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Document 52017DC0053

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 Second Report on the State of the Energy Union

COM/2017/053 final

Brussels, 1.2.2017

COM(2017) 53 final

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

Second Report on the State of the Energy Union


I.    Introduction

For the Energy Union, 2016 was the year of delivery. It was a year in which the vision of the Energy Union Framework Strategy 1 was further translated into concrete legislative and non-legislative initiatives, most recently with the "Clean Energy for all Europeans" package presented on 30 November 2016. As a next step, the low emission mobility strategy 2 will also be translated into concrete initiatives, in line with the Commission Work Programme for 2017. 3 It is important that the co-legislators work towards the adoption of the proposed initiatives without delay and in line with the Joint Declaration of the three institutions on the European Union's legislative priorities for 2017 4 , to allow for a swift energy transition on the ground.

The Energy Union is a European priority project, identified by the Juncker Commission as one of the 10 political priorities 5 , in which five dimensions are closely interlinked: energy security, solidarity and trust; a fully integrated European energy market; energy efficiency contributing to moderation of demand; decarbonising the economy; and research, innovation and competitiveness. Progress has been made on all these dimensions.

The Energy Union is part of the positive agenda for the European Union as set out in the Bratislava Declaration 6 , and cannot be separated from other key European policies. It contributes to meeting the Sustainable Development Goals 7 and the implementation of the Circular Economy agenda 8 , and relies on close interaction with the Capitals Market Union, the Digital Single Market, the New Skills Agenda for Europe, the Investment Plan for Europe and the Security Union. By reviewing existing legislation and making sure it is kept fit for purpose, the Energy Union agenda also contributes to the Commission's Regulatory Fitness and Performance (REFIT) agenda.

The Energy Union is about more than energy and climate alone: it is about accelerating the modernisation of Europe’s entire economy, making it low carbon and efficient in energy and resources, in a socially fair manner. Its ultimate goal is to make sure that Europe's consumers, workers and businesses benefit from it. European companies should be at the forefront of the necessary investments, since this would create an early mover advantage for new technologies and business models. There is, in other words, a strong business case for the transition to a more modern, low carbon economy.

This also requires a strong external dimension. In a fast-changing geopolitical environment, a successful Energy Union is crucial to protect the long term economic interests and well-being of Europe and its citizens. 9 Work on the internal agenda has therefore been complemented by a reinforced energy diplomacy, designed to strengthen security of energy supply, to expand exports of European low carbon technology solutions and boost industrial competitiveness. More generally, energy diplomacy should increase Europe’s room-of-manoeuvre, together with its international partners, in a more volatile world. This is the area where Europe has solid potential to show global leadership.

A strong external dimension includes a robust climate diplomacy, showing leadership in steering the world towards a global clean energy transition and contributing to achieving the Sustainable Development Goals, in particular ensuring sustainable energy for all. Following the adoption of the Paris Agreement 10 in December 2015, it was the swift ratification by the European Union that enabled the entry into force of the first-ever universal, legally binding global climate deal on 4 November 2016.

In 2016, the European Union demonstrated that it is also at the forefront of implementing the Paris Agreement at home. The Commission has adopted all the legislative proposals necessary to deliver the European Union's ambitious commitments under the Agreement. These proposals and the facilitating measures accompanying them contribute fundamentally to the Commission's overall agenda to create jobs, growth and related investments.

At the same time, the Commission proposals should ensure that this transition remains affordable for European citizens and businesses alike, and that it leads to new jobs, skills and opportunities, boosting growth and ensuring high quality of life in the European Union. This is what also young Europeans expect from the European Union.

For all these reasons, the focus now turns to implementation. Agreement with the European Parliament and the Council should be reached on the legislative initiatives, existing legislation should be implemented and the Treaty’s competition and state aid rules should be strictly enforced. At the same time non-legislative action at Union, national and local level should continue and be reinforced.

II.    trends and policy observations

Since the first report on the State of the Energy Union published in November 2015 11 , a number of trends in the European Union's transition to a low-carbon economy were continued and even strengthened. 12 The main observations which can be drawn from national developments during 2016 are summarised in policy observations in Annex 2. They are the basis for a more in-depth analysis of Member States’ policies which the Commission intends to carry out in 2017.

The European Union as a whole has continued to make good progress on delivering the Energy Union objectives, in particular on the 2020 energy and climate targets. It has already achieved considerable reductions in energy consumption. If Member States' efforts continue, the European Union is on track to reach its 2020 energy efficiency targets. 13  

 

Figure 1: Primary energy consumption and GDP developments 14

In 2015, greenhouse gas emissions in the European Union were 22% below the 1990 level. 15 Despite a temporary limited increase in 2015, emissions remain on a decreasing trend. 16 The emissions in the sectors covered by the European Union Emissions Trading System (ETS) continued to fall in 2015. 17  

The European Union is also on track in the renewable sector where – based on 2014 data – the share of renewables reached 16% of the gross final energy consumption of the European Union 18 . As the trajectory becomes steeper closer to 2020, further efforts should be made.

Figure 2: Renewable energy shares in the European Union vs. Renewable Energy Directive and National Renewable Energy Action Plan Trajectories 19

Another important trend is that the European Union continues to successfully decouple its economic growth from its greenhouse gas emissions. During the 1990-2015 period, the European Union's combined Gross Domestic Product (GDP) grew by 50 %, while emissions decreased by 22 %. This decoupling is expected to continue under current trends and projections.

Figure 3: Historic and projected changes in GDP (in real terms), greenhouse gas (GHG) emissions, and emissions intensity of the economy (ratio between emissions and GDP) Index (1990 = 100) 20  

The European Union has also managed to significantly reduce the greenhouse gas intensity of its economy. It is presently one of the most greenhouse gas efficient major economies, and is set to become the most greenhouse gas efficient economy in the G20 through the implementation of the 2030 climate and energy targets. However, other regions are also significantly reducing their greenhouse gas intensity, based on their climate plans under the Paris Agreement. In other words, despite these positive trends, there is no time for complacency if Europe wants to remain a global leader.

