This research paper attempts to analyze the work done by the European Union (EU) in the Energy Sector, through understanding of the Energy Policies formulated by it.
European Union (EU) is a unique economic and political alliance formed between 27 European countries; post World War – II repercussions, based on the understanding that economic co-operation and dependence among countries is vital to avoiding any kind of conflict between them. This dependence should manifest itself in the form of free trade relations that would ultimately promote economic collaboration and teamwork. Since then, some of the concrete steps taken by the EU to formalize this economic partnership are to evolve itself as a single separate independent entity from the rest of the world, having a common currency, the euro as well as governing the activities of all the member countries using a common law comprising of voluntarily and democratically agreed upon treaties and agreements made by them. One of the key objectives of the EU, among others, includes “fostering human rights on a global scale from every aspect, through the attainment of peace, stability and prosperity, worldwide (European Union)”. For this, the union has formulated numerous policies on almost every issue that holds relevance to the sustenance of human existence, including, “agriculture, food safety, employment & social affairs, foreign & security policy, consumers and energy to name a few” (European Union).
The broader long-term vision of the Energy Policy in the EU, definitely lies in the attainment of “a competitive, sustainable & secured form of energy” (European Union), whereas, simultaneous creation of a competitive internal energy market that sells quality at affordable prices, development of renewable sources of energy, and assured reduction of dependence on energy imports in the wake of globally rising energy prices and increasing energy efficiency and energy conservation” (EU Energy Policy), represents its short-term mission. These are reflected in the key energy policies formulated so far, the strategies devised to implement them, and the ultimate future for the EU Energy Sector that lies ahead, as discussed next.
1. EU Energy Policy Strategies
1.1 EU’s Energy-related Strategies 2006-2007
The advent of 2006 saw Europe surrounded by new energy-related challenges such as rising energy prices worldwide reflected in escalating fossil fuel prices (see figure 1) along with the urgent need to pump massive infrastructure-up gradation investments to cope up with the ever-increasing energy demand in Europe alone, which could not be met, thanks to the rapidly depleting hydrocarbon reserves in most of the European countries (see figure 2). This immediately increased the dependence of Europe on energy imports, by as much as 50% at that time, which according to experts was bound to increase to 70% by 2030 (European Council), if no serious steps were taken by the Union to ramp up its own domestic energy production and competitiveness. All these wake-up calls, elicited a response from the European Heads of State and Government towards the end of 2005, to call for a true European Energy Policy, the need for which was formally expressed in the form of a Green Paper published by the European Commission on 8 March, 2006, titled, A European Strategy for Sustainable, Competitive and Secure Energy (Dimireva). The proposed energy policy for Europe was adopted in January, 2007, and endeavored to create a really strong internal energy market and achieve other important landmarks pertaining to both renewable sources of energy and greenhouse effect resulting from gas emissions. Next, the energy policy emphasized benefit for the common European citizen by providing him with an increased buying choice, an affordably clean energy transmitted through a secured supply from the real internal market. These goals were adopted by the European Commission on 19 September, 2007 and their attainment was made possible by separating production and supply of energy from its transmission networks to spur cross-border trade, collaboration & investments in energy. Even greater objectivity in the market operations and increased camaraderie amongst the EU countries was attempted to facilitate attainment of the above mentioned consumer-centric goals. Finally, towards the end of the year in November 2007, a European Strategic Energy Technology Plan (SET Plan) was proposed by the Commission, aimed to speed up the “development and deployment of low-carbon technologies” (Dimireva) as a way to increase domestic energy competitiveness of EU and at the same time meet the energy and climate change objectives of the policy, through the development of a novel energy plan for the entire Europe that involved much improved and enhanced leveraging of all the financial and non-financial resources.
1.2 EU’s Energy-related Strategies 2007-2008
The year 2008 started on a positive note for EU with the European Commission putting forward an integrated proposal for Climate Action on 23 January, 2008 that laid down a consensually designed strategy, whereby, all EU countries would proactively work in unity towards decreasing the proportion of greenhouse gas emissions and increasing the proportion of renewable energy usage by 20% each as part of their total energy consumption by 2020 (Dimireva). Further, in case of gas emissions this figure was extended to 80%-95% by the year 2050 (European Council). As the year drew to a close, the political system of Europe also agreed to its carefully chalked out energy agenda to help the country attain sustainability, competitiveness, and a secured energy supply. This heartened the European Commission’s efforts so far and motivated it to propose a two-pronged nation-wide energy package in November 2008 to strengthen the new found energy security in Europe that comprised of solidifying the team spirit amongst the member nations by introducing a new policy to accelerate investments in more efficient, low-carbon energy networks & proposing an Energy Security & Solidarity Action Plan aimed at ensuring regular energy supply in the EU, while also enforcing energy efficiency legislation on commercial and residential establishments & energy-consuming products and appliances to promote energy conservation in pivotal areas (Dimireva).
