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In the newly published European “State of the Energy Union Report-2024”, the EU-wide efforts in managing unprecedented challenges in the EU-wide energy policy are described providing the member states with necessary political and regulatory means for pursuing the clean energy transition and laying the foundations for renewed economic growth and competitiveness.
Background
Almost each year the Commission publishes the accounts of the EU-wide progress in reaching the objectives of the Energy Union. Following last year State of the Energy Union report dealing with the challenges and achievements in 2020-2023, this year’s report gives an update on how the EU successfully acted on unprecedented developments and challenges in the last year of this Commission’s mandate.
The EU’s post-pandemic recovery plan has also been vital to ensure that the states have access to the necessary funding for their clean transition plans. Green investments have reached a record level thanks also to national Recovery and Resilience Plans, NRRPs: by mid-June 2024, out of €240 bn disbursed as part of NRRPs, €184 bn were allocated to energy related reforms and investments. Market integration and grid and infrastructure development has also been key to ensure renewables expansion.
During last five years a virtual completion of the Baltic States energy markets’ synchronization with the Continental Electricity Network has occurred; besides, the EU states have made major steps forward with the EU-wide “projects of common interest”, and rapid adjustment of gas/oil infrastructure to support the changing import patterns.
Renewed energy policy: towards decarbonized future
Massive overhaul of EU energy policy we have done over the past five years with a serious legal framework to turn the energy sector towards a decarbonised future; the EU managed to withstand critical risks to its security of energy supply, regain control over the energy market and prices, and accelerate transition to climate neutrality. The following features were mentioned by the report-24:
= Renewable energy generation is breaking new capacity records: in the first half of 2024, half of the EU’s electricity generation came from renewable sources. The states agreed on new and higher targets for renewables and energy efficiency; they need strong push to reach 42.5% of renewables in the energy mix by 2030. Following two record years for renewables installations, in the first half of 2024 wind and solar have risen to new highs, overtaking for the first time ever fossil fuels in our electricity mix.
= Fossil fuels import. The share of Russian gas in EU imports dropped from 45 percent in 2021 to 15-18 percent in June 2024, while imports from trusted partners like Norway and the US have increased; the EU has reduced gas demand between August 2022 and May 2024 by 138 billion cubic meters. The EU reached its 90% winter gas storage target on 19 August 2024, well ahead of the 1 November deadline.
= Energy prices are more stable and remain significantly below the peak levels of the energy crisis of 2022. As M. Draghi revealed in the recent report, “even though energy prices have fallen considerably from their peaks a couple of years ago, the EU companies still face electricity prices that are 2-3 times those in the US and natural gas prices are 4-5 times higher. This price gap is primarily driven by Europe’s lack of natural resources, but also by fundamental issues with the EU’s common energy market”. He added that “the market rules prevent industries and households from capturing the full benefits of clean energy; high taxes and rents captured by financial traders only raise energy costs…”
Reference to: https://www.integrin.dk/2024/09/09/eu-wide-competitiveness-challenges-and-perspectives-in-draghi-report/
= The EU’s greenhouse gas emissions fell by 32.5% from 1990 to 2022, while the EU economy has grown by around 67% in the same period.
= At international level, the EU led the global initiative to triple renewable energy capacity and double energy efficiency improvements as part of the transition away from fossil fuels, which was endorsed by all Parties at COP28 in Dubai. The EU states continue to import too much fossil fuels: they have to rely on more domestically produced clean energy, import less fossil fuels, etc. to ensure competitiveness, security of supply and the EU’s energy sovereignty and economic resilience.
Source: https://ec.europa.eu/commission/presscorner/detail/en/ip_24_4581
The report’s content
The first part of the report shows how the high energy and climate ambition under the European Green Deal provided the basis for the EU’s crisis response strategy and the REPowerEU Plan. It also outlines steps to enhance the competitiveness of European industry.
The second part analyses the state of play in the implementation of the Energy Union in all its five dimensions: 1) security, solidarity and trust; 2) a fully integrated internal energy market; 3) energy efficiency; 4) climate action and decarbonising the economy; and 5) research, innovation and competitiveness.
This year’s report is accompanied by an annex containing information on voluntary and national schemes on bioenergy in the EU member states.
Source: https://energy.ec.europa.eu/publications/state-energy-union-report-2024_en
Division of competence in energy
It has to be remembered that in the European integration process, the energy is within the “shared competence”: i.e. generally (in short) the EU makes political-economic and legal framework on energy issues, and the states manage trans-European energy grids. So, the optimal EU-wide energy policy involves quite resolute efforts from both sides…
For example, the Commission has urged the member states to deliver presently missing National Energy and Climate Plans: presently only ten states delivered finally agreed plans, which is way past the deadline; these plans are essential to turn commitments into action, and to give certainty to investors.