Figure 4: GHG emissions intensity (MtCO2 eq/billion USD) 21

III.    assessment of progress and challenges

The transition to a modern, low-carbon economy is happening

The Energy Union Framework Strategy set out the ambition to move away from an economy dependent on fossil fuels. The decarbonisation of the European economy is well under way. Co-legislators agreed in record speed on the European Union’s ratification of the Paris Agreement. To implement the European Union's commitments, the Commission adopted the proposals necessary to deliver on the 2030 climate and energy framework, for the European Union Emissions Trading System 22 already in July 2015 and for the sectors outside of the Emissions Trading System 23 , covering also the integration of land use, land use change and forestry (LULUCF)  24 , in July 2016. As a next step, attention will turn to preparing the European Union's participation in the first "facilitative dialogue" in 2018, where the parties should take stock of the collective ambition and progress in implementing the Paris Agreement.

In 2016, the Commission also presented a European low emission mobility strategy with an equally clear ambition: by mid-century, greenhouse gas emissions from transport should be at least 60% lower than in 1990 and be firmly on the path towards zero, while ensuring the mobility needs of people and goods as well as global connectivity. Emissions of air pollutants from transport that harm public health should also be drastically reduced without delay. It focused in particular on road transport, which is responsible for over 70% of transport greenhouse gas emissions.

Just after the entry into force of the Paris Agreement, the Commission adopted the Clean Energy package, which sets the regulatory framework for the post-2020 period, but also gives a strong push to the transition towards a cleaner economy. Around the same time, the revised National Emissions Ceilings (NEC) Directive 25 was adopted. By setting tougher emission limits for key air pollutants, the European Union contributes to improving the health of its citizens and avoiding premature deaths, while at the same time cutting down the huge economic costs for society. 26 In a modern economy, citizens should benefit from investment in health.

Progress towards an innovative energy- and resource-efficient economy

The Commission delivered on its promise of treating energy efficiency as a source in its own right. The Commission proposed a binding European Union level target of 30% for improving energy efficiency by 2030. A series of accompanying initiatives on energy efficiency will ensure that the target can be delivered cost-efficiently, by adapting the relevant legislation to a 2030 context and tackling the multiple barriers holding back investments in energy efficiency and, in particular, in the renovation of buildings.

A modern economy should not only be efficient in its energy use, but also in its use of resources throughout their life-cycle. The energy transition should go hand in hand with a transition to a circular economy as great energy savings can be achieved through more waste prevention and recycling. As set out in the recently adopted Communication on the role of Waste-to-Energy 27 for instance, whilst respecting the waste hierarchy principle, the amount of energy recovered from waste could rise by 29% if proved techniques and supporting measures were properly implemented in order to play its part in meeting the objectives set out in the Energy Union Framework Strategy and in the Paris Agreement. Europe is a leader in the green technologies sector. The output of environmental goods and services per unit of Gross Domestic Product (GDP) has grown by more than 50% over the last decade and the employment linked to this ‘green economy’ has risen to more than 4 million full-time equivalents. In this area too, there is a compelling business case and a proven economic potential.

The modernisation of Europe’s economy requires effective competition and a stable regulatory framework in the energy markets to encourage innovation and competitiveness. The Communication "Accelerating Clean Energy Innovation" 28 presents a European Union strategy to enable European companies and new businesses to boost research and innovation in clean energy solutions and should ensure that their results are quickly and successfully brought to the marketplace. Considerable progress 29 was made in all of the priority areas of the Strategic Energy Technology (SET) Plan with the aim to integrate cost-efficient low-carbon technologies into the energy system.

The strong support to research and innovation in clean energy technologies also led to the European Union joining the global Mission Innovation. 30 The European Union will fulfil its leadership role by ensuring that this initiative delivers transformative results, in close cooperation with investors. Improved and additional indicators, for instance on imports, exports and market shares of clean energy technologies, will lead to a better assessment of the European Union's global performance and competitiveness in this field, and to an update of our research and innovation targets. To this end, the Commission will work with Member States, the industry, the research and innovation community and other key stakeholders, in the framework of a Clean Energy Industrial Competitiveness Forum which is planned to be covened in close coordination with already existing fora before the end of this year.

Consumer empowerment

The Energy Union should offer tangible benefits for consumers, who are at the centre of the energy transition. More and more consumers are active in the energy market, as can be seen for example by increasing solar photovoltaic capacities on private houses, by more renewable energy cooperatives emerging or by higher switching rates in both the electricity and gas markets. However, action is still needed to support the many consumers who do not yet have the possibility to participate.

As the energy prices and costs report 31 has shown, prices on the retail market have increased in recent years despite lower wholesale prices. The electricity market design proposals 32 and the new renewables directive 33 will empower consumers further to participate fully in the market and provide additional measures to protect vulnerable consumers, avoid disconnections and address energy poverty in the European Union. Strict competition enforcement will also contribute to the enhancement of consumer welfare through lower prices, more choice and more innovation.

The Commission plans to launch an awareness raising campaign in 2017 to encourage more consumers to participate in and benefit from energy market developments. The campaign aims to highlight the benefits of energy efficiency and switching. It will start as a pilot in several Member States and may be rolled out to other Member States once results from the pilot are available.

In addition, the Observatory of Energy Poverty starts operating at the end of 2017, helping Member States to monitor energy poverty and set up measures to tackle this growing problem. Its aim is to produce energy poverty statistics, to serve as a hub to disseminate good practices to key stakeholders and to be a source of information on energy poverty for the wider public.

The clean energy transition should be fair and take into account its transformative impact on stakeholders, including industries and workers. The Commission is therefore examining how it can optimise its support to the structural transition in coal and carbon-intensive regions, in compliance with competition rules. To this end, it intends to work in partnership with the stakeholders of these regions, to better target European Union support, encouraging exchange of good practices, including discussions on industrial roadmaps and re-skilling needs and promoting synergies / joint cooperation.

Future-proof infrastructure for the Energy Union

A resilient infrastructure is the backbone of the Energy Union. Last year, important interconnection projects were put in operation and regional cooperation was considerably strengthened.

Work on new interconnectors was launched, such as for the Trans Adriatic Pipeline (TAP), part of the Southern Gas Corridor; financing agreements were signed, such as a grant agreement for an investment of EUR 187 million from the Connecting Europe Facility to the Balticconnector, a gas interconnector between Finland and Estonia, and a EUR 179 million grant agreement for the BRUA gas pipeline through Bulgaria, Romania, Hungary and Austria 34 . As regards the Central East South Europe Gas Connectivity group (CESEC), its mandate should be extended to electricity, renewables and energy efficiency.

