Editorial - VGB PowerTech Journal 1-2/2016

Powering the Energy Union’s decarbonisation agenda

Decarbonisation is essential to guarantee the long-term sustainability of the global economy and Europe’s electricity sector is fully committed to leading this transition. Electrification of the transport and heating and cooling sectors is also vital in this regard. However, the real challenge is to create a holistic market design that delivers the technologies needed for a balanced low carbon energy mix, while being able to adapt to the evolving economics of power systems. The new market design, including a reformed and strengthened EU ETS, must provide a solid basis for sustainable investment in low carbon technologies, ensuring, in particular, a robust business model for such investments. Only the combination of an effectively reformed EU ETS and an improved EU electricity market design can lead to proper price signals from the relevant markets to drive investments in mature low carbon technologies, allowing decarbonisation to take place in a cost-effective manner.

The European power sector is currently undergoing one of the most transformative changes in its history: accelerated technological change, shifting consumer preferences, the application of ICT technology to link power generation and demand, as well as the evolving EU climate and energy policy agenda. These provide unprecedented challenges and important opportunities for the sector.

Meanwhile, in the midst of this energy transition, Europe needs to ensure secure, sustainable, affordable and competitive energy for all its citizens and businesses. The Energy Union project, based on its five mutually supportive dimensions (energy security, solidarity and trust; the internal energy market; energy efficiency as a contribution to the moderation of energy demand; decarbonisation of the economy; and research, innovation and competitiveness) is intended to address these challenges.

The European power sector sees immense potential in the Energy Union project and we fully support efforts to develop an ambitious, European approach to energy policy. This is an opportunity for the Member States to enhance the security of supply, cost competitiveness and emission reductions in ways which individual countries cannot achieve on their own. EU institutions and Member States should therefore work together to ensure that collective and national measures lead to the development of a decarbonised and fully competitive single market in energy.

The agreement reached last December at the COP21 UN Climate Change Conference in Paris should result in an ambitious and rules based climate change regime, which paves the way for a stable and predictable framework for policy and action. We are happy that the Paris Agreement provides a clear and unequivocal signal to government and investors to invest in low-carbon technology in line with the long-term decarbonisation objectives.

In this context, the power sector welcomes the Commission’s proposal to revise the EU ETS Directive. It puts the EU on course to take important steps on the path towards cost-effectively decarbonising the European economy. However, the success of the reformed EU ETS will depend on ensuring full consistency and coherence between the various elements and targets of the 2030 Climate and Energy Framework, as well as developing an adequate governance framework which enables the achievement of these objectives.

European policies and implementing instruments must therefore be designed in a way that does not undermine the overall economic efficiency and environmental effectiveness of the EU-ETS. Coherent and integrated policy instruments based on a well-functioning EU ETS will be crucial to achieve the EU’s GHG emission reduction targets on a level playing field and in the most cost-effective way.

As a global leader in decarbonisation, the European power sector is committed to decarbonising power supply by 2050. In 2014, 56 % of electricity generated in the EU came from low carbon sources. We see electricity on track to becoming a carbon neutral energy carrier and if used more widely to replace fossil fuels in transport, heating and cooling, more electricity can actually mean reductions in greenhouse gas (GHG) emissions and more energy efficiency.

To date, the European electricity industry has delivered the bulk of GHG emission reductions on the pathway towards a low-carbon European economy, these reductions coming primarily from the supply side. Looking forward, we see the electrification of the demand side sectors of the economy, which do not fall under the EU ETS, as being crucial on the path to decarbonisation.

The upcoming revision of the Effort Sharing Decision and the EU’s strategy for decarbonisation of transport and heating and cooling, provide an excellent opportunity to enhance the role of decarbonised electricity in achieving decarbonisation. We need stronger commitment to electrification to ensure that not only the electricity mix, but also important sectors such as heating, cooling and transport, will be decarbonised.