The State of the European Union 2017

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THE EUROPEAN ENERGY UNION: SPURNING INTEGRATION OR BUSINESS AS USUAL?
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will reach its limits due to overarching costs,
technical limits, and the physics of gas, electric-
ity as well as interconnected networks. The
awareness that more and improved coopera-
tion is needed is underlined, on the one hand,
in electricity, by the effects of a strongly inter-
connected network such as loop flows and ever
decreasing marginal prices due to the abun-
dancy of installed generation capacity. On the
other hand, in gas, by the vulnerability of the
Union due to energy dependency (cf. Ukraine
crisis). Concerted action is needed.
The Commission’s proposals
At the end of November 2016, the European
Commission released a whole set of legislative
and regulatory proposals to reach the ambitious
European Union’s energy targets set in different
papers and key documents before (i.e. A policy
framework from 2020 to 20302, a roadmap for
a low carbon economy in 20503). The Clean
Energy Package aims to streamline the existing
measures, introduce new regulation and en-
force better and more coordinate governance to
“equip all European citizens and businesses
with the means to make the most of the clean
energy transition”. 4 The proposal covers energy
2Communication from the Commission to the European
Parliament, the Council, the European Economic and So-
cial Committee and the Committee of the Regions: A policy
framework for climate and energy in the period from 2020
to 2030. Available at:
tent/EN/TXT/PDF/?uri 015&from=EN.
3Communication from the Commission to the European
Parliament, the Council, the European Economic and Social
Committee and the Committee of the Regions: A roadmap
for moving to a competitive low carbon economy in 2050.
Available at:
PDF/?uri 112&from=EN
4
es-new-rules-consumer-centred-clean-energy-transition
efficiency, renewable energy, electricity market
design, electricity security of supply and govern-
ance. It follows the overall goal to create a low
carbon economy by 2050 (as a consequence of
the Paris COP21 agreement), putting energy ef-
ficiency first, achieving global leadership in re-
newable energies and providing a fair deal for
consumers.
Even though the Union is on track to reach
it’s 2020 goals, one can argue that more pro-
found changes have to be undertaken if the EU
is to reach its objectives for 2030, and even fur-
ther to fulfil its commitment as a party to the
Paris COP21 Agreement. The Winter Package
ignores the structural deficits of the present en-
ergy market systems. Leaving aside the fact that
investments in the energy infrastructure and the
installation of new capacities are motivated by
wholesale prices, the Emission Trading System
(ETS), which lies at the heart of the decarbonisa-
tion strategy, as it is aimed to increase low CO2-
investments, is crippled by the abundancy of
CO2 certificates. Increasing shares of renewable
energy are concentrated within some regions of
the European Union. Furthermore, the current
state of the energy landscape is conditioned to
a huge extent by a dysfunctional market envi-
ronment, defined by over capacities, low mar-
kets prices, grid congestions, stranded invest-
ments and growing (re)dispatch costs. The
Winter Package does not account for this diag-
nosis; instead business as usual is preferred over
a profound market transformation towards a
market in which both renewables and energy
efficiency are driven by investment signals and a
long-term political commitment by all member
states. The package’s formulated policy goal
(energy efficiency first and renewable leader-
ship) thus remains mere lip service.
When it comes to electricity market design
in detail, the Commission is proposing to recast