A new High-Level Group was set up on energy cooperation between the Northern Seas countries 35 , focussing on better integration of offshore wind and enhanced interconnections. Tenders for offshore wind projects in 2016 delivered record low bids, showing that prices for offshore wind are also reducing and electricity from offshore production is becoming cheaper 36 .

New Liquefied Natural Gas (LNG) terminals in Świnoujście (Poland) 37 , Dunkerque (France) and Pori (Finland) entered in operation in recent months, providing new market opportunities, but also improving security of gas supply of the Member States and their neighbours. The East Mediterranean is also a promising source of gas supply for the European Union. This increases the diversification opportunities and reduces import dependency on a single supplier, a key objective of the Energy Union.

However, bottlenecks still exist due to missing or underused infrastructure. Interconnections and, where relevant, internal lines are still needed to further integrate the internal electricity market in South Western Europe and in Northern and Eastern Europe (e.g. Germany, Poland and the Czech Republic) and the management of these interconnections must be improved. Work towards the synchronisation of the Baltic States with the European electricity system should continue. The 15% electricity interconnection target for 2030 should ensure, provided that this capacity is made available to the market, that the European Union can make optimal use of its renewable resources, ensure security of supply and market integration.

Efforts on infrastructure should be stepped up in 2017. The third list of Projects of Common Interest (PCIs) intends to identify those projects which are most urgently needed to contribute to market integration, sustainability, security of supply and competition. The new list should be accompanied by a communication on energy infrastructure. The next State of the Energy Union will single out those projects of common interest where insufficient progress has been made, so that no Member State will be left behind in the energy transition. At the same time, existing infrastructure should be made fully available to market players by transmission system operators and market rules should promote an efficient use of infrastructure before building new infrastructure.

In view of scarce resources in the Member States, public resources should be used smartly. Member States should make sure that their support to energy infrastructure in the widest sense is in line with the principles of the Energy Union. Support should only be given if in line with the long-term energy policy of the European Union, avoiding stranded assets and carbon lock-in. 38 Greater efforts are needed to provide infrastrucuture for clean energy in transport.

Protection of critical infrastructures in energy and transport sectors is a topic of growing importance in light of recent terrorist attacks and other geopolitical threats. Legislation is already in place to assess the relevant needs and improve the protection of critical infrastructure. 39 Future work in the energy sector should focus on strengthening the physical protection of installations as well as measures to keep services running. Digitalisation of the energy sector increases its exposure to cyber-attack and the need for strong data protection rules. In order to implement the Network and Information Security (NIS) Directive 40 and to promote synergies between the Energy Union and the Digital Single Market, an expert group is analysing the specific cybersecurity needs of the energy sector. This is also crucial from a consumers’ perspective.

The investment challenge

To reach the European Union's 2030 climate and energy targets, about EUR 379 billion investments are needed each year over the 2020-2030 period. 41 Therefore, work on investments will be intensified in 2017, using all available instruments in a coherent way.

The European Fund for Strategic Investments (EFSI) continues to play a crucial role in this by helping to unlock private financing. Until now, more than 20% of investment supported by the European Fund for Strategic Investments was related to the energy field. While extending the Fund, the Commission proposed that at least 40% of projects in the Fund's infrastructure and innovation window should contribute to climate, energy and environment action in line with the objectives of the Paris Agreement. 42 Blending of the European Fund for Strategic Investments with other European Union funds and funding instruments will further increase the opportunity for deploying funds to higher-risk investments in the future. 43

The European Structural and Investment Funds (ESIF) also provide substantial support through a variety of projects. Between 2014 and 2020, the support amounts to in total around EUR 98 billion with national public and private co-financing. Investment in research and innovation through Horizon 2020, including the InnovFin Energy Demo Projects financial instruments 44 , is equally instrumental in developing clean energy solutions. Research and innovation projects supporting cutting edge technologies already produced significant results in 2016 in areas such as photovoltaic, hydrogen and zero emission fuel cell buses. 45

Additional funding instruments will be put in place. In its proposal to revise the European Union Emissions Trading System for the period after 2020, the Commission proposed an Innovation Fund to support innovation in the power sector and industry. To appropriately scope this fund, the Commission intends to launch in 2017 a series of sector-specific expert roundtables with representatives of energy intensive industries, renewable energy project promoters, innovators and investors. Moreover the proposal includes the setting up of a Modernisation Fund, to support lower-income Member States to modernise their energy systems.

In 2017, particular attention will be paid to implementing the Smart Finance for Smart Buildings initiative 46 , in cooperation with the European Investment Bank (EIB) and Member States. One element therein is the development of flexible financing platforms to accelerate buildings renovation. It is equally important to address obstacles that slow down renovation. The Commission is therefore analysing, in close cooperation with the Member States, the impact of public accounting rules on the market for energy performance contracting. It plans to update its guidance on the statistical treatment of such partnerships before late spring 2017.

Financing should be sustainable. With that goal in mind, the High-Level Expert Group on Sustainable Finance 47 plans to present, in the course of 2017, policy recommendations to the Commission aimed at facilitating the flow of public and private capital towards sustainable investments and minimising possible risks to the European Union financial system due to its exposure to carbon intensive assets.

In the same logic, technologies and resources which are being phased out or might not be sustainable in the long term should not be supported through public money. The Clean Energy package made it clear that the European Union is stepping up its efforts towards phasing out fossil fuel subsidies. Future reports on the State of the Energy Union will monitor developments on this commitment made under the G7 and G20.

A strong Energy Union external dimension

The changing international environment leads to new challenges but also brings new opportunities. As an importer of energy, the European Union has a significant interest in well-functioning and rule-based international energy markets and is working actively to strengthen governance in multilateral fora such as the G7, the G20 and the International Energy Agency, among others. The European Union also works in regional and bilateral formats to promote the functioning, integration and reform of energy markets, such as the reform process of the Energy Community or a reinvigorated dialogue with Algeria, and to promote diversification projects of strategic importance, such as the Southern Gas Corridor. In the enlargement and neighbourhood regions of Europe, the Commission has launched an initiative with International Financial Institutions to jointly promote energy sector reforms and scale up investments in energy efficiency in buildings, public and private. 48

The European Union continued to promote energy reforms in Ukraine. Tangible progress was achieved with respect to the gas market and important decisions were taken to improve energy efficiency. The Commission conducted a series of bilateral and trilateral meetings with Russia and Ukraine to ensure stable domestic supplies to Ukraine and gas transit from Russia via Ukraine to the European Union. Reforms need to continue, including in the electricity sector.

