10 commandments for European consistency on the road to 2050

Jean –Michel Glachant (Florence School)

CEDEC Congress in Brussels, 20 March 2012

Project Leader Manfred Hafner

Research Coordinator Leonardo Meeus

Research team Isabel Azevedo, Claudio Marcantonini, Jean-Michel Glachant

Project advisors Pantelis Capros, Christian von Hirschhausen

Intervention based on THINK policy research report:

Output

(consistent)… introduction… Consistency inside EC

2050 roadmaps by DG Climate, Move, and Energy

Consistency outside EC Collected evidence

2050 stakeholders visions: Eurelectric, EGAF, IEA, ECF, EREC-Greenpeace 2050 states strategies: Denmark, Finland, France, Germany, Ireland & UK

Consistency for a European path Our 10 recommendations for a consistent European path

“EU”: what consistency tools in today’s institutional context? “Energy policy” 6 key challenges: EE, GHG, RE, IEM, INFRA and R&D

“THINK Path”: 10 useful EU-interventions to guide member states’ first steps on the road towards 2050

4

DG Climate 2050 Roadmap

Targets for CO2 emissions’ reduction compared to 1990

80% within all sectors

88 to 91% within the building sector

DG Energy 2050 Roadmap

Targets for energy consumption reduction compared to 2005

32 to 40% among all sectors (p.e.)

40 to 50% within the building sector (f.e.)

EC consistency: 2050 roadmaps

Introduction

* Building sector stands for “Residential and Tertiary” sector

Presentation outline

1.Stakeholders visions

Same key 2050 policy challenges?

2.MemberStates strategies

Consistent 2050 approach from pioneer Member States already dealing with these challenges?

3.EU policy consistency

What are then “consistency adding” EU interventions in this 2050 context?

6 Policy Areas What are the key 2050 policy challenges?

Examples from the visions

Energy efficiency

Ambitious energy savings • Eurelectric: 20% more savings than baseline• ECF: 45% buildings emissions’ reduction due to EE• IEA: 30% of the emissions’reduction due to EE• EREC/Greenpeace: 40% more savings than baseline

GHG emissions Decarbonization of the electricity sector

• Eurelectric: highest electrification levels• IEA and EREC/Greenpeace: higher direct use of RES

Renewable energy

Ambitious renewable energy levels The use of RES in electricity generation ranges from • 30 (EGAF) to almost 100% (EREC/Greenpeace)• All inside the EU, except EREC/Greenpeace up to 60 GW

Energy infrastructure

Electricity grid adequacy (expansion and smartening of the grid)

• Eurelectric: 40% increase of interconnections• ECF: up to 90% increase of interconnection

Internal energy market

Electricity supply security (timely investments and system flexibility)

additional back-up capacity • ECF: 170 (40% RES) to 270 (80%RES) GW

R&D Technology development is a precondition for most of the above challenges

Commercial availability CCTS• Eurelectric: 2025; EGAF: 2030• IEA: 2015-2025; ECF: 2020

Presentation outline

1.Stakeholders visions

Same key 2050 policy challenges?

2.Member States strategies

Consistent 2050 approach from pioneer Member States already dealing with these challenges?

3.EU policy consistency

What are then “consistency adding” EU interventions in this 2050 context?

6 Policy Areas What are pioneer Member States doing? (Denmark, Finland, France, Germany, Ireland and UK)

Energy efficiency New opportunities for cooperation with shared focus on building sector, even though approaches are currently diverging

GHG emissions New risks for policy fragmentation regarding future generation technology portfolios, e.g. UK carbon floor price for electricity generation from 2013

Renewable energy New risks for policy fragmentation with diverging views on relative importance renewable energy and other low carbon technologies

Energy infrastructure New opportunities for cooperation in the development of electricity grids, and pioneering member states seem to be willing to further integrate their electricity transmission grids to enable their low-carbon energy strategies

Internal energy market New risk of market fragmentation with market reforms triggered by electricity supply concerns (UK & France)

R&D New opportunities for cooperation with shared view that it is important, even though approaches are currently diverging

Presentation outline

1.Stakeholders visions

Same key 2050 policy challenges?

2.Member States strategies

Consistent 2050 approach from pioneer Member States already dealing with these challenges?

3.EU policy consistency

What are then “consistency adding” EU interventions in this 2050 context?

1ST TYPE 2ND TYPE 3RD TYPE

Setting targets for member state action

Framing the choice of measures taken by member states

Creation of a EU-wide

instrument

Effort-sharing Harmonization Level playing field

EU consistency

EU role

EU policy tools

Three levels of involvement

EU consistency policy tools: Collected evidence policy tools 10 commandments

Area 1 -Energy Efficiency

FIRST type of EU consistency

SECOND type of EU consistency

THIRD type of EU consistency

Binding targets: Harmonization: EU-wide instrument:

Promising? - Transition cost sensitive to achievement of energy saving ambitions

- History of indicative targets being not achieved

- Increased risk of lock-in with “wrong” long life assets

- Not necessarily opportune to harmonize member state approaches due to local character of many of the energy saving measures

- But, having harmonized proven records that are comparable is important to promote spreading of good practices

- See THINK report on smart cities (topic 2)

How could it be done?

