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Building the Energy Union

Aspen Energy Forum
Rome, 25/06/2015, International Workshop

The ongoing efforts to build a well functioning Energy Union in Europe should be seen in the context of major global changes related in various ways to the energy sector – possibly a whole new phase of globalization, featuring new actors, new forms of balance of power, new conflicts (actual or potential). The EU has recognized the complexity of the challenge and adopted a more comprehensive approach to energy issues: the very circumstance that there is a Commissioner with a double portfolio – climate action and energy – reflects this attempt to coordinate different policy areas.

Markets are becoming more diverse, with a growing role for renewable sources: this is affecting infrastructure requirements, energy intensive industries, but also households and individual consumers. A more decentralized energy system is emerging, which needs rapid adjustments by regulators and businesses. Even before new legislation is enacted, however, there has to be better implementation of existing legislation, and in this perspective the national action plans, in particular, need to be streamlined.

In any case, as suppliers and distribution networks change and evolve, policies must guarantee a predictable business and regulatory environment; in its absence, major investments will not be made.

Two main challenges have been emphasized: the constant risk that energy interdependence will be used as a political weapon by some of Europe’s suppliers (Russia is clearly a case in point), and the pressure of increased global competition on European producers (and workers). In such a context, the EU Commission and the member states need to balance partly conflicting targets, as evidenced for instance by the goal of a 20% share of European GDP for the manufacturing sector: close coordination between policy areas is essential to this end.

Among the priorities for Brussels there is a review of the ETS mechanism, the creation of a level playing field when in light of varying subsidies, and the construction of better connections across the continent. These objectives are especially relevant to electricity markets.

Regarding energy security, diversification is a strategic choice, and additional supplies will also have to be guaranteed. More specifically, it will be essential to overcome existing bottlenecks and inefficiencies in the sector of LNG. In all of the major scenarios that have been developed for the next few years, gas remains the key back-up source for renewables, thus playing a crucial role in the energy mix.

In general terms, energy efficiency is a “win-win” proposition – benefiting the industry as well as consumers at all levels – and yet important obstacles remain, such as in the field of energy-efficient buildings, where financing is still an unresolved issue.

Just as important as EU-wide initiatives are regional projects – provided they follow the agreed guidelines and criteria – because they can increase generation capacity and efficiency to the benefit of all member states, while linking some of them to non-EU states in the context of long-term partnerships.