EC launches new vision for energy policy

The European Commission has today proposed a new energy policy for Europe that focuses on fighting climate change and making Europe’s internal energy market more competitive.

"Today marks a step change for the European Union,” says Commission President José Manuel Barroso. “Energy policy was a core area at the start of the European project. We must now return it to centre stage."

To make the internal power market more competitive, the EC is pushing for greater separation of energy production from energy distribution. This can either be achieved by forcing vertically integrated power companies to sell off their transmission assets, or by allowing companies to retain ownership but surrender operational control to independent bodies. The EC has expressed a “clear preference” for full ownership unbundling, although this will be more difficult to achieve.

“Open and fair access to the transmission grids is vital to competitive markets, but full ownership unbundling is not the only way to achieve the Commission's stated aims,” says Jayesh Parmar, Partner and Head of Energy Advisory Services at Ernst & Young.

The EC also proposes to introduce stronger independent regulatory control of power and gas markets, either in the form of a single EU regulator or a European network of independent regulators that would work closely with Brussels in identifying key bottlenecks and appointing coordinators, in an effort to deliver the EU target of 10% minimum interconnection levels.

Regarding climate change, the EC has proposed that any post-2012 Kyoto Protocol framework should lead to a 30% cut in emissions from developed countries by 2020, and has urged the EU to cut greenhouse gas emissions by at least 20% over the same period. It has also proposed that 20% of the overall EU energy mix should be sourced from renewable energy by 2020. A minimum target of 10% for biofuels will supplement this renewables target. In addition, a 2007 renewables legislative package will include specific measures to facilitate the market penetration of both biofuels and heating and cooling.

The EC has also called for more use of fuel-efficient vehicles, tougher standards and better labelling on appliances; improved energy performance of the EU's existing buildings and improved efficiency of heat and electricity generation, transmission and distribution in an effort to achieve its previously-stated objective of saving 20% of total primary energy consumption by 2020.

The EC has sidestepped the nuclear issue, saying that “it is for each member state to decide whether or not to rely on nuclear electricity.” Nuclear power accounts for 30% of EU electricity at present.

Finally, the EC suggests that the EU develop effective solidarity mechanisms to deal with any energy supply crisis and actively develop a common external energy policy to increasingly "speak with one voice" with non-EU countries.