The political agreement reached between the European Parliament and the Council on the proposal on energy-related intergovernmental agreements 49 , which was part of the February 2016 security of supply package, was an important achievement. This will lead to more transparency and compliance of intergovernmental agreements with Union law. Progress has also been made on the legislative proposal on the security of gas supply 50 , with a position established by the European Parliament and a political orientation by the Energy Council in early December 2016.

Global leadership of the European Union on the clean energy transition is required. As a global market place for clean technologies is being unlocked at an unprecedented scale, the European Union is using its external policies to share its experiences in this area and to mainstream the shift to a low-carbon global economy, first and foremost by developing strong partnerships with countries and regions.

This is notably the case in Africa as well as in the neighbourhood, through the Energy Community. The importance of the issue was also recognised in the Global Strategy, 51 which has specifically called for building greater synergies between energy and climate diplomacies. In the climate field, cooperation on emission trading with China, for instance, is working well and both sides agreed to intensify it further through another bilateral project aimed at supporting the implementation of a nation-wide Emission Trading Scheme in China that should start operating in 2017.

International action on climate change delivered in 2016 an agreement at the International Civil Aviation Organization (ICAO) to start addressing fast-growing international aviation emissions. Following this agreement, the Commission intends to make a legislative proposal on the scope of the European Union emissions trading system for aviation shortly. In addition, international diplomacy led to the adoption of the Kigali Amendment to the Montreal Protocol on a global phase-down of highly global warming hydrofluorocarbons (HFCs) and in the International Maritime Organization (IMO) to an agreement towards an emission reduction strategy for the international shipping sector. These outcomes represent timely steps forward in tackling climate change in fast growing emission sectors.

2016 also saw the reinforcement of the Energy Council between the European Union and the United States, which continued to serve as the prime example of high-level bilateral cooperation on energy and climate issues, including in the areas of energy security, energy policy and energy technology development and deployment.

Africa is and will remain a privileged partner for the European Union. Millions of people in Africa do not yet have access to modern forms of energy. However, universal access to sustainable energy is key to underpin the required pace of economic growth and the creation of a decent work environment, including for women and youth. The Joint European Union-Africa Strategic Partnership provides the framework for further cooperation between these two continents. The European Union is also strongly supporting the African Renewable Energy Initiative (AREI) 52 , an Africa-led initiative with the objective to increase Africa’s renewable energy capacity, since its establishment at the 2015 Paris Climate Conference (COP21). Energy will also be pivotal in investments through the future European External Investment Plan and other already existing instruments. 53

The European Union's active energy and climate diplomacy is reinforced by support for action by cities and regions in all parts of the world through the Global Covenant of Mayors. The alliance set up between the European Union's Covenant of Mayors and the Compact of Mayors starts full operation in 2017 and brings together more than 7,100 cities across 6 continents. Equally, the implementation of the New Urban Agenda, adopted during the Habitat III conference, remains a priority for the European Union, including in view of its wider sustainability dimension.

IV.    A NEW ENERGY UNION TOUR TO DRIVE JOBS, GROWTH AND INVESTMENTS

To boost the clean energy transition and modernise Europe’s economy, implementation has to start now.  54 With that goal in mind, the Commission is launching another Energy Union tour. It is a good opportunity to engage with national and other stakeholders and help to resolve obstacles together. Therefore, the tour is targeted at the specific needs of the Member States, e.g. to support the transition of carbon-intensive regions or to bring the energy transition to islands. 55 It will also bring the Energy Union closer to European citizens through dialogue with all levels of society, in particular with the European youth. To succeed, Europe needs the full engagement of a generation of young people, equipped with the right skills and convinced of the need to participate in the energy transition.

As part of the implementation agenda, the tour will in particular focus on the integrated national energy and climate plans and on action at the local level.

Governance and planning for a successful Energy Union on the ground

As part of the Clean Energy package, the Commission proposed a new governance system for the Energy Union 56 , based on a more streamlined planning, reporting and monitoring of its implementation. Now that most of the Energy Union proposals are on the table, Member States have all key elements to start preparing their integrated national energy and climate plan. These plans will be a crucial instrument for Member States to ensure certainty and predictability for businesses, employees and investors and facilitate much-needed investments in the low-carbon economy.

Most European Union Member States still need to start developing their National Plan. In order to deliver on the commitment of having plans ready well before 2021, as agreed by the Council 57 , work should be accelerated. Even though it will be challenging, the Commission calls on Member States to present their draft by 1 January 2018. The technical working group on national energy and climate plans will continue providing support to the Member States. To be inclusive, the draft plans should be based on consultations with investors, social partners, local and regional authorities, including those with specific needs, and other relevant stakeholders in the Member States. Regional cooperation at an early stage is also key in putting the plans together. The national energy and climate plans should be developed, whenever possible, in parallel with air pollution control programmes to ensure synergies and reduce costs since these plans rely to a large extent on similar measures and actions.

The importance of the local level for delivering the Energy Union

Cities and rural areas are crucial for the modernisation and decarbonisation of the European economy. Urban areas are a major source of greenhouse gases, with urban energy consumption generating about three quarters of global carbon emissions. Cities and rural areas are particularly vulnerable to climate change impacts. At the same time, rural areas, as suppliers of renewable resourcs for the bioeconomy, and cities, as centres of innovation and growth and engines of economic development, are also – and increasingly so – part of the solution. Cities are responsible for a quarter of all public expenditure and almost half of public investment. 58 They produce 68% of the Gross Domestic Product (GDP) of the European Union with 62% of the jobs, are key players in the effort to decouple greenhouse gas emissions and resource consumption from economic growth 59 and help national economies become more knowledge-based and competitive. This is where the modernisation of Europe's economy starts.

The adoption of the Pact of Amsterdam establishing the Urban Agenda for the European Union, the European Summit of Regions and Cities in Bratislava and the launch of the one-stop-shop for cities gave a strong boost to city action. The Urban Agenda is implemented through partnerships on a wide range of areas with a direct impact on Europe’s economy. They involve the Commission, Member States, cities and relevant stakeholders.

