Clean Energy for All

Policy framework for EU electricity market transition

The European Union (EU) Council of Ministers formally adopted four key legislations recently, which will redesign the EU electricity market to accelerate the region’s transition to clean energy. The legislations, published by the European Commission (EC) in November 2016, are part of the Clean Energy for all Europeans Package – an updated EU energy policy framework to facilitate the transition towards cleaner energy and to deliver on the EU’s Paris Agreement commitments to reduce greenhouse gas (GHR) emissions.

In 2009, the EU had set ambitious energy and climate targets to reduce GHG emissions by 20 per cent, increase renewable energy to 20 per cent of the total energy mix and increase energy efficiency by 20 per cent by 2020. Further, during the 2015 Paris Climate Agreement, the EU pledged to achieve a further reduction in GHG emissions of at least 40 per cent by 2030. To meet this daunting challenge and forge ahead on its path towards energy transition, the EU proposed the Clean Energy for all Europeans Package in 2016.

The package consists of five key elements – energy efficiency, more renewables in the energy mix, better governance of the energy union, more rights to consumers, and a smarter and more efficient electricity market. Eight legislations will be enacted to achieve these five objectives.

Energy efficiency: Two directives have been introduced to achieve energy efficiency. The existing directive on energy efficiency has been amended and a binding target of at least 32.5 per cent energy efficiency or reduction in energy consumption (compared to projections) by 2030 has been set. The amended directive on energy efficiency has been in place since December 2018. Further, the energy performance in buildings directive (EPBD) outlines specific measures for the building sector to tackle the issue of reducing energy consumption and CO2 emissions through smarter and greener buildings. The amended directive, under which many provisions from the 2010 EPBD have been updated, has been in place since June 2018.

Renewable energy: A new ambitious target of at least 32 per cent of renewable energy in the energy mix by 2030 has been fixed. The directive also has specific provisions for fostering public and private investment for the EU to maintain its global leadership in renewables. The recast renewable energy directive came into force in December 2018.

Governance regulation: The package includes a robust governance system for the energy union. Under the new energy rulebook, member states are required to draft respective national energy and climate plans (NECPs) for 2021-30, setting out plans to achieve their energy targets, and in particular, the 2030 targets on energy efficiency and renewable energy. The regulation on the governance of the energy union has been in force since December 2018. The draft NECPs are currently being analysed by the EC, with country-specific recommendations to be issued before the end of June 2019.

Electricity market design: The new laws will increase the security of supply by helping integrate renewables into the grid and managing risks, as well as by improving cross-border cooperation. The package seeks to redesign the EU electricity market to adapt to the new realities of the market. The modern EU electricity market is envisioned to be more flexible, more market oriented and better placed to integrate a greater share of renewables.

The electricity market design elements comprise four dossiers – a new electricity regulation, an amended directive for common rules for internal electricity markets, a new regulation on risk preparedness and a new regulation to establish a stronger agency for the cooperation of energy regulators called ACER.

The new rules on the electricity market will enable an effortless integration of renewable energy into the grid, encourage more interconnections and cross-border trade, and ensure that the market provides reliable signals for future investment. The creation of modern infrastructure and interconnections is already being supported by the EU through the Projects of Common Interest framework and financially by the Connecting Europe Facility.

On May 22, the EU formally adopted the four regulations mentioned above on electricity market design. However, they will become legally binding when they are published in the EU official journal.

More rights for consumers: The new rules also make it easier for individuals to produce, store or sell their own energy. The rules strengthen consumer rights with more transparency on bills, and greater flexibility in terms of choice. They will have the right to request a smart meter to keep themselves informed of their energy consumption and costs in real time, with full control over their data.

Next steps

The completion of the Clean Energy for all Europeans Package will accelerate the region’s clean energy transition and is expected to provide all Europeans with access to secure, competitive and sustainable energy.

The EU is now working on its long-term strategy to transform itself into a prosperous, modern, competitive and climate-neutral economy. In December 2018, during the 24th Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC) climate talks, the EU presented its 2050 Long-Term Climate Neutrality Strategy. This included options on how to decarbonise the EU by the year 2050. EU-wise debates will take place over the next few months to adopt an ambitious decarbonisation strategy. Following this, the final strategy will be submitted in early 2020 to the UNFCCC.

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