European Energy Union: A Vision That Still Requires Implementation

The European Commission unveiled its Energy Union package on Wednesday, announcing that the EU will reduce its dependence on fossil fuels, putting forward a regional approach to energy issues through stronger flows of energy across the continent. This strategy also envisages an attempt to broaden energy policy, solidarity, and powers on a European level.  

“We will come with new legislation to strengthen the European regulatory framework, a necessity if we want to continue to increase cross-border energy flows” Vice-President Maroš Šefčovič said during his speech at the European Parliament.

There are two sources of complexities and doubts arising in this context: the package needs actual proposals, and it also indicates a stronger role of the European Commission in member states’ negotiations with third countries for Intergovernmental Agreements. That is why, to strike a balance of the Energy Union is almost impossible. Much has to do with the next 12 months - the legislative proposals of Brussels, and the reactions of local governments to reduced powers in the energy debate.   

In this sense, the work on the Energy Union, which directly involved 14 different commissioners, is a first (well received) indication of the principles, but the implementation will play an even bigger role. 

FIRST STUMBLING BLOCK: MEMBER STATES’ ACCEPTANCE 

Several member states are questioning the role of the European Union, and their reactions to reduced decision-making powers will have a key effect on how the Energy Union will look like. What is undeniable is that the European Commission is trying to enlarge its competencies, and avoid a repatriation of power on a national level.   

‘Compliance checks for Intergovernmental Agreements (IGAs) are currently carried out after a Member State and a non-EU country have concluded an agreement. In future, the Commission should be informed about the negotiation of intergovernmental agreements from an early stage, so that a better ex ante assessment of IGAs' compatibility with in particular internal market rules and security of supply criteria is ensured’ reads a document released by the European Commission. 

Also in Šefčovič’s speech, it was clear that Brussels will try to push for a stricter enforcement of existing EU law.

“We will therefore come forward with a proposal that will ensure that intergovernmental gas contracts fully comply with EU law, and we will increase transparency in commercial contracts” the Commissioner said on Wednesday.

SECOND STUMBLING BLOCK: IMPLEMENTATION PROCESS

Discussing the Energy Union with energy experts, it seems clear that it will take time to come up with an assessment of the Energy Union. Forecasts vary between 9 months and 2/3 years. 

Indeed, as it is now, the Energy Union is just a vision.  

‘Within these dimensions, the action plan annexed to the framework strategy presents specific measures that will be prepared and implemented over the next years. This action plan will be followed-up and reviewed as time progresses to ensure that it keeps responding to evolving challenges and new developments’ the European Commission said.  

European authorities said they will work on the revision of the Security of Gas Supply regulation, further measures to enhance market integration, enhanced rules for cross-border energy trade, a review of the Energy Efficiency and Energy Performance of Buildings Directives, new rules to integrate renewable production into the market, a legislation to reform the EU ETS by introducing a market stability reserve (MSR).

‘The co-legislators are currently negotiating MSR design elements which will determine the pace of absorbing surplus allowances into the MSR’ wrote the Commission, adding that there will also be an increase in the linear reduction factor (the rate at which the emissions cap is tightened from year to year) from 1.74 % to 2.2 % as of 2021.

CLEAR POINT: STRONGER GOVERNANCE - BUT HOW? 

The European Commission made it clear. A new governance system will be launched.

‘The governance should secure the attainment of the objectives of the Energy Union, notably the implementation of the internal energy market and the delivery of the 2030 Framework for Climate and Energy. It should also provide long-term investor certainty.’ 

Brussels called for a simplification of existing planning and reporting, and a simultaneous increase in cooperation between Member States. Countries will also be called to closely cooperate with the Commission.

‘The Commission will publish an annual State of the Energy Union in order to address the key issues, produce the necessary deliverables and steer the policy debate.’

Meanwhile, as already made clear earlier this months by leaked documents, the Commission will propose a European energy regulator. 

‘The Commission considers that EU-wide regulation of the single market should be strengthened through a significant reinforcement of the powers and independence of ACER.’

SO WHAT? LET'S THE GAME BEGIN!

The cards are on the table, but the game has yet to start. Further discussion on the Energy Union will put flesh on the bones. At the moment, nothing is certain. The only clear message is that the European Commission wants to become stronger, and the European Union is the first test in this direction. Despite hailing it the biggest energy change for more than half a century, EC's shake-up is still down the road.  

Proceeding with its plans, though, Brussels has to keep in mind that problems are around the corner. The statement of Hungary’s Viktor Orbán on Russia-led Turkish Stream on Tuesday is an example. Moscow’s threat this week that gas disruptions to Ukraine may impact Europe and the eventuality of this event, could be another serious reality-check.

Visions without facts remain flimsy imagination. Next months (or years) will tell the future of the Energy Union, and the European Union. 

Sergio Matalucci 

Sergio Matalucci is an Associate Partner at Natural Gas Europe. Follow him on Twitter: @SergioMatalucci