Across the European Union, city-based projects are being launched, looking for synergies between areas such as energy, mobility, digital, water, air and waste management and the circular economy. Successful projects such as the ones for smart cities produce savings for citizens and industry, improve air quality and create local jobs. The Energy Union tour is a timely opportunity to highlight such projects so that they can be scaled-up and replicated all across Europe, and better link them to the European investment agenda.

V.    Conclusion

The European Commission is strongly committed to continue its work on projects which show real European added value and bring tangible benefits to European citizens. The modernisation of Europe’s economy is such a project, and is what the Energy Union is all about. To be successful, the Energy Union related legislative proposals presented by the Commission in 2015 and 2016 need to be addressed with urgency, in line with the Joint Declaration of the three institutions on the European Union's legislative priorities for 2017.

It is important to maintain the overall coherence and ambition of the Energy Union related proposals, as well as the political momentum of the Energy Union project. Therefore, progress should be reviewed on a regular basis at a more political level, including by the European Council. In line with the Bratislava Declaration, the European Council will revert to the energy and climate issues when appropriate.

As important as making progress on the legislative files is speeding up the implementation of the Energy Union’s facilitating measures and ensuring full compliance with the existing rules. The European Union and its Member States need to reinforce, for instance, the implementation of energy and climate diplomacy priorities and work on synergies between them, and set up, before the end of the year, the investment platforms which will facilitate financing energy efficiency and renewable energy projects.

Implementation of these and others measures is needed to make progress on the ground already now, to deliver on the jobs, growth and investments. Only when concrete progress on the ground is made, the multiple benefits of the clean energy transition will become visible in Member States, regions and communities, a key condition for the Energy Union’s lasting success.

(1)

COM(2015) 80.

(2)

COM(2016) 501.

(3)

COM(2016) 710.

(4)

http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32016C1224(01)&from=EN.

(5)

  https://ec.europa.eu/priorities/sites/beta-political/files/juncker-political-guidelines-speech_en_0.pdf ; see also the European Council's Strategic Agenda for the Union in the times of change, Annex I to the European Council conclusions of 26/27 June 2014.

(6)

Declaration and Roadmap following the Bratislava Summit of 27 Member States devoted to diagnose the present state of the European Union and discuss a common future, 16 September 2016.

(7)

Communication "Next steps for a sustainable European future", COM(2016) 739.

(8)

Communication "Closing the loop - An EU action plan for the Circular Economy", COM(2015) 614.

(9)

In accordance with, among others, the “Joint Framework of Countering Hybrid Threats”, JOIN(2016) 18.

(10)

See http://unfccc.int/files/essential_background/convention/application/pdf/english_paris_agreement.pdf .

(11)

COM(2015) 572.

(12)

For details see the Commission Staff Working Document "Monitoring progress towards the Energy Union objectives – key indicators" (SWD(2017) 32) and the European Environment Agency's "Trends and projections in Europe 2016 – Tracking progress towards Europe's climate and energy targets" (http://www.eea.europa.eu/publications/trends-and-projections-in-europe).

(13)

COM(2017) 56; the European Union already achieved its 2020 final energy consumption target. In 2014, its primary energy consumption was only 1.6% above its 2020 primary energy consumption target.

(14)

Based on Eurostat data.

(15)

According to the approximated inventory for 2015.

(16)

COM(2016) 707.

(17)

COM(2017) 48.

(18)

COM(2017) 57.

(19)

Öko-Institut report on renewable energy; published on the Commission website (http://ec.europa.eu/energy/en/studies).

(20)

European Commission, European Environment Agency.

(21)

Source: The emissions Gap Report 2016-2030 trends and ambition. UNEP, November 2016. INDC = Intended Nationally Determined Contribution; USA's assessed INDC is for 2025; all are unconditional INDC except for Indonesia, South Africa, Argentina, India and Mexico conditional INDC.

(22)

COM(2015) 337.

(23)

COM(2016) 482.

(24)

COM(2016) 479.

(25)

Directive (EU) 2016/2284 on the reduction of national emissions of certain atmospheric pollutants.

(26)

In 2013, more than 450.000 people are estimated to have died prematurely from air pollution in the European Union. Direct economic damages amount to EUR 15 billion from lost work days and reduced productivity from respiratory diseases, and EUR 4 billion from healthcare costs. See the European Environment Agency's 2016 Air Quality in Europe report: http://www.eea.europa.eu/publications/air-quality-in-europe-2016

(27)

COM(2017) 34.

(28)

COM(2016) 763.

(29)

See: https://ec.europa.eu/energy/sites/ener/files/documents/set-plan_progress_2016.pdf

(30)

Mission Innovation is a global initiative of 22 governments which have pledged to double their public clean energy research and development investment over five years.

(31)

COM(2016) 769.

(32)

See in particular COM(2016) 864 (Electricity Directive) and COM(2016) 861 (Electricity Regulation).

(33)

COM(2016) 767.

(34)

Since its start in 2014, the Connecting Europe Facility has provided funding for 75 actions, totalling EUR 1.2 billion, among which 12 grants for works.

(35)

  https://ec.europa.eu/energy/en/news/north-seas-countries-agree-closer-energy-cooperation .

(36)

E.g. EUR 64/MWh (Denmark) and EUR 54.50/MWh (Netherlands).

(37)

Co-financed with EUR 223 million from the European Regional Development Fund.

(38)

On stranded assets in the power sector see the European Environment Agency report 19/2016. "Transforming the EU power sector: avoiding a carbon lock-in".

(39)

Council Directive 2008/114/EC on the identification and designation of European critical infrastructures and the assessment of the need to improve their protection.

(40)

Directive (EU) 2016/1148 on measures to ensure a high common level of network and information security across the Union.

(41)

Impact Assessment for the amendment of the Energy Efficiency Directive, SWD(2016) 405 (investment figures excluding transport sector).

(42)

So far around half of all approved transactions under the Infrastructure and Innovation window are in the energy and climate sector. The Investment Plan for Europe, State of Play, May 2016. See also Communication "Europe investing again – Taking stock of the Investment Plan for Europe and next steps", COM(2016) 359.

(43)

This includes a blending call under the Connecting Europe Facility in February, with an envelope of EUR 150 million.

(44)

http://www.eib.org/products/blending/innovfin/products/energy-demo-projects.htm.

