New government regulations are often at the start of pivotal changes for a company, either as a trigger for new business opportunities or as an underlying force that pushes it to adapt to the tangible reality. Without a doubt, it is better to be proactive to understand the regulatory scene for continued positive results within the organization.
Currently, a regulatory uproar is taking place within the European Union (EU) energy sector poised to bring major changes by 2020 and beyond. Colloquially known as “Winter Package” but officially named the “Clean Energy for All Europeans” (CEfAE) package, it was introduced by the European Commission (EC) on November 2016. Facing both growing economies and the need for an imperative transition towards clean energy, the CEfAE is the EC’s latest shot to remain competitive in the current and ever changing landscape of energy geopolitics.
At Greenfish, we believe it is important for your company to be ahead of these upcoming energy regulations and understand the changes they will trigger. That’s why we have chosen to dedicate a series of white papers analyzing the implications of the CEfAE package. Nonetheless, representing several hundred pages of policy documents and communication, the CEfAE is quite a hefty legislation. What can be understood in this vast field of energy information?
This inaugural paper will play the role of an appetizer for this gargantuan topic. Hopefully, it will trigger your appetite for the numerous opportunities the package represents by aiming at clarifying the context, timeline, and content of these wide-reaching proposals.
The CEfAE: a strategic priority
As one of the ten main political priorities initiated by the EC under the Juncker presidency, the Energy Union brought momentum to the negotiation table as progress toward a climate-safe EU. This project that was created in 2015 introduces a general framework strategy and a global vision for all the Member States, with concrete objectives to reform the ageing European energy sector. A strongly bonded Europe on energy will resonate within an ecosystem of other European priorities such as the Investment Plan or the Digital Single Market, shown in Figure 1 below.
Figure 1 – Interconnexion between the Energy Union and other priorities of the EC
At the Energy Union’s core, the founding dimensions are:
- Security, solidarity and trust: a recurrent dialogue between member states to provide the security of energy sources and its diversity, which are geopolitically and economically crucial;
- A fully integrated internal energy market: building and reforming the appropriate infrastructure and legislation to allow energy flow freely from one state to another;
- Energy efficiency: reducing a country’s energy intensity creates job growth, reduces emissions, and dependence;
- Climate action: by ratifying the Paris Agreement, Member States work to strengthen carbon policies such as the European carbon market (EU-ETS), national targets, low-emission mobility regulation, etc.
- Research innovation and competitivity: providing adequate funds and regulation for the emergence of technological breakthroughs with a low carbon focus
Still in its early stage, the Energy Union is steadily evolving over the years. It publishes an annual status update to communicate the progress on its objectives, recommended for our courageous readers.
The CEfAE: the basics
The CEfAE package is the legislative cornerstone to implement the Energy Union vision. Aimed at providing 177 billion euros per year of public and private investment for the post 2020 period, it will have far-reaching implications on many sectors. Indeed, it covers a range of topics from energy efficiency to leadership in renewables via consumer empowerment, internal energy markets, or cooperation between national energy regulators. Accordingly, with the large scope of the proposals, there has been an increasing number of critical reactions in the past months. Heated discussion on clarifying grey areas of the package include:
- the increase of the energy efficiency targets from 27% to a binding 30% by 2030,
- the phasing out of coal subsidies,
- a 15% target by 2030 for better electrical interconnection between countries,
- the scrapping of priority dispatch on the grid for new renewable sources concerning certain member states and full participation of renewable energy sources to the wholesale market,
- the push to shift from centralized to decentralized electricity systems
- the enhancement of the consumer’s rights and options on energy markets.
To reform and create uniform inter-national energy systems and strategies is complex. The package of 8 texts is a well-chosen balance of 4 regulations (immediately enforceable as law in each Member State) and 4 directives (needs to be transposed into national law) to navigate inter-country negotiations the best way possible. In between the lines, each main topic is present within all texts of the package, making it difficult to treat a text as just one topic.
The CEfAE: the envisioned timeline
Introduced by the EC a little less than a year ago, the CEfAE package will follow the regular EU parliamentary process (see Figure 2 below). The end goal? Have the texts enter into force at the end of the first quarter of 2019. Thus, the negotiation process has just begun before any obligations affect the Members States. For each regulation or directive (for example the Energy Efficiency Directive), the Parliament and the Council of the EU will spend 2017 to formulate their opinions on these texts internally. As of today, discussions within both the Parliament and the Council are progressing. Draft reports were published on all legislative documents (8 texts) at the Parliament. In addition, the Member States’ Energy Ministers who, are part of the EU Council, agreed on a general approach on the Energy Efficiency and Energy Performance In Buildings directives. 2018 will be the year that the so-called trilogue between the Council of the EU, Parliament, and Commission will occur to negotiate the final scope of each text.
Figure 2 – Parliamentary process of the legislations of the CEfAE package
That said, unforeseen developments can still be expected for such a mammoth institutional process, probably on both the content and timeframe. Numerous assertive interests will involve close examination of how the negotiation unfolds in the coming months. It is pivotal for companies to grasp this developing energy context to prepare their strategic operations for the impending political changes! With these white papers, Greenfish will pave the way for your understanding on this hot topic. Will the time constraint push politicians to dilute the overall package ambitions or will it allow for the emergence of new EU energy pioneers? Stay tuned as we will look at how this package is met by politicians and businesses alike, specifically on the upcoming views on key texts such as the Renewable Energy Directive or the Electricity Market Regulation.
Toutia Daryoush – Junior Environmental Consultant at Greenfish
Quentin Lancrenon – Project Analyst at Greenfish
Nassim Daoudi – Managing Director at Greenfish