EU Energy Policy & the Energy Union: achieving a level European playing field and economies of scale through a common, liberalized and integrated market

© Didier Doceux/Fotolia

In February 2015, the European Commission announced its proposal for the creation of an Energy Union built on the five dimensions of: energy security, solidarity, and trust; a fully integrated European energy market; energy efficiency; decarbonization; and research, innovation, and competitiveness. BDI supports this development and these fundamental aims, and looks forward to concrete action in 2016, which has been labeled the ‘Year of Delivery’ by EU Vice President Maros Sefcovic.

The Energy Union, still in its nascent stages, includes steps to diversify supply sources and routes, increase the interconnections between EU member states, further integrate electricity markets and deepen the EU energy market. These are all worthy goals that the BDI and German industry have and will continue to support and contribute to. In particular, BDI hopes these measures can help prove that a sustainable energy and climate policy and a healthy industry are compatible and can co-exist.

 

German Industry feels that the Energy Union is a step in the right direction towards achieving three important goals of EU energy policy: security of supply, sustainability, and competitiveness.

 

When it comes to security of supply, leveraging our resources and increasing the connections and deepening integration within the EU market will go a long way towards improving supply security. Currently, the EU relies on imports to meet more than half of its energy needs at a cost of more than €1 billion per day, making it the largest energy importer in the world. The EU’s Third Energy Package was a step in the right direction in this regard, helping to diversify energy sources and transport routes as well as to make greater use of domestic energy resources.

 

The BDI agrees with the Commission that diversification is an important component of supply security and joint approaches can improve the resiliency of the EU, especially in instances of supply shortages or disruptions. However, we maintain that all proposals to improve energy security should not infringe on the underlying principles of a market economy and free entrepreneurship. Furthermore, when it comes to transparency in negotiating supply contracts, we believe that this transparency should remain voluntary.

 

In terms of sustainability, renewing and improving the EU Emissions Trading System (ETS) is the appropriate mechanism to ensure our shared EU climate goals are met. The BDI supports the recognition of the ETS as an important tool under the Energy Union framework- German Industry also agrees with the sentiments expressed in the November 2015 State of the Energy Union that following the Agreement in Paris, ‘all countries need to turn their commitments into concrete policy actions.’

 

In particular, BDI appreciates the inclusion of energy efficiency as a tool to mitigate demand as energy efficiency is an integral component to the achievement of our energy and climate objectives. However, we hope that efficiency measures will be targeted to areas where the largest gains can be made at the lowest costs, to achieve the largest efficiency improvements per Euro.

 

When it comes to competitiveness, more integration will not only leverage resources and ensure supply at the lowest cost, but also establish a more level playing field for all businesses across Europe. The BDI supports the goals of the Energy Union, namely to ‘ensure sustainable, affordable and competitive energy for all citizens and enterprises.’ Efforts to achieve an integrated market in Europe will improve competitiveness and make it easier to reach our climate goals at the lowest cost, and improve the cost-effectiveness of the Energiewende.

 

However, such an outcome is not guaranteed. The Energy Union must not become just another layer of complexity and bureaucracy for businesses to navigate. German energy policy should be in accordance with EU rules and objectives, while businesses should not be subject to duplicative rules and overlapping regulation. Furthermore, the market should dictate the appropriate energy mix and market-based mechanisms and instruments should remain the preferred method of choice for achieving energy and climate policy objectives.

 

Finally, while the BDI praises the central role that a single European energy market plays in the Energy Union strategy, it also emphasizes that predictability is needed to incentivize the high level of investment required to achieve this goal. We take note of the strong progress Germany has made in many of the areas under the Energy Union, and point out that progress with respect to further integration of the European market is crucial to continue on this path.