03 Apr 2014   |   News

EC energy policy shift for 2030: a competitive low-carbon economy

Subsidies for renewable energies should be progressively eliminated where they distort competition, Director-General Dominique Ristori tells Science|Business

The European Commission is championing a more “coherent and global approach” to energy policy in its 2030 package, says Dominique Ristori, director general at DG Energy. The priority now is to forge a more competitive low-carbon economy. “This is fundamental because it will influence the whole chain of decisions,” Ristori told Science|Business.

For starters, Europe needs a more market-based approach to renewable energies and this should include, “the progressive elimination of unjustified subsidies for mature technologies,” Ristori said.

Other key elements of the Commission’s new systems-based approach to energy policy include a smart and interconnected electricity grid – and big gains in energy efficiency. “We should give high priority to the creation of a fully integrated and single European grid,” said Ristori.

Across the EU, policies supporting renewable energy policies prompted the rapid uptake of wind and solar electricity generation. However, this has come in advance of upgrading grids – causing a spike in electricity costs. The surge of wind and solar power has also created difficulty balancing electricity supply and demand. To address that disequilibrium, Europe needs to cut state support for commercially viable technologies and put an end to certain uncontrolled costs, Ristori says.

In January, the Commission announced the broad outlines of its 2030 climate and energy framework, including proposals for a non-binding target of at least a 27 per cent share of renewables in the electricity mix and a 40 per cent reduction in CO2 emissions compared with 1990. Key goals include a cost-efficient approach to the development of renewables and reducing greenhouse gas emissions, accelerating energy market integration and reducing market distortions. 

Big gains in energy efficiency will also be crucial to meeting the ambitious 2030 target for cutting CO2 emissions by 40 per cent, says Ristori, who spent three years as director-general of the Joint Research Centre of the European Commission before moving to DG Energy on 1 January.  Europe has made impressive gains, reducing energy intensity by 24 per cent across the economy, “but we are not exploiting energy efficiency at its full potential,” he said.

Mass deployment of renewables

Three key sectors – housing, transport and electrical equipment – will be in the spotlight as part of DG Energy’s mid-year review of the Europe’s Energy Efficiency Directive. “Eighty per cent of our buildings across Europe were built prior to any energy efficiency standards.  “We can profit a lot from active and passive measures – and create new jobs,” Ristori said.

Under the EU’s revised Cohesion policy for 2014-2020 at least €23 billion in so-called structural funds has been ear-marked for clean energy investments – a major new source of funding for mass deployment of renewables, energy efficiency, low-carbon urban transport and smart grid solutions.

As Europe ponders the next phase of greening its economy, policy makers must square their ambitions with the staggering cost of a rapid shift to low-carbon technologies. Soaring electricity prices have squeezed consumers and industry. Industrial companies including chemical giant BASF have warned that EU energy costs are making them uncompetitive.  Addressing that dilemma, the Commission’s January Communication on the 2030 EU energy and climate framework sets a priority on cost-efficient policies.

Linking energy and industrial policy

Ristori noted that the Commission is now taking a closer look at the link between energy policy and industrial policy, and is analysing the potential of shale gas as well as energy prices and energy costs. “We can see now a clear indication of priority regarding how to put in place a more competitive low-carbon economy.”

The linchpin of Europe’s clean energy ambitions going forward is connecting its disparate electricity grids – and making them smarter.  That will help bring renewable energy costs down and bolster overall system efficiency. Under a revised Strategic Energy Technologies (SET) Plan, EU and member state partnerships will receive €6 billion for energy research and innovation linked to real needs of the economy. A separate EU project, The Connecting Europe Facility, will provide €9.1 billion to remove bottlenecks across Europe’s electricity grids and help to eliminate “electricity islands” including the Baltics and regions of the Iberian Peninsula.

“The development of a new European smart grid will be of fundamental importance,” says Ristori, not only to facilitate cross-border exchanges but also to ensure a secure supply of energy.  The goal:  linking at least 10 per cent of installed capacity across Europe.  “This is absolutely key to exploiting the full potential of the internal market,” Ristori says. Member states already are working on reducing the administrative burden for companies pursuing cross-border interconnection – a key obstacle up to now.

Diluting renewables targets?

Asked about criticism that the Commission had diluted the 2030 target for renewables by making the 27 per cent renewables goal a non-binding one, Ristori said Europe is already at 21 per cent of renewables for electricity generation – and is likely to exceed 33 per cent by 2030 against the background of a 44 per cent share of world installed capacity of electricity generation from renewables.  

Instead of an EU binding target, the Commission is proposing a new and more flexible system of governance including direct dialogue between the member states and the Commission – to reach and possibly go beyond the 27 per cent goal.  “I am confident we can do this if we use the full potential of research and innovation,” Ristori said. “Some European states already put in place national plans for 2030 going far beyond the 27 per cent target, including Denmark, Austria, and Germany.

But a key challenge – technological and financial – is defining a new grid strategy and balancing base load electricity produced by big gas, nuclear or coal plants with decentralised energy produced by renewables. At the same time, Ristori said, Europe should incorporate in its new grid a recharging system that addresses the challenge of electro-mobility and electric vehicles in urban centres. “This will be important in order to accelerate positively the shift to the low-carbon economy,” Ristori said. Developing a new market in electric mobility could be a real commercial opportunity for Europe, he added.

When will Europe’s new grid become a reality?  It will depend on collaboration between the Commission, member states, regulators and the transmission system operators (TSOs).  “We can implement only in the context of structured cooperation with all key players, Ristori said, adding that he saw real will in the capitals across Europe to cooperate in finding the best possible solution to grid issues and to the “Europeanisation of energy policy.”

Ristori also is keen to build a stronger energy research and innovation partnership with the US, developing a common approach to clean energy research, common rules and common standards. Pointing to US President Barack Obama’s 2014 State-of-the-Union speech in January, Ristori said the US and EU share many common clean energy goals. “We should identify some common challenges to be addressed. We are both speaking about smart grid, the modernisation of grid, as well as common standards for electro-mobility, for this, we need targeted innovation".

By joining forces to develop clean energy technologies while developing countries such as China and India remain heavily dependent on coal, the US and EU could gain competitive edge and open new markets.  Working in tandem would also be a more effective approach to addressing global climate change. “We cannot abandon this challenge.  It is important to combine competitiveness and sustainability,” said Ristori, adding that Europe will only achieve that goal by fully leveraging research and innovation.

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