Developments in
European Energy Policy
Alex McLean, Partner
20 June 2019
Energy Union Strategy
§ Security, solidarity and trust: diversify energy sources and ensure energy security through solidarity and cooperation
§ Fully integrated internal energy market:
enable free flow of energy through adequate infrastructure without technical or regulatory barriers
§ Energy efficiency: reduce dependence on
imports, lower emissions, drive jobs and growth
§ Climate action, decarbonising the economy:
retain leadership in renewable energy
§ Research, innovation and competitiveness:
prioritise research and innovation to drive the energy transition and improve competitiveness
Secure, sustainable, competitive and affordable energy for EU consumers
Energy Security
The Energy Security Problem
§ The EU imports more than half of all the energy it consumes
§ The EU’s total energy import bill is more than
€1billion per day
§ Many countries are heavily reliant on a single supplier, including some that rely entirely on Russia for their natural gas
§ Significant vulnerability to supply disruptions, whether caused by political or commercial disputes, or infrastructure failure
§ The 2009 gas dispute between Russia and
transit country Ukraine left many EU countries with severe shortages
2014 energy security stress tests:
§ Prolonged supply disruption would have a substantial impact on the EU, particularly Eastern Europe
§ If all countries cooperate, consumers
could remain supplied for six months
Energy Security
Energy Security Strategy
§ Increase energy efficiency and achieve 2030 energy and climate goals
§ Increase energy production in the EU and diversify supplier countries and routes:
Ø further deployment of renewables Ø sustainable production of fossil fuels
Ø safe nuclear energy (where option is chosen) Ø negotiating effectively with current major
energy partners as well as new partners
§ Complete the internal energy market and build stronger infrastructure links
§ Speak with one voice in external energy policy
§ Strengthen emergency and solidarity
mechanisms and protect critical infrastructure
Energy Security
EU Energy Security Implementation
§ Continued efforts to diversify external
supply sources and new arrangements (e.g.
southern gas corridor)
§ Over 30 projects of common interest
implemented + 75 more to be implemented by 2022
§ €3.4billion in connecting Europe (CEF) facility energy funding since 2014
§ €1.3billion from the European fund for strategic investment (EFSI)
§ EU public funding in energy infrastructure has leveraged total investments of around
€50 billion
Implications for Ireland
§ Brexit physically isolates us from the rest of the EU and creates energy security challenges
§ Focus on energy efficiency
§ Diversification of supply routes:
Ø increased interconnection Ø LNG
§ Decrease dependence on energy imports:
Ø increased investment in renewables
Ø Decrease reliance on imported hydrocarbons
§ Consider storage options
Fully Integrated Internal Energy Market
• National Energy and Climate Plans
• Renewable energy and energy efficiency trajectories and progress reports
• Gap filler mechanism (including financial contributions)
Governance
• More robust infrastructure increasing fluidity of the network
• Integration of isolated and disconnected regions
• Making the grid fit for an increased share of renewable energy
Infrastructure
• Market coupling to reduce and equalise energy costs throughout Europe
• Over the past seven years, day-ahead market coupling alone has rendered a benefit of approximately €1billion per year to European consumers
Wholesale Markets
• Bills and contracts to be made clearer and information improved
• Consumers to have access to comparison tools and be free to choose supplier
• Smart metering and dynamic purchasing contracts to be made available
Consumers
Energy Efficiency
Energy Efficiency Targets
§ 2012: 20% energy savings 2020
§ 2018: 32.5% with possible upwards revision by 2023
§ National Energy & Climate Plans to
outline how Member States will meet the 2030 targets for energy efficiency
Energy Efficiency Performance
§ EU energy consumption decreased from 2007 to 2014, but increased since, likely due to good economic performance, low-oil prices and colder winters
§ 2017: primary energy consumption was 5.3 % above and final energy consumption was 3.3% above 2020 targets.
