Fortum's comments on the European Commission's first 'State of the Energy Union 2015' Report

The ‘State of the Energy Union 2015’ Report lays a foundation for stronger energy policy coordination in expectation of synergies and improved security of supply. Fortum welcomes the aim to improve consistency in energy policies.

The ‘State of the Energy Union 2015’ Report, published today, 18 November 2015, is the follow-up to the Energy Union Package unveiled by the European Commission in February 2015 with the view to ‘achieve a resilient Energy Union with a forward-looking climate change policy’. The essence of this Report, which the Commission aims to revise annually, is to monitor the progress made under the five strategic Energy Union dimensions1), including specific country-by-country reports, and to give guidance to member states on the development of national energy and climate plans.  The Report also outlines national level progress in meeting the EU 2030 energy and climate targets.

 

The State of the Energy Union Report has been published along with key documents, including the second list of Projects of Common Interest, the consultation on the RES (Renewable Energy Sources) Directive, the Energy Efficiency progress report, the climate action progress report, the implementation report on EU Energy Security Strategy and on the Nuclear Safety Directive, and a Staff Working Document on Energy Consumers Trends.
 
In the communication today, the Commission tables several policy papers in line with the Energy Union action plan and outlines the work plan for next year:
 
  • the adoption of - together with the state of the Union Report - the second list of Projects of Common Interest (PCI) to reduce delays in permitting and to improve finance granting for infrastructure investments
  • proposals to implement a new electricity market design in line with the Commission’s intent to make the European Union the world leader in RES with the revision of the third energy market package and the security of electricity supply directive, including detailed guidelines for regional cooperation
  • its new RES Directive and bioenergy sustainability policy to translate its ambition to achieve the target of 27% of RES in the Energy Union by 2030
  • a new European strategy for Heating and Cooling and a proposal to bring the Energy Efficiency Directive in line with the 2030 ambition
  • the revision of the regulation on security of gas supply to enhance the European resilience towards supply disruptions
 
Fortum welcomes the first of its kind State of the Energy Union Report and sees the Energy Union as a welcome initiative to improve consistency in energy policies:
 
  • To allow a cost-efficient energy transition that remains affordable for customers, it is important that the ETS is used as the main driver for CO2 abatement, RES development and energy efficiency alike, whilst additional EU and/or national measures should be investigated in sectors remaining outside the ETS.
    In the run-up towards 2030, the interplay between ETS, RES and energy efficiency should be carefully kept in focus to avoid policy overlaps and contradicting signals:
    • Efforts related to meeting the binding European-wide RES target should be based on all possibly contributing sectors (i.e. power, as well as transport, heating and cooling, and agriculture).
    • The need for a RES review mechanism should be looked at from the perspective of the over achievement of the 2020 RES target and not lead to creating recurrent overcapacity.
  • A well-functioning internal market is a major source of competitiveness and security of supply, and also a key prerequisite for cost-efficient implementation of the decarbonisation targets. Success in integrating renewable energy, including decentralised energy, in the market will be key for the future market design development. All generators, irrespective of their size and nature,  should be subject to same market obligations. In order to encourage market-based investments into low-carbon technologies, the market should be allowed to be driven by market fundaments.
  • A revised electricity market design should enhance the functioning of the internal market taking into consideration the need for further interconnection investments. National measures promoting security of electricity supply (e.g. capacity remuneration mechanisms) should not undermine market functioning, and full harmonisation of cross-border capacity elements should be thoroughly envisaged.
  • Regional “roadmaps” or policy coordination mechanisms, setting out a shared view by the the regions's countries of their contribution towards the EU 2030 target, should be developed.
  • The European Commission and member states should ensure that taxation does not undermine or distort the incentives generated through energy and climate policy measures.
  • A European strategy for the heating and cooling sector should enhance competition between different technologies based on a level playing field. Furthermore, customers should be able to choose their heating and cooling methods and influence their consumption and thereby their costs. Heating and cooling represent more than 50% of the energy consumption in the EU. It thus constitutes a relatively untapped potential for increased energy efficiency and security of supply.

 

1) These include the decarbonisation of the economy, energy efficiency to moderate Energy Demand, a fully integrated Internal Energy Market, energy security, solidarity and trust, and an Energy Union for research, innovation and competitiveness.


 

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