their energy markets through State aid, support policies are designed in line with the requirements in the State Aid Guidelines for environment and energy 23  to avoid potential distortions of the market. In addition, the ongoing State aid Sector Inquiry on Electricity Capacity Mechanisms 24  is examining the extent to which existing and planned capacity mechanisms may hinder the efficiency of the internal market.

When preparing these legislative proposals, the Commission will put special emphasis on stimulating demand response participation as a means to increasing efficiency and flexibility in energy networks. Lack of information on cost and consumption, difficulties in switching suppliers and lack of reward for active participation should become a thing of the past.

Consumers – both households and industry – want more transparency of energy prices and costs. Therefore, the Commission is preparing, for publication in 2016, a new energy prices and costs report to provide an overview of the cost of energy, taxes, levies, but also subsidies. This should contribute to a more informed discussion on different price levels in Member States, the different components of energy prices, their influence on the competitiveness of European industry and investment in Europe and their ability to influence consumer behaviour. As a first step, the Commission presented today a proposal to improve European statistics on gas and electricity prices. 25

When reviewing key legislation in 2016, the Commission is paying particular attention to the protection of vulnerable consumers, such as in the review of the Energy Efficiency Directive or in the new market design proposal, where obligations of Member States and market operators with regard to vulnerable consumers could be better articulated. The Commission intends to ensure that financing programmes for energy efficiency are accessible to poor and vulnerable energy customers and it will seek to improve data collection on energy poverty.

Policy conclusions at Member State, regional and EU levels:

Many Member States have made good progress in opening up their wholesale markets to competition, and this has had significant benefits. However, there are large differences between Member States, and many Member States have not yet fully implemented the necessary rules that allow for competitive and liquid markets.

With regard to electricity infrastructure, 22 Member States are on track to reach or have already reached the 10% electricity interconnection capacity target for 2020. The eight Member States currently remaining below the 2020 interconnection target are Cyprus, Ireland, Italy, Poland, Portugal, Romania, Spain and the United Kingdom.

Interconnections are still needed to further deepen the internal electricity market (e.g. in South Western Europe) as well as between several Member States in Northern and Eastern Europe (e.g. Germany, Poland and the Czech Republic), or further connecting Member States (Ireland and the United Kingdom) with the rest of North Western Europe.

Retail price regulation must be limited in time and confined to exceptional cases following a recent ruling of the European Court of Justice 26 . While several more Member States have recently successfully moved away from end-user price regulation (Ireland, Latvia), prices for households remain regulated to different degrees in about half of the Member States which may constitute an obstacle to demand-side participation and retail competition.

All Member States need to better inform consumers about energy efficiency options and to further improve the investment conditions for private consumers. In addition, more focused measures are needed for vulnerable consumers to address energy and fuel poverty effectively.

Consumer empowerment via the roll-out of smart metering has been effectively implemented only in some Member States (most notably Finland, Italy and Sweden), as well as to a lesser extent in several more (including Denmark, Estonia and the Netherlands). In several Member States, administrative burdens act as barriers for consumers aiming to switch to new suppliers and better contractual conditions.

At the regional level, by mid-2015 most of the EU wholesale electricity markets are coupled to one or several of their neighbours, with signs of price convergence. The situation is more contrasted with regard to gas. Despite some price convergence on major European gas hubs, marked price differences and inadequate market integration remain across the EU, due in part to the effects of long-term contracts and missing interconnections. Retail markets for both electricity and gas are still national (or sub-national). We need further efforts by all Member States to advance regional market integration.

5.    Energy security, solidarity and trust

Progress made

The EU and its Member States have decided to support a more coherent EU foreign and energy policy action that takes geopolitical developments into account. In July 2015, the Council adopted conclusions on energy diplomacy along with an action plan 27 . These point to the need for strengthened bi- and multilateral dialogues, enhanced use of foreign policy instruments to strengthen diversification, as well as the promotion of rule-based, transparent and sustainable energy markets.

The transition to a competitive, low carbon economy will reduce the use of imported fossil fuels by moderating energy demand and exploiting renewable and other indigenous sources of energy. Investment in resilient infrastructure has to take account of this changing environment, in order to avoid having stranded assets.

2015 has been characterised by the ongoing tensions between Russia and Ukraine; persistently low oil prices impacting energy markets all over the world; new initiatives for additional supply infrastructure for natural gas from Russia; new perspectives opened up by the nuclear agreement with Iran, as well as a continued decline of the domestic production of fossil fuels.

Despite the difficult political situation, Ukraine has proven during the winter 2014/15 to be a reliable transit partner for Russian gas. The EU believes that it is in the interest of all parties that Ukraine remains an important transit country. The EU actively supports the efforts of the Ukrainian Government and Naftogaz to ensure that this remains the case, in particular through the deep structural reforms of the gas sector that Ukraine is currently undertaking. It is essential that this reform process continues. Throughout 2015, the Commission has actively facilitated the negotiations between Ukraine and Russia to secure gas supply to Ukraine through the winter. This resulted in the initialling of a binding protocol on 25 September 2015 and its implementation as of 9 October 2015. The capacity of reverse flows from the EU, in particular from Slovakia, to Ukraine has also significantly increased over 2015, enabling Ukraine to import gas via the EU and thus reduce its direct dependence on Russia.

The Commission takes note of the plans of commercial companies to build further pipelines connecting Russia and Germany through the Baltic Sea. If built, Nord Stream 3 and 4 would not give access to a new source of supply and would further increase transmission capacity from Russia to the EU, while even now this is only used at 50% rate. These pipelines will have to comply fully with EU law. The Commission will assess any such project against the European regulatory framework on its own merits.

