Editor's note

Starting with the Commission’s first energy strategy, i.e. so-called “framework for a resilient energy union” (published almost a year on 25 February 2015), a new momentum was created in bringing about the transition in the member states to a low-carbon, secure and competitive economy. Energy union has been since one of the ten priorities in the new President Juncker’s Commission.

The first “State of the Energy Union” shows a year’s progress made towards building the “new Energy Union” while highlighting the issues needed further actions.  

See more on the state of the energy union in: 

= http://europa.eu/rapid/press-release_MEMO-15-6106_en.htm and 

= http://ec.europa.eu/priorities/energy-union-and-climate_en

New strategy priorities: background

On 16 February 2016, the Commission adopted a new sustainable energy security package, with two energy union’s important legislative proposals aimed at “balancing power between the EU institutions and the member states”.

The Commission also intends to revise regulation on the security of gas supply (in effect since 2010) with the two-fold implications: a) energy security will be discussed at the regional/national level; and b) solidarity principle will apply in case of a gas supply crisis.

Besides, the Commission also issued a Liquefied Natural Gas (LNG) strategy destined to water down the effects of the decline in the EU gas production. LNG will be made as the main backup plan for the Union in the event of a gas supply disruption.

Moreover, the heating and cooling strategy has been adopted by the Commission with the aim of making the new strategy to boost the efficiency of related equipment in EU households, stimulate the use of renewables and minimize the waste of heat in industrial processes.

See: http://www.vieuws.eu/energy/brussels-briefing-on-energy

Alongside with this package, the Commission wants to update existing laws on its inspection power over the so-called intergovernmental energy agreements (IGAs).

Below are some remarks on the main aspects of the new energy strategy package with effects for the Baltic States.

Energy security. The energy security is becoming one of the most important aspects in the energy union. Urgent measures include: a) security of supply regulation (existed from 2010 though needed reassessment); b) increased interconnectivity among member states and feasible energy infrastructure; c) creating reverse gas flow options, and d) introducing rules for network to avoid cross-border infrastructure congestion.

However, the stress tests performed by the Commission in 2014 showed that the member states still are too vulnerable to major disruption of gas supplies. Latest figures on Europe's energy dependency show that for the 10^th consecutive year the EU imports over half of the energy it consumed in 2014.  

Clean energy transition

The Commission demands from the member states carefully managed transition to “almost 100% renewables”. With this in mind it forces the EU-28 states improve states’ energy efficiency while turning to a “decarbonisation plan”, in which gas can be the bridge between coal and renewables. However, gas will still be an important part of the European energy system up to 2030; the strategy therefore is not to use more gas, but using it more intelligently.

In this context, energy efficiency has to be prioritised in the member states to improve the EU energy security and implement climate-energy Paris commitments.

The Commission has calculated that for every 1% increase of energy efficiency, gas imports fall by 2.6%.

Securing Europe's energy flow. The Commission proposals include the following steps:

·         all countries will have to ensure the supply of households and essential social service in case of a crisis;  

·         in this practice, the member states will have to give priority to protected consumers in neighboring countries over non-protected customers at home;  

·         in the same way, Preventive Action and Emergency Plans will have to be done at a regional/national level. The plans will be based on more accurate, regional assessment of common risks: in this way the member states will be much better prepared for an emergency situation;  

·         the principle of solidarity will also be extended to EU neighbours: energy union issues will now be included in preventing and tackling possible supply crisis in the member states.

Intergovernmental Agreements (IGAs). The current system does not ensure that IGAs comply with EU law or policies. Once the IGAs are signed it is often too late for termination and never an IGA has been successfully renegotiated once already enacted.

The Commission is then left with little option but to pursue legal procedures that are "too little, too late" to rectify the damage.

There are about a third of the existing 124 IGAs, which contain provision that didn’t comply with EU law thus severely damaging the supply. Thus, the Commission is proposing a mandatory assessment of any IGA before it is signed.

