Energy priorities for the Von der Leyen Commission.
Date: 2020-03-11
Institutions: European University Institute
Subjects: EU energy policy, European Commission, climate change policy, energy efficiency, energy technology, renewable energy

Issue 2019/16
October 2019

Energy Priorities for the Von der Leyen 
Commission 
By Christopher Jones, Andris Piebalgs and  
Jean-Michel Glachant 
Florence School of Regulation 

Highlights 

•  The next European Commission’s energy policy should be based 
on six key foundations, able to ensure the achievement of the 2030 
targets and to put the EU on a stable path to full decarbonisation 
by  2050,  while  also  providing  an  engine  in  terms  of  jobs  and 
economic growth.

•  First,  determined  action  is  needed  with  regards  to  electricity 
balancing  markets  to  ensure  that  the  increased  level  of 
intermittency  in  the  electricity  market  does  not  provide  a 
fundamental break on the development of RES investment.

•  Second,  “Renewable  Energy  Apollo  Projects”  are  necessary 
because the EU will not achieve ist 2030 targets on renewables 
on a “business as usual” basis.

•  Third, we need to ensure we lay the groundwork for a physical 
electricity grid designed for 2050; that grid will look significantly 
different from that of today and sustained investment is required.

•  Fourth, sector coupling represents one of the greatest challenges 
for the next Commission. The ETS is the obvious mechanism to 
drive this change, and the Commission will have to see how to let 
it fulfil its full potential.

•  Firth,  new  digital  technologies  will  open  important  new 
opportunities. A new regulatory framework is needed to ensure 
that the digital economy, and EVs in particular, can make their 
full contribution to the EU’s decarbonised energy market. 

•  Sixth, the next Commission will need to provide the regulatory 
framework  and  create  the  investment  conditions  to  enable  the 
decarbonised hydrogen market to emerge and grow.

The  following  article  was  prepared  in  order  to  provide  input  by  the  Florence 
School of Regulation (FSR) into the Commission’s forthcoming deliberations 
on its detailed Work Program for the next legislature and had been addressed 
by the Director of the FSR, Jean-Michel Glachant, to President Von der Leyen, 
EVP Timmermans and Energy Commissioner Simson.

fsr.eui.eu

POLICYBRIEF 
Introduction

We believe that the next Commission will be deter-
minative  for  the  success  or  failure  of  European 
Energy Policy. 

Putting  the  EU  fully  on  track  to  achieve  the  full 
decarbonisation  of  its  energy  system  by  2050,  and 
achieving the 2030 targets,  must be  considered  the 
foundation upon which all else is built. We now have 
the  technologies  to  meet  this  challenge,  although 
some – such as cost-effective hydrogen production 
at  scale  –  are  still  in  their  infancy.  By  meeting  our 
2030 targets, putting us on a path to reach our 2050 
goal, creating new technologies and new industries, 
as  well  as  producing  our  own  energy  instead  of 
importing oil, we can become a beacon to the world. 
If Europe does not play this role, who else will?

Sustainability and decarbonisation, are therefore the 
foundation of our energy policy, and is an obligation 
for  the  EU  rather  than  an  option.  But  it  cannot  be 
our  sole  energy  goal.  Europe’s  energy  policy,  since 
its inception in the mid-2000’s has always had three 
underlying objectives: (i) sustainability, (ii) security 
and (iii) competitiveness. We must strive to form an 
energy policy that is an ‘equilateral triangle’ of these 
three objectives. 

Since  much  of  the  rest  of  the  world  are  less  com-
mitted  to  dealing  with  the  climate  crisis,  achieving 
this  triangle  is  difficult.  Indeed,  decarbonising  our 
energy  system  will  raise  prices  in  the  short-to-
medium term, but this rise in prices can be limited 
if we plan ahead, invest wisely, and act with determi-
nation to ensure that we reap the benefits – in tech-
nology leadership and exports – that will result. The 
judicious use of trade policy instruments, to protect 
our jobs, can help this change and push others to act 
as well.

But we have to face these challenges, and opportuni-
ties, with our eyes wide open. We cannot ignore the 
challenges ahead that we must overcome if we wish 
to  fully  decarbonise  our  energy  system.  There  are 

many such challenges, and they are far from being 
solvable merely on the basis of what we know today.

Without strong leadership from the Commission in 
the next five years, we see a risk that the EU’s global 
leadership in energy policy will falter, as electricity 
prices rise quicker and more significantly than they 
must  and  this,  in  turn,  risks  provoking  a  reduced 
determination  at  the  national  level  to  push  ahead 
with ambition.

Yet,  at  the  same  time,  it  is  becoming  evident  that 
current approaches to energy policy and regulation 
will need to significantly evolve in the next decade to 
meet  new  challenges.  The  foundations  for  this  will 
need to be laid now, to create the conditions that will 
drive investment in new technologies.