§ 2020 target for both primary and final energy consumption are unlikely to be achieved in either the EU or Ireland
§ Heating and cooling account for half of the
EU's energy consumption
Energy Efficiency
Impact of Measures
§ Energy savings have direct and tangible impacts on energy security, decarbonisation and affordability for consumers
§ Energy performance of buildings rules aiming at decarbonisation of building stock by 2050
§ Clearer and simpler energy efficiency labelling help households save almost €500 per year
§ €18billion from the European structural investment fund allocated to energy efficiency (2014-2020)
§ €2.5billion Horizon 2020 funding to decarbonise the EU’s building stock (2018-2020)
§ 900,000 jobs in the European energy efficiency sector
Decarbonisation: Greenhouse Gas Emissions
Greenhouse Gas Emissions Targets
§ 2020 GHG Reduction Targets
§ 20% reduction in GHGs from 2005 levels
§ 21% reduction in EU-ETS sectors
§ Ireland’s national reduction target is 20% in Non EU-ETS Sectors
§ 2030 GHG Reduction Targets
§ 40% reduction in GHGs from 2005 levels
§ 43% reduction in EU-ETS sectors
§ 30% reduction in Non EU-ETS Sectors (Ireland’s national target also 30%)
Ireland Projected Performance 2018
§ Non EU-ETS (existing measures):
§ 1% increase by 2020
§ 6% increase by 2030
§ Non EU-ETS (additional measures):
§ 0.4% reduction by 2020
§ 10% reduction by 2030
EU Actual and Projected Performance
Decarbonisation: Renewable Energy
Renewable Energy 2020: 20% renewable energy in gross final consumption
2030: at least 32%
renewable energy in gross final consumption
2050: 80% renewable electricity
National Energy & Climate
Plans to outline how Member
States will meet the 2030
targets for energy efficiency
Decarbonisation
Renewable Energy Challenges
§ Renewable Energy Directive does not impose national targets. Member States identify how they will achieve their
renewables ambition in NECPs.
§ If aggregate ambition in NECPs is less than the EU 32% target, how long will it take to agree revised NECPs?
§ Do the interim milestones reflect a
reasonable trajectory and will they give sufficient warning?
§ Have we created an adequate enabling environment (infrastructure, support schemes, production v consumption targets, GOOs)?
EU Renewable Energy investment in decline
§ Consistent trend since 2011
§ Need to ask why, and whether the factors
that have caused this still apply?
Research and Innovation
The importance of research & innovation
§ Research and innovation is essential to drive the energy transition and improve competitiveness
§ EU companies spend less on innovation than their competitors
§ The EU is home to only 26 "Unicorn start- ups" (valued at over $1billion) compared to 109 in the US and 59 in China
§ Research & Development intensity is uneven among EU regions
§ 40% of the workforce in Europe needs digital upskilling
EU Support for Research & Innovation
§ Innovation Fund: around €10billion to support the demonstration of low- carbon technologies and processes
§ Horizon 2020: Innovfin Energy Demonstration Project has provided
€107million in loans to 4 first-of-a-kind energy demonstration projects since 2016
§ Storage: Strategic action plan for batteries establishes measures to
develop an innovative, sustainable and
competitive battery production chain
What does all this mean?
§ Extremely challenging EU target given trajectory of recent years
§ Query whether we are giving ourselves the best chance of success
§ Ireland’s 70% renewable electricity target is impressively
ambitious. We have the expertise, capital and projects – can we develop the enabling physical and regulatory infrastructure?
§ Renewable heating and transport are challenging, but given the base from which we are starting represent a massive opportunity
§ Given the market coupling and renewables aspirations, the EU target seems relatively modest
§ Increased interconnection is fundamental to Ireland achieving its
renewable electricity targets (along with significant investments in
storage and other system services technologies)
What does all this mean?
§ Extremely challenging EU target, with radical changes required to additional measures to achieve 2030 and 2050 targets
§ Ireland has very low industrial emissions (excluding powergen) in the EU-ETS sectors, but faces a significant challenge to make
savings in the non-traded sector
§ Distinction between traded and non-traded sectors is important
Few countries have Ireland’s natural advantages when it comes to decarbonisation of transport:
§ Small island that minimises range issues
§ Single DSO should facilitate roll out of charging infrastructure
§ Most public transport Government owned or procured
§ High penetration of renewables – massive benefits from distributed
storage
What does all this mean?
§ 2030 targets are extremely ambitious given likely difficulty in achieving the 2020 targets
§ Ireland is likely to only achieve 16% energy saving by 2020, making the 2030 targets extremely challenging
§ Energy savings represent an invaluable opportunity to assist in
meeting decarbonisation, security and interconnection targets – and so must be a priority
§ Ireland has a reputation for world leading research and innovation in the renewable energy sector
§ The energy transition will give rise to significant opportunities,
including a significant enterprise opportunity for Ireland as a whole
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