The EU will only support infrastructure projects that are in line with the core principles of the Energy Union, including the EU Energy Security Strategy 28 . Diversification of energy sources, suppliers and routes is crucial for ensuring secure and resilient supplies to European citizens and companies. The Union's energy security is also closely linked to its Neighbourhood's energy security. 29 The Energy Community plays a central role in this respect, both in promoting priority interconnection projects but also in ensuring that the region operates under rules compatible with those of the EU. In this respect, at the Vienna Western Balkan Summit, the countries of the region decided to establish a regional electricity market. In the Central and South Eastern Europe Gas Connectivity High Level Group, six Energy Community countries have joined the Memorandum of Understanding and agreed to the Action Plan together with nine EU countries – a prime example of the fact that Energy Union extends and brings benefits beyond EU borders. Over 2015, the Commission has engaged in supporting the reform process in the Energy Community. The International Energy Charter was co-signed by the European Commission at the Conference on 20-21 May 2015 in The Hague.

The recent discoveries of gas in the East Mediterranean increase the potential of the Mediterranean region to contribute to Europe’s energy security. Therefore, cooperation has been stepped up through the establishment of three Euro-Med platforms on gas, the regional electricity market, and the promotion of renewable energy and energy efficiency. Talks on the Trans-Caspian pipeline have been relaunched and work on the Southern Gas Corridor continued in 2015.

Attention over the last months has turned strongly to electricity. In some Member States the oversupply of electricity has been reduced during the last decade and the threat of brownouts is now being raised. In order to evaluate where the real problems in the electricity system are and how these can be best tackled, several initiatives were taken to ensure that electricity generation adequacy analysis is carried out on a regional basis and based on a common methodology. 30  

Way forward

Geopolitical challenges will not go away in 2016. The EU will need to pursue its new energy diplomacy effectively and speak with one voice vis-à-vis third countries. It will also need to develop the relevant energy diplomacy action plans so as to strengthen diversification also through foreign policy instruments.

The Revision of the Regulation on Security of Gas Supply foreseen for 2016 intends to improve the EU's resilience to supply disruptions. It will be particularly important to strengthen regional cooperation between Member States, both to prevent and to mitigate supply shocks, as well as to ensure solidarity in the event of an emergency. The Commission intends to come forward at the same time with a strategy for Liquefied Natural Gas (LNG) and gas storage, to ensure that the European Union can take full benefit of the diversification potential offered by Liquefied Natural Gas. In parallel, the Commission continues to stress the importance of energy in general and Liquefied Natural Gas in particular in the ongoing negotiations on the Transatlantic Trade and Investment Partnership (TTIP).

To increase transparency and to ensure that intergovernmental agreements (IGAs) in the energy field comply with applicable EU legislation and policies, the Commission is preparing a proposal to revise the current Decision on intergovernmental agreements.

By the end of 2016, the Commission intends to come forward with a new legal instrument on security of electricity supply designed to enhance transparency, ensure a common approach and better address cross-border solutions to security of electricity supply. This instrument is supposed to be fully integrated with the redesign of the electricity market.

In the nuclear field, the publication in 2016 of a new Nuclear Illustrative Programme (PINC) will provide an overview of investments envisaged by Member States until 2050 for all stages of the nuclear cycle. With half of the EU Member States having indicated their intention to continue relying on this energy source to generate part of their electricity, this initiative should bring more clarity on long-term nuclear investment needs and on the management of nuclear liabilities.

Policy conclusions at Member State, regional and EU levels:

The EU is making progress to diversify sources, routes and suppliers of energy. However, about 40% of the EU gas imports in 2013 came from Russia and a series of Member States are still totally or predominantly dependent on supply from Russia, notably Bulgaria, Czech Republic, Estonia, Finland Hungary, Latvia, Lithuania and Slovakia.

Three Member States (Bulgaria, Lithuania and Portugal) have yet to meet the infrastructure standard of the Security of Gas Supply Regulation.

There is a need to further connect in particular the Baltic States and Finland to the Central European gas market, to improve connections between Member States (e.g. Hungary, Romania, Bulgaria and Greece, Portugal and Spain with France) and to ensure that all Member States have access to liquid hubs and can benefit from the Liquefied Natural Gas (LNG) capacity that countries have been developing or have the potential to develop.

At the regional level, the stress tests carried out in 2014 clearly show the benefits of regional cooperation to prevent or mitigate a gas crisis. The Commission already actively promotes such cooperation, e.g. through the Central and South Eastern Europe Gas Connectivity High Level Group (CESEC). This work should continue.

Member States must also reinforce (regional) cooperation with regard to security of electricity supply and generation adequacy.

6.    An Energy Union for research, innovation and competitiveness

Progress made

Research, innovation (R&I) and competitiveness are paramount to accelerate the EU energy transition and to reap its benefits in terms of jobs and growth that the Energy union can bring. In September 2015, the Commission presented the Communication "Towards an Integrated Strategic Energy Technology (SET) Plan". 31 This gives a new impetus to the development and deployment of low-carbon technologies, by better coordinating and prioritising research & innovation efforts across Europe.

Financing is key to bring innovation to the market. Therefore, the Commission and the European Investment Bank are developing their efforts under the Investment Plan for Europe and the European Fund for Strategic Investment (EFSI). In that sense, the InnovFin Energy Demonstration Projects provide risk financing in the form of loans, equity and guarantees, going beyond traditional grant-based support. This should boost the competitiveness of innovative energy technology companies.

The EU Emissions Trading System also provides financing opportunities for investments in innovation. On average, in 2014, Member States used or planned to use for climate and energy related purposes around 87 % of the total revenues from the auctioning of allowances under the EU Emissions Trading System, amounting to €3.2 billion. Under the NER 300 programme, a cumulative funding of € 2.1 billion, which is expected to leverage an additional € 2.7 billion of private investments, is destined to finance innovative projects in 20 Member States.

In the proposals for the revision of the Emissions Trading System Directive, presented in July 2015, the Commission proposed a new Innovation Fund and a new Modernisation Fund. The Innovation Fund builds on the NER 300 programme, while extending its scope to low carbon innovation in industrial sectors. By supporting low-carbon innovation and demonstration, the Innovation Fund will also contribute to realising the key actions of the Strategic Energy Technology Plan. The new Modernisation Fund is designed for Member States with a Gross Domestic Product (GDP) per capita below 60% of the EU average and will be targeted at modernising the energy system and improving energy efficiency. The revised EU Emissions Trading System Directive also proposes more targeted carbon leakage rules to safeguard the international competitiveness of the sectors most at risk of relocating their production outside the EU.

