energising european recovery
Last year’s Winter Energy Package contains the seeds of two fundamental economic and political requirements needed for the EU to prosper: returning some ‘power to the people’, alongside European investment and network integration, write a number of energy experts.
Michael Grubb is professor of climate change policy at University College London; Simon Müller is an analyst at the International Energy Agency in Paris; Jean-Michel Glachant is the director of the Florence School of Regulation; and Karsten Neuhoff heads the climate policy department at DIW Berlin.
Energy is a backbone of economic development. The origin of the EU itself lies in the European Coal and Steel Community, an energy-based treaty that helped to power post-war reconstruction.
December’s Winter Package marks recognition that the energy challenge has changed fundamentally. Embodying the much-vaunted Energy Union, it is constructed around major challenges, which also offer profound opportunities.
The first opportunity lies in the way in which new technologies are revolutionising the potential role of energy consumers, and indeed could create a whole new class of ‘prosumers’. Farmers, retail chains and even households, particularly in rural areas, have new opportunities to be active participants in the energy system.
They can offer generation from localised renewables, and deliver flexibility, for example from automated management of thermal (think fridge and freezers) or electrical (think electric cars) storage. Industrial consumers could also make money from smart scheduling of industrial production or cheap on-site backup generation.
If trust is a problem (and in few sectors is trust in suppliers so low as in energy), and ‘take control’ is seen as an answer, then offering more consumer control over energy use and potentially generation is not a bad place to start.
The EU package offers basic standards, legislative frameworks and data protection systems required to underpin this. Becoming ‘prosumers’ could give hundreds of millions of people a bigger stake in the energy system, and also stem the sense that technology modernisation is leaving rural economies behind.
But the energy transition also demands huge investment, at a time when European economies are struggling with stagnation. Much of European energy infrastructure is aged and polluting, and dependent on fossil fuel imports.
Better networks could improve security and reduce costs. Dramatic reductions in the cost of solar and wind energy in particular (in addition to batteries) brings within reach two interrelated goals: the delivery of the Paris Agreement goals on climate change, and reducing European energy dependence in a world of increasingly febrile international relations just as the US is losing its strategic interest in Middle East oil security.
The Winter Package establishes a governance system to coax and coordinate member states towards the goals already agreed. The transition cannot be bankrolled by government expenditure or by imposing more costs on consumers, but neither is needed.
As many have noted, the paradox of modern finance is the huge pools of private capital which are earning next to nothing, indeed, some institutional investors are accepting negative interest rates for perceived safe havens, like German railway bonds.
This is effectively paying for infrastructure to hold their money. With such cheap capital, renewable energy and network infrastructure can make attractive destinations for investment in an energy transition with investment potentially exceeding €100 billion a year across Europe: enough to help inject some momentum into European economic recovery.
Programmes to improve Eastern Europe’s building efficiency and maybe infrastructure for electric vehicles would make the endeavour even bigger. And even more than modern railways, energy efficiency, and energy sources which once constructed will be very cheap to run, have every prospect of boosting long run productivity.
The key need is to establish investor confidence born of a clear commitment to building a consumer-oriented low carbon energy system fit for the 21st century. The Winter Package makes first promising steps into the direction.
The revised renewables directive includes an article on “Stability of financial support”, which is essential to attract cheap capital to the sector.
Effective reform of carbon pricing can underline the strategic direction for European energy (and raise finance). The financial framework in the package could further facilitate investment in particular against the background of the fragile finances of many southern European countries.
Those countries too would form the natural nucleus for a trans-Mediterranean investment programme to engage North Africa – countries with abundant clean energy resources just cables away, with a desperate need for productive investment which could also help to stem the tide of refugees.
Like the original coal and steel community, the key to stability is not markets, but investment with a common purpose.
A crucial factor in Europe’s malaise is that it has lost its sense of ambition and mission. Developing the energy industries and infrastructure for a 21st century energy system is an investment in all our futures, for which Europe is still best placed to lead.
And who knows, by bringing investment, purpose, and engagement, it might even save the Union itself.
eu risks missing climate goals without 'sustainable' biofuels, experts warn.
The European Commission’s proposal to gradually phase out “sustainable” first generation biofuels will prevent the EU from meeting its 2030 climate goals, experts claim.
In November last year, the European Commission presented its draft proposal to review the Renewable Energy Directive for the post-2020 period as part of a Clean Energy Package.
The executive proposed that biofuels should have a limited role in decarbonising the transport sector and should not receive public support after 2020.
The Commission’s plan is to reduce the contribution of conventional biofuels in transport from a maximum of 7% in 2021 to 3.8% in 2030, effectively bringing crop-based biofuels use to pre-2008 levels.
It also created an obligation to raise the share of other ‘low emissions fuels’ such as renewable electricity and advanced biofuels in transport to 6.8%.
The Commission was heavily criticised by industry. Ethanol producers accused the executive of being supportive of oil use in EU transport, while the biodiesel industry called the proposal “unacceptable”, predicting an increase of fossil fuels in transport due to a lack of availability of advanced biofuels.
