The European region has been intensively focusing on the studies of energy policies relating to the Energy Trilemma and energy scenarios studies, as both are relevant to EU energy market reform. The World Energy Council community works closely with key stakeholders at the European Union and runs workshops and EU-World Energy Council seminars. Both European Bank for Reconstruction and Development (EBRD), and European Investment Bank (EIB) work closely with the World Energy Council in the region.
Energy in Europe
REGIONAL OVERVIEW & CONTEXT
Europe’s Critical Uncertainties revolve around EU cohesion, a changing energy mix and energy security concerns driven by commitments to the Climate Framework and EU decarbonisation policies. The main area of concern is the impact of a changing energy mix on existing market structures and on the reliability of energy infrastructure. Among security challenges are the ability to attract adequate investments and, for some countries, overreliance on a single supplier or on a single fuel source. Russia’s dominance as a supplier of natural gas to Europe remains a source of tension with some European countries as Moscow seeks to secure a greater share of the European market. Action Priorities remain consistent with last year’s efforts to decarbonise and enhance the efficiency of energy systems.
CRITICAL UNCERTAINTIES & ACTION PRIORITIES
EU Cohesion continues as the most impactful Critical Uncertainty. Concerns emerge from different perspectives. Brexit and political evolutions in some countries raise increasing challenges to the EU dynamics with potential impacts on the way energy is dealt with. On the energy side, questions are building up regarding the efficient way to deal with diverse energy choices across Europe. Increasing tensions around Russian gas supplies also raise uncertainties, especially around their possible impact on regional energy trade. Meanwhile, gas and power interconnectors are being built to strengthen security of supply among EU members.
Climate Framework also remains in the uncertainties space while most countries in the region are committed to achieving net-zero greenhouse gas emissions by 2050. Uncertainties revolve around building the ideal energy mix and implementing decarbonisation plans while ensuring energy security and economic growth, especially in countries like Poland where fossil fuels play an important role, or Belgium and Bulgaria which strongly rely on nuclear. Hydrogen emerges as a stronger candidate for decarbonisation of energy uses, with Germany and the UK leading efforts but uncertainty still remains high regarding its potential role.
Market Design remains consistent as a Critical Uncertainty. Concerns revolve around implementing an enabling regulatory framework to deliver an adequate level of investments and for clean energy technologies and energy mix diversification. Challenges include changes in the tariff structure, guaranteeing reliable capacities to the power markets, the role of long-term contracts, the incorporation of auctions and feed-in tariffs.
Energy Efficiency is once again seen as requiring further action. Curbing energy consumption is a priority in the effort to achieve climate and energy security objectives. The focus is on improving efficiency in buildings, with a strong state, EU and donor support to upgrade buildings’ infrastructure including lighting, insulation and heat Incentives being promoted across Europe include tax credits and competitive tenders though the effectiveness of these measures is still a subject of debate.
Renewable Energies maintain their high impact and low uncertainty position. In line with decarbonisation commitments, European governments are putting forward ambitious plans and incentives for private investments in wind, solar, as well as hydro and biofuels generation. The main challenges identified across the region for the renewables’ integration process include market redesign, storage capacity, public acceptance and grid interconnections. Despite these efforts, it is likely that some large EU countries will miss their 2020 renewables targets.
Energy Subsidies remain high on the list of action priorities. Several European countries provide substantial subsidies to the energy sector (mostly fossil fuels). Germany’s energy subsidies are Europe’s largest. It allocates €27 billion a year in renewable energy subsidies and €9.5 billion for fossil fuels. The United Kingdom on average sets aside £10.5 billion a year for fossil fuel subsidies and about £7.10 billion a year for renewable subsidies. Reducing or eliminating subsidies is an action priority for a number of countries.