In addition, the Horizon 2020 Framework programme is crucial to support the research & innovation objectives of the Energy Union. In the period 2014-2015 its financial contribution amounted to more than  9 billion to support energy research (including nuclear), clean transport, climate action and resource efficiency, bioeconomy and key enabling technologies. Moreover, energy and low-carbon research and innovation are one of the most commonly selected smart specialisation areas – for over 100 EU regions – which indicate that considerable funding from the European Structural and Investment Funds will be allocated to this. The Smart Specialisation Platform on Energy, launched by the Commission in 2015 32 , should support this work.

Way forward

As part of the 2016 State of the Energy Union package, the Commission intends to present an integrated Energy Union strategy for research, innovation and competitiveness. This integrated strategy should reflect the findings of the consultation which the Commission will launch with the Member States and stakeholders on three interconnected strands: energy technologies, transport and global competitiveness. It involves increasing public and private investment in research and innovation, removing disincentives for innovation, and overcoming barriers to private investment. Bottom-up research should be better promoted as a major feature of a vibrant innovation ecosystem.

Attention will be paid in 2016 to a more effective coordination between the Energy Union, the Digital Single Market and the Circular Economy. This concerns, inter alia, the progressive digitalisation of the energy and transport sectors.

The energy transition will lead to changes in many sectors and therefore requires a closer involvement of the social partners. This could include ensuring that skills and training schemes match the needs of new job profiles, looking at working conditions in new sectors or facilitating a socially fair transition in sectors or regions where jobs will be lost. The Commission has started to engage with the Social Partners at the European level and will continue this dialogue in 2016. It encourages Member States to equally discuss with social partners the consequences of the energy transition and how they can best be anticipated and managed. 33

Policy conclusions at Member State, regional and EU levels:

European industry, research institutes and academic innovative actors are overall well positioned in the global energy landscape. There are many Member States (including Austria, Denmark, Finland, France, Germany and the United Kingdom) who have made significant efforts to promote innovation and business opportunities in energy efficiency and low-carbon technology. That is one of the reasons why, despite the economic and financial crisis, employment has grown in the renewable energy sector, with almost half a million additional jobs created in the EU in the last five years.

Recent positive initiatives of some Member States (including France, the Netherlands and Portugal) have led to more environmental and growth friendly tax systems. Still, there remain opportunities to shift the tax system in a way that stimulates employment and competitiveness while contributing to the Energy Union objectives in a number of Member States) 34 . Member States engaging in such tax shift should at the same time ensure to avoid disproportionate impacts on the affordability of energy. Key enabling conditions are necessary to bring innovation to markets. By better reflecting environmental and economic costs, tax reforms, e.g. in the area of transport and mobility, have the potential to support this transition.



7.    implementation of the Energy Union

Progress made

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.

At the political level, Vice-President Šefčovič has undertaken an Energy Union Tour over the last several months. He engaged in a dialogue with national governments and parliaments and with the European Parliament as well as stakeholders and citizens. These visits, as well as the many outreach activities of many other Commissioners, notably of Commissioner Arias Cañete, are instrumental to listen and discuss the Energy Union and its opportunities for the EU and its Member States.

Supported by a technical dialogue with Member States, this process has led to a much clearer picture of the opportunities, strengths, threats and weaknesses of the Energy Union at Member State level, as can be seen in the accompanying factsheets which have been validated with Member States following bilateral discussions. 35 It also resulted in the proposed methodology on key indicators attached to this State of the Energy Union. 36  This Staff Working Document shows the comparative EU-wide situation for the five dimensions of the Energy Union using these first key indicators. Key indicators will be used in the future to measure and monitor the delivery of the Energy Union.

The energy transition requires strategic planning. Currently only around a third of Member States have comprehensive energy and climate strategies in place beyond 2020, including national indicative targets for greenhouse gas emissions, renewables and energy efficiency. This is a matter of serious concern in view of the necessity to create a predictable framework for investments in areas which often require long-term planning.

Way forward

Integrated national energy and climate plans, addressing all five dimensions of the Energy Union, are necessary tools to have more strategic planning. They will be instrumental for the achievement of the 2030 targets. The related guidance document, annexed to this State of the Energy Union, provides the basis for Member States to start developing their plans for the period covered by the 2030 framework.

In order to provide certainty and predictability to project developers and investors in a rapidly changing environment, preparatory work should start without delay. Member States should therefore present draft National Plans in 2017 as a basis for further discussions, with a view to finalising these National Plans in 2018 so that they will be operational well before 2021.

National plans also need to reflect the outcome of regional consultations in areas that would benefit from enhanced cooperation with neighbouring Member States. In 2016 the Commission intends to come forward with guidance on how to strengthen regional cooperation in the broader sense and how the Commission can facilitate regional approaches.

In order to track progress, a transparent monitoring system needs to be put in place based on key indicators as well as on Member States' biannual reports concerning progress made on their national plans. The Commission intends to assess collective progress made at the EU level in its annual State of the Energy Union and, if necessary, propose policy actions and measures to ensure the delivery of the Energy Union objectives.

Based on inter alia a fitness check of current reporting obligations 37 and ongoing discussions with Member States, the European Parliament and stakeholders, the Commission foresees in 2016 a proposal on streamlining planning and reporting requirements related to climate and energy actions for Member States and the Commission to reduce as soon as possible unnecessary administrative burden in line with the better regulation agenda and to align planning and reporting requirements with the Energy Union Framework Strategy.

8.    Conclusions and way forward

It is essential to maintain the ambition, balance and momentum created by the launch of the Energy Union Framework Strategy in February 2015. 2016 will be an important year, a year of delivery, in which the strategic vision set out in the Energy Union Strategy will be translated in EU-level legislative initiatives, more coherence in our engagement with external partners, and further development and implementation of the Energy Union.

(1)

     COM(2015)80.