Missing climate goals
Speaking at an event in the European Parliament on Tuesday (10 January) organised by the European renewable ethanol association, ePURE Secretary General Emmanuel Desplechin pointed out that the use of “sustainable conventional biofuels” such as ethanol made from corn, wheat, and sugar beets would help the EU meet its climate and energy goals for transport.
He, also, said that it could be a real “missed opportunity” for the EU.
“Instead of further encouraging the use of renewable low-carbon fuels, such as biofuels made in Europe from sustainably produced European feedstock, the Commission’s proposal is friendly to oil,” he noted.
The industry claims that ethanol produced in Europe has 64% GHG higher savings compared to petrol, which is equivalent to the annual GHG emissions of 4 million cars.
In apolicy paper, the industry calls the Commission’s proposal “counteractive” and says that it risks missing the EU 2030 climate and energy goals, leaving a shortfall of approximately 10% from what is needed.
Tory MEP Julie Girling [ECR], who hosted the event, expressed her concerns regarding the European Commission’s proposed policy framework.
“I worry about the confusion policy backdrop,” the British MEP noted, adding that EU lawmakers should focus on science.
“Renewable energy use in transport requires a serious and sensible grip on what can be achieved […] to change the policy rules for biofuels – not once, not twice, but three times – doesn’t strike me as a sensible way forward,” she emphasised.
Dr Paul Deane of the Environmental Research Institute, University College Cork, noted that transport was responsible for about 1/3 of the energy that we consume in Europe and about ¼ of our emissions.
“It’s the only sector that emissions are on increase across Europe and this is worrying,” he said, adding that a lot of member states have a lot of ground to cover and many others will not meet their binding 10% goal by 2020.
For Dr Deane, this slow progress could be attributed to the fact that bioenergy policies have been one of the most volatile policy areas in Europe. “The political uncertainty around the policy has stalled a lot of investments,” he emphasised.
Another reason, according to Deane, is that the original renewable directive’s “hopes” for advanced biofuels were not met over the last few years, primarily due to costs, the collapse of the oil market and political instability, which has contributed to the lack of investment in a number of projects.
Referring to electric vehicles, he said that they would play an important role in delivering emissions’ reductions for passenger cars from now to 2050. However, their impact in the short to medium term is “small or ineligible”.
“Modelling by the Commission shows electricity in road transport reaching between 1%-3% (of energy in transport) by 2030 and up to 20% by 2050. The same modelling shows liquid biofuels meeting 36% of energy in transport in 2050,” he explained, stressing that their expensive technology will be faced with a difficult commercial landscape.
More common sense
Deane also emphasised that we should not forget biofuels.
“Biofuels that demonstrate proven emission reductions and low indirect land use change (iLUC) should play a role in decarbonizing transport in Europe,” he said, adding that there was a need for a more common sense approach of energy in transport, where “policies encourage the correct type of biofuels that deliver significant emissions’ reductions and policies that discourage biofuels which don’t”.
He noted that bioenergy was a wide family of fuels, and that the challenge to EU lawmakers is to develop a policy that is clear and makes distinctions between the different families of biofuels.
Deane also criticised the perception of science in EU policy, saying that one should not be picky.
“Policy should be science-based and evidence-driven. In Europe, we either accept the science or we don’t,” he concluded.
No information on employment
Bernd Kuepker, policy officer with DG Energy, explained the executive’s rationale behind the proposed plan and noted that member states might set a lower limit and distinguish between different types of biofuels, for instance, by setting a lower limit for the contribution from food or crop-based biofuels produced from oil crops, taking into account iLUC.
But, he stressed that there was a difference between the ethanol from crop-based starch and advanced biofuels, which have low or negative estimates for iLUC.
“On the contrary, [crop-based starch] has clearly positive and really significant iLUC and will not be able to achieve the savings that the Commission aims at,” the EU official said.
Another important angle is the risk for job losses, where the industry believes that the Commission’s plan will lead to the permanent loss of 133,000 direct and indirect rural jobs.
Asked by EurActiv.com whether the Juncker Commission has conducted an employment impact study of the case, Kuepker said that there was none in place.
“We looked at different factors and generally what has been considered is that the highest share of jobs is in the agricultural sector and we don’t expect it to stop,” he stated, adding that with the plans for advanced biofuels, job losses related to first generation biofuels will be compensated.
“So, it’s certainly not a policy whose main objective is to create jobs, but the proposal will not decrease the employment rates either,” he concluded.
Dr. Carlo Hamelinck, an energy expert at Ecofys consultancy, said that sustainable biofuels are essential for sustainable transport and noted that it was remarkable that the Commission decided to limit them as without biofuels, more cropland is abandoned and a decline of EU agricultural sector is expected.
He explained that conventional biodiesel feedstocks had typically large ILUC impact due to the loss of soil organic carbon in grass and forest land contrary to the conventional ethanol and advanced fuels, which both have a lower ILUC impact thanks to the lack of connection to palm oil.