Europe struggles to meet CO2 targets, deal with Russian pressure and unify its electricity grid

By Eric Marx | 02/27/2015 08:12 AM EST

The European Union wants to revamp its energy policy to boost spending on renewables and assorted efficiency measures. Commentators say the long list of policy changes announced by the European Commission on Wednesday is a reaction to the Russian menace in the East, as well as pending E.U. climate commitments due later this year in Paris.

Included in the new strategy framework are large sums for infrastructure spending aimed at building up missing interconnection points for key gas and electricity projects. The first list was adopted already in 2013, but faster approval is now expected with €5.35 billion in earmarked funds set aside for the task. Over the next five years, the commission wants to mobilize at least €315 billion in private and public investment. (A euro is currently worth $1.11.)

The biggest change, however, could be the creation of an E.U. single market for energy, as part of a much-heralded action plan that seeks to bring about significant reforms to the way Europe now produces, transports and consumes its energy.


European Commission Vice President Maros Sefcovic called it "the most ambitious energy project since the European Coal and Steel Community."

The arrival of the plan could not be more timely. The European Union imports 55 percent of its energy, spending more than €1 billion a day on fossil fuel imports. Six countries, including Bulgaria and Estonia, rely entirely on Russia for gas. Meanwhile, in the next decade, roughly half of the European Union’s electricity capacity will have to be retired, according to the International Energy Agency.

Yet the goal of a single energy market has proved elusive for decades. Miguel Arias Cañete, the European commissioner for climate action and energy, acknowledged as much at the press conference announcing the new framework. "We must not miss another opportunity," he said.

Connecting more nations together

The new strategy resolves to connect countries like Spain and Portugal, along with member states in the Baltics, to the European grid. Cañete vowed this would be the commission’s highest priority. These projects will be expedited through accelerated licensing procedures and improved regulatory conditions.

Cañete referenced last week’s interconnection between Spain and France as an example of the way in which the internal energy market can be integrated.

More controversial is the proposal to establish a single purchaser of gas on behalf of E.U. member states. Sefcovic said this would enable E.U. countries to secure "much better treatment and a much better price" when negotiating long-term contracts. E.U. companies currently face gas prices that are no less than three times higher than those enjoyed by their American counterparts.

In response to a reporter’s question, Sefcovic said national governments would have to share "the price, the volume and the conditions under which the gas is being sold."

The provision is aimed at breaking Russia’s dominance by coordinating energy policies. Both Sefcovic and Cañete pointed to the abandoned South Stream project as an example of an intergovernmental gas contract negotiated on an uneven playing field lacking in transparency.

Yet Germany, Hungary and the United Kingdom have voiced opposition to the proposal, saying it would contravene E.U. treaties that grant discretion to the member states on matters of energy choice.

Also controversial is the commission’s desire to increase the powers and independence of the Agency for the Cooperation of Energy Regulators (ACER). The agency, less than 4 years old, was set up to help complete the internal energy market but currently only gives recommendations at the request of national energy regulators.

Russian aggression becomes a factor

Seen as a further devolution of power to Brussels, the ACER proposal may encounter strong opposition once it goes up for a vote in the council later in the year.

"A rebalancing of respective powers in member states is not needed," Cañete said. "Principles of subsidiarity will be respected, but we must have a constructive approach so national policies support the overall strategy."

Lots of dialogue has yet to take place. In the next year, Cañete will present a proposal for a new electricity market design, with legislation expected to follow in 2016.

Odds are the going will be tough, predicted Annika Hedberg, an expert on energy and climate at the European Policy Center.

Emphasis on interconnectors is well-placed, yet infrastructure investments take many years to come to fruition. The commission is mapping out a 10 percent interconnector objective by 2020, which does seem achievable. More emphasis is needed on things like efficiency, which has immediate deliverables. That’s also in the report, along with language dealing with the electrification of the transport sector.

"What we see is momentum across Europe to take this seriously, now that there is this realization of energy vulnerability," Hedberg said.

Granted, Russian aggression is now the driving force. Still, it comes down to member states getting beyond their own differences.

"The reality," Hedberg said, "is that all this time it has been sabotaged — not by Russia but by the member states themselves."