(2)

     It is accompanied by a series of reports and staff working documents as a first step towards streamlining the Commission's reporting obligations.

(3)

     Commission Work Programme, COM(2015)610. All proposals will be prepared in line with the principles of subsidiarity, proportionality and better regulation. Some of these proposals will be REFIT initiatives.

(4)

     The others are Brazil and Canada.

(5)

     27% produced from renewable energy sources and another 27% produced from nuclear energy.

(6)

     COM(2014)15 and its impact assessment.

(7)

     Environment Council conclusions of 18/09/2015.

(8)

     The World-harmonised Light-duty vehicle Test Procedure (WLTP) has been adopted under the United Nations Economic Commission for Europe (UNECE) framework in 2014 to replace the old "New European Drive Cycle" (NEDC) test cycle.

(9)

     This will ensure actual compliance of real life vehicles' emissions performance with the regulatory limit values, subject to tolerances due to the uncertainties of the test procedure and measuring instruments, which will be progressively reduced over time.

(10)

     See the Climate Action Progress Report, COM(2015)576 + SWD(2015)246.

(11)

     As the interim targets are defined as an average of two years, new 2014 Eurostat data could change this assessment.

(12)

     COM(2015)341.

(13)

     COM(2015)574 and accompanying Staff working document SWD(2015)245.

(14)

     COM(2014)520.

(15)

     The Energy Efficiency Financial Institutions Groups (EEFIG) Report ( www.eefig.eu ).

(16)

      http://ec.europa.eu/energy/en/topics/infrastructure/central-and-south-eastern-europe-gas-connectivity .

(17)

     COM(2015)340.

(18)

     COM(2015)339; accompanied by a Staff Working Document on best practices on renewable energy self-consumption, SWD(2015)114.

(19)

     SWD(2015)249.

(20)

     31% in electricity and 25% in gas, according to the ACER monitoring report on the implementation of Projects of Common Interest.

(21)

     C(2015)8052

(22)

     SWD(2015)247.

(23)

     OJ C 200/1 of 28 June 2014.

(24)

     C(2015)2814.

(25)

     COM(2015)496.

(26)

     C36/14, European Commission v. Republic of Poland.

(27)

     Council conclusions on energy and climate diplomacy (10995/15 and 11029/15).

(28)

     COM(2014)330.

(29)

     JOIN(2015)50, accompanied by SWD(2015)500.

(30)

     See e.g. the declaration of Germany and its neighbours on security of electricity, http://www.benelux.int/files/4414/3375/5898/Jointdeclaration.pdf .

(31)

     C(2015)6317.

(32)

      http://s3platform.jrc.ec.europa.eu/s3p-energy .

(33)

     The new EU-wide Skills Agenda that the Commission is preparing should set out measures on how to better anticipate skills needs and improve the transparency and recognition of qualifications.

(34)

     Tax Reforms Report in the EU Member States, 2015 (November) – Taxation Paper N°58; http://ec.europa.eu/taxation_customs/resources/documents/taxation/gen_info/economic_analysis/tax_papers/taxation_paper_58.pdf .

(35)

     The Member States' factsheets are included in SWD(2015)208-209, 217-242.

(36)

     SWD(2015)243.

(37)

     Item 10 of the REFIT initiatives, Annex II of the Commission Work Programme (COM(2015)610).

Top

Brussels, 18.11.2015

COM(2015) 572 final

ANNEX

UPDATED ROADMAP FOR THE ENERGY UNION

to the

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANK

State of the Energy Union

{SWD(2015) 208}
{SWD(2015) 209}
{SWD(2015) 217 à 243}


Updated Roadmap for the Energy Union  
November 2015

Key: SoS: Security of Supply / IEM: Internal Energy Market / EE: Energy Efficiency / GHG: Greenhouse gases / R&I: Research and Innovation

This roadmap is the same as the one presented in the annex to the Commission Communication "A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy", adopted on 25 February 2015 (COM(2015)80). The only new information in this table is the last column, which provides an update for those initiatives which have already been adopted or where the time schedule changed. It does not provide any new information on initiatives originally foreseen for 2016 or later.

Actions

Responsible party

Timetable (shown in the annex to COM(2015)80)

SoS

IEM

EE

GHG

R&I

Comments / Update

Infrastructure

Effective implementation of the 10% electricity interconnection target

Commission

Member States

National Regulatory Authorities

Transmission System Operators

2015-20

X

X

X

Adopted on 25 February 2015 (COM(2015)82)

2nd list of Projects of Common Interest (PCI) – leading to Commission Delegated Act

Commission

Member States

2015

X

X

X

Delegated act adopted on 18 November 2015 (C(2015)8052)

Communication on the progress towards the completion of the list of the most vital energy infrastructures and on the necessary measures to reach the 15% electricity interconnection target for 2030

Commission

2016

X

X

Establish an Energy Infrastructure Forum

Commission

Member States

2015

X

X

First meeting of the Energy Infrastructure Forum took place 9-10 November 2015 in Copenhagen

Electricity

Initiative on market design and regional electricity markets, and coordination of capacities to ensure security of supply, boosting cross-border trade and facilitating integration of renewable energy

Commission

2015-2016

X

X

X

X

Consultative Communication adopted on 15 July 2015 (COM(2015)340) with legislative proposals to follow in 2016

Review of the Directive concerning measures to safeguard security of electricity supply

Commission

2016

X

X

X

Retail

New Deal for energy consumers: Empowering consumers, deploying Demand Side Response; using smart technology; linking wholesale and retail markets; phase-out of regulated prices; flanking measures to protect vulnerable customers

Commission

Member States

2015-2016

X

X

X

X

Communication adopted on 15 July 2015 (COM(2015)339) with legislative proposals to follow in 2016

Gas

Revision of the Regulation on security of gas supply

Commission

2015-2016

X

X

Foreseen for 2016

Liquified Natural Gas and Storage strategy

Commission

2015-2016

X

Foreseen for 2016

Regulatory framework

Review of the Agency for the Cooperation of Energy Regulators (ACER) and the energy regulatory framework

Commission

2015-16

X

X

X

Covered by the Consultative Communication adopted on 15 July 2015 (COM(2015)340) with legislative proposals to follow in 2016

Renewables

Renewable Energy Package: including a new Renewable Energy Directive for 2030; best practices in renewable energy self-consumption and support schemes; bioenergy sustainability policy.

