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The European Energy Union

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Yamina SahebSenior Energy Policy Analyst, OpenExp

"Once relegated to the shadows, energy savings are finally being considered as an energy source in their own right"

Considering energy efficiencyIn economic terms, energy efficiency refers to the efforts made to reduce the energy consumption of a system... as an energy source in its own right can radically alter our vision of the energy mixThe range of energy sources of a region.. Taking this approach, the combined weight of energy savings and renewable energies in Europe could exceed total fossil fuelFuel is any solid, liquid or gaseous substance or material that can be combined with an oxidant... consumption by 2030. In this article, Yamina Saheb, an economist specialized in scientific and policy matters at the European Commission, offers her analysis.

CoalCoal is ranked by its degree of transformation or maturity, increasing in carbon content from... was the main source of energy in the 19th century, followed by oil, gas and nuclear powerIn physics, power is the amount of energy supplied by a system per unit time. In simpler terms, power can be viewed as energy output... in the 20th century and, most probably, energy efficiency and renewable energies in the 21st century.

Once relegated to the shadows, energy savings are finally being considered as an energy source in their own right. The concept was first introduced in a 2008 U.S. paper that demonstrated the increasing potential of energy efficiency technologies in the United States1. More recently, in its 2013 annual report on the world energy efficiency market, the International Energy Agency (IEA)An independent, intergovernmental organization founded within the framework of the OECD... showed that the cumulative energy savings in 11 IEA member countries between 1974 and 2010 exceeded consumption of any other single fuel source2.

Closer to home, the European Commission has released energy mix forecasts based on plans to make efficiency the continent's leading source of energy by 2030. Had energy efficiency not been factored into the mix, fossil fuels would account for 60% of energy needs in Europe.

If the political will existed among our governments and heads of state, energy savings and renewable energies could together outweigh the total amount of fossil fuels that Europe might need in 2030. Achieving this goal, however, would require our elected representatives to adopt 2030 energy efficiency targets of at least 40% before the end of 2016. The current target is 27%.

In its "Energy Union" strategy adopted in February 2015, the European Union confirmed the importance and future role of energy savings in the bloc's energy mix, highlighting the need "to fundamentally rethink energy efficiency and treat it as an energy source in its own right, representing the value of energy saved"3.

The strategy goes one step further by calling on the Commission to "ensure that energy efficiency and demand side response can compete on equal terms with generation capacity", thereby guaranteeing that energy savings have fair access to energy markets.

Let there be no doubt about it, Europe's energy revolution has begun.

 

Yamina Saheb is an engineer and economist with a Ph.D. in energy engineering. Yamina previously worked as a building expert at the International Energy Agency's Energy Efficiency and Environment Division, where she set up and managed the Sustainable Building Centre. In 2013, she joined the European Commission's Joint Research Centre as a Scientific and Policy Officer in charge of analyzing energy efficiency policies in Europe.

 

 

 

Patrice Geoffron
Patrice GeoffronPh.D in industrial economics and has been Professor of Economics at Université Paris-Dauphine since 2002

"Europe broke new ground by becoming the first major region worldwide to make reforming its energy model a political priority."

Energy has been a top priority for Europe's nations since they started to come together to build the European Community. In keeping with this focus, the European Union (E.U.) set out in the late 2000s to become the leading figure in the global energy transition, aiming to drastically reduce hydrocarbonOrganic compound consisting of carbon and hydrogen. Hydrocarbons are the principal constituents of crude oil, natural gas and petroleum products. consumption and greenhouse gas (ghg) Gas with physical properties that cause the Earth's atmosphere to warm up. There are a number of naturally occurring greenhouse gases... (GHG) emissions within the space of a few decades. In this article, Patrice Geoffron, Professor at Université Paris-Dauphine, offers his analysis of the global economic environment surrounding this strategy.

Europe broke new ground by becoming the first major region worldwide to make reforming its energy model a political priority. The decision was not motivated solely by a desire to set an example or an awareness of Old Europe's responsibility as the cradle of industrialization for two centuries' worth of "historical" greenhouse gas emissions. It was also based on a long-term economic strategy designed to re-lay the foundations of Europe's competitiveness. To reduce emissions by 80% from 1990 levels between now and 2050 (with interim targets of 20% by 2020 and 40% by 2030), the European Commission estimates that nearly €300 billion will have to be invested annually, representing an increase in investment of 1.5% of GDP, or the equivalent of one Juncker Plan every year. In other words, Europe's enthusiasm is fueled by a determination to derive an economic benefit from leading the way.

However, this strategy was put into action in a more hostile environment than anticipated:

  • The economic crisis severely limited the options for financing the transition, resulting in on/off support for "low-carbon" solutions from many Member States, particularly in Southern Europe.
  • The unconventional oilOil that cannot be extracted using current technology or that entails additional technology or costs to produce... and gas revolution shifted the balance of competitiveness among nations, revitalizing the shale-rich United States to the detriment of Europe, whose industries are either energy intensive or reliant on natural gas inputs, as is the case for petrochemicals.
  • The price of fossil fuels, including oil, proved particularly unstable, undermining the strongly held belief that Europe's energy transition would reduce collective dependence on an ever-costlier resource. The dramatic fall in oil prices offered a convincing endpoint to the commodities "super cycle", rocking the very foundations of Europe's strategy.

As champions in the fight against climate change, the Europeans viewed the COP21 Paris climate conference in December 2015 as the "moment of truth". On the one hand, the Paris production sharing contract (or agreement)Oil contract under which the oil that is produced is shared between the state and the oil company... validated and lent weight to Europe's strategy. But on the other, it ushered in a new era of heightened competition in the international race to develop low-carbon technologies. The risk now is that the Europeans will have to compete with China's mass-production capacity (the country was behind more than a third of "green" investments in 2015) and the sheer clout of U.S.‑based tech giants such as Google, Apple, Facebook and Amazon (the energy transition relies heavily on digitalization and big data). But a bigger threat is that Europe's energy transition will be fragmented into 28 uncoordinated national strategies – soon to be 27 after Brexit – ill-suited to the impending demands of globalized competition.

While it seeks to address the undeniably critical issue of securing energy supply and connecting networks across the E.U., the European Energy Union project – a priority of the Juncker Commission – does not change this structural characteristic of the European model. Since the Treaty of Rome, each Member State has been free to decide its own energy mixThe range of energy sources of a region., within certain common rules. This makes it impossible to rationalize investment and, in the longer term, create European champions with the critical mass to compete in the global low‑carbon technologies market. With the recent solar panelA collection of photovoltaic cells connected by wires and covered by glass or a plastic film that protects the cells in bad weather... episode fresh in mind, it may be feared that the Europeans watch powerlessly as some of the value‑added and jobs created by these environmentally beneficial industries are lured off the continent.

 

Patrice Geoffron holds a Ph.D in industrial economics and has been Professor of Economics at Université Paris-Dauphine since 2002. After serving as Vice-President in charge of international relations at Paris Dauphine, he directed the university's Center of Geopolitics of Energy and Raw Materials (CGEMP). In 2014, he joined the scientific board of the French Center for Unconventional preservation (hydrocarbons)The final phase in petroleum system formation, after a deposit has accumulated... (CHNC). Patrice is also a member of the Cercle des Economistes think tank, co-editor of Economics and Policy of Energy and the Environment and a member of the editorial board of Revue de l'Énergie.

 

 

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