Energy policy, EU elections and the 2024 Zeitgeist

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At the time of this writing, 7 June 2024, Europeans are taking part in one of the largest democratic exercises in the world. Hundreds of millions of European citizens are having their say on which policymakers will represent them in the European Parliament for the next five years.

With the shakeup in people comes a shakeup in ideas as well. Ideas about what the European Union is, what it should do to tackle global issues across its 27 Member States and how it can realistically do so. This time is no exception.

In 2019, Europe voted for an environmentally conscious European Parliament on the back of a so-called Green Wave. Greta Thunberg’s Fridays for Future school walkouts were at their height and the support for environmental policy to combat climate change delivered the most green-minded policymakers ever seen to Brussels. This in turn led to the European Green Deal, proposed by the European Commission in December 2019, which cascaded into a slew of legislation to ultimately make Europe the first net-zero continent.

The Deal includes, among others, ambitious targets for renewables deployment, a 55% emission reduction objective by 2030, policies to decarbonise buildings and support renovations, energy efficiency incentives, the phase out of internal combustion engines by 2035, a law to restore 80% of Europe’s degraded habitats and much more. Five years later and most of the legislation in the Green Deal has been passed into law, and now it is up to EU countries to implement it.

But back to the changeover of ideas – latest news and opinion polls suggest there is some blowback over the outcome of Green Deal legislation. Some believe it is making life unaffordable. Others worry over signs of a continent that is deindustrialising. Still more are increasingly concerned about their countries’ energy security. Captured in the opinion polls, center to left wing parties – especially those in support of environmental policies – stand to lose a substantial number of seats as a shift to the right is forecasted in the next configuration of the European Parliament.

Why is this? Why is policy at the EU level seen as so important when it is on the Member States to implement the rules? And more specifically, what does this mean for EU energy policy going forward? That’s what this article seeks to answer.

What is EU policy?

First things first, let us unpack the idea of EU policy more generally. This can seem to some as a very obscure thing that has little to no impact on day-to-day life, but it really does. EU energy policy, for example, will impact everything from how countries produce energy, how it is sold, transmitted and distributed within and between countries, energy efficiency standards of the power appliances you own, emissions standards for vehicles, and the list goes on. So where does EU policy come from?

EU policy process explained

This all starts at the very top in the EU, with a proposal being made by the executive branch of the EU, known as the European Commission. The Commission is the only body in the EU that has the authority to propose legislation, but it may be invited to do so by other EU institutions or by EU citizens themselves. This proposal is a draft piece of legislation, either in the form of a ‘regulation’ which is legally binding for Member States if passed, or a ‘directive’ which only has certain results that Member States must achieve but leaves it to the Member States to decide how to get there with their own national laws. The legislation is ultimately a means to an end, trying to attain a certain goal – for example, the EU Climate Law which says that the EU must be climate-neutral by 2050 and reduce emissions to 55% below 1990 levels by 2030.

The Commission’s proposal is then debated in the two legislative bodies of the EU, the Council of the European Union, made up of representatives of the Member States, and the European Parliament which is made up of elected representatives of EU citizens, known as Members of European Parliament or MEPs. Both bodies will take time to make amendments to the proposal that they will then take into discussions with each other in what are known as trilogues.

In trilogues, the Commission, the Parliament and the Council debate amendments made in the previous stage trying to reach a compromise that takes everyone’s considerations on board. Once a compromise is reached, the Council and Parliament go back to their respective bodies to get final approval in votes before the legislation is passed and published in the Official Journal of the EU – the codified version of all EU policy that becomes law.

Why does EU policy matter for Europeans?

This drawn-out, far-removed process will certainly make the average person think “so what?” and “why does this matter for me if the EU makes a law?”. It matters because the law is then applicable in the Member States. What is more, the EU and its public institutions are crucial for upholding an internal single market that provides standardisation, predictability and fair competition across countries. This is what allows all Europeans to access affordable, safe and high-quality products and services from across the Continent, no matter which Member State they live in.

On the entrepreneurial side, this also makes it possible for want-to-be business owners to start a business and operate seamlessly across the Union, ensuring fair competitive practices no matter the national market they choose to work in, and providing a level of certainty about what to expect. Of course, the internal market is not perfect, but the project of developing this massive united free space for Europeans to do business has been instrumental for innovation, a strong economy and a high quality of life over the past decades.

What is EU energy policy?

Going a step deeper, we zoom in on the topic most relevant to Eurelectric at the EU level: energy policy. This is still a relatively broad umbrella encompassing a lot of policy across a wide value chain. It includes everything from the raw materials needed as fuel or inputs, to generation where electricity or heat is produced, to transmission where power, heat, and gas is transported in bulk to more localised distribution zones and finally the consumers and the way they use their energy in appliances and solutions.

What are the different areas of EU energy policy?