Commission

2015-2017

X

X

X

Best practice guidelines for renewable energy self-consumption adopted on 15 July 2015 (SWD(2015)141)

Renewable Energy Package foreseen for 2016

Communication on Waste to Energy

Commission

2016

X

X

Climate Action

Legislative proposal to revise the EU Emissions Trading System, 2021-2030

Commission

2015

X

X

X

Proposal adopted on 15 July 2015 (COM(2015)337)

Legislative proposals on the Effort-Sharing Decision and the inclusion of Land Use, Land Use Change and Forestry (LULUCF) into the 2030 Climate and Energy Framework

Commission

2016

X

Transport actions

Fair and efficient pricing for sustainable transport – revision of the Eurovignette Directive and framework to promote European electronic tolling

Commission

2016

X

X

Review of market access rules for road transport to improve its energy efficiency

Commission

2016

X

X

Master Plan for the deployment of Cooperative Intelligent Transport Systems

Commission

Member States

Industry

2016

X

X

X

Review of Regulations setting emission performance standards to establish post-2020 targets for cars and vans

Commission

2016 - 2017

X

X

X

Establishing a monitoring and reporting system for heavy duty vehicles (trucks and buses) with a view to improving purchaser information

Commission

2016-2017

X

X

X

Review of Directive on the Promotion of Clean and Energy Efficient Road Transport Vehicles

Commission

2017

X

X

Communication on decarbonising the transport sector, including an action plan on second and third generation biofuels and other alternative, sustainable fuels

Commission

2017

X

X

X

Foreseen for 2016.

Energy efficiency

Review of the Energy Efficiency Directive

Commission

2016

X

X

X

X

Review of the Directive on Energy Performance of Buildings including Smart Finance for Smart Buildings initiative

Commission

2016

X

X

X

X

Review of the energy efficiency framework for products (Energy Labelling Directive and Ecodesign Directives)

Commission

2015

X

X

X

X

Energy Labelling Regulation proposal adopted on 15 July 2015 (COM(2015)341)

Ecodesign work plan linked to the December 2015 Circular Economy package

Strengthening the targeted use of financial instruments to support investments in energy efficiency

Commission

2015-

X

X

Heating and Cooling

EU strategy for Heating and Cooling – the contribution from heating and cooling in realising the EU's energy and climate objectives

Commission

2015

X

X

X

X

X

Foreseen for 2016

External Energy and Climate Policy

EU Energy and Climate policy diplomacy

Commission

HR/VP

Member States

2015

X

X

X

X

Council conclusions on climate diplomacy adopted by the Foreign Affairs Council on 20 July 2015 (11029/15)

Council conclusions on energy diplomacy adopted by the Foreign Affairs Council on 20 July 2015 (10995/15)

Review of the Decision on information exchange mechanism with regard to intergovernmental agreements between Member States and third countries in the field of energy

Commission

HR/VP

2016

X

X

New and strengthened energy dialogues with countries of importance for EU energy policy

Commission

HR/VP

2015 -

X

X

X

X

X

Memorandum of Understanding on an upgraded strategic partnership with Ukraine

Commission

HR/VP

European Parliament

Council

2015

X

X

Foreseen for 2016

Trilateral Memorandum of Understanding on the Trans-Caspian pipelines with Azerbaijan and Turkmenistan

Commission

HR/VP

European Parliament

Council

2015

X

X

Foreseen for 2016

Initiative to strengthen the Energy Community

Commission

Energy Community Contracting Parties

HR/VP

2015

X

X

Key decisions taken at the Ministerial Council of the Energy Community in October 2015

Joint Act on security of supply to follow

Strengthen Euromed cooperation on gas, electricity, energy efficiency and renewables

Commission

HR/VP

2015-2016

X

X

Gas platform launched in June 2015

Regional electricity market platform launched in October 2015

Renewables and energy efficiency platform to be launched in 2016

Adoption and signature of a new International Energy Charter on behalf of the EU and EURATOM

Commission

HR/VP

2015

X

X

The International Energy Charter was co-signed by the European Commission at the Conference on 20-21 May 2015 in The Hague.

Industrial competitiveness

A new European energy R&I approach to accelerate energy system transformation, composed of

- an integrated Strategic Energy Technology (SET) Plan

- a strategic transport R&I agenda

Commission

2015-2017

X

Communication on the SET Plan adopted on 15 September 2015 (C(2015)6317)

Smart Specialisation Platform on Energy launched in 2015

Integrated Energy Union research, innovation and competitiveness strategy foreseen for 2016

Analysis of energy prices and costs (including taxes and subsidies)

Commission

2016 and every 2 years thereafter

X

Initiative on EU global technology and innovation leadership on energy and climate to boost growth and jobs

Commission

2015-2016

X

X

X

Linked to the integrated and comprehensive Energy Union research, innovation and competitiveness strategy

Enhanced trade policy to facilitate export of EU technologies

Commission

2015-2019

X

X

X

Cross cutting measures

Review of the Guidelines on State aid for environmental protection and energy

Commission    

2017-2019

X

X

X

X

X

Report on the European Energy Security Strategy; including a platform and roadmap for Euromed and strategies for LNG, energy storage, and the Southern gas corridor

Commission

2015-2016

X

X

X

X

X

Report (SWD) adopted on 18 November 2015 (SWD(2015)404)

LNG and gas storage strategy foreseen for 2016

Data, analysis and intelligence for the Energy Union: initiative pooling and making easily accessible all relevant knowledge in the Commission and Member States

Commission

2016

X

X

X

X

X

Nuclear

Council Regulation updating the information requirements of Article 41 of the Euratom Treaty in the light of the European Energy Security Strategy

