The Energy Union what s behind it? by Malte Fiedler

Transcription

1 The Energy Union what s behind it? by Malte Fiedler Policy PapeR November 2015

2 Faced with the multiple crises of neoliberal capitalism and growing geopolitical tensions, the European Union (EU) shifts from one failed crisis management to the other. Thereby, the financial and economic crisis, as well as the failure of the EU migration regime, have revealed deeply rooted institutional weaknesses. As of now, the different crisis dynamics have merged into a general crisis of European integration, accompanied by growing right-wing populism and nationalism all over Europe. With this background, the European Commission (EC) tries to secure the European integration process by defining new political projects to achieve greater coherence and solidarity in the EU. To reinforce Europeanisation of energy policy, the EC has lately called out the Energy Union. In the past, energy policy has been considered one of the least-integrated policy fields at the EU-level. Indeed, member states do not always act collectively on internal and external energy affairs. However, political projects like the Internal Energy Market (iem) for electricity and gas and the 2020 targets for renewable energy, energy efficiency and the reduction of carbon emissions moved integration forward. Nevertheless, implementation has not yet been sufficient to meet the three objectives of EU energy policy: competitiveness, energy security and sustainability. According to the EC, the Energy Union is based on these three objectives. To accomplish them, it focuses on five interrelated dimensions: (1) Energy security, solidarity and trust; (2) the iem; (3) energy efficiency as a contribution to the moderation of energy demand; (4) decarbonisation of the economy; and (5) research, innovation and competitiveness (2015b: 4). More than marketing? In a press release, the EC draws the bright future for the Energy Union (2015a: 1): The Energy Union means making energy more secure, affordable and sustainable. It will allow a free flow of energy across borders and a secure supply in every EU country, for every European. New technologies and renewed infrastructure will cut household bills and create new jobs and skills, as companies expand exports and boost growth. It will lead to a sustainable, low carbon and environmentally friendly economy, putting Europe at the forefront of renewable energy production and the fight against global warming. However, within these five dimensions, the objective of energy security clearly dominates discussions about the Energy Union. It was Donald Tusk (2014), former Polish prime minister and now president of the European Council, who initially put forward the idea of an Energy Union to prevent Russia s energy stranglehold, because of state monopoly Gazprom s role as the main supplier of natural gas for the EU. Also, when Jean-Claude Juncker was selected as new president of the EC and announced the creation of an Energy Union as one out of ten primary goals of his strategic agenda during his presidency, he mentioned current geopolitical events namely the Russian-Ukrainian conflict which have brought the issue of energy security back to the top of the political agenda (Juncker 2014: 5). According to him, member states must pool their resources and combine [their] infrastructures [ ] to reduce import dependency, and thus increase energy security (Ibid.). Up to now, the Energy Union is barely more than the strategic vision of the EC, outlined in its Communication on , the Energy Union Package (European Commission 2015b). In the following, we will focus on the five dimensions of the Energy Union and examine what s behind it. 2

