Debate: State of the Energy Union
Date: WEDNESDAY, 24 NOVEMBER 2021
Speaker: Kadri Simson
Language: EN

Since our last report, we have made huge strides in implementing our clean energy agenda in policy and legislative terms. The EU adopted the European Climate Law in March, making the reduction of at least 55% of emissions and the goal of climate neutrality by 2050 legally binding.  In April, we presented the first delegated act on taxonomy. A few months later, in July, the Commission put forward an interconnected package of proposals to put Europe on the path to climate neutrality. This Fit for 55 package included a revision of the Renewable Energy and Energy Efficiency Directives to align them with our new and higher ambition.  It has been a year of progress. At the same time, this year’s report is being published against the background of a sharp spike in gas and electricity prices in the EU and also globally. This is a concern for citizens, industry and governments across the EU and raises questions about the future of our clean energy agenda.  To respond to them, in October the Commission presented a toolbox of short and longer-term measures to tackle the challenge. It is against this backdrop that we come to this year’s State of the Energy Union Report because this report and its annexes provide us with some important indications to assess the progress of the energy union across all its dimensions, but also to chart a response to today’s rising energy prices. Today, I would like to highlight four main messages coming from this report.  First, the report demonstrates that renewables markets have shown resilience through the pandemic. In 2020, renewables overtook fossil fuels for the first time as the EU’s main power source. The share of renewable energy sources in the overall EU energy mix is expected to have reached at least 22%. Overall investment in renewables grew substantially in the EU to EUR 48.8 billion euros in 2020, up from EUR 32.9 billion euros in 2019.  Increasing ambition and delivering on decarbonisation is also about achieving the existing 2020 target for renewables. The latest available data shows that the EU as a whole, and the majority of Member States individually, were on track to achieve these targets, thanks, partly, to the lowering of prices of key technologies such as wind and solar over the years.  This is good news, but it is not enough. We need to accelerate the deployment of renewables in the years to come. This means moving forward with a revised RED III proposal, but also tackling head—on the permitting and authorisation bottleneck. Next year, we will present ideas on how to facilitate the permitting process. A better administrative and business environment will be a key in getting more projects off the ground.  Second, soaring energy prices remind us that we remain too reliant on fossil fuels in the EU. This is confirmed by this year’s State of the Energy Union. Paradoxically in 2020, the EU level of dependency from fossil fuel imports is the highest since a decade. More work also needs to be done to phase out fossil fuel subsidies. Although these subsidies fell in 2020, this is more a reflection of decreased energy consumption overall rather than a new trend. Subsidies are a major impediment to a cost-efficient energy and climate transition and to a functioning energy market. They should be targeted to boost the uptake of new energy technologies to promote sustainable patterns of energy consumption and to lower energy bills.  Third, the report makes the benefits of market coupling clear. This is the most tangible example of the progress made in harmonising national rules on energy trading and system operation. Market coupling connects all Member States and creates a common EU trading platform for electricity. This is very important in the context of the current energy price spike.  A recent ACER report shows that those countries that are better interconnected and less dependent on fossil fuels have remained less vulnerable to energy price volatility. Therefore, market coupling is an antidote to this phenomenon we are currently experiencing. That’s why I will maintain the focus on market integration. Accomplishing market coupling in all timeframes across internal borders, including close to real—time balancing, would generate additional welfare benefits of more than EUR 1.5 billion per year. It would also reduce the need for backup fossil fuel power plants, thus saving significantly on greenhouse gas emissions.  Fourth, and finally, the State of the Energy Union is accompanied by a report on the competitiveness of the clean energy industry in Europe. The report shows that the EU remains at the forefront of clean energy research. At global level it has a greater share of green inventions in climate change mitigation technologies than other major economies. The EU is also well placed in terms of global market share in a number of established clean energy technologies such as wind, but global competition remains fierce. In solar PV, the EU is at the cutting edge in certain parts of the value chain, especially research and development, but we have a comparably small market share in manufacturing. Next year, we will present a solar strategy to help the domestic solar industry to grow and compete on the international scale. We also maintain our strong global position in hydrogen technology, storage and batteries. Each of these have major scaling-up potential in the years to come and represent a great opportunity for the EU. Yet the report clearly shows that we cannot be complacent or we will rapidly lose our position in this global scale. Increased private and public investments are needed for the EU to maintain its competitiveness and the Recovery Fund is an opportunity not to be wasted.  This report shows that we have come a long way in our progress towards a sustainable and competitive energy union, but it’s also a warning that more needs to be done. I will end my remarks here and look forward to hearing your views on how to make our energy union stronger.