Towards the middle of 2009, in the month of July, the proposals presented by the Commission in November 2008, after a close scrutiny, follow-up and approval by the Energy Council early that year (2009), were passed in the European Parliament & the Spring European Council, enforcing improvement in the security levels of gas supplies within the internal gas market framework. This regulation sought to empower the prevalent system and entitle both the member nations and all major stakeholders in the gas market to take effective remedial actions in advance in anticipation of problems that might arise due to possible disruptions in gas supplies from the market (Dimireva).
2. EU’s Key Energy Policies
2.1 Energy Efficiency
“The ambitious target of a 20% increase in energy efficiency to be achieved by 2020 was already a part of a Green Paper regarding Energy Efficiency published by the European Commission in 2005, which was expected to result in savings of not only €100B per annum but also reduced CO2 emissions of as less as 780 million tons” (Dimireva). To accord complete effectiveness to the policy, all buildings, including both residential and commercial establishments as well as energy-based products and appliances were also brought under its purview, asserting that “lighting alone accounted for approx. 33% of building energy consumption, with the remaining utilized by heating and cooling facilities. Thus, the current energy efficiency guidelines could alone save up to 40 MTOE (Mega Ton Oil Equivalent) between 2006 & 2020” (Dimireva). Further, all electrical gadgets used mostly in households were said to form a large percentage of the 25% energy consumption taking place in households. To economize on this, all these products were made more energy efficient through “implementation of efficiency labeling such as the Energy Star Programme and minimum efficiency requirements in their design, and consumers were also educated about the same” (Dimireva). Finally, the EU Commission also proposed measures to “regulate street & office lighting in 2008, leading to transition from incandescent lighting to CFL lamps in 2009, based on EU Council’s directions to do the same” (Dimireva). According to the European Council, the above mentioned energy directives if seriously implemented would themselves lead to more than 15% of energy savings by 2020, through a major reduction in the GHG emissions, thereby, highlighting the crucial and collaborative role that the world in general needs to play along with Europe with regards to energy efficiency.
2.2 Renewable Energy
Wind Power – 14%
Hydro-Electric Power – 10.5%
Biomass – 6.7%
Solar Power – 2.4% (Concentrated solar power – 0.5%)
Geothermal Energy – 0.3%
Tidal Power – 0.2%
2.3 Security of Supply
In order to promote energy efficiency, there first needs to be not only sufficient sources of energy supply, but at the same time they should be free from any disruptions. EU, fully cognizant of this fact, sought to multiply the number of sources by bringing in the element of diversity, in terms of rewardingly collaborating with many energy supplying countries to mitigate Europe’s existing energy dependency. This also took the form of the member countries mutually agreeing upon maintaining minimum levels of oil and gas stocks in the form of petroleum reserves, all the time, regardless of the flow, in order to maintain continuity of supply so as to tackle any untoward situation. Similarly, EU also proactively explored alternative transit routes and transport mechanisms, other than the existing ones, by partnering with key supplier companies in different countries as an important contributory step towards putting in place an energy supply safeguarding mechanism. Finally, major investment activities were also initiated in Europe’s energy infrastructure, to ensure regular supply of electricity also, along with that of oil and gas (Dimireva).
2.4 Energy Infrastructure
Although, the need for attaining secured energy efficiency was definitely a critically daunting task faced by EU, but the creation of a formal energy infrastructure in the form of strategically planned and located energy networks that could embody such heavy-duty arrangement and cater to the energy needs of an average European was equally significant. “This dream was fulfilled on 19 October, 2011 with the European Commission’s revelation of the proposal to set-up a Trans-European Energy Network Infrastructure (TEN-E) by 2020, including guidelines to be adhered to regarding the same” (Dimireva). The proposal targeted rapid transit network set-up and completion in 12 priority areas including, electricity, gas, oil & carbon-di-oxide (Dimireva). Since this was a fairly long-term massive project, requiring substantial funding at different stages, so applications for funding were invited from interested parties that included electricity & gas transmission companies who were eligible by virtue of their on-going and past experience of handling such work. Even promoters in the form of investors in LNG facilities and gas storages were encouraged to apply. However, a prerequisite of all such applications was that all these projects “needed the support and approval of the EU members” (Dimireva) . As of now, many hands are actively funding the TEN-E project including “community assistance programs such as Community support Frameworks (CSF I & II) as well as community initiatives like REGEN & INTERREG II, that are financing those areas of the project that are eligible for community support. Finally, structural funds are also flowing in from the European Regional Development Fund (ERDF) that does so because of its active contribution in the development of the eligible region” (Dimireva).
3. What Lies Ahead?
3.1 The EU Energy Roadmap 2050
The above mentioned lengthy discussion points towards the baby steps being taken to build a robust energy infrastructure by 2050 that can sustain human existence and industrial progress, simultaneously. The design and development of this futuristic societal cum industrial order is fast underway and EU in process has set for itself two prime goals, namely; ensuring that greenhouse gas emissions are manageably reduced by 20% by year 2020, and further extending this figure to “80-95%, below 1990 levels by the year 2050, in response to necessary reductions made by the developing countries as a group” (European Union). However, the European Union should remember that this progression from 2020 to 2050 would be a bumpy ride, thanks to a plethora of challenges awaiting it. The biggest challenge pertains to such a long time-frame that brings with it lack of control over the events taking place in between, thereby, resulting in uncertainty of the success of all plans and efforts made, giving birth to indecisiveness in every corner.