3 The leading Motive: Energy Security 1 At the heart of the problem of energy security lies the scarcity of eventually all fossil resources on our planet. Aside from the previous success of energy transitions, global energy consumption is still largely based on fossil fuels. In the EU, the share of fossil fuels in the energy-mix decreased from 82.1 percent (1990) to 73.9 percent (2012), but remains at a high level in terms of final consumption (European Energy Agency 2015). While a peak in supply of conventional oil might have already been reached (iea 2010: ) 2, a peak of natural gas and ultimately a peak everything in all fossil fuels and raw materials will most likely be the future (Mahnkopf 2013). Although, unconventional fossil fuels (e.g. fracking for shale gas) can most likely stabilise supply for decades to come, if prices are high enough to make extraction profitable (one example is the shale-gas boom in the US), policy makers have to react to the challenges of depleting fossil fuels. These challenges are reinforced by the EU s high import dependency: 88 percent of crude oil, 66 percent of its natural gas, 42 percent of its solid fuels such as coal and 95 percent of its uranium are imported (iea 2014: 47). Furthermore, existing reserves are concentrated in certain geographical areas. Oil and gas are especially conventional concentrated in Russia, the Golf region and the Caspian Sea (Scholten & Bosman 2013: 6 10). As resources become scarcer, greater competition for the existing reserves can stimulate geopolitical conflicts. In the current debates about energy security in the EU, the strong dependency on Russia as a supplier of oil and gas has been brought into question. Because of the existing pipeline infrastructure, more than 30 percent of imports for gas and oil come from Russia (iea 2014: 47). Six EU member states even depend on Russia as their single supplier. 1 Energy security in the EU context means the uninterrupted availability of energy sources at an affordable price(s) (Dreyer and Stang 2013: 1). 2 Even if proven reserves have grown steadily in recent years in volume terms they have remained broadly flat as a percentage of production. Consequently for the EC, the diversification of energy sources, suppliers and transport routes is a key means for improving energy security. Building on the Energy Security Strategy outlined in May 2014, the EC wants to achieve diversification by exploring new supply regions and new technologies, whereby the new resources have to be accessed with new infrastructure projects. Regarding the development of new infrastructure, the objective of energy security is closely connected to the completion of the IEM (cf. also European Commission 2015b: 4). Here, the EC proposes to secure new gas corridors, with a special focus on the Southern Gas Corridor of Central Asia around the Caspian Sea. Diversification of gas supply Generally, the Energy Union strategy has a great emphasis on security of gas supply. It is thus planned to revise the Security of Gas Supply regulation in Further, a new comprehensive strategy on liquefied natural gas (LNG) will be outlined (Ibid: 5). New LNG hubs should enable multiple suppliers in Central and Eastern Europe, as well as in the Mediterranean. The role of domestic natural gas in the diversification strategy remains unclear. The issue of fracking for shale gas is especially highly controversial and contested at the EU-level. Considering that existing pipeline projects, such as the Nabucco-Pipeline and South Stream, have recently failed, uncertainties remain. As a Project of Common Interest (PCI), the Trans-Adriatic- Pipeline, which should access natural gas from the Caspian Sea via Turkey, Greece, Albania and Italy, is supported by the EU to access the Southern Gas Corridor bypassing Russia. Russia on the other hand, wants to develop Turkish Stream as a successor of South Stream, which should transport natural gas from Russia across the Black Sea via Turkey and Greece into the EU gas network. Moreover, the benefits regarding LNG remain vague. LNG-Hubs are increasingly under construction, although the capacity of existing infrastructure is not used much (EPRS 2014: 2). 3

4 Regarding foreign policy, the EC wants to assess options for a common purchase of natural gas in order to achieve a better negotiation position for countries depending on a single supplier, but it is missing a concrete plan for joint gas purchasing (2015b: 6). Instead, the EC stresses strengthening the EU s Energy Community, as part of its Neighbourhood Partnership and the integration of the IEM, so that member states can rely on their neighbouring countries in times of supply crisis. Under the Energy Union, Intergovernmental Agreements of member states with third countries should also better comply with EU rules for the IEM. The background is that six member states: Bulgaria, Hungary, Greece, Slovenia, Croatia and Austria, had signed contracts with Russia about the development of South Stream, which according to the EC breached EU law (Siddi 2015: 5). Reinforcing the Integration of the Internal Energy Market Under the Energy Union, the completion of the IEM seems to be the most important task for the EC in order to meet its objectives, as it comprises all three: sustainability, energy security and competitiveness. The IEM, which has been developed since the 1980s, should help to decarbonise the economy by integrating renewable energy sources (res) into the market, maintain energy security by reducing import dependency, bring down costs for consumers and increase competitiveness, thus stimulating growth and employment for the whole EU. In this sense, the IEM is seen as a necessity to deepen the Single Market (Fiedler 2015: 25 30). The EC initially announced in a communication in November 2012 that it wants the integration of the iem to be completed by the end of 2014 (European Commission 2012). However, the implementation of the policy framework for the Third Energy Package, which entered into force in March 2011, lags behind. The IEM remains a political project in the making. Therefore, different initiatives are pursued in the attempt to achieve IEM integration. Gas and electricity markets are further liberalised according to the Third Package, common market regulations are outlined with the help of the ACer agency, the necessary cross-border infrastructure is built and support schemes for different energy sources are harmonised on the European level. Accordingly, first priority for the establishment of the Energy Union is the implementation of existing IEM and related legislation, and stricter enforcement (European Commission 2015b: 9). One of the most important innovations with the Energy Union is the proposed strengthening of the IEM governance framework. The Agency for Cooperation of Energy Regulators (ACer) should be empowered in order to oversee the development of the IEM (Ibid.). Until now, ACers role has been rather passive, embedded in a governance framework with The European Networks of Transmission System Operators for Electricity and Gas (ENTSO-E/G) and the Commission. Focus on interconnection and cross-border infrastructure The struggle over the Energy and Climate 2030 framework has been of great importance for the future of the energy transition in Europe. Through it, the forces that profit most out of the existing fossiland nuclear-based energy system, have recently been most successful by struggling for targets which will not move the EU far beyond its 2020 targets. In consequence, the energy transition towards RES will most likely be slowed down. However, for the first time a target for IEM integration has been agreed on. An 10 percent electricity interconnection target, to be achieved by 2020, and 15 percent (by 2030) is set out (European Council 2014). The targets are supported with the decision to support countries which have been until now less integrated with financial means. Thereby, one of the key challenges is building the necessary Trans-European cross-border infrastructure. The EU identified 248 Projects of common interest (PCIs) and 33 projects included in the 2014 European Energy Security Strategy, which should enhance market integration (European Commission 2015b: 8). Up to this point, infrastructure 4