Commission

2015

X

X

Foreseen for 2016

Communication on a nuclear illustrative programme (PINC) pursuing Article 40 of the Euratom Treaty

Commission

2015

X

X

Foreseen for 2016

Top

Brussels, 18.11.2015

COM(2015) 572 final

ANNEX

GUIDANCE TO MEMBER STATES ON NATIONAL ENERGY AND CLIMATE PLANS AS PART OF THE ENERGY UNION GOVERNANCE

to the

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANK

State of the Energy Union

{SWD(2015) 208}
{SWD(2015) 209}
{SWD(2015) 217 à 243}


GUIDANCE TO MEMBER STATES ON NATIONAL ENERGY AND CLIMATE PLANS AS PART OF THE ENERGY UNION GOVERNANCE

1.Introduction

The Commission's Communication on a Framework Strategy for the Energy Union adopted on 25 February 2015 explains that the Energy Union needs an integrated governance and monitoring process, to make sure that energy-related actions at European, regional, national and local level all contribute to the Energy Union's objectives. 

In October 2014 – when agreeing on the 2030 Framework for climate and energy – the European Council called for a reliable and transparent governance system without any unnecessary administrative burden to help ensure that the EU meets its energy policy goals and on 19 March 2015, it concluded that a reliable and transparent governance system must be developed. Streamlined and integrated national energy and climate plans will be at the core of this governance system. The governance system will build on existing building blocks, such as national climate programmes, national plans for renewable energy and energy efficiency.

The Commission will closely cooperate with Member States on the delivery of these common goals in order to jointly ensure a successful implementation of the Energy Union, reduce the administrative burden and enhance transparency for Member States, and ensure investor certainty until the year 2030 and beyond.

The purpose of this document is to offer guidance to Member States on the process of developing their integrated national energy and climate plan as well as the main elements.

This document launches and explains the main steps of the gradual process from now until the finalisation of national plans in 2018, including the main roles and tasks of both Member States and the Commission. In 2016, the Commission will present a legislative initiative on streamlining of planning and reporting requirements and present a template for the structure of national energy and climate plans in order to complement and further specify this Guidance.

1.General principles and scope of the national plans

The national plan should take a holistic approach and address the five dimensions of the Energy Union in an integrated way which recognises the interactions between the different dimensions. Specific elements of existing plans may be preserved depending on the area and periodicity of the planning processes. The national plan should cover the period from 2021 to 2030 and build upon what each Member State should deliver in relation to their policies for 2020 and also include a perspective until 2050.

While Member States have the right to develop policies suitable to national circumstances, national plans should set out the direction of national energy and climate objectives and policies in a way that is coherent with delivering on the commonly agreed objectives of the Energy Union, in particular the 2030 targets (greenhouse gas emission reductions, renewable energy, energy efficiency and electricity interconnections) agreed by the European Council in October 2014. While for emission reductions in the non-ETS sector the approach taken in the Effort Sharing Decision will be continued to 2030, the EU-level targets for renewable energy and energy efficiency will be met by collective efforts of the Member States as well as through policies and measures at EU level.

It is very important that national plans provide long term predictability and certainty for investment and ensure greater cooperation and coherence among Member States' approaches on climate and energy policies.

2.Content of national plans

National plans should cover the period from 2021 to 2030, including a perspective until 2050 in order to ensure consistency with long-term policy objectives at the EU and national level.

National plans should include the following elements:

a) Current Situation

Overview of the national energy system and policy context of the national plan across the five dimensions of the Energy Union (including macroeconomic context, greenhouse gas emissions, energy mix and the situation in each subsector of the energy system).

Assessment of the situation in terms of current energy and climate policies and measures, including support schemes and fiscal systems for renewable energy and energy efficiency, building on experiences with reaching 2020 targets for energy and climate.

Overview of key issues of cross-border relevance including opportunities and challenges for further regional cooperation and integration.

The administrative structure of implementing national energy and climate policies, including responsibilities of main administrative bodies and their interactions.

National plans may be built upon Member States' existing national energy and climate policy strategies for the years 2020, 2030 and beyond in accordance with this Guidance.

b) Objectives, policies and measures for the five dimensions

The national plans should define objectives for each dimension of the Energy Union. With regard to the 2030 targets for energy, the plans should set out national contributions needed to deliver collectively the EU-level targets. For greenhouse gas emissions in the non-ETS sectors, the plans should set out the policies and measures planned to meet the annual binding national limits set under the revised Effort Sharing Decision.

The interaction between the different dimensions should be set out (e. g. the contribution of renewable energies and energy efficiency to greenhouse gas emission reduction, the infrastructure needs arising from a greater use of renewables etc.).

For each objective, the plan should include a description of the policies and measures planned for meeting these objectives. This should also include an assessment of how these policies interact with each other to ensure policy coherence and avoid overlapping regulation.

Energy security, solidarity and trust

Medium- to long-term objectives and standards relating to security of supply, including with regard to diversification of energy sources and supply countries, infrastructure, storage, demand response, readiness to cope with constrained or interrupted supply of an energy source, and the deployment of alternative domestic sources. The objectives should include regional cooperation and the policy measures to achieve these objectives should be regionally coordinated. In this context, national plans should build on the specific security of supply plans (assessment plans, preventive action plans and emergency plans) which are drawn up in accordance with the regulation on gas security of supply.

Policy strategies concerning energy security in the broader sense, including other relevant policy choices such as those relating to energy savings or the energy mix.

The general policy approach to ensure security of external energy supply, including through infrastructure and as applicable the intended approach to international governmental agreements with third countries should also be covered.

A fully integrated internal energy market

Development of electricity interconnectivity from 2021 to 2030 (ratio between cross-border transmission capacity and installed generation capacity), with the agreed 15% target for 2030 in mind, taking into account Member State specific factors such as costs and potential trade flows. This should also include an indication of the main projects envisaged to achieve the necessary interconnectivity in a 2030 perspective.

For energy infrastructure, how planned national infrastructure projects as well as the Projects of Common interest (PCIs) relating to the Member State will be implemented, including a time-line. In this context, national plans should build on the regulation on guidelines for trans-European energy infrastructure.