- Energy saving targets for 2020, and beyond- Overall and sector specific energy savings

- Harmonization of measuring and reporting tools for energy saving measures

- EU-good practices’ forum or register- EU-cities’ benchmarking

Area 2-GHG emissions

FIRST type of EU consistency

SECOND type of EU consistency

THIRD type of EU consistency

Binding targets: Harmonization: EU-wide instrument:

Promising? - Transition to 2050 requires long term steep decarbonisation, which requires a credible long term carbon price signal

- Already harmonized approach for the EU ETS applied to carbonized power sector

- A credible long term carbon price signal

How could it be done?

- Credible GHG reduction target beyond 2020

- More ambitious targets

- ETS pricing carbon for the power sector to be harmonized with renewable targets

- EU-carbon market repository, platform and authority for EU-ETS

- EU-carbon tax (for non-EU-ETS sectors)

Area 3-Renewable energy

FIRST type of EU consistency

SECOND type of EU consistency

THIRD type of EU consistency

Binding targets: Harmonization: EU-wide instrument:

Promising? - All scenarios project much more renewable energy

- With exceptions, the technologies will not all be cost competitive by 2020

- Integration process for renewable energy technologies

- Potential in non-EU countries, such as the Mediterranean

- Multi-lateral nature of these projects suggests to create a level playing field

How could it be done?

- Renewable energy target beyond 2020

- Minimum market conformity requirements for national support schemes

- EU-decision bodies of Mediterranean regulators, transmission companies and trade platforms

Area 4-Energy infrastructure

FIRST type of EU consistency

SECOND type of EU consistency

THIRD type of EU consistency

Binding targets: Harmonization: EU-wide instrument:

Promising? - All paths towards 2050 project big transmission expansion

- Each member state would have a minimum amount of border capacity

- Smart grids needed to deal with system integration challenges

- But, smart grids need smart regulation

- Fundamental problem of asymmetric costs and benefits

- Super grids and off-shore grids

How could it be done?

- Ambitious targets would need to be more sophisticated than the indicative Barcelona targets (import capacity)

- Mandating energy regulators to support the innovation process, and its Europeanization; to not only improving the cost efficiency of country grids

-EU infrastructure cost recovery instrument-EU CostBenef. Analysis- EU-grid planner

Area 5-Internal balancing energy market

FIRST type of EU consistency

SECOND type of EU consistency

THIRD type of EU consistency

Binding targets: Harmonization: EU-wide instrument:

Promising? - System flexibility is what keeps the lights on in a low carbon electricity system

- Ensuring enough balancing services available requires a shared effort in an EU internal balancing market

- All visions assume an EU internal balancing market so grid expansion reduces the need for back-up capacity

- Market redesign of some member states fuelled by national system specificities, but EU would avoid that supply security measures being only national in scope work against the EU transition process

How could it be done?

- Minimum targets for reservation of balancing services

- Regional Initiatives for balancing markets

- Minimum requirements for electricity supply security measures

- Balancing market codes

Area 6-EnergyTechnology

THIRD type of EU consistency

EU-wide instrument:

Promising?THINK report on R&D (topic 1):

The existing SET-Plan is “existing” industry focused and bottom up,

*could be complemented by a more top down approach that can prioritize projects coming from other industries (and other technologies)

**and also improves the balance between :

¤“early innovation” to create new options and

¤¤“later stage innovation” to push the most promising options into market

How could it be done?

Ten priority EU-interventions to add value to member states’ first steps on the road towards 2050

Type of EU involvement 1st 2nd 3rd

1) Make energy saving targets binding √

2) Mobilize cities towards a low carbon future √ √

3) Strengthen the carbon price signal √ √ √

4) Integrate renewable energy technologies into the internal electricity market √

5) Create a level playing field for renewable energy cooperation with non-EU countries

√

6) Harmonize the regulation of distribution and transmission grids √

7) Establish an EU infrastructure investment cost recovery instrument √

8) Create an internal balancing market √ √ √

9) Harmonize security of electricity supply mechanisms √

10) Complement the Strategic Energy Technology Plan (SET-Plan) √

…and follow the example of pioneering member states in tracking progress, i.e. monitoring investments and choices made by private

actors, as well as policy implementation by policy makers

Pioneering member state

Procedure to track progress to be able to adapt their policies on the road towards 2050

France French government will need to report on the status of the implementation of its 2050 policy on a yearly basis.

Germany Strategy foresees that the government will need to monitor and report on progress every three years.

UK Committee on Climate Change makes an annual progress report, and the government is also required to present regular reports on progress.

These reports have advocated stronger measures, such as the introduction of a carbon floor prices that was not part of the initial strategy.

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