5 projects have been planned and regulated at the national and local level, whereas PCIs get a special prioritised licensing treatment, marking another shift towards stronger regulation on the European scale. Included in PCIs are new natural gas pipelines, cross-border networks for Carbon Capture Storage (CCS) and priority electricity grid projects (European Commission 2011). The list of PCIs is updated from now on every year. The EC notices that the Energy Union objectives will require major investments in generation, networks and energy efficiency, estimated at some 200 billion annually in the next decade (European Commission 2015b: 8), whereby the most of it should come from the private sector, supported by means of the European Investment Bank, 5.85 billion EUR of the Connecting Europe Facility and financing under the European Structural and Investment Funds and the newly proposed European Fund for Strategic Investments (Ibid.). Under the Energy Union, the EC wants to reveal further measures for the achievement of the 15 percent target in January In the meantime, stronger tendencies of a regional integration of energy markets in the EU become visible. Germany, its neighbour countries, plus Norway and Sweden plan to set up a mini- Energy Union by increasingly integrating their energy markets. One step is the allowance of price fluctuations on the electricity wholesale market(s) (Sagener 2015). Whether that regional integration will benefit the making of the iem remains, however, unclear. Energy Efficiency First? With energy efficiency initiatives, the EC tries to tackle the problem of energy security and carbon emissions on the demand side. Following the logic that the cheapest and cleanest energy is that not produced nor consumed, the EC wants to think energy efficiency as a resource (2015b: 12). Member states still show a high potential for energy savings, especially in the building sector, concerning heating and cooling. An estimated 70 percent of EU housing stock is considered energy inefficient (Crisp 2015). The transport sector relies heavily on the consumption of fossil fuels, especially oil (94 percent), which is not only a challenge for energy security, but also for the sustainability objective and the transition of the EU towards a low-carbon economy. Proposed is decarbonisation through electrification of the transport sector and the development of alternative fuels (European Commission 2015b: 13 14). With the Energy Union, efficiency investments should be stronger supported, with EU financial instruments. The main legal background is the electricity efficiency directive, set to achieve the 2020 target of energy efficiency improvement of 20 percent. Although implementation of the existing directive is still lagging behind (Coalition for Energy Savings 2015), energyintensive industry has been successful in preventing stronger binding targets within the 2030 climate and energy framework (Fiedler 2015: 65 66). The European Council agreed on an EU-wide target of 27 percent for energy efficiency, which is non-binding at the national level. In 2015 and 2016, the Commission will review all relevant energy efficiency legislation and will propose revisions, where needed, to achieve the 2030 target. Even though one motive of the Energy Union is energy efficiency first, the focus is stronger on the supply side: On the integration of the IEM and the establishment of new gas corridors to improve energy security. 5

