EU Energy Union: a different future by the same old path?

14 Sep 2015

The Energy Union seeks to build a secure, affordable and climate-friendly energy supply for the EU. UKERC Researcher and Associate Research Fellow at the University of Exeter, Joseph Dutton, argues the plan is running into the same problems that have affected EU energy policies in the past.

The new ‘Energy Union’ strategy proposed by the European Commission in February seeks to shift Europe away from centralised energy systems dominated by fossil-fuels to one with renewable energy and the citizen consumer at its core.

It is a broad and ambitious set of policies and would fundamentally change the European energy sector. But if we look at the path taken to get to this stage, we find a number of similarities with that taken towards previous policy packages, as well as the  clues to policy areas likely to face opposition from member states as the development of the Energy Union progresses.  

Under the Lisbon Treaty member states retained the right to determine their energy mix, but in reality, this right was undermined by legally binding renewable targets from the Commission and policies leading to the phasing out of coal-fired power generation. Although the governance framework of the Energy Union is still under development, member states look set to remain at the forefront of some policy creation. For example, features of the gas security of supply mechanism – such as the central gas buyer mechanism and collective LNG negotiation and purchasing – are set to be introduced on a voluntary basis only – which is a reflection of continuing member state strength and priorities in matters relating to gas markets. Countries such as the UK and Netherlands that have established wholesale markets with high liquidity and trading activity are likely to oppose measures perceived to undermine their operation, while member states in eastern and central Europe both need and are expected to sign up to collective measures. Similarly, future targets on renewable generation and cross-border electricity interconnection in the framework will not be legally binding on member states.

The tension between member state energy policy preference and that of the Commission is not new. In 1992 the inclusion of an energy chapter in the Maastricht Treaty was successfully vetoed by member states with large energy resources. That said, some previous policies have received the full backing of powerful member states because of their alignment with domestic political priorities and preferences; for example, the UK’s support for market liberalisation, the creation of the internal energy market, and new interconnectors. Equally the UK remains committed to tackling climate change at an international level – even though the new Conservative government has rolled back domestic environmental policies – as it is regarded as a security issue and therefore a foreign policy concern. Policies on the internal market and continued liberalisation of energy are also likely to be supported by other member states.

The external dimension of the proposals may actually prove more divisive than internal aspects, as it is expected that there will be a formalised link between EU energy and foreign policies. Energy policy is a so-called ‘horizontal’ issue in the EU and it is already a component of foreign, environmental and competition policies. But the Energy Union would firm up these policies and extend their reach; proposals include EU involvement in global energy markets and bilateral negotiations with energy exporters to increase security of supply. Although increased security benefits the EU at large, member states such as Italy, Spain and the UK have strong bilateral relations with countries outside the EU from which they import energy and could resist any formalisation of energy-based diplomacy that may be perceived as undermining their own arrangements.

The external dimension of the Energy Union framework highlights the EU’s import dependency and the potential for disruption to supplies, most notably Russian gas flows. In the short term – and compounding worries about Russian imports – storage volumes in northwest Europe are lower compared to recent years and a production cap at the Netherland’s Groningen field could also mean tighter supplies depending upon gas demand this coming winter.

Even though areas of the framework focusing on securing energy supplies are inevitably forward looking, they are also firmly in response to past events. EU energy policies have consistently been reactive, giving the impression that the Commission has always been fighting the previous war. Reacting to gas supply disruptions – such as those resulting from successive Russia-Ukraine disputes – to secure future deliveries is necessary but this need arguably highlights flaws in previous policies that were unsuccessful in doing this. The reactive nature of policy is also shown by how the creation of a fully integrated European energy market is one of the five strategy dimensions at the heart of the Energy Union. Much of the initial framework proposal is dedicated to developing the internal market through more physical interconnections and increased regulatory frameworks, but much of this is to finally complete, implement and enforce the existing 2007 Third Energy Package and the internal energy market.

The Energy Union framework contains proposals that could revolutionise the European energy sector and could represent a departure from the current structure of the energy sector. But its development already appears to be running into the same problems that affected the EU energy policies of the past.

The working paper ‘EU Energy Policy and the Third Package’ (July 2015) can be downloaded here: https://geography.exeter.ac.uk/research/groups/energypolicy/publications/working/