The Commission will notify the EU states of any doubts within six weeks and then give a final opinion of compatibility with EU law within 12 weeks: it means that no country should sign an IGA until the Commission has given its opinion.

When concluding the proposed intergovernmental agreement or amendment, the EU states will have to take the utmost of the Commission's opinion. This is an important and unprecedented step to ensure a level playing field for all.

As EU markets continue to integrate, decisions taken by one member state can have a negative impact on the security of supply in neighbouring countries or on the functioning of the EU internal energy market. Thus the two legislative proposals are becoming an important part of reinforcing the EU energy security.

Reference: Speech by Commissioner Miguel Arias Cañete, Brussels, 16 February 2016, in:

http://europa.eu/rapid/press-release_SPEECH-16-326_en.htm?locale=en.

Plans concerning liquefied Natural Gas and Storage. With global supply of LNG set to increase by up to 50% in the next few years, the EU intends to strengthen resilience, diversify supply sources and boost European competitiveness. The member states have to be connected to the world’s LNG market by building the key infrastructure needed.

Half of the gas interconnectors in Europe now operate reverse flow: it means new supply routes and a more liquid, accessible and competitive market. But the import capacities are mainly in Western Europe, i.e. in other parts of the EU, hence under-developed gas markets and single supplier dependencies are still a reality.

To fix that the EU needs to proritise a number of LNG infrastructure projects in the Baltics, Central and South Eastern Europe and South West Europe. The goal is to remove bottlenecks, diversify supply sources and bring price competition to those regions. With the help of the regional co-operation groups in those areas the EU will now seek to accelerate final decisions on these priority projects. The projects will ensure full access to the financing options available through the Connecting Europe Facility and EFSI.

European LNG imports almost halved between 2011 and 2014: the EU has effectively become a residual market, getting what Asian countries did not need or could not afford. Recent decline in LNG prices has made Europe a more attractive proposal and there is a need to capitalise on that.

The EU wants to reinforce dialogue with international partners to promote free, liquid and transparent global LNG markets: in particular through developing a growing partnership with Australia, and engaging in high-level dialogues with key suppliers such as Algeria, Canada and the US amongst others.

New strategy on heating and cooling. Member states have to focus on sustainable energy; the fact is that consumers use half of the EU's energy, while 75% of which is powered by fossil fuels. Consumers account for three quarters of the EU total gas consumption and 13% of oil consumption (most of that energy is used inefficiently).

Thus, about 90% of European buildings in the housing sector are energy inefficient and are mostly fitted with old boilers with low efficiency rates.

It is not, though, surprising as about half of European building stock was built before energy performance standards even existed; with renovation rates below 1% it becomes even more important. The point is that the heating and cooling sector can be one of the main drivers towards European climate and energy goals.

Thus the EU strategy focuses on removing the barriers to decarbonisation in buildings and industry. The following steps are envisaged:

·         better link up heating and cooling to electricity networks and to renewable energy. That will reduce costs for consumers and provide storage for cheaper variable renewables. Commission proposals for a new electricity market design (later in 2016) will provide the flexibility and demand response to make that happen;  

·         speed up renovation rates: Commission’s 2016 review of the Energy Performance of Buildings Directive will look at how to replace inefficient boilers and incentivise renovations in multi-apartment buildings

But to do that the member states also need to make the right financing available: good news is that one the first projects under the European Fund for Structural Investments focuses on energy renovation of private residential buildings in France.

To build on that success, the Commission will launch Smart Finance for Smart Buildings initiative. It will facilitate access to new and innovative funding mechanisms for energy efficiency renovations, for example by aggregating small projects into investible packages.

Being ambitious on energy efficiency policy also means securing long-term security of supply strategy. That's why the Commission will review the whole range of energy efficiency laws later this year while looking forward to enforcing the current laws.

Note: the State of the Energy Union Communication and EU-28 states factsheets can be found on the Commission’s website:

http://ec.europa.eu/priorities/energy-union/state-energy-union/index_en.htm.