At Eurelectric, we broadly follow everything from power generation to the final energy user except transmission. We believe in a technology-neutral approach. Every technology that can help Europe slash carbon emissions - from solar to wind, hydropower, nuclear, biomass and so on - is welcomed and it’s up to Member States to decide on which technology they wish to capitalise on. Each area has its own intricacies and we therefore have dedicated teams and departments for each area, and often break this down into even more granular areas of energy policy. These include but are not limited to:

Decarbonisation

Decarbonisation covers policy that is aimed at addressing climate change by reducing the overall carbon emissions of the power sector in Europe. A key example of this would be the EU emissions trading system (ETS), a cap-and-trade system for emissions in Europe. ETS sets a limit to the total amount of greenhouse gas emissions that can be emitted by companies, installations and aircraft operators covered by the system. Since 2005, the EU ETS has helped bring down emissions from power and industry plants by 37% - reports the Commission.  Complementing the ETS is the Carbon Border Adjustment Mechanism (CBAM), an effective carbon tariff levied on imports to the EU for goods not subject to carbon pricing in their country of origin.

Decarbonisation is a very broad topic for Eurelectric, having an impact on everything from the inputs into the energy system and the generation of power, all the way down to the end user’s efficient use of that power. We detailed this impact in our Decarbonisation Speedways study in June 2023.

Electrification

Electrification refers to the policies that promote the transition of energy usage to clean and renewable electricity from other energy carriers such as coal, oil and other fossil fuels. Some examples of this would include the Alternative Fuels and Infrastructure Regulation (AFIR) that aims to increase the availability of electric charging infrastructure across the EU to enable wider electric vehicle (EV) usage – or the Renewable Energy Directive which sets a target for 42.5% of final energy consumption in the EU by 2030 to be generated by renewable energy sources – mainly wind and solar.

These policies also apply across the entire value chain. In fact, electrification can also be considered a supplement to decarbonisation policy, as it is the most cost-effective and efficient way to decarbonise Europe’s transport, buildings and industry thus mitigating climate change. Pro-electrification policy is therefore a boon for climate action and environmental objectives, and also for people trying to reduce their energy consumption, and it is why we have called for an Electrification Action Plan from the Commission in the first 100 days of their next legislative mandate.

Markets

Markets are a vital part of getting energy from where it is produced to the final consumer who needs it. This makes energy markets a very important area in the energy policy space, as efficient electricity markets can allocate electricity at the best price to those who need it while market failures can lead to price instability or shortages. During the 2022-23 energy crisis, the efficacy of the wholesale electricity market was called into question, leading to a proposal from the Commission to reform the market in March 2023. This Electricity Market Design reform – adopted by the European Parliament in April 2024 and by the Council in May – is an example of energy policy relating to markets, and it has knock on impacts on the prices of energy as well as on how contracts for buying and selling power  can be formulated.

Consumers

Consumers are also impacted by such policy developments, as the wholesale price of electricity is then fed through into retail markets, so the design also needs to ensure that people can access affordable electricity without supply disruptions., Most of all, consumers are those that energy serves a purpose for, and therefore they are at the very heart of the energy transition. All energy policy will have impact on billions of consumers.

Take for example the Energy Performance of Buildings Directive which aims to improve the energy efficiency of Europe’s building stock by setting targets for increasing existing buildings’ energy ratings in the run up to 2050. Energy consumers are ultimately the ones that make the investments to make this happen, so the Directive has a direct impact on energy consumers in the EU.

Another example is all the new energy solutions entering the market. EVs, heat pumps and rooftop solar panels are enabling consumers to become prosumers – consumers that are also active actors in the energy system – meaning that energy policy impacts their interactions with the energy system. Eurelectric wants to ensure that consumers are actively engaged in the energy transition and has taken this topic up with our Power2People workstream.

Power distribution

Before getting to the consumers, however, the power needs to be delivered to them through power transmission and distribution lines. While transmission covers the high-voltage current flowing from generation plants across long distances, power distribution consist in  medium- to  low-voltage power lines that connect the substations at the end of high-voltage transmission lines, as well as small scale renewables with homes, offices, factories and charging stations.

These power lines that make up the grid are ageing today in Europe, with a third of them going beyond 50% of their lifespan. As the energy transition unfolds, we will need much more available grid capacity for more electricity to flow and for more points of connection. The Commission moved in the direction to address this with an Action Plan for Grids in November 2023. At Eurelectric, we recently published the Grids for Speed study which highlights investment needs for the future of the power system and how energy policy can help make that happen.

According to our study, EU countries should invest € 67 billion per year in the power distribution grid, almost doubling current annual investment levels of € 36 billion. This includes financing for building new infrastructure, reinforcing the existing one, ramping up digitalisation, ensuring maintenance and strengthening resilience to climate change and natural disasters.

Even data policy at the EU level can be considered energy policy for Eurelectric and has a particularly important relevance for impact power distribution. As the world digitalises more and more, digitalisation of the power system becomes an imperative to understand new flows of energy. A fresh example of this can be found in our report Wired for Tomorrow.

How elections impact EU energy policy?