With this paper, which is built on the findings of the 
EUI Brussels Energy Conference that took place on 
September 12th, we seek to identify what we believe 
are the key priorities for the next Commission, and 
provide  our  recommendations  for  achieving  them. 
We identify ‘Six Energy Foundations’ for the next 
Commission. These are not intended to be exhaus-
tive – as there are many other actions that will also 
require  the  Commission’s  attention  –  ,  but,  in  our 
view, they represent the most essential priorities. 

Achieving  the  2030  Energy  Efficiency  and 
Renewable Energy Objectives.

With respect to energy efficiency, we can only under-
line  the  importance  of  the  ‘energy  efficiency  first’ 
principle. Indeed, simply put, it is the cheapest, most 
effective and most job-creating manner for the EU 
to achieve its decarbonisation objectives and, at the 
same time, to fully address the goals of competitive-
ness and security of supply. 

We note with concern that the Member States’ inten-
tions, as laid out in their draft National Energy and 
Climate  Action  Plans  (NECPs),  fail  to  collectively 
achieve the 32.5% energy efficiency target. Further-
more, the plans themselves fail to provide any con-

2 ■  Robert Schuman Centre - Policy Brief ■ Issue 2019/16 ■ October 2019

vincing details as to how even their current (lower) 
level of ambition would be achieved.

This concern is exacerbated by the fact that the EU, 
overall, is only close to achieving its 2020 target of 
20% improved energy efficiency because growth in 
energy demand was severely reduced, between 2008 
and 2014, by the economic crisis, and demand in the 
Member States has been creeping up ever since. 

The  32.5%  overall  EU  energy  efficiency  target 
for  2030  looks  close  to  being  ‘on-track’  in  terms 
of  Member  States’  intentions  based  on  the  draft 
NECPs, although additional commitment is needed. 
However, this is only because of the very ambitious 
targets sets by some ‘outlier’ Member States such as 
Italy  (43%)  and  Spain  (39.6%)  which,  on  the  basis 
of  the  NECPs,  look  unlikely  to  be  achieved.  Fur-
thermore, an examination of all the NECPs demon-
strates a lack of transparency – or future planning – 
by Member States on how they will take the difficult 
concrete  actions  necessary  to  achieve  their  targets, 
which,  even  if  less  ambitious  than  Italy  or  Spain, 
remain challenging.

We  note  that  the  actions  that  could  be  character-
ized  as  the  ‘low-hanging  fruits’  regarding  energy 
efficiency that can be taken at the Community level 
have already been taken, and achieving results in the 
future will be determined by the ability of Member 
States  to  take  often  difficult  political  decisions  at 
the  national  level.  Nonetheless,  vigilance,  transpar-
ency and assisting Member States in achieving their 
objectives  will  be  essential.  Therefore,  we  strongly 
welcome  the  proposals  of  the  Commission  to  har-
ness the successor of the EFSI to drive energy effi-
ciency projects forwards.

Regarding renewable energy, we congratulate the EU 
on achieving its 20% target for 2020. The 2030 target 
of 32% means, according to Commission modelling, 
that  the  EU’s  electricity  system  will  need  to  be  on 
average 55% provided by renewable energy by 2030, 
more  than  45%  of  which  will  come  from  intermit-
tent sources, notably wind and PV. 

However, having read the National Energy and Cli-
mate  Action  Plans  of  the  Member  States,  and  wit-
nessed  recent  developments  on  the  market,  we  are 
concerned that, unless the Commission takes deci-
sive action right at the beginning of its mandate, we 
will fail to meet both targets.

As mentioned above, since 2014, energy demand has 
been increasing in most Member States. If demand 
had increased at this speed between 2008 and 2014, 
we would not have met our 2020 renewable energy 
targets  without  far  greater  efforts.  On  current 
trends, and without action at the Member State level 
regarding energy efficiency that we fail to see today, 
we  expect  energy  demand  to  continue  to  increase, 
making the targets far more difficult to achieve. This 
is an indication of how important action on energy 
efficiency by the Member States is.

To  meet  the  2030  renewable  energy  target,  we  will 
have  to  install  the  equivalent  of  150%  of  the  wind 
and PV capacity that we will have installed between 
2009 and 2020. Yet, we see ‘onshore wind fatigue’ in 
many countries and increasing planning constraints. 
Above all, we note that the Member States’ National 
Energy and Climate Plans do not contain convincing 
detail  on  the  concrete  action  that  they  will  take 
achieve their renewable energy targets. 

These  factors,  combined  with  the  expectation  that 
network  costs  may  rise  appreciably  from  2025  to 
deal with the challenge of an increasing level of inter-
mittent power on the grid (meaning price increases 
for  households  and  industry),  give  us  concern  that 
Member  States,  no  longer  obliged  to  meet  legally 
binding targets, may be tempted to scale down the 
level of their ambition in the future. This is particu-
larly  the  case  for  ‘outlier’  Member  States  that  have 
committed to achieve more than their ‘fair share’ of 
the overall 32% EU objective. 

Specifically regarding network costs, we see the issue 
of  balancing  the  grid  becoming  increasingly  crit-
ical as we move towards the second half of the next 
decade. 