Source: https://ec.europa.eu/commission/presscorner/detail/en/speech_24_4641
Renewable energy
Significant progress has been made on renewable energy. Wind power overtook gas to become the EU’s second largest source of electricity behind nuclear, and by the first half of 2024 renewables generated 50% of electricity in the EU. In 2022 the EU’s primary energy consumption renewed its downward trend, falling by 4.1%.
Nevertheless, energy efficiency efforts will need to be stepped up further for the EU to meet the 11.7% final energy consumption reduction target by 2030. Further improvement is needed, not least in the electrification of heating equipment across the board and the rate of renovation of buildings.
However, additional and resolute efforts are needed to address high energy prices: this is key to improve the competitiveness of EU industry, and to accelerate investments in Europe’s integrated infrastructure networks, which are essential for the electrification of the European economy.
Enhancing energy security and competitiveness
EU manufacturers face growing competition in net-zero technologies on global and domestic markets. The Report recalls the importance of the Net-Zero Industry Act and the Critical Raw Materials Act, alongside the reform of the Electricity Market Design to face these challenges.
E.g. critical raw materials are vital for technology’s part in green and digital transition, as well as in defence and space exploration.
Thus, the benchmarks for domestic capacities along the strategic raw material supply chain to be reached by 2030 include: 10% of the EU’s annual needs for extraction; 40% for processing and 25% for recycling. No more than 65% of EU’s annual needs of each strategic raw material at any relevant stage of processing should come from a single third country.
More on “critical materials” law in: https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/green-deal-industrial-plan/european-critical-raw-materials-act_en
The report-24 also recognizes the need to build on partnerships with industry to accelerate the development of net-zero technologies and strengthen the EU’s manufacturing base. Industrial alliances such as the European Battery Alliance, European Clean Hydrogen Alliance, Solar PV Industry Alliance, Renewable and Low-Carbon Fuels value chain Industrial Alliance and Alliance on Small Modular Reactors will play an important role. The Commission’s clean transition dialogues with industry and social partners will support the implementation of the European Green Deal.
The EU Innovation Fund, with its estimated budget of around €40 billion until 2030, also plays a crucial role. The European Hydrogen Bank, financed from the EU ETS Innovation Fund, for example, has conducted a first successful round of EU auctions awarding nearly €720 million to 7 renewable hydrogen projects in Europe.
On Innovation Fund in: https://climate.ec.europa.eu/eu-action/eu-funding-climate-action/innovation-fund_en
Empowering consumers in the clean transition
With new energy market legislation, such as the reformed Electricity Market Design, the most vulnerable will be a better protection from disconnections. In case of a natural gas price crisis, the states can introduce measures to protect consumers and ensure access to affordable energy and essential social services. This includes interventions on price settings at retail level to shield consumers from excessively high prices.
The Social Climate Fund is a key instrument to mobilise at least €86.7 bn for 2026-2032, which is financed from ETS revenues and at least 25 percent of the member state co-funding. The fund is supporting structural measures and investments in energy efficiency renovations, access to affordable and energy-efficient housing, clean heating and cooling, and integration of renewable energy as well as in zero- and low-emission mobility and transport. There is also an option to provide temporary direct income support for the member states.
On social climate fund in: https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-ets/social-climate-fund_en
Note. More information in the following Commission’s web-pages: = State of the Energy Union Report 2024; = Factsheet State of the Energy Union Report 2024; = Annex on bioenergy; = Report on the functioning of the Regulation on the Governance of the Energy Union and Climate Action; = Energy Union webpage; = REPowerEU Plan; = National Energy and Climate Plans (NECPs); and = Delivering the European Green Deal.
Citations
= “While living in turbulent times and having challenges ahead, today’s report shows the unprecedented progress we have made in this mandate to strengthen Energy Union. Emissions are falling, and renewables play a prominent role in our energy system today. We should swiftly implement the new policy and regulatory framework to address the elevated energy prices, and accelerate development of infrastructure. We will also bring the lesson learned on overdependence on one supplier with us and continue with our project of joint purchasing expanded to new commodities as ensuring industrial competitiveness will be vital for the EU’s future economic success.”
Maroš Šefčovič, Executive Vice-President for European Green Deal
= “This year’s report shows that we are no longer at the mercy of Putin’s pipelines, and we keep standing by our Ukrainian partners as winter approaches. The report highlights the progress we have made under this mandate towards a secure, competitive, and affordable energy sector in the EU. The EU is well equipped to navigate the profound changes and challenges that lie ahead and deliver on its commitments towards the planet and its citizens. Our Energy Union is stronger and greener than ever before.”
Kadri Simson, Commissioner for Energy
Source: https://ec.europa.eu/commission/presscorner/detail/en/ip_24_4581