(45)

In photovoltaics, the R2M-Si project spin-off company is moving from demonstration to commissioning to producing highly efficient photovoltaic modules. The Fuel Cells and Hydrogen public-private partnership delivered the first publicly accessible hydrogen refuelling station in Belgium, the world's first proton exchange membrane 2MW fuel cell power plant, and the initiation of the roll-out of some 140 zero emission fuel cell buses across Europe.

(46)

Annex 1 to COM(2016) 860.

(47)

Commission Decision of 28.10.2016, C(2016) 6912.

(48)

https://ec.europa.eu/commission/2014-2019/hahn/announcements/1st-high-level-meeting-enhanced-cooperation-enlargement-and-neighbourhood-regions-europe_en.

(49)

COM(2016) 53.

(50)

COM(2016) 52.

(51)

Communication “Shared Vision, Common Action: A Stronger Europe – A Global Strategy for the European Union’s foreign and Security Policy", http://www.eeas.europa.eu/top_stories/pdf/eugs_review_web.pdf

(52)

http://www.arei.org/.

(53)

Communication "Strengthening European Investments for jobs and growth: Towards a second phase of the European Fund for Strategic Investments and a new European External Investment Plan", COM(2016) 581.

(54)

Annexes 1 and 2 to COM(2016) 860.

(55)

In 2017, the Commission intends to launch a process bringing European islands together to accelerate the development and adoption of best available technologies on islands and in island regions.

(56)

COM(2016) 759.

(57)

Council conclusions on the governance of the Energy Union, 26 November 2015.

(58)

Report "The State of European Cities 2016 – Cities leading the way to a better future", SWD(2016) 325, http://ec.europa.eu/regional_policy/sources/policy/themes/cities-report/state_eu_cities2016_en.pdf .

(59)

See the UNEP City-level decoupling report, http://www.unep.org/resourcepanel/Publications/City-Leveldecoupling/tabid/106135/Default.aspx .

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Brussels, 1.2.2017

COM(2017) 53 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

Second Report on the State of the Energy Union


Updated Roadmap for the Energy Union –
State of play: 1 February 2017

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

This roadmap is 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) and updated in November 2015 in the context of the 1st State of the Energy Union (COM(2015)572). New information in this table relates to 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 planned for 2017 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)

An evaluation of the implementation of the Projects of Common Interest and of the Regulation on guidelines for trans-European energy infrastructure is taking place in 2017

The 3rd list of Projects of Common Interest is scheduled for publication in Q4/2017

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

Planned for 2017; to be adopted together with the 3rd list of Projects of Common Interest in Q4/2017

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; a second meeting took place 23-24 June 2016

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)

Legislative proposals adopted on 30 November 2016 (COM(2016) 861 (Electricity Regulation) and COM(2016) 864 (Electricity Directive))

Final Report on the Sector Inquiry on Capacity Mechanisms adopted on 30 November 2016 (COM(2016) 752)

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

Commission

2016

X

X

X

Legislative proposals adopted on 30 November 2016 (COM(2016) 862)

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)

Legislative proposals on consumer issues included in the proposals on the new electricity market design (see above)

Gas

Revision of the Regulation on security of gas supply

Commission

2015-2016

X

X

Legislative proposals adopted on 16 February 2016 (COM(2016)52)

Inter-institutional negotiations on-going; political orientation given by the Energy Council in early December 2016; position agreed in ITRE Committee of the EP; trilogue negotiations planned for conclusion in first half of 2017

Liquified Natural Gas and Storage strategy

Commission

2015-2016

X

Communication adopted on 16 February 2016 (COM(2016)49)

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)

Legislative proposals adopted on 30 November 2016 (COM(2016) 863)

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)

Legislative proposals adopted on 30 November 2016 (COM(2016) 767)

Communication on Waste to Energy

Commission

2016

X

X

Communication adopted on 26 January 2017 (COM(2017) 34)

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)

Inter-institutional negotiations on-going; next step in Council is to agree a position; next step in EP is Plenary vote expected for February 2017

Legislative proposal on the scope of the EU emissions trading system for aviation planned for adoption in 2017

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

Legislative proposals adopted on 20 July 2016 (COM(2016) 482 (non-ETS); COM(2016) 479 (LULUCF))

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

Planned for 2017; implementation of the low emission mobility strategy

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

Commission

2016

X

X

Planned for 2017; implementation of the low emission mobility strategy

Master Plan for the deployment of Cooperative Intelligent Transport Systems

Commission

Member States

Industry

2016

X

X

X

Communication adopted on 30 November 2016 (COM(2016) 766)

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

Commission

2016 - 2017

X

X

X

Planned for 2017; implementation of the low emission mobility strategy

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

Planned for 2017; implementation of the low emission mobility strategy

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

Commission

2017

X

X

Planned for 2017; implementation of the low emission mobility strategy

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

Communication on the European Strategy for low-emission mobility adopted on 20 July 2016 (COM(2016)501)

Fuel element partly covered by the legislative proposal adopted on 30 November 2016 (COM(2016) 767 (Renewables Directive))

Energy efficiency

Review of the Energy Efficiency Directive

Commission

2016

X

X

X

X

Legislative proposals adopted on 30 November 2016 (COM(2016) 761)

Staff Working Document on good practices in energy efficiency (SWD(2016) 404

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

Commission

2016

X

X

X

X

Legislative proposals adopted on 30 November 2016 (COM(2016) 765;

Smart financing for smart buildings is part of the Buildings initiative (Annex 1 of Communication COM(2016) 860)

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)

Agreement has been reached in the trilogue on all substantive issues; open procedural issues expected to be resolved in 1st half of 2017

Ecodesign work plan adopted on 30 November 2016 (COM(2016) 773); 8 measures adopted at the same time

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

Commission

2015-

X

X

Communication "Europe investing again – Taking stock of the Investment Plan for Europe and next steps" adopted on 1 June 2016 (COM(2016) 359).