3 ■  Energy Priorities for the Von der Leyen Commission

Germany had 36.2% renewable electricity on average 
at the end of 2017, but already in May 2018, it pro-
duced more than 100% of its electricity requirements 
for  the  first  time.  This  is  now  becoming  a  more 
common occurrence, and Germany currently solves 
the problem by exporting the excess electricity, prin-
cipally to Poland and the Benelux.

On  the  basis  of  the  National  Energy  and  Climate 
Action  plans,  we  can  expect  that  renewable  elec-
tricity  will  cover  the  following  share  of  electricity 
consumption by 2030: 

•  Belgium, 40.4%;

•  Denmark greater than 100%;

•  France: 40%;

•  Germany 65%; 

• 

Italy: 55.4%, 

•  Netherlands: 66%, 

•  Portugal: 80%; and 

•  Spain: 74%. 

Given the minimum trajectory required in meeting 
these targets – contained in the Governance Regula-
tion – and assuming that Member States succeed in 
meeting  their  2030  RES  targets,  between  2025  and 
2030, we can expect that the whole region of Cen-
tral Western Europe and Iberia, as well as Italy, will 
have  an  increasing  number  of  days  when  PV  and 
wind  production  will  significantly  exceed  100%  of 
demand and, this, probably for sustained periods. 

Since whole regions of the EU (rather than just indi-
vidual  countries)  will  most  likely  be  collectively  in 
excess RES production compared to demand during 
periods where sun and wind are plentiful, it will no 
longer be possible to export the electricity to neigh-
bouring  countries,  although  such  exports  this  may 
provide  a  partial  solution  for  a  limited  period  in 
Central Western Europe. Exports will not, however, 

solve the issue for Iberia or Italy, even in the short 
term.

In any event, it is clear that, as time progresses, more 
regions  of  the  EU  will  have  production  surplus  – 
above  peak  demand  –  from  intermittent  RES  pro-
duction,  and  for  increasing  periods.  As  we  move 
towards  2030  and  beyond,  this  is  likely  to  be  sys-
temic, and increasingly significant.

On  the  basis  of  currently  foreseeable  technology, 
there are limited options to deal with this ‘RES Peak’ 
issue:  (i)  demand  response  (increasing  consumer 
demand at specific times), (ii) battery storage (cur-
rently  expensive;  car  battery  usage  will  be  crucial 
here [see below]), (iii) hydrogen, produced by elec-
trolysis  (currently  expensive,  even  using  very  low-
cost,  otherwise  curtailed  electricity),  (iv)  pumped 
hydro storage, and (v) curtailment.  

Leaving  aside  curtailment,  it  is  clear  that  all  the 
options aside from demand response (which will be 
limited, as it is difficult to increase energy demand, 
even  with  lower  prices),  pumped  storage,  and  EV 
daily  storage  (when  we  have  sufficient  EVs  and 
appropriate regulatory framework – see below), will 
add very significant costs to the system, once peak 
RES becomes a regular, and important seasonal fea-
ture of EU electricity markets. 

Furthermore, investment signals are not yet in place 
to merit investment in hydrogen storage. These sig-
nals currently exist only to a limited extent regarding 
large-scale  battery  storage,  but  there  risks  to  be  a 
disincentive  to  be  the  first  investor  because  of  the 
expected  reductions  in  cost  in  this  technology. 
Therefore, there is a very real chance that there will 
be  a  shortage  of  cost-effective  storage  solutions  by 
the mid-to late 2020s. 

If storage solutions are not available, and are not suf-
ficiently  competitive,  then  the  most  cost-effective 
solution will be curtailment. However, if, already in 
the mid-to late 2020s, we see widespread curtailment 
at peak times, and peak times become an ever more 

4 ■  Robert Schuman Centre - Policy Brief ■ Issue 2019/16 ■ October 2019

commonplace event, the logic of further increasing 
the level of intermittent RES from that point onwards 
becomes an ever decreasingly valuable proposition.
Thus,  if  electricity  storage,  capable  of  dealing  with 
both  daily  and  seasonable  imbalances  and  suffi-
ciently competitive to the alternative of curtailment, 
is  not  in  place  by  the  mid-2020s  (and  thereafter 
increases to meet demand), growth in RES electricity 
will likely falter. 

This  is  an  issue  that  needs  to  be  addressed  today, 
and determined action to deal with this already now 
should be the first Energy Foundation for the next 
Commission.

Investment  in  R&D  to  bring  down  the  cost  of 
hydrogen and battery storage will be essential, guar-
anteeing  that  the  EU  is  at  the  forefront  of  techno-
logical development in this area so that we reap the 
industrial  benefits  from  our  leadership  in  dealing 
with the climate crisis. 

The use of storage from electric vehicles (EVs) will 
almost certainly be the cheapest manner to deal with 
daily  imbalances,  and  the  Commission  needs  to 
ensure that the necessary regulatory framework is in 
place for its rapid introduction and, where necessary, 
support this development through research funding 
(see below). 

