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Luis Colasante

Luis Colasante

Luis Colasante is the Group Energy Manager and Head of Economic Research at Sogefi Group. He is in charge of developing the Group energy strategies and policies; as…

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New EU Energy Strategy To Create Up To 900,000 Jobs

On 30 November 2016, the European Commission officially released its “Clean Energy for All Europeans” package, also known as “Winter Package” i.e., moving the EU to meet its climate change target with numerous legislative proposals to reform the EU energy market. This legislation will have an important impact on the electricity market and the development of renewable-energy going forward.

The European Commission wants the EU to be ahead on the global clean energy transition. For this reason the EU has committed to cut C02 emissions by at least 40 percent by 2030, while modernizing the EU’s economy, delivering jobs and growth for all European citizens. The legislative proposals include a new target for energy efficiency, achieving global leadership in renewable energies and proving a fair deal for consumers.

The Winter Package proposes an increase in the share of renewables in the energy generation mix to 27 percent, with half of this target being met via renewable electricity generation. With regards to energy efficiency, the European Commission proposed a target of a 30 percent increase by 2030 – a target slightly higher than the minimum 27 percent target which had been set by Member States in 2014. The Winter Package marks the beginning of a new energy revolution in Europe, recognizing that the region’s energy challenges have evolved over the last decades.

Since BREXIT, EU executives are seeking to highlight the advantages of being part of a unified bloc, with one of the executive priority being consumer right, pending to lower energy prices, reducing energy bills and removing barriers for generators to sell their renewable electricity and feed the grid.

For the time being, the EU executives have some work to do in order to show how the wholesale power market has dropped since the global financial crisis and the invoices of the end-user continue to increase around 3 percent year-on-year. Related: Why Russia Beat Saudi Arabia As China’s No.1 Oil Supplier

The European Commission points-out, that the Winter Package will also positively impact the economy: “It will create up to 900,000 additional jobs across the energy sector, it will generate a 190 billion Euros increase in GDP gains by 2030, it will boost over 170 billion Euro in additional investments across Europe each year”.

One aim of the Package is to boost the consumers’ role to be more active on the market; providing more flexibility to the system by participating in the demand-response mechanism, as well as the use of new technologies as storage and creating a decentralized electricity market model.

The European Commission is aware that a well-functioning integrated electricity market relies on strong price signals and one of their priorities is to end regulated electricity prices in the retail – and wholesale sector – for all EU Member States, seeking market prices set as close to real time as possible.

Among others key measures of the Winter Package is the renewable energy use in the transport sector (biofuels, bio-liquids and biomass fuels), and if produced from basic food-based biofuels (food or feed crops), the calculation of each Member State gross final consumption of renewable energy would be capped at 7 percent of total energy consumption for road and rail use by 2020. This package also proposes to decrease the cap to 3.8 percent by 2030. Simultaneously, the Package proposes an obligation to promote other “renewables and low-carbon fuels”, including advanced biofuels, renewables transport fuels of non-biological origin (e.g hydrogen), waste-based fuels and renewable electricity. The level of this obligation is progressively increased from 1.5 percent in 2021 to 6.8 percent in 2030. Related: Cash Strapped Iranian Oil Industry Braces For Trump Impact

This Winter Package, consisting on 1,000-page reform implies a radical change of society and political institutions, as well as coordination between member states’ national energy policies. These measures demand colossal financial investments at a time when Europe faces several political and economic challenges.

The clean energy transition may face some serious financing challenges, however, using the right financial mechanisms (record low or even negative yields in the German bonds market), the EU could profit from the current circumstances in financial markets to raise investment funds at a low cost.

An investment decision will always be a compromise between risk/reward projects; i.e., less risk to obtain a maximum return. How does one make such investments (in networks, infrastructure and renewables capacities) more attractive to the private investors and/or money managers?

The commission’s “Clean Energy for All Europeans” proposals are designed to show that the energy transition is the growing sector of the future and “that’s where the smart money is” according to the European Commission. The European Commission seeks to transform the energy transition into a concrete industrial opportunity by using up to 177 billion euros of public and private investment per year (starting 2021); the level of envisaged investment should aid the European economy recovery.

In spite of some criticism on this ambitious target proposed by the European Commission, it’s important that the European Parliament and EU Member States approve the Winter Package. By doing so, Europe is taking a step to become the 21st century leader in tackling climate change and will become the most competitive energy market worldwide.

By Luis Colasante for Oilprice.com

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  • Jerzy Minsk on January 26 2017 said:
    These clowns are making Europe too expensive for all but the Davos crowd. There is no accountability in the EU. They call day night and red blue and believe their own claims. But the people always have to pay for the arrogance of the elites. Until they refuse to pay any longer.

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