Objectives with respect to market competition, market integration and coupling, deployment of flexibility in the power sector, including development of short term markets, demand response competitiveness of energy markets, and roll-out of smart technologies and smart grids.

Assessment of the implications of planned infrastructure investments and of developments in energy production on wholesale and retail energy prices and on market integration with other Member States.

Energy efficiency contributing to moderation of demand

National policies and measures planned to support the achievement of the agreed EU-level energy efficiency target of at least 27% (to be reviewed by 2020 with a view to 30%) taking into account the expected energy savings from these policies and measures as well as the implementation of existing EU legislation.

A trajectory for energy savings to be quantified as the resulting level of primary as well as final energy consumption until 2030 should be provided as the Member State's contribution to achieving the EU target.

National policies and measures planned to increase energy efficiency in the building sector. This includes national building renovation strategies and national energy efficiency investment programmes.

Decarbonisation of the economy

Planned policies and measures to reduce greenhouse gas emissions, covering all key emitting sectors, including transport and agriculture, to meet the annual binding national limits for the non-ETS sectors up to 2030 set under the revised Effort Sharing Decision, with an outlook to the long-term vision and goal to become a low-carbon economy (2050).

National policies and measures planned to support the achievement of the agreed EU-level binding target for renewable energy of at least 27%, taking into account the implementation of existing EU legislation as well as a perspective up to 2050.

A trajectory for the share of renewable energy in gross final energy consumption until 2030, including trajectories for relevant technologies as well as for electricity demand (installed capacity and produced energy), should be provided as the Member State's contribution guided by the need to deliver collectively the EU target.

Measures to be taken for increasing the flexibility of the energy system with regard to renewable energy production. Status and plans for electricity market coupling and integration, regional measures for balancing and reserves and how system adequacy is assessed in the context of renewable energy. National policies and measures planned to support other low carbon technologies.

National policies and measures planned to support the decarbonisation of transport.

If Member States intend to support development of specific technologies, the plan should also include an assessment of the implications for energy prices and energy utilities and on market integration with other Member States.

Research, innovation and competitiveness

Objectives, policies and measures set at the national level to ensure an appropriate contribution to the new European energy R&I approach to accelerate energy system transformation, in particular to the actions of the Integrated Strategic Energy Technology (SET) Plan.

National policy strategies and funding programmes for research and innovation in the areas of renewable energy, energy efficiency, and other low-carbon technologies including in the transport sector, as well as their market uptake, including strategies to support research and technology institutions.

Industrial policy strategies concerning competitiveness of the low-carbon technology sector and competitiveness in a broader sense, including subsidies, the impact on growth, jobs and skills, subsectors, finance and resources.

As applicable, objectives relating to the competitiveness of the energy system and its contribution to the competitiveness of the economy as such as well as to international trade in EU energy technologies and equipment and access to third country markets.

c) Integrated projections and indicators

National plans should entail a separate section on projections as an analytical basis of the plan, including reference and policy scenarios assessing the relevant impacts of the policies and measures proposed. Biennial progress reports on the implementation of national plans should make use of key indicators developed by the Commission in cooperation with Member States as well as updated projections, policies and measures.

Due to the cross-cutting nature of the five dimensions of the Energy Union, there is a need to assess and validate policy objectives and instruments based on integrated methodological tools. For this reason national plans should include projections for the period until 2030 and beyond for the energy system and for greenhouse gas emissions 1 , including a 2050 perspective. The projections should take account of, e.g. the macroeconomic context (such as expected Gross Domestic Products and population growth), structural changes to the economy likely to impact on the energy system and greenhouse gas emissions, global energy trends (such as international fossil fuel price developments) as well as carbon prices, cross-border grid interconnections, and technology costs. The Commission will provide technical recommendations on these issues, with Member States providing clarity where they would deviate from these, for instance due to model requirements.

The national plan should set out at least two scenarios: (i) a reference scenario based on current trends and existing policies and measures at EU and national level; and (ii) at least one policy scenario reflecting the implementation of envisaged national objectives by additional policies and measures for the five dimensions of the Energy Union including notably the 2030 targets, as outlined in the national plan. Potential synergies and trade-offs between the policies and measures would then be highlighted.

The Commission can support Member States by providing data and analysis. An important input will be the new EU Energy, Transport and greenhouse gas emissions Reference Scenario, prepared in close cooperation with Member States and to be published in the first half of 2016. Policy and sensitivity scenarios could also be provided to Member States to support their strategic planning, identify common challenges and assess implications of individual Member States' policy choices on the achievement of common Energy Union objectives. The EU Reference Scenario will also represent a basis for assessing Member States' collective contributions to Energy Union objectives.

National projections should be presented timely to allow EU-level aggregation and subsequent assessment of the overall state of the energy system and progress made. Therefore assumptions made as well as trends of the main modelling outcomes describing the energy system should be clearly and transparently presented.

Member States should make use of key indicators in the progress reports on the implementation of their national plans. Building on the indicators proposed in the 2030 Framework for climate and energy and those already included in the country factsheets, the Commission is presenting in a Staff Working Document 2  a concept and first analysis of key indicators for monitoring progress towards the Energy Union objectives. It proposes indicators for the five dimensions of the Energy Union, for example on energy prices, competitiveness, the diversification of energy imports, decarbonisation, research and innovation or energy market functioning.

3.Regional cooperation to establish the national plans

A functioning Energy Union requires that Member States coordinate and cooperate among each other in developing their energy policies. National plans should therefore from the outset build on regional consultations.

Member States should identify areas suitable for joint or coordinated planning within their region and should consult their region early on in the preparation process. The various national plans in a region should complement and where possible reinforce each other, using national strengths to address the region's challenges in the most secure and cost-effective way. Particular attention should be paid to ensuring a coordinated approach concerning the development of new energy resources and infrastructures.