Building  pumped  storage  is  one  of  the  most  long-
term cost-effective ways of providing balancing, but 
their  lag  times  and  amortization  periods  are  long. 
Furthermore, capital investment costs are high and 
revenue guarantee schemes (but probably not subsi-
dies) will therefore be needed to attract investment, 
and will need to be adapted to purpose, notably with 
respect  to  the  required  duration  of  support.  Sus-
tained efforts will be needed by the Commission and 
Member States to explain to citizens why new reser-
voirs are needed to meet the challenge of decarbon-
ising  our  energy  system  in  an  affordable  and  clean 
manner,  thereby  facilitating  the  relevant  planning 
procedures.

 We believe that the Commission should consider a 
specific initiative covering all of these issues. Without 
an appropriate regulatory and support framework in 
place in the near term, there is an evident risk that 
the  growth  in  renewable  energy  investment  will 
falter in the latter part of the next decade. Therefore, 
action is urgent now. 

In  order  to  ensure  that  concrete  RES  investments 
follow ambitious targets, the Commission has under-
lined in its recommendations on the National Energy 
and Climate Plans the need for concrete, transparent, 
stable  and  long-term  predictable  renewable  energy 
commitments and programs by the Member States. 
It is vital that this is delivered. 

However,  it  is  very  clear  that  we  will  not  achieve 
this new 2030 ambitious target using a ‘business as 
usual’  model,  Unless  the  EU  harnesses  some  of  its 
great renewable energy assets, and above all offshore 
wind, we fear that we will not meet our 2030 goals, 
nor lay the foundations for their continued growth 
to 2050. A piecemeal approach, relying on hundreds 
of thousands of small projects, will not get us there. 

Two of our most valuable renewable energy assets lie 
in the Far North Sea and the Baltic Sea. We have the 
capacity, in these areas, to produce a huge part of the 
energy required to meet our 2030 targets and then 
develop  them  further  to  provide  the  cheap  renew-
able  power  we  will  need  for  a  fully  decarbonised 
system in 2050.

But these projects will require determined action if 
we  want  them  to  be  achieved  cost  effectively. They 
require  an  integrated  approach,  bringing  together 
the  assets  of  different  Member  States  in  a  coordi-
nated,  collaborative  manner.  The  Commission  has 
already  demonstrated  that  an  integrated  approach 
to the infrastructure necessary to develop the North 
and Baltic seas – using a ‘hub and spoke’ type model 
–  will  save  EU  citizens  billions  of  Euros  compared 
to  a  project-by-project  approach.  It  now  needs  to 
deliver on this vision.

5 ■  Energy Priorities for the Von der Leyen Commission

Hundreds of billions of Euros will need to be invested 
in new infrastructure over a 20- to 30-year period, 
and  an  entirely  new  regulatory  approach  will  also 
need  to  be  developed.  Above  all,  a  new  integrated 
offshore electricity network will need to be designed 
on the basis of efficiency and inter-connectivity, not 
national boundaries.

These  are  the  renewable  energy  Apollo  Projects 
of  Europe’s  energy  future  and  their  achievement 
should be the second of the next Commission’s Six 
Energy  Foundations.  But  they  will  not  happen  on 
their own. 

To  deliver  them,  the  EU  will  collectively  need  to 
commit to delivering these projects, developing new 
forms  of  cooperation  between  the  Member  States 
and regulators concerned, and using EU infrastruc-
ture and innovation funding to de-risk the first steps 
towards  the  achievement  of  these  integrated  pro-
jects. The best way to provide this framework is leg-
islation agreed at EU level, relevant to both the Far 
North Seas and the Baltic, as well as future meshed 
grid networks that we cannot predict today. In addi-
tion to strong political commitment to getting these 
projects done, funding through the CEF, the Cross-
Border Renewables fund, the ETS Innovation Fund 
and  research  funding,  combined  with  a  legislative 
framework dealing with the specific and novel chal-
lenges  faced  by  such  ‘hybrid’  projects  can  lay  the 
foundations for the rapid development of these pre-
cious European assets.

Equally, the EU’s long-term objectives with respect 
to  renewable  electricity  will  not  be  met  without 
additional onshore infrastructure. 

Spain  has  a  2030  RES  objective  of  42%  (including 
74% renewable electricity), and Portugal has a 47% 
RES target (including 82% renewable electricity). Yet 
Iberia’s  interconnection  level  with  France  is  one  of 
the EU’s lowest. Surely Iberia, with huge PV poten-
tial,  has  the  right  to  participate  in  Europe’s  future 
energy market? 

Equally,  it  will  be  essential  to  bring  the  renewable 
electricity from the North and Baltic seas to centres 
of  electricity  consumption,  and  provide  the  pos-
sibility for very large scale PV developments in the 
South  to  reach  demand  centres,  including  those  in 
the North. Whilst underground HVDC cables offer 
solutions, they are relatively expensive. Realistically, 
however,  they  will  be  an  equally  important  part  of 
the  EU’s  long-term  future,  and  investing  now  to 
start  the  interconnections  that  we  will  need  in  10 
to 20 year time – not least to lower the cost of this 
technology – must be one of the next Commission’s 
aims.  Ensuring  that  we  lay  the  foundations  for  a 
physical electricity grid designed for 2050 should 
be the third of the next Commission’s Six Energy 
Foundations.

