Ladies and Gentlemen,
With today’s package we respond to the ever changing landscape of energy geopolitics by focusing on the three most important commitments in the energy field: security, solidarity and sustainability.
As you know energy security is one of the underlying planks of the Energy Union.
And that’s because we all remember the gas crises of 2006 and 2009 that left many millions out in the cold.
“Never again”, we said.
- So we adopted a Security of Supply Regulation in 2010
- We increased interconnectivity and infrastructure
- We created reverse gas flow options
- And we introduced rules for network use to avoid cross-border infrastructure congestion.
That is real progress.
But the stress tests of 2014 showed we are still far too vulnerable to major disruption of gas supplies.
That is backed up by the latest figures on Europe’s energy dependency: for the 10th consecutive year the EU needed to import over half of the energy it consumed in 2014.
And with political tensions on our borders still on a knife-edge, it is a sharp reminder that this problem is not “just going to go away”.
In the same vein, I can assure that our commitment to a clean energy transition is not “just going to go away”.
But the reality is that there is no quick fix in the energy transition.
We cannot get to 100% renewables overnight or improve our energy efficiency immediately at the click of a finger.
What we need is a carefully managed energy transition.
That is why when it comes to our decarbonisation plan, gas can be the bridge between coal and renewables.
The point is that gas will still be an important part of our energy system come 2030.
But our strategy is not about using more gas, but about using it more intelligently.
In this context, energy efficiency has to be prioritised if we are to improve our energy security and make good on our Paris commitments.
For every 1% increase of energy efficiency, gas imports fall by 2.6%.
So what are we are proposing today to secure Europe’s energy flow?
The two legislative proposals and the two strategies.
Let me start with the Security of Supply Regulation
The principle of solidarity is of course one of the bedrocks of the European Union. With 28 countries, that solidarity can sometimes get strained or stretched.
But when it comes to energy security, solidarity becomes essential.
And that is why solidarity is absolutely central to our proposed on a revised Security of Gas Supply Regulation.
What we have seen over the years is that national policies do not always account for the security of supply situation of their neighbours.
That we do not properly look at external threats during risk assessments.
And that commercial gas supply contracts are not transparent enough to allow preventive measures to be put into place.
So for the first time we are enshrining solidarity and regional co-operation in law to prevent and mitigate a future crisis. Under our proposals:
- All countries will have to ensure the supply of households and essential social service in case of a crisis.
- In practice this means Member States will have to give priority to protected consumers in neighbouring countries over non-protected customers at home.
- In the same spirit, Preventive Action and Emergency Plans will have to be done at a regional level. Those plans will be based on more accurate, regional assessment of common risks. This way Member States will be much better prepared for an emergency situation.
- And the principle of solidarity will also be extended to EU neighbours. Energy Community countries will now be included in preventing and tackling possible supply crisis.
And to go alongside that we are also proposing an automatic notification of gas supply contracts of duration of more than 1 year if the markets share is big enough to be relevant for security of supply (we consider a 40% market share to be an appropriate threshold).
Let me clarify: this is not about the Commission snooping on commercial deals. It is not about the Commission checking prices or making changes to private contracts.
This is about having greater transparency on the security of supply situation in a given region.
That will help us identify cases where risk assessment and prevention measures need to be updated or adapted.
And it is in that same quest for transparency that we are also proposing changes to the way Intergovernmental Agreements (IGAs) are signed.
The current system does not ensure that IGAs comply with EU law or policies.
Once they are signed it is often too late for termination and we have never seen an IGA successfully renegotiated once already enacted.
The Commission is then left with little option but to pursue legal procedures that are “too little, too late” to rectify the damage.
When you consider that around a third of the existing 124 IGAs contained provision that didn’t comply with EU law you see how damaging this can be.
Today we are proposing a mandatory assessment of any IGA before it is signed.
The Commission will notify the Member State of any doubts within six weeks and then give a final opinion of compatibility with EU law within 12 weeks.
Either way, it means that no country should sign an IGA until the Commission has given its opinion.
And when concluding the proposed intergovernmental agreement or amendment, Member States will have to take the utmost of the Commission’s opinion.