Talking about considering achieving such a major de-carbonization objective by 2050, we find that creation of such a low-carbon economy by 2050 is heavily dependent upon a number of favorable scenarios, most pivotal among them being procurement of timely energy investments. The scenario analysis conducted by European Commission, Member Nations & other key stakeholders indicates the need to make systematic social and structural changes in the existing policy to provide a suitable investment framework for the investors. However, such a large and unpredictable time window where circumstances change “at the bat of any eye-lid”, make accurate forecasting of the future happenings, an impossible task, thereby, seeming to spill water on the possibility of making such changes and achieving results on time. This has put even the investors, citizens and government in an awkwardly indecisive situation. Moreover, even though, the required investment figures today themselves appear to be gigantic; “still postponing them to a future date” (European Commission) is not a solution because they would only escalate further, during the 39 year window from 2011-2050. Adding to the problem is the inherent nature of energy investments i.e. having a normally long gestation period, “as evident from current round of investments being made to replace the infrastructure that was built 30-40 years ago”(European Commission), making it even more difficult to decide where to move post-2020.
However, despite such challenges, the Energy Roadmap 2050 also has to its advantage a number of opportunities that offer EU the assurance to surely be able to fulfill its dream of a secured, sustainable & a competitive de-carbonized energy system by 2050, making us draw an analogy to a popular saying, “there is always light at the end of the tunnel”.
Firstly, as of now the current status of the global energy sector is that it produces a mammoth amount of man-made greenhouse gas emissions. Therefore, if EU decides to reduce this amount to as low as 80% or even 85% through major planned changes brought about in the carbon prices, technology and networks, then it will pressurize the world energy systems to comply automatically, by yielding to the pressure. Further, “assuming the ‘soon to happen’ dependence of the world energy markets on one another, would make the energy situation planned by 2050 severely impactful to both the EU energy market as well all energy trends prevalent in other economies, resulting in creation of a globally de-carbonized energy system. Consequently, the prices and demands of fossil fuels would also plummet, worldwide” (European Commission).
Finally, a major factor promoting optimism about the increased probability of the fulfillment of this long-cherished dream stems from the following key possible de-carbonization-friendly scenarios:
“Transforming the current energy system into a de-carbonized and self-sufficient one would prove much more economical than the Current Policy Initiatives (CPI) scenario, as evident from fossil fuel price volatility that has currently triggered energy import dependency of around 58%, which in case of a de-carbonized one would drop to 35-45% by 2050” (European Commission).
De-carbonization of energy system, by reducing fossil fuel import dependency “decreases the total fuel costs and in turn increases capital expenditures on industrial power plants, grids, renewable energy sources etc. that would consequently also cause an upswing in the economic activity of the country by spiking up employment levels in different industrial and service sectors, thereby, also exposing Europe to more innovative thinking & R&D efforts” (European Commission).
Increased capital expenditure on de-carbonized energy systems would also necessitate a parallel increase in the energy savings by all economic sectors including, households and Member states (European Commission).
Electricity would suddenly gain importance by doubling its share to almost 40% by 2050 (see figure 5) in order to lend support towards de-carbonization of transportation, heating/cooling etc. “This change would also necessitate an aligned structural change in the power generation system that would have to achieve a much higher level of de-carbonization” (European Union).
Finally, the share of renewable sources of energy would substantially increase to around “55% of total energy consumption during the de-carbonized energy scenario in 2050, as compared to a meager 10%” (European Commission) in today’s current scenario.
This lengthy discussion so far makes us conclude that currently, the world in general and EU in particular is undergoing a big energy crisis, owing to the fast depleting global hydrocarbon reserves, back-breaking world energy prices triggered by “ever increasing global demand for energy (see figure 6) as well as future supply uncertainties” (Boneva), that are slowly bringing the world on the brink of a massive energy shortage. However, the good news is that “the technical revolution brought about by technological advancements is constantly showing us a golden opportunity to get back to the nature’s priceless gift of alternative renewable sources of energy by exploring, inventing & implementing them through making increased investments in energy infrastructure projects that support them, as dictated by the need of the hour” (Boneva). This realization has actually guided the European Union’s highly ambitious Energy Roadmap 2050, which if successful, “would reduce the GHG emissions drastically through timely de-carbonization and transformation of the European energy system, ultimately fulfilling the long cherished dream of a competitive, sustainable and secured source of energy supply without getting touched by the climate change problem in the wake of this globally mismatched energy demand and supply situation.“ Regardless of the de-carbonization scenario adopted, considering the uniformity of costs in each, what matters is that a common approach be adopted by the EU to economize the process (European Commission)”.
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