Sector Coupling

In  our  opinion,  Sector  Coupling  represents  one  of 
the greatest challenges for the next Commission. If 
the  Commission  succeeds  in  creating  a  regulatory 
framework that truly ensures undistorted and trans-
parent  sector  coupling,  it  will  have  put  the  EU  on 
the path to a decarbonised and cost-effective energy 
future that will serve as a beacon for other countries 
to follow.

Sector  Coupling  in  a  decarbonised  energy  market 
means no more than a legal, regulatory and tax system 
whereby  all  energy  sources  (wind,  PV,  nuclear  for 
those countries that choose this option, natural gas 
with CCS…) and energy vectors (hydrogen, biofuels 
and gases…) compete with one another in an undis-
torted  manner  for  all  sources  of  energy  demand, 
taking  account  of  any  residual  carbon  content  and 
non-energy socially relevant considerations (such as 
air pollution, etc).

This  is  the  ‘holy  grail’  of  energy  policies,  as  it  will 
ensure  a  cost-optimal  approach,  establish  reli-
able energy and ETS prices and thus drive research 

6 ■  Robert Schuman Centre - Policy Brief ■ Issue 2019/16 ■ October 2019

and  development  into  the  most  promising  options 
moving forward.

The EU’s 2020 renewable energy targets have been an 
overall success. They created mass demand for wind 
and PV at a time when these technologies were far 
from competitive. Although Europe has paid renew-
able energy subsidies and increased electricity prices 
to achieve this, it has been a price worth paying. It has 
led to the industrialisation of wind and PV, driving 
research and economies of scale to the point where, 
correctly  situated  and  regulated,  wind  and  PV  are 
the cheapest sources of energy on the planet today. 

Without Europe’s bold vision and action, this would 
not have happened, and certainly not at the breath-
taking  speed  that  it  has.  Renewable  technologies 
would certainly not be seeing the exponential growth 
rates all across the world that we see today, even in 
countries hesitant to embrace action to deal with the 
climate crisis. European citizens should feel proud of 
what we have already achieved.

We support the 2030 renewable energy targets, but 
for different reasons than the one for which the 2020 
targets were needed. ‘Demand push’ through targets 
will have a limited effect in terms of further indus-
trialising production processes and bringing econo-
mies of scale, even if this should not be discounted. 
Rather, the 2030 targets are needed because the ETS 
is  not  able  today  to  fulfil  its  real  objective:  estab-
lishing  a  truly  effective  long-term  pricing  mecha-
nism  for  carbon  and  determining  which  energy 
source and vector should meet demand. 

The  ETS  does  not  cover  all  sectors,  and  does  not 
legally  guarantee  that  CO2  emissions  connected 
to the ETS system will be reduced to zero by 2050. 
Therefore,  it  does  not  establish  the  forward  prices 
necessary  to  push  investment  into  decarbonising 
the  electricity  system  through  the  shift  to  renew-
able electricity sufficiently quickly, nor justify invest-
ments today into the technologies and markets that 
we will need moving forwards (such as, for example, 
hydrogen technologies). 

7 ■  Energy Priorities for the Von der Leyen Commission

Furthermore,  current  ETS  prices  are  probably 
too  low  to  catalyse  the  level  of  investment  in  wind 
and PV, in the short term, that is physically neces-
sary to enable us to meet our 2050 goals, simply in 
terms  of  the  time,  planning  and  network  develop-
ment required to guarantee a high renewable share 
by 2050. Renewable electricity will without a doubt 
form the ‘backbone’ of our electricity system in 2050, 
meeting  the  ‘lion’s  share’  of  demand.  Thus,  at  least 
until 2030, the targets are needed to guarantee that 
the  renewable  energy  capacity  is  in  place  by  2030 
so that it can act as a ‘springboard’ that will enable 
us then to remove the remaining 60% of the carbon 
from  our  overall  energy  system  in  the  remaining 
twenty years. 

However, whilst the targets to 2030 make sense, this 
regulatory  driven  approach,  whereby  targets,  not 
markets,  decide  upon  the  EU’s  future  energy  mix, 
cannot be our long-term future. 

Already  by  2030  the  EU  will  have  an  average  of 
around 55% of its electricity from renewable sources, 
and  these  are  intermittent:  producing  a  lot  of  elec-
tricity when the wind blows and the sun shines, but 
much less so when it does not. As mentioned above, 
this  needs  balancing,  which  will  bring  important 
additional costs into the system.

