Identifying the challenges facing Europe’s energy market and how to address them

Last Thursday I spoke at a meeting of the Agency for the Cooperation of Energy Regulators (ACER) and the Council of European Energy Regulators (CEER) to mark the one year anniversary of the launch of their “Bridge to 2025”.

The Bridge to 2025 is an in-depth analysis of Europe’s energy sector. It helps to identify the challenges facing Europe’s energy markets in the coming years and sets out the ambitions of EU energy regulators and what they hope to achieve by 2025.

The main aims of the Bridge to 2025 are:

•    Establishing a liquid, competitive and integrated wholesale energy market;
•    Enhancing Europe’s security of supply and channelling the external element of the internal energy market
•    Moving to a low carbon society with increased renewables and smart, flexible responsive energy supply;
•    Developing a functioning retail market that benefits consumers; and
•    Building stakeholder dialogue, cooperation and new governance arrangements.

During my speech I spelt out my view of the EU’s energy markets and what we can do to improve them and benefit consumers.

Why is this important?
The future governance of our energy framework and how to engage with all stakeholders is of vital importance to us all and the discussion of how to address these challenges will become ever more important in the coming years.

This discussion is intimately linked with proposals to build an Energy Union which aims at supplying secure, affordable and sustainable energy across the EU and is based on the 2030 climate and energy policy framework.

This policy relies on four main building blocks: an at least 40% reduction in greenhouse gas emissions compared to 1990, two targets of at least 27% for renewable energy and energy savings and a 15% electricity interconnection target.

While I would like to see more ambitious targets, I am happy to see the EU making moves in this direction.

What we need to do
Crucially, we need to reconcile three major responsibilities: the transition to a sustainable and decarbonised economy with increased energy efficiency, renewables and a smart, flexible, energy supply; the need to guarantee secure and stable energy and the development of a functioning retail market that benefits consumers and enables the fight against energy poverty.

In order to ensure we have a secure and stable energy supply we will need to ensure we have a diverse energy supply – if we rely on just one energy source we will fall into major difficulties if anything happens to that source. Diversification is the answer here.

Renewable energy will also play an increasingly important role in the market and we need to develop and support smart and flexible energy supplies.

We must also transition to a low carbon energy sector. This will help to deliver lower prices in the long run and a more secure energy supply. Securing further improvements in energy efficiency will be a key aspect of the transition. Energy efficiency covers a wide range of technologies and materials from insulation and energy saving light bulbs to smart supply-side technologies, including the promotion of district heating and smart grids. Energy efficiency is the lowest-cost means of reducing our carbon emissions and has the potential to create local jobs, boost future markets in the field of technological innovation and contribute to regeneration.

Guaranteeing secure and stable energy
Since 1973, and the first oil crisis, securing supply has been a central issue to the EU and national energy policies. 40 years later, security and diversification challenges remain paramount.

One vital solution to energy security is to deepen market integration. In order to promote solidarity between regional markets and Member States, we need to reinforce connecting infrastructure and use available EU funding to intensify technical support for critical projects.

Building an EU Energy Union will help with this, we are stronger when we work together and we can also achieve greater energy savings and reductions by pooling our resources.

Energy poverty
By developing functioning retail markets we can benefit consumers and fight back against energy poverty. To do this we need to make sure that the retail market is properly functioning in the sense that is protecting consumers as changes occur.

We need to put consumers at the forefront of the energy transition:
•    Consumers should have real choices and wide range of service offers;
•    We should facilitate the development of more pro-active customer consumption flexibility; and
•    Smart technologies and new services should be made available to manage the consumption of all consumers which will reduce electricity bills and enable consumers to engage in the electricity market.

I fully support the idea as proposed by CEER to establish a toolbox of good practices to encourage and empower EU customers to participate fully in the energy market.

The issue of fuel poverty is of major concern to both national and European politicians. According to the Fuel Poverty Statistics Report, around 2.28 million people in the UK, representing 10.4% of all UK households, suffer from fuel poverty. At the European level, around 25 million people are estimated to suffer from fuel poverty. Unfortunately, this number is expected to increase due to rising energy prices and increased fuel bills. This will have a drastic impact on the quality of life of European citizens. We must ease this burden on citizens through social and economic policy and this issue must be reflected in any upcoming Energy legislation.

As Chair of the S&D working group on Energy Poverty, I am working on a manifesto and concrete proposals, which could be introduced in the upcoming legislation.

The main challenges we have identified so far are:
•    The expansion of new energy technologies, mostly renewables and the need to integrate them;
•    The development of an increasingly integrated market to respond to energy security threats; and
•    The political need to focus more on Energy Efficiency and consumers in building the Energy Union.

What it comes down to is, we need a strong governance system as a pre-requisite in order to address these challenges.

Within the S&D group, I have been pushing for a robust, resilient, democratic and transparent governance system.

The Energy Union should be a new energy model for Europe, based on strong cross-cutting legislative grounds and strong objectives with binding national targets on renewables, efficiency and interconnections.

Working together we can ensure Europe’s energy markets continue to function and to serve the people of Europe.