INSIGHT: EU identifies 2020 energy policy goals

12 November 2010 18:05  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS)--The EU will need to invest €1,000bn ($1,370bn) over the next 10 years to create a single European energy market, reduce emissions and secure its energy supplies, Energy Commissioner Gunther Oettinger said this week.

“We urgently need far-reaching changes in energy production, use and supply,” the European Commission said in a policy document.

“The EU is on the threshold of an unprecedented period for energy policy,” it added, against the backdrop of the need for significant investment in the energy sector, carbon pricing and higher international energy prices.

In its Energy 2020 strategy, the Commission outlines the steps it believes member states need to take to build a sustainable energy future.

The document has been prepared ahead of the first EU summit on energy on 4 February next year. The Commission expects to turn these policy recommendations into concrete legislative proposals over the next 18 months.

The EU has to look outside its boundaries for so much of its energy  crude increasingly from widespread national oil producers, natural gas from Russia and deep-sea liquefied natural gas (LNG)  that it is increasingly influenced by geopolitical uncertainties.

“For oil and gas, rising import requirements and increasing demand from emerging and developing countries call for stronger mechanisms to secure new, diversified and safe supply routes,” the Commission said.

“The international market for oil supplies could become very tight before 2020,” it said, implying that EU consumers need to step up efforts to reduce oil demand.

The strategy is driven primarily by the region’s climate change control goals  and the aim to sharply reduce carbon dioxide emissions (by 20% by 2020) and produce 20% of its energy needs from renewables  but addresses the wider issues that pertain directly to that: energy supply, demand and conservation.

The strategy document sets out what the Commission calls initial policy decisions which will be needed to meet the EU’s 2020 energy goals. The “programme of action” will be modified as the EU moves towards its 2050 low-carbon economy objectives.

“First and foremost, the strategy underlines the need to rebalance energy actions in favour of a demand-driven policy, empowering consumers and decoupling economic growth from energy use,” the Commission says.

In particular, this means encouraging the transport and construction sectors to do more to help save energy and diversify away from renewables.

How the EU implements large pieces of its strategy is not necessarily apparent but the Commission says that beyond the Emissions Trading Scheme (its carbon trading system), the strategy “should help create market conditions which stimulate higher energy savings and more low-carbon investments, to exploit a wide range of centralised and distributed renewable energy as well as key technologies for energy storage and electro-mobility (notably electric vehicles and public transport)”.

This means that taxation and other policy instruments will be “fully exploited” to bring about change.

Public authorities have to lead by example, the Commission said, by pushing for greater energy conservation in buildings and in transport. The EU’s “energy efficiency plan” will be released in early 2011, with regulatory proposals expected over the course of the year.

As far as electricity is concerned, investments should lead to nearly two-thirds of total supply from low-carbon sources by the early 2020s compared with 45% today, the Commission said.

It added that energy prices will be affected by the huge need for investment in the energy sector, as well as carbon pricing and higher international energy prices. 

“Competitiveness, supply security and climate objectives will be undermined unless electricity grids are upgraded, obsolete plants are replaced by competitive and cleaner alternatives and energy is used more efficiently throughout the whole energy chain,” it said.

Oettinger has said that Europe will need to invest in smart grids to link offshore wind farms in the North Sea, solar plants in the south and existing hydroelectric dams to households.

Research and development investment should be directed towards more effective electricity storage on a large scale and for vehicles.

A “smart cities” innovation partnership project is due to be launched in early 2011 to help unlock local potential for energy saving and more renewables use.

A soon-to-be-launched  €9bn “industrial bioenergy initiative” is designed to speed the uptake of second-generation biofuels.

($1 = €0.73)

Visit ICIS Heren for more on Europe’s gas, electricity and carbon markets and on global LNG
Read Doris de Guzman’s Green Chemicals blog
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By: Nigel Davis
+44 20 8652 3214

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