This is an important and unprecedented step to ensure a level playing field for all.
As EU markets continue to integrate, decisions taken by one Member State can have a negative impact on the security of supply in neighbouring countries or on the functioning of the EU internal energy market.
And that is why the two legislative proposals on the table today are an important part of reinforcing our energy security.
And it is for that same reason that we have also launched a new strategy on Liquefied Natural Gas and Storage.
With global supply of LNG set to increase by up to 50% in the next few years, we have a major opportunity to strengthen our resilience, diversify our supply sources and boost our competitiveness.
But to do that we have to connect Europe to the world’s LNG market by building the key infrastructure needed.
We know that this works.
Half of the gas interconnectors in Europe now operate reverse flow. That means new supply routes and a more liquid, accessible and competitive market.
But the import capacities are mainly in Western Europe. In other parts of the EU, under-developed gas markets and single supplier dependencies are still a reality.
To fix that we have today highlighted a number of priority LNG infrastructure projects in the Baltics, Central and South Eastern Europe and South West Europe.
The goal is to remove bottlenecks, diversify supply sources and bring price competition to those regions.
With the help of the regional co-operation groups in those areas we will now seek to accelerate final decisions on these priority projects.
And we will ensure they have full access to the financing options available through the Connecting Europe Facility and EFSI.
This will help ensure that those regions can reap the benefits that the international LNG markets can offer.
Because up until now we haven’t been able to do that.
European LNG imports almost halved between 2011 and 2014. We effectively became a residual market, getting what Asian countries did not need or could not afford.
But the recent decline in LNG prices has made Europe a more attractive proposal and we need to capitalise on that.
And that is why we will reinforce our dialogue with international partners to promote free, liquid and transparent global LNG markets.
In particular I look forward to working with the Japanese Presidency of the G7, developing our growing partnership with Australia, and engaging in high-level dialogues with key suppliers such as Algeria, Canada and the US amongst others.
When it comes to energy security, there is no better long term antidote than focusing on sustainable energy.
That is why we have todaypublished a new strategy on Heating and Cooling.
It is a sector that consumes half of the EU’s energy and is 75% powered by fossil fuels. It accounts for three quarters of our total gas consumption and 13% of oil consumption.
And most of that energy is used inefficiently.
90% of our buildings in the housing sector are energy inefficient and are mostly fitted with old boilers with low efficiency rates.
Maybe that is no surprise when you consider that half of our building stock was built before energy performance standards even existed. And with renovation rates below 1% you see we have much work to do.
The point is that the heating and cooling sector can be one of the main drivers towards our climate and energy goals.
Our strategy focuses on removing the barriers to decarbonisation in buildings and industry.
- We need to better link up heating and cooling to electricity networks and to renewable energy. That will reduce costs for consumers and provide storage for cheaper variable renewables. Our proposals later this year for a new electricity market design will provide the flexibility and demand response to make that happen.
- We also need to speed up renovation rates. Our 2016 review of the Energy Performance of Buildings Directive will look at how to replace inefficient boilers and incentivise renovations in multi-apartment buildings
But to do that we also need to make the right financing available.
The good news is that one the first projects under the European Fund for Structural Investments focuses on energy renovation of private residential buildings in France.
To build on that success we will launch our Smart Finance for Smart Buildings initiative. It will facilitate access to new and innovative funding mechanisms for energy efficiency renovations, for example by aggregating small projects into investible packages.
And that is important because being ambitious on energy efficiency policy is the central plank of our long-term security of supply strategy.
That’s why we’ll review our whole range of energy efficiency laws later this year and why we’re getting serious on enforcing the current laws.
Ladies and Gentlemen,
This is the just the start of a busy year in which the Energy Union turn its commitments into reality.
Today’s package is an important first step.
It is packed with detail, some of it very technical. But the thinking behind could not be any simpler.
It is about securing our energy supply and getting ready for possible interruptions.
It is about a reliable, transparent, competitive and flexible system in which energy flows across borders and consumers reap the benefits.
And it is about standing together to protect the most vulnerable.