Communication "Strengthening European Investments for jobs and growth: Towards a second phase of the European Fund for Strategic Investments and a new European External Investment Plan" adopted on 14 September 2016 (COM(2016) 581)

Legislative proposal on the extension of the European Fund for Strategic Investment (EFSI) Regulation (COM(2016) 597)

Legislative proposal on the revision of the Financial Regulation and a number of sectoral regulations for further simplification and flexibility, including for more effective use of financial instruments (COM(2016) 605)

See also the enabling actions, including the buildings initiative, included in the 'Clean Energy for all Europeans' package of 30 November 2016 (COM(2016) 860, Annex 1)

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

Communication adopted on 16 February 2016 (COM(2016)51)

Covered in the legislative proposals which were part of the 'Clean Energy for all Europeans' package of 30 November 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)

Council conclusions on European climate diplomacy after COP21 adopted by the Foreign Affairs Council on 15 February 2016 (6061/16)

Council conclusions on Energy and Development adopted by the Foreign Affairs Council (Development) on 28 November 2016 (14839/16)

Council Conclusions on strengthening the synergies between EU energy and climate diplomacies – Planned for the Foreign Affairs Council on 6 March 2017

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

Communication adopted on 16 February 2016 (COM(2016)53)

Political compromise agreed in trilogue formation in December 2016

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

Commission

HR/VP

2015 -

X

X

X

X

X

On-going

Memorandum of Understanding on an upgraded strategic partnership with Ukraine

Commission

HR/VP

European Parliament

Council

2015

X

X

Signed during the EU-Ukraine Summit on 24 November 2016

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

Commission

HR/VP

European Parliament

Council

2015

X

X

Ashgabat Declaration by Turkmenistan, Turkey, Azerbaijan and Georgia signed on 1 May 2015; no further negotiations take place on a trilateral MoU

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 and September 2016

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 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 Strategic Energy Technology (SET) Plan adopted on 15 September 2015 (C(2015)6317)

Smart Specialisation Platform on Energy launched in 2015

Communication "Accelerating Clean Energy Innovation" adopted on 30 November 2016 (COM(2016) 763)

A strategic transport research & innovation agenda is planned for 2017

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

Commission

2016 and every 2 years thereafter

X

Report adopted on 30 November 2016 (COM(2016) 769)

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 acceleration of clean energy innovation (see above)

Enhanced trade policy to facilitate export of EU technologies

Commission

2015-2019

X

X

X

On-going

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)

Communication on LNG and storage adopted on 16 February 2016 (COM(2016)49)

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

On-going

Regulation (EU) 2016/1952 on European statistics on natural gas and electricity prices adopted

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

Planned for 2017

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

Commission

2015

X

X

Communication adopted on 4 April 2016 for consultation of the European Economic and Social Committee (EESC) (COM(2016)177)

Final version, taking into account the opinion of the European Economic and Social Committee (EESC), is planned for adoption in 2017

Top

Brussels, 1.2.2017

COM(2017) 53 final

ANNEX

The Energy Union’s five dimensions: policy observations at Member State and EU level

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

Second Report on the State of the Energy Union


The main observations which can be drawn from national developments during 2016 are summarised in these policy observations. They are the basis for a more in-depth analysis of Member States’ policies which the Commission intends to carry out in 2017.

National Energy and Climate Plans

A small number of Member States are already advancing on the preparation of their integrated National Energy and Climate Plan for the period 2021 to 2030, which should include the national contributions to the Energy Union objectives and the 2030 targets for energy and climate. However, most Member States still need to start this process or to move ahead more quickly.

Energy security

In 22 Member States, total net import dependency decreased between 2005 and 2014, indicating an improvement in energy security. Such positive trends were supported by increased indigenous renewable energy production (in e.g. Austria, Estonia, Ireland, Italy, Latvia, Portugal or Spain) and by decreasing the overall energy demand also due to energy efficiency improvements. Over the same period, total net import dependency significantly increased in a few countries, due to the decline of indigenous fossil fuel production (Denmark, Poland, the United Kingdom) or the closure of nuclear plants (Lithuania). Planned infrastructure projects might also impact the energy dependence of several Member States.

The European Union still imports more than half of its energy needs, but is making progress to diversify sources, routes and suppliers of energy. However, some Member States are still fully or predominantly dependent on supply from a single third country, notably Bulgaria, Estonia, Finland, Hungary, Lithuania and Slovakia, in particular for gas but often for oil and/or coal, too.

New interconnections and Liquefied Natural Gas (LNG) terminals facilitated an improvement of security of gas supply over the last years. These improvements have not only been beneficial for the internal gas market, but have increased the possibility for Member States to substitute main/traditional routes in case of disruptions. Today, an increased percentage of gas demand can be satisfied through alternative channels with only two Member States remaining that could not fully substitute for the disruption of their most important gas source 1 : Bulgaria and Portugal.

There still remains a need for further improving gas interconnections between Member States (e.g. Croatia, Hungary, Romania, Bulgaria and Greece; Portugal and Spain with France) and to ensure that consumers and suppliers in all Member States have access to liquid hubs and can benefit from the Liquefied Natural Gas (LNG) and interconnection capacities that have been developed or have the potential to develop.



Internal energy market

Electricity infrastructure

Electricity interconnections and the reinforcement of internal lines are needed to further integrate the internal electricity market, e.g. in South Western Europe and in Northern and Central-Eastern Europe (e.g. Germany, Poland and the Czech Republic), or to work towards the synchronisation of the Baltic States with the European electricity system. 11 Member States have not yet reached the 2020 electricity interconnection target of 10 % (Bulgaria, Cyprus, Germany, Spain, France, Ireland, Italy, Poland, Portugal, Romania and the United Kingdom) and need to continue their efforts. In some Member States, the recent increase in installed renewable generation capacity has been quicker than the increase in interconnection capacity, making these countries undershoot the interconnection target.

Congestion management remains an issue for seven Member States (Austria, Czech Republic, Denmark, Germany, Hungary, Poland and Slovakia). This needs a solution that will facilitate cross-border electricity flows in Central Europe and across the Union while ensuring system security.

Wholesale markets

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 of them have not yet fully implemented the necessary rules that allow for competitive and liquid markets, particularly for wholesale gas markets. Furthermore, undertakings still have significant market power in a number of Member States. Competition enforcement therefore remains key to ensure open and competitive markets.  

At the regional level, by mid-2015 most of the European wholesale electricity markets are coupled to one or several of their neighbours. Largely driven by falling coal and gas prices, the gradual penetration of renewables into the power sector and subdued demand, wholesale electricity prices decreased in most Member States between 2013 and 2015. Regional differences remained significant, with the highest prices in the United Kingdom and Southern Europe and the lowest prices in the Scandinavian countries.