Post  2030,  therefore,  we  will  need  the  market  to 
determine the correct energy balance for Europe. In 
the long-term, a target driven approach will not be 
able to determine the correct balance in our decar-
bonised energy mix between:

1.  higher  levels  of  renewable  electricity  and  bio-

mass; 

2.  nuclear  (for  those  countries  that  choose  to 

pursue this path);  

3.  natural gas combined with CCS; and 

4.  hydrogen  produced  from  renewable  electricity 
or natural gas (where the resultant CO2 is stored 
through CCS or pyrolysis)

Furthermore, a target-based approach will also not 
be able to determine the most cost-effective approach 
to balancing.

This  is  very  important.  Whilst  we  cannot  exclude 
the  need  for  further  renewable  energy  targets  in 
2040  if  the  ETS  price  remains  too  low  to  ensure 
the  continued  development  of  the  ’springboard  to 
2050’  mentioned  above,  as  a  matter  of  principle,  if 
we take a regulatory approach to this rather than let-
ting the market decide the correct long-term balance 
between  renewable  electricity  and  other  net  zero-
carbon  energy  sources  and  vectors,  we  will  stifle 
innovation and increase cost.

Establishing  an  effective  sector  coupling  approach 
is therefore vital; it will need to be the basis of our 
future energy economy. 

However,  this  is  a  huge  challenge.  It  will  require  a 
wholesale rethink of our approach to energy regula-
tion and taxation. It is not correct to think that sector 
coupling simply means removing obvious regulatory 
barriers to hydrogen competing with electricity, and 
EV  and  battery  storage  vs  other  mechanisms,  and 
dealing with issues such as unbundling of hydrogen 
networks, important though these issues are.

It means ensuring an undistorted level playing field 
between these different technologies. 

It  will  require  a  major  reform  of  regulation  with 
respect to the manner that progressively decarbon-
ised gas competes with renewable energy; this is dis-
cussed below, under ‘Gas Decarbonisaion’. 

However,  sector  coupling  goes  far  beyond  this. 
Not least it requires rethinking our tax system, and 
we  applaud  the  intention  to  revisit  the  Energy  Tax 
Directive. This change will not be simple under cur-
rent  EU  voting  rules  on  tax,  but  a  medium  term 
phased  approach,  whereby  Member  States  agree  to 
gradually  evolve  energy  taxes  towards  a  non-dis-
criminatory  ‘sector  coupling  based’  system  should 
be feasible. This could happen over a 15-year period 
for example, giving ample time to take the difficult 

political  decisions  needed  to  shift  tax  patterns  in  a 
manner that would be imperceptible to citizens and 
directed towards guaranteeing fair energy prices for 
citizens and increasing our competitiveness.

This revision will have to address some fundamental 
issues. For example, we will see electric self-driving 
cars booming in the coming years. Electricity used 
in  EVs  is  typically  taxed  less  than  petrol  or  diesel. 
Taxi  drivers  pay  taxes,  the  software  in  self-driving 
cars do not. Electricity typically attracts both envi-
ronmental and social charges, other energy sources 
often  do  not.  The  necessary  reorientation  of  taxes 
and revenues will require difficult political choices, 
but this change is a fundamental requirement of an 
efficient decarbonised energy system. 

We  therefore  encourage  the  Commission  to  view 
Sector Coupling as fourth of the six Energy Foun-
dations of the next Commission and, at least, start 
the  process  that  will  get  us,  by  2030,  to  a  non-dis-
torted and transparent energy system that will stand 
the test of time and drive an efficient energy market 
of the future. 

This will ensure a competitive market, drive innova-
tion  and  set  a  model  for  the  rest  of  the  world.  We 
believe  that  sector  coupling  will  drive  innovation 
in balancing and coupling technologies that we can 
only imagine today, harnessing the storage power of 
car batteries and homes. When the EU takes leader-
ship of this, it will create a driver for export services.

The  ETS  is  the  obvious  mechanism  to  drive  this 
change, and the Commission will have to see how to 
let it fulfil its full potential.

The imposition of carbon border taxes requires care, 
as they can lead to a loss of competitiveness in down-
stream sectors. For example, if carbon border taxes 
on steel lead to increased EU steel prices, the com-
petitiveness of our car industry can suffer. However, 
a willingness to protect our companies from unfair 
competition  from  countries  not  willing  to  address 
the  climate  challenge  is  a  valuable  tool  that  can  be 

8 ■  Robert Schuman Centre - Policy Brief ■ Issue 2019/16 ■ October 2019

part of the solution in moving progressively towards 
a truly effective ETS.

The Digital Energy Economy

The EU’s energy market will have to look very dif-
ferent by 2030, yet alone 2050. Electric vehicles and 
batteries in houses will be increasing in importance, 
and this can make a huge contribution in developing 
a cheap and efficient approach to balancing the elec-
tricity network, by using this storage capacity to help 
balance intermittent renewables. 

The electric vehicle (EV) fleet in Europe has grown 
fast  over  the  last  5  years,  with  compound  average 
growth rates of around 80% from 2012–2017. With 
the  new  EU  targets  for  RES  in  transport,  we  can 
expect these growth rates to continue.

