Posted by: Esa Hyvärinen
Due to the current political crisis in Ukraine, energy security is high on the EU energy agenda. The EU wants to act in a coordinated manner with regard to energy policies and speak with one voice in external energy policy matters. To answer those questions and in response to the March European Council, the EU Commission released a Strategy for European Energy Security at the end of May 2014. The strategy calls for a functioning internal energy market, increased cooperation between the Member States, implementation of the already made decisions as well as lists several action areas to ensure better energy security.
Functioning internal energy market a key for energy security
The Strategy states that “the key to improved energy security lies first in a more collective approach through a functioning internal market”. Currently, implementation of European energy policies and legislation, including those affecting energy security, are too often addressed only at a national level. This approach does not take into account the interdependencies between the Member States.
I believe that lack of an internal energy market is the single, biggest, barrier for improved energy security in the EU. It seems to me that the EU and the Member States are victims of vicious circular reasoning: if there is no common market, there is no point for energy policy coordination or using one voice in external policy matters. If there is no coordination and a common approach, an internal energy market does not come up as a priority either. Without a functioning internal energy market the Member States simply lack any incentive to make joint energy related decisions, also those concerning energy security.
Better coordination between the Member States and making the internal energy market a reality would be the key for ensuring the energy security of the EU and each Member State. It would also improve energy efficiency and enable cost-savings in the long run.
Promoting functioning market = promoting energy efficiency
The strategy sets out areas where decisions would need to be taken or concrete actions implemented including moderating energy demand and increasing energy production in the EU. When it comes to energy savings, the strategy correctly asks for prioritisation and refers primarily to sectors remaining outside the EU ETS, such as buildings. Indeed, district heating and cooling, especially when based on energy efficient CHP, have a big untapped potential to contribute to more efficient production and consumption of energy. Furthermore, CHP is well-suited for using biomass and waste fuels that are both renewable and local.
Heating business is legislated and regulated locally by the Member States. Due to historical rationale, the Member States have a huge variety of approaches. Strict regulation and lack of a real heat market often lead economic and environmental inefficiency. Promoting a common European approach and introducing market-based practices for the heat sector would also be the best way to promote energy efficiency; it is more deregulation than regulation that would be needed to capture the efficiency benefits in this sector.
Removing bottlenecks and integrating renewable energy sources to the market
In order to have a functioning internal energy market and to utilise renewable energy to its full potential, we must have an adequate transmission system EU-wide. The proposed 10 to 15%-increase in interconnections compared to installed capacity in each Member States is very good. The EU should look for possibilities to make that target a binding one. Network connections must be further developed to remove bottlenecks inside and between the countries.
Renewable energy has increased rapidly in the EU during the past few years. This trend is positive also from the energy security point of view because renewable energy sources represent – almost by definition – a domestic source of energy. The increase, however, is a result of abundant subsidies that are visible in consumers’ energy bills and/or add the tax burden of citizens. There too, the strategy asks for better coordination between the member states to save cost.
Climate policies promote energy security too
The proposed 2030 energy and climate policy framework, where the emphasis is on CO2-reductions, is in fact well-suited for energy security too; it would bring new renewables into the market and promote energy efficiency in a coordinated and economically efficient manner. Therefore, prompt decisions on the 2030 package, as proposed by the EU Commission earlier this year, would be positive to energy security too.
Implementing already made decisions is a good start
I believe that in terms of energy security a great deal would be achieved by properly implementing the decisions that have already been agreed upon. And not just implemented, but put into practice in such a way that interdependencies with other Member States are taken into account. The focus should be on the EU-level security of energy supply, after which a functioning internal energy market would ensure that of each individual Member State.
What would be needed is increased trust and solidarity, which, in turn, would require a functioning internal market. If an Energy Union, whatever it eventually could mean in practice, was able to contribute to building that trust and solidarity, it is an idea worth exploring more in detail. Needless to say, however, that the EU should not create structures and operational models that it would not allow from its external partners.