Wholesale prices of gas decreased in all Member States between 2013 and 2015, as weak demand, oversupply in the main regional markets, low oil prices and steady Liquefied Natural Gas (LNG) imports put pressure on European gas prices. In contrast to electricity, there has been a clear convergence of national prices, facilitated by lower oil prices which allowed oil-indexed prices to approximate Northwest European hub prices.

Retail markets and consumers

Unlike wholesale prices, retail prices of gas and electricity generally increased in the last 5 years. In case of electricity, the increasing share of taxes and levies in the retail price contributed to this trend. Retail markets for both electricity and gas are still national (or sub-national). Further efforts are needed to advance regional market integration. Competition enforcement may be required in some cases.

While several more Member States have recently 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 constitutes an obstacle to demand-side participation and retail competition.

Consumer empowerment via the roll-out of smart metering has been effectively implemented only in some Member States (most notably Finland, Italy, Sweden and Malta). In Estonia, Spain and Denmark about half of households are already equipped with electricity smart meters. As regards penetration rates for gas smart meters, only the Netherlands has made some significant progress, with almost 30% of households having smart meters. In several Member States, administrative burdens act as barriers for consumers aiming to switch to new suppliers and better contractual conditions.

Energy poverty is a concern for many Member States. On average, in the European Union, low-income households spent 8.6% of their expenditures for energy-related purposes. Moreover, this share increased for most Member States since 2005. In addition, a growing share of these households (23% in 2015) does not have sufficient financial means to heat their homes to an adequately warm level. More focused measures are needed by Member States for vulnerable consumers to address energy and fuel poverty effectively.

Energy efficiency

Considerable progress has been made with regard to energy efficiency. In 2014, the primary energy consumption 2 of the European Union was only 1.6% above its primary energy consumption target for 2020, and the final energy consumption 3 in 2014 was already lower than the target agreed for 2020. Even if primary and final energy consumption are expected to have increased by around 1.5% and 2%, respectively, in 2015 compared to 2014, the 2020 targets can be met, provided the necessary measures are put in place.

Energy efficiency policies are considerably contributing to a decrease in energy consumption and decarbonisation, and can also contribute to better air quality. Increased efforts are needed to renovate existing buildings in order to reduce the overall energy consumption, energy bills of consumers and make the European Union's building stock smarter and more sustainable. In this respect, financing conditions of energy efficiency investments need to be further improved in Member States, including by consolidating synergies between project promoters and financiers as well as promoting project aggregation. New skills and information and communication technology (ICT) have great potential to contribute to improving energy efficiency. Further improvements of energy efficiency in the transport sector to exploit remaining potentials are needed in most Member States.



Decarbonisation

27 Member States have emissions below their annual limits in 2013 and 2014 under the Effort Sharing Decision 4 . Only Malta's emissions exceeded the limit for these two years.

According to their projections based on policies already implemented, most Member States are expected to reach their Effort Sharing Decision targets in 2020. A few Member States still need to put in place additional measures or to make use of flexibilities in 2020. This is in particular the case for Ireland, Luxembourg and Belgium.

An important contribution to Energy Union actions in the European Union comes from revenues that Member States generate from auctioning emission allowances under the European Union emissions trading system (ETS). Over the period 2013-2015 these auctions generated nearly EUR 11.8 billion. Member States have used or plan to use approximately 80% of these revenues for climate and energy purposes. Member States use most of these revenues domestically for renewable energy (EUR 2.89 billion), energy efficiency (EUR 1.96 billion), and sustainable transport (EUR 730 million).

All but one Member State (the Netherlands) exhibited average 2013/2014 renewable energy shares which were equal or higher than their corresponding indicative trajectory according to the Renewables Directive. According to estimates 5 , 25 Member States already exceeded their 2015/2016 indicative trajectories in 2015. Three Member States (France, the Netherlands and Luxembourg) showed 2015 estimated renewable energy shares below their 2015/2016 indicative trajectory.

However, Member States will have to continue, and several Member States to strengthen efforts to reach their 2020 binding targets, as the trajectory becomes steeper closer to 2020.

Infrastructure for alternative fuels in transport is a key enabler for low-emission mobility. Under the Alternative Fuels Directive 6 , Member States are required to submit national policy frameworks for alternative fuel infrastructure by November 2016. The majority of Member States has not met this obligation yet.

Research, innovation and competitiveness

European industry, research institutes and academic innovative actors are overall well positioned in the global energy landscape. With 30% of global patents in renewables, the European Union is a leader in low carbon key technology innovation. More is however needed to quickly and successfully bring these innovations to the market and turn them into growth and job opportunities by addressing internal and export markets.

The latest figures dated 2014 show that total research and innovation investment (public and private) in the EU28 has increased by 22% since 2010 in Energy Union research and innovation priorities. The private sector is responsible for this increase with the sustainable transport sector representing the highest share of all private investment with 43%. Public national investment has slightly decreased in this period, except in the sector of smart energy system, both in absolute terms and as a share of the Gross Domestic Product (GDP). Public investment now only represents 15% of the total overall investment.

Compared to its main economic partners, the European manufacturing industry had in 2014 the second lowest real unit energy costs 7 as a percentage of value added, just after the USA. China, Russia, Japan and Australia show substantially higher values than the European Union. The good performance of the European Union is mostly explained by the low levels of energy intensity of the manufacturing sector which has helped to compensate higher real energy prices.

(1)

So-called N-1 rule.

(2)

‘Primary energy consumption’ means gross inland consumption, excluding non-energy uses; Article 3(2) of the Energy Efficiency Directive.

(3)

‘Final energy consumption’ means all energy supplied to industry, transport, households, services and agriculture. It excludes deliveries to the energy transformation sector and the energy industries themselves; Article 3(3) of the Energy Efficiency Directive.

(4)

According to the Effort Sharing Decision (ESD), Member States need to meet binding annual greenhouse gas emission limits for the period 2013–2020 in sectors not covered by the European Union emissions trading system (ETS), such as buildings, transport, waste and agriculture.

(5)

See the Renewable Energy Progress Report (COM(2017) 57) as well as the European Environment Agency's projections report (http://www.eea.europa.eu/publications/trends-and-projections-in-europe).

(6)

Directive 2014/94/EU on the deployment of alternative fuels infrastructure.

(7)

See the key indicators report (SWD(2017) 32) for more details.

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