On this basis, there is every expectation that within 
a relatively short period, if the legal, regulatory and 
financial mechanisms are in place, the use of EV bat-
tery storage, both from batteries installed in vehicles 
and ‘second life’ batteries, can resolve a very signifi-
cant part of the EU’s daily balancing needs in a highly 
cost-effective  manner,  and  one  in  which  citizens 
participate  and  benefit.  EV  batteries,  together  with 
those installed in homes and offices for example, can 
be used to balance consumption and supply in indi-
vidual houses with PV panels, but more importantly, 
collectively, can be used to balance the grid.

Indeed, the ‘Smart Charging’ of EV batteries can help 
ensure  a  positive  experience  for  EV  drivers  (who 
have  their  EV  battery  charged  at  the  time  needed) 
and, at the same time, help to lower the energy tran-
sition cost for society.

However,  delivering  such  a  system  in  practice  is  a 
regulatory and technical challenge. Not least because 
it  will  require  data  systems  that  involve  potentially 
hundreds  of  millions  of  balancing  actors  that  will 
need to be fed into real time balancing systems at the 
DSO  level,  together  with  payment  and  monitoring 
systems.  

At present, several regulatory barriers exist for ‘smart 
charging’ in terms of missing regulation, regulation 
that prevents (or discriminates) against EV storage, 
grid  charges  that  hinder  the  installation  of  high 
capacity  charging  points  and  tax  barriers.  Further-
more, regulation differs between EU Member states 
whereas homogeneity in regulation lowers the costs 
for companies to work cross-border.

Equally,  the  smart  meters  that  we  are  installing  in 
homes enable us to revolutionise the ability of every 
citizen  to  participate  in  our  decarbonised  energy 
system of tomorrow. Citizens will develop new forms 
of participating, from being producers, to suppliers 
of flexibility services, to joining energy communities 
that club together to invest in windmills or PV parks. 

As already mentioned, balancing the electricity grid 
will be one of the greatest challenges in developing a 
cost-effective decarbonised electricity system. To do 
this we will need to harness the most important forms 
of  cheap  balancing;  those  that  use  existing  assets. 
Thus, using car batteries for electricity storage on a 
real-time basis, and IT systems to manage demand 
in industry and homes and reward flexibility whilst 
maintaining convenience, will be essential. 

The  EU’s  leadership  of  renewable  electricity  gives 
us  a  unique  chance  to  develop  the  IT  systems  and 
mechanisms  that  will  become  the  future  global 
standard.  Whilst  this  may  seem  to  be  a  challenge 
for  tomorrow,  the  Commission  needs  to  lead  this 
today,  ensuring  that  the  existing  electricity  regula-
tory framework not only permits such systems, but 
actually encourages them. 

These new regulatory approaches will need to be in 
place already by the mid-2020s to limit the increasing 
cost of dealing with peak RES. Where necessary, the 
Commission  needs  to  use  its  R&D  and  Innovation 
funds to drive forward the necessary innovation and 
structures  that  will  be  required.  Accelerating  the 
development  of  the  digital  energy  market  is  the 
proposed fifth of the Six Energy Foundations.

9 ■  Energy Priorities for the Von der Leyen Commission

We  therefore  propose  that  the  next  Commission 
adopts a specific package of measures ensuring that 
the regulatory framework is rapidly in place to ensure 
that the digital economy – and in this respect the role 
of EVs in particular – can make their full contribu-
tion to the EU’s decarbonised energy market. 

The Hydrogen Economy

There is no longer any academic debate on whether 
hydrogen  will  form  part  of  the  EU’s  decarbonised 
energy mix. 

Electricity  is  too  expensive  an  option  for  certain 
energy  intensive  industrial  processes  and  looks  ill 
adapted to long-haul transport. Hydrogen will need 
to play a role here. Depending on cost, and the avail-
ability  of  less  expensive  options,  it  is  equally  likely 
to play some role in storing peak RES electricity on 
a  seasonal  basis.  Furthermore,  it  is  likely  to  play  a 
role  in  heating  buildings  (as  a  complement  to  heat 
pumps)  and,  more  widely,  in  transport.  Lastly,  and 
again  depending  on  its  cost  compared  to  available 
alternatives, it may be required as part of the decar-
bonised  electricity  mix  as  a  complement  to  RES 
electricity.  Finally,  it  may  be  simply  impossible  to 
construct  the  electricity  infrastructure  that  would 
be needed for us to source almost all of our energy 
requirements from renewable electricity.

As  explained  above,  it  is  the  market  that  will  ulti-
mately need to determine the future EU energy bal-
ance between, for example, RES electricity, biomass, 
nuclear and hydrogen, achieved through sector cou-
pling. But at present, there is a ‘hydrogen investment 
paradox’. 

Whilst it is clear that the EU will need a great deal 
of  decarbonised  carbon  by  2050,  there  is  currently 
no investment case to invest in decarbonised or low-
carbon hydrogen via electrolysis (aside perhaps for 
RES peaking), steam methane reforming combined 
with CCS, nor pyrolysis (converting natural gas into 
hydrogen and CO2 in solid carbon that can be used 

in industrial processes). However, we urgently need 
to  invest  in  hydrogen  at  industrial  scale  to  bring 
down  the  cost  of  decarbonised  hydrogen,  as  today 
it is very expensive and its widespread use in the EU 
energy system would raise prices to an unacceptable 
level compared to competitors located in countries 
failing to deal with the climate crisis.