After seeing the different areas and the wide array of policy that impacts the power sector and how it trickles down to the individual using that power, it is clear that the policies coming from the EU are important. So how do elections change this?

The EU has several bodies in the institutions that look after policy regarding all these areas. When elections happen, political positions within those institutions are redistributed meaning that the policies that come from them will be coloured by the ideology of the parties holding the position.

In the European Commission:

The European Commission’s political appointee in charge of energy is the Commissioner for Energy. With an election, each Member State must nominate a new Commissioner who is to be confirmed by the new Parliamentarians. This means that the nominee must stand up to the Parliament’s majoritarian scrutiny before getting the job as Energy Commissioner.

However, not everything changes as the executive agency in charge of energy, the Directorate General for Energy or DG ENER, will largely keep the same technocratic staff. Given the impact of energy on climate change, energy policy is also covered by the Directorate General for Climate Action (DG CLIMA) and a Commissioner for the Environment who must undertake the same process explained above. In this way, energy policy is impacted mainly in the form of the original proposals coming from the Commission, which will be tinted with the party in charge’s priorities, both the Commissioner position and indirectly by the Parliament that enabled them to get there.

In the European Parliament:

The Parliament can influence energy policy in two ways. The more technical way is in the committee of MEPs that are responsible for Industry, Research and Energy (ITRE Committee) legislation as well as a committee for Environment, Public Health and Food Safety (ENVI Committee) legislation. Here is where amendments to legislative proposals are made.

The coalitions formed after elections to secure power will determine not only how many positions in the committee are doled out to the political parties, but also who is in charge. Therefore, the legislation coming through the committees will be subject to the ideological views of those MEPs taking up residence in the committee, and thus amendments will be reflective of that.

More broadly, the makeup of the Parliament as a whole also impacts who needs to support the final legislation to be passed. The average ideological views of the MEPs in the Parliament therefore dictate how progressive or conservative the legislation that can and cannot be passed will be.

In the Council of the European Union and European Council:

The only change in the case of an election at the EU level is in the European Council where the President is replaced. Beyond that, the two Councils responsible for Energy and Climate respectively, the Energy Council and the Environment Council, made up of the Ministers of Energy and Climate of the Member States will not change unless a national election is held at the same time.

At a lower level, permanent representatives of Member States to the EU (effectively ambassadors) work on legislation in the Council of the European Union in what is known as the Committee of the Permanent Representatives of the Governments of the Member States to the European Union or Coreper. There are two Corepers (I and II) and Coreper I is responsible for both energy topics and environment. These too are not subject to change during an EU election. Therefore, this institution can be seen as the only stable one throughout an EU election.

Bringing it all together: the June 2024 EU Elections

In 2024 what this changeover means can be summarised as follows. With more concern for cost-of-living, security and industrial competitiveness, progressive energy policy pushing for decarbonisation at the EU level is less of a priority to voters.

This will result in MEPs being voted in that are more likely to support policies that incentivise investment in power distribution, affordable energy and a wide selection of clean energy technologies that are produced in Europe, with a stronger focus on industrial decarbonisation and competitiveness.

Such a shift will also lead to a Commission focused on proposing solutions to these issues, as well as ensuring that defense and security are maintained on the Continent. With a limited budget, more expensive and progressive environmental policies to up the ante on what has already been passed in the Green Deal will not be expected. The good news, however, is that the shift will not be so big as to rescind on the policies on the Green Deal.

In fact, what will be most expected is a focus on implementing the already passed legislation on the Green Deal: getting things done, tearing down red tape, keeping European industries competitive and ensuring it does not burden people with higher energy bills.

Another priority for the upcoming legislative mandate will most likely concern energy security. International events in recent years have put our countries’ energy security in jeopardy culminating in Russia’s invasion of Ukraine in February 2022 and the energy crisis induced by Russia’s gas crunch. Global geopolitical tensions, market interventions, extreme weather, cyber sabotage and increasing power demand are putting energy security at risk. Meanwhile our national energy systems are evolving with renewable energy sources and technology developments bringing higher variability and growing decentralisation.

This necessitates a change in the way we think about the energy system. Our States will need to introduce higher flexibility into their systems and enable system operators to gain more awareness over the state of our energy infrastructure and systems’ needs. They will need to support a much more intricate coordination of responsibilities within the system and they will need to ensure that the actors in this system have predictable sustainable revenues to keep them up and running.

Yet, European Member States’ present a variety of national and regional situations. When addressing such complex issues, there won’t be a one-size-fits all solution. Each challenge has its own specificities which reflect the reality on the ground and require tailored solutions that work for unique circumstances.

 

We showed how energy policy can have an often overlooked impact on European citizens daily lives, but what is even more forgotten is that citizens can also have an impact on EU policies. Casting our vote in European elections is our chance to make our voice heard and represented to the highest levels of policy making. It’s a democratic right that should not be taken for granted. Eurelectric encourages all European citizens to exercise such right and take active part to the EU elections this June. This is the intersection of energy policy and the EU election taking the 2024 Zeitgeist into consideration.