6 What about Decarbonisation? In December 2015, the UN climate change conference in Paris (COP21) is approaching. The official objective is a global, legally binding agreement on the mitigation of climate change as a successor to the Kyoto-Protocol. However, in times of economic crisis and geopolitical conflicts, the objectives of energy security and industries competitiveness subordinate serious efforts on the mitigation of climate change. Climate policy in the EU strongly relies on marketbased approaches. The EU Emission Trading Scheme (EU-etS) is the main instrument to reduce carbon emission. Further, binding emission reduction targets under the 2020 and 2030 climate and energy framework, as well as support mechanisms for res in line with the IEM, should pave the way to a low-carbon economy. The existing approaches do not change with the Energy Union. The EUetS remains the cornerstone of climate policy (European Commission 2015b: 14) and should provide cost-effective investment incentives in lowcarbon energy sources. Thereby, an approach of technological neutrality has materialised in the EU state apparatuses, which also refers to nuclear power and clean coal in combination with Carbon Capture and Strange (CCS) and Carbon Capture and Use (CCU) technology as low carbon energy sources. Under the 2030 climate and energy framework, the EU has set a 40 percent binding-target on greenhouse gas reductions compared to the 1990 level, which will be translated into national reduction targets. Beside all existing problems, the main instrument to achieve the targets will be the ETS 3. The EU-etS Directive will be revised to meet the new target. Furthermore, a binding-target on EU-level is set out to increase RES by 27 percent in the energy-mix of final consumption until 2030 (European Council 2014). In respect to the right of member-states to determine their energy-mix, targets will not be translated into nationally binding targets. (Ibid: 5). National policies in support of RES should further be in line with state aid guidelines and should aim at integration in the iem (Ibid). All in all, the new targets will most likely slow down the energy transition towards RES in the EU (cf. also Fiedler 2015). Research and Development Research and Innovation (R&I) of RES and other low-carbon sources, storage facilities, Smart Grids and sustainable transport should help to achieve decarbonisation and accelerate a so called energy system transformation (European Commission 2015b: 16). Whether a real transformation of the EU energy system is intended by the EC remains, however, questionable. Because of the technological neutrality approach on low-carbon energy sources, the EC s strategy appears rather contradictory. Investment in R&I should both focus on renewable energy technologies and less-polluting fossil technologies like CCS and CCU. Further, the EC also wants to maintain leadership in the nuclear domain (Ibid: 16-17). A clear policy direction cannot be identified percent of emissions have to be reduced in the ETSsectors and 30 percent in the non-ets sector by 2030, relative to 2005 level. Thereby, the ETS broadly covers power and heat generation, the energy-intensive industry and commercial aviation. Nevertheless, under the new framework, corporations under high-international competition still receive emission allowances for free. Further, member-states with a comparable low GDP receive more allowances. 6

7 Challenges for the Left To reinforce the Europeanisation of energy policy, the EC reiterates the objective of energy security and integration of the IEM long-term objectives of EU energy policy into the Energy Union initiative. New initiatives, however, do not yet stand out. The aim is to get new drive in existing political projects on energy policy, with a long term perspective to achieve greater coherence of climate and energy policy and international relations. Even now, it remains unclear whether the Energy Union will deserve its name. What is certain, however, is that existing struggles over energy security and the establishment of the IEM will be intensified. Upcoming policy developments will be highly relevant for the future design of European energy markets and energy transition towards RES. Current trends lead towards a natural gas lock-in under the objective of energy security and a centralisation as well as Europeanisation of energy infrastructure development and decision making, under the objective of market integration and competitiveness. These developments mainly benefit all the actors who want to preserve the existing fossil- and nuclear-based energy system as long as possible and profitable. Options for action from of a social-ecological perspective should therefore focus on strategies of democratisation and decentralisation, and clearly be committed to an energy transition towards RES. Under existing power relations on the European scale, any reinforcement of decision power for the EU institutions will most likely lead to a materialisation of the interests of social forces attached to the existing fossil-nuclear energy system. A shift in power relations will be necessary in order to re-stimulate the energy transition towards RES and pave the way for a social-ecological transformation, not just of the energy system, but economy and society as a whole. Thereby, alliance-building between social-ecological forces, trade unions and environmental organisations, as well as minor parts of green capital fractions, could be worth thinking about. What is needed as a starting point, however, is a common vision for a social and ecological Energy Union framework; an Energy Union of the left, which enables new democratic forms of production, distribution, and consumption of energy instead of reiterating old policy concepts that rely on free-market dreams and a fossil fuel lock-in. 7

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