On the other hand, it will need to form part of any 
decarbonised  energy  system.  Therefore,  if  the  EU 
can  lead  the  way  in  getting  costs  down  through 
industrialisation,  and  take  leadership  of  this  future 
global industry, it can have profound long-term ben-
efits for the EU.

Thus,  creating  a  regulatory  environment  that  ena-
bles  hydrogen  to  compete  equally  on  the  market, 
establishing standards and guarantees of origin, and 
investing heavily in research and development rep-
resents the final of the Six Energy Foundations.

The next Commission will therefore need to provide 
the regulatory framework and create the investment 
conditions  necessary  to  enable  the  decarbonised 
hydrogen market to emerge and grow, much as it did 
with renewable electricity. This will need to cover a 
myriad of different issues to provide a strong long-
term framework, and the foundations for sector cou-
pling to work effectively.

It will need to cover Guarantees of Origin that dem-
onstrate  the  CO2  content  of  any  gas,  unbundling 
rules  regarding  the  hydrogen  network  that  will 
emerge  from  the  existing  gas  grid,  and  gas  stand-
ardisation issues to enable the grid to adapt to dif-
ferent  forms  of  hydrogen.  Equally,  it  will  need  to 
set  a  framework  whereby  all  forms  of  low-carbon 
hydrogen,  and  later  only  decarbonised  hydrogen, 
can compete on a level-playing field.

Above all, it will require a commitment of EU research 
and  innovation  funding  to  drive  down  the  cost  of 
hydrogen  production  at  scale.  This  needs  to  cover 
CCS  but  should  equally  focus  on  pyrolysis,  which 
is an emerging and very promising technology, pro-

10 ■  Robert Schuman Centre - Policy Brief ■ Issue 2019/16 ■ October 2019

ducing  the  valuable  industrial  by-product  of  solid 
graphite. Under the pyrolysis method, hydrogen can 
be produced close to hydrogen demand where CCS 
is  unavailable.  Given  public  reluctance  to  storing 
CO2 on land, pyrolysis looks particularly important 
for the EU’s energy future. 

Although  the  market  must  decide  which  form  of 
decarbonised hydrogen is the most competitive, the 
EU  needs  to  invest  now,  and  heavily,  in  ensuring 
that costs decline rapidly. Once again, if the EU does 
not do this, then who else will? Furthermore, in the 
long-term, there is every likelihood that this invest-
ment will repay itself many times over.

Lastly,  the  EU  needs  to  decide  whether  we  should 
already  push  demand  for  hydrogen,  giving  a  tech-
nology pull to work hand-in-hand with the research 
funding push. This could be done by legislating for 
minimum levels of hydrogen to be blended into nat-
ural  gas,  through  national  hydrogen  targets  in  the 
context of the energy Governance mechanism, or by 
taxing  grey  hydrogen  in  combination  with  carbon 
border  taxes.  Whilst  we  agree  that  these  represent 
interesting options, their potential economic effects 
need to be considered carefully.

11 ■  Energy Priorities for the Von der Leyen Commission

Florence School of Regulation
Robert Schuman Centre  
for Advanced Studies

European University Institute
Via Boccaccio, 121
50133 Florence
Italy 

Contact:
email: fsr@eui.eu  website: fsr.eui.eu

Robert Schuman Centre for Advanced Studies
The Robert Schuman Centre for Advanced Studies, created in 1992 and directed by Professor Brigid Laffan, aims to develop 
inter-disciplinary and comparative research on the major issues facing the process of European integration, European socie-
ties and Europe’s place in 21st century global politics. The Centre is home to a large post-doctoral programme and hosts major 
research programmes, projects and data sets, in addition to a range of working groups and ad hoc initiatives. The research 
agenda is organised around a set of core themes and is continuously evolving, reflecting the changing agenda of European inte-
gration, the expanding membership of the European Union, developments in Europe’s neighbourhood and the wider world.

The Florence School of Regulation 
The Florence School of Regulation (FSR) was founded in 2004 as a partnership between the Council of the European Energy 
Regulators (CEER) and the European University Institute (EUI), and it works closely with the European Commission. The 
Florence School of Regulation, dealing with the main network industries, has developed a strong core of general regulatory 
topics and concepts as well as inter-sectoral discussion of regulatory practices and policies.

Complete information on our activities can be found online at: fsr.eui.eu

12 ■  Robert Schuman Centre - Policy Brief ■ Issue 2019/16 ■ October 2019

Content © Christopher Jones, Andris Piebalgs, Jean-Michel Glachant© European University Institute, 2019Views expressed in this publication reflect the opinion of individual authors and not those of the European University InstituteQM-AX-19-016-EN-Ndoi:10.2870/734901ISBN:978-92-9084-737-3ISSN:2467-4540