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European Energy Union

Don't Tread on Any Toes

October 20, 2015 | by ALISON SINGER

EU Gas © Roman Sigaev/fotolia.com

The creation of an EU-wide energy system is a declared goal of the European Commission. While some EU countries are more amenable to it than others, adapting domestic government structures to EU affairs remains a key challenge.

Maros Sefcovic, vice-president of the European Commission, is on a whirlwind tour of European nations as the Commission begins the massive undertaking of developing a European Energy Union. It is one of the European Union’s key priorities, with a goal of reducing barriers to the flow of energy in an EU-wide energy system. The Energy Union is necessary due to "an ever more pressing need to ensure secure, sustainable, affordable, and competitive energy for all citizens."

The EU is the world’s largest energy importer, currently importing more than half of its energy to the tune of EUR 400 billion per year. The current infrastructure and energy markets have left some parts of the EU as isolated energy islands with limited transport and connectivity options, perpetuating a dependence on fossil fuels. Diversification in energy sources will reduce dependence on single sources and thus minimize supply disruptions and price fluctuations. The dependence on fossil fuels must also be reduced for the sake of the global climate and environment.

The Energy Union focuses on five broad goals: 1) increasing energy efficiency; 2) energy security; 3) developing an internal energy market; 4) decarbonizing the economy; and 5) research, innovation, and competitiveness. For all of this, governance must provide long-term investor certainty, streamline existing planning and reporting mechanism, and increase cooperation between member states and the European Commission.

The Energy Union remains an ambitious, difficult endeavor

Most member states have state-owned, or a history of state-owned energy companies, and view energy policies and prices as important tenets of national policy. The Energy Union, therefore, must be careful not to tread on any toes, and avoid dictating how member states organize their energy portfolios. John Pickett, an energy partner at Linklaters, says that "the proposals look notably centralizing at a time when the European project is not universally popular and may therefore require considerable political capital if it is to be achieved."

Environmental groups are also concerned with the continued dependency on fossil fuels integrated into the current proposals. While the technology to achieve the Energy Union is largely available – large-scale interconnectors and pipelines, increased storage capacity, and software to make power grids “smart” – these technologies have generally not yet been implemented. The costs of building and implementing the necessary infrastructure are considerable.

Energy supplies and systems are, of course, highly variable. As Mr. Sefcovic makes his way across Europe he is speaking to individual member states about their own challenges and potentials. Germany is known as one of the most progressive nations in terms of energy policy, but its success at promoting renewables has come at a high cost, and electricity prices are expected to increase. Germany also currently lacks sufficient internal transmission capacity, and needs expansion of internal and cross-border grids. The Energy Union can increase the cost-effectiveness of the Energiewende through enhanced cross-border trade and internal transmission lines and interconnections.

Germany lacks a central policy unit for EU affairs

However, Germany’s own political structure may prove a barrier to fully integrate into the Energy Union. The Bertelsmann Stiftung’s new Sustainable Governance Indicators (SGI) point out that Germany lacks a central policy unit specific to coordinating and managing EU affairs. Specifically, the energy transition did not feature coordination between state governments and ministries, or between the federal government and the states. This organizational chaos may prove a serious problem in Germany’s attempt to integrate, and display leadership, in the Energy Union. “There is an urgent need for institutional and/or organizational change,” find the Bertelsmann Stiftung’s experts. Compared with other countries in the OECD and EU, Germany only receives a middling score with regards to adapting domestic government structure to international and supranational developments.

However, when it comes to this adaptation Hungary, for instance, is doing worse. The country has struggled to increase energy efficiency, and has higher energy and carbon intensities than the EU average. It also suffers from dependency on single suppliers of natural gas and nuclear energy, making it susceptible to supply disruptions. Prime Minister Viktor Orbán has stressed his country’s independence, and claims that the nation is fighting for sovereignty against the EU, the IMF, and the US. There has been massive governmental restructuring in recent years, including eliminating several ministries and causing problems with EU affairs. The unwillingness to work with and within the EU will make Hungary’s integration into the Energy Union extremely difficult.

Germany and Hungary offer only two examples of the difficulties in creating a successful European Energy Union. Infrastructure, policies, and markets in other nations may be more amenable to union, but it is clear that the Commission faces an uphill battle. It is a battle worth fighting, however.

And the Commission is taking steps in the right direction. Recent signs of interest and cooperation include a Memorandum of Understanding between the European Commission and the Baltic Sea Region countries to modernize and strengthen the Baltic Energy Market Interconnection Plan. Thirteen nations signed a declaration for regional cooperation on the security of electricity supply within the European internal market. The political declaration of the Pentalateral Energy Forum indicates the desire for open and transparent dialogue of energy security and market integration. These developments demonstrate a desire at the highest levels of government to move forward with the ideas embedded in the Energy Union, but future implementation remains dependent upon cooperation, innovation, and political will.

Alison Singer is a PhD student in Community Sustainability at Michigan State University, USA.

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