Common approaches and joint objectives can increase long-term predictability and investment certainty. Coordination of national policies should therefore also prevent adverse incentives and mitigate possible adverse effects of national policies for other Member States. Plans should therefore contain an assessment of how the envisaged objectives and policies in the plans will impact on other Member States in the region and how regional cooperation across policy areas and sub-sectors should be strengthened.

Existing fora for regional cooperation framework, including macro-regional strategies, can be used for this purpose. The Commission will actively engage in the process and support the development of appropriate new fora. It is key that regions are balanced, enabling cooperation across several dimensions of the Energy Union.

The Commission will provide more detailed guidance to Member States on regional cooperation in the context of the implementation of the Energy Union objectives in 2016.

4.Reports on implementation of the plans and updates

Member States should provide progress reports every two years on the implementation of national plans starting in 2020. These implementation reports will be an important instrument in helping all Member States to see what is happening in implementing the Energy Union objectives.

The Commission will report on progress in its annual report on the State of the Energy Union.

Updating of national plans is foreseen once during the period from 2021 to 2030 to take account of changing circumstances and amendments in view of delivering on the commonly agreed objectives of the Energy Union, in particular the 2030 targets for climate and energy. As regards specific policy measures of the national plans, additional updates may be foreseen if necessary.

5.Process and timeline

The preparation of the national plans will be a dynamic process. Even though the outcome of the upcoming legislative processes for the key related EU legislation will have an impact on the design and implementation of national policies, the process of developing national plans needs to start in 2016 so that the plans can be finalised well before 2020 taking into account related EU legislation.

Existing planning and reporting obligations for policy areas with existing 2020 targets will remain unchanged until the year 2020. Reports would be synchronised with the new process of national energy and climate plans. For the period beyond 2020, the Commission will present a legislative initiative on streamlining of planning and reporting requirements in 2016 in order to reduce administrative burden and ensure coherence, simplification and consistency between the various planning and reporting streams while maintaining the quality of reported information and data. The Commission and Member States should already be able to consolidate and streamline a certain amount of reporting before 2020, where this can be done without legislative changes and without impacting on the substantive obligations. The Commission is already showing the way in its consolidation of periodic reports with the first State of the Energy Union.

The timeline for developing national energy and climate plans, which shows the relevant activities of Member States and the Commission, is presented in the table at the end of this section.

By autumn 2016 Member States are invited to present first results of their integrated projections for a reference scenario. Regional discussions with other Member States should be initialised. In the same year, the Commission will finalise the EU Reference Scenario 2016, provide a template for national plans, and issue guidance on regional cooperation. The relevant legislative proposals on the revised Effort Sharing Decision, renewable energy, energy efficiency, market design, and streamlining of planning and reporting obligations will be presented in the course of 2016.

In 2017, national political process on the plans should be initialised in order to allow for broad political validation of the plans at the national level and regional and stakeholder consultations finalised. By March 2017 integrated projections should be provided to the Commission covering both a reference and policy scenarios. 3 These projections will form a key input to Member States' national plans. Draft national plans should be submitted to the Commission in 2017, after which a consultation with other Member States and the Commission will be organised, in particular with a view to collectively achieving EU-level energy targets and objectives. Subsequently, the Commission will issue recommendations on draft national plans and present them in subsequent State of the Energy Union.

In 2018, final plans should be submitted to the Commission, taking into account consultations with other Member States, Commission recommendations and relevant EU legislation. The Commission will subsequently issue the State of the Energy Union including a first aggregate assessment of national energy and climate plans.

As regards the 2030 targets for renewable energy and energy efficiency agreed at EU level, the Commission will assess collective efforts presented in Member States' national plans in view of delivering on these targets. Policies and measures at EU level to complement national efforts in ensuring target delivery will, inter alia, be laid out in the new Renewable Energy Directive and the reviewed Energy Efficiency Directive to be presented by the Commission in 2016. The specific application of some of these measures will be determined at a later stage based on Member States' collective efforts presented in their national plans and on progress reports in view of delivering on the Energy Union objectives.

Along the process, the Commission will organise regular meetings and engage in dialogue with Member States to provide technical support, take stock of the preparation of the plans and discuss the way forward.

In the governance process, adequate involvement of all relevant European Institutions, notably the Council and the European Parliament, will be ensured.



Table: Timeline for developing national energy and climate plans

Member States

European Commission

2016

Start to develop overarching strategy, main objectives and overview of policies of national energy and climate plans

Develop integrated methodological tools to prepare a reference and policy scenarios as the analytical basis of national plans and present first results of reference scenario

Start national stakeholder consultations on national plans

Start regional discussions with other Member States on the preparation of national plans

Finalise, in collaboration with Member States, the EU Reference Scenario 2016

Provide template for national plans, including on main variables and parameters for national integrated projections

Provide guidance on regional cooperation

Present legislative proposals on the revised Effort Sharing Decision, renewable energy, energy efficiency (including for the buildings sector), market design, and streamlining of planning and reporting obligations

Hold technical meetings with Member States e.g. on methodological tools as well as key indicators

Issue 2nd State of the Energy Union

2017

Finalise stakeholder consultations and regional consultations on national plans

Engage in national political process on national plans

Provide integrated projections to the Commission covering both a reference and policy scenarios

Submit draft national plans to the Commission based on Commission Guidance on national plans and template

Provide technical support to Member States on the preparation of national plans

Facilitate and support regional consultations with other Member States on national plans including establishment of appropriate fora

Organise consultation with Member States of draft national plans and provide recommendations on draft plans

Issue 3rd State of the Energy Union

2018

Finalise national plans, taking into account Member States' peer review and Commission recommendations

Submit final national energy and climate plans

Provide support to Member States in finalising national plans

Issue 4th State of the Energy Union including first aggregate assessment of national energy and climate plans to be presented to Council and Parliament

(1)

     Requirements under the Monitoring Mechanism Regulation on reporting of greenhouse gas projections shall be complied with.

(2)

     SWD(2015)243.

(3)

     For simplification purposes, the date set will allow to use these projections to fulfil Greenhouse gas projection reporting requirements under the Monitoring Mechanism Regulation.

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