EnergyEnergy

European Energy PolicyEuropean Energy Policy

EnergyEnergy

Why energy policy matters for Europe

EU pays 2.5% of its annual GDP to import energy: € 270 bn for oil € 40 bn for gas

Several Member States rely on a single supplier for gas

EU = 20% of world energy use & largest global energy importer But EU will increasingly compete for energy sources

Energy represents 80% of EU GHG emissions

Investment challenge around € 1 trillion by 2020 (mostly private sector)

Energy costs are an important and increasing part of households' and businesses' expenses

EnergyEnergy

India and China accounting for 50% of growth: the EU will increasingly compete for energy resources

Global demand is on the rise – effects on energy security and climate changeGrowth in primary energy demand (in Mtoe), IEA 2011

Source: IEA, World Energy Outlook 2011

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The security of supply challenge

> 75 %

50 - 75 %

25 – 50 %

< 25%

0%

% of missing gas supply – 300 mcm/d for 14 days 6-20 January 2009

Source: European Commission

The January 2009 gas crisis showed the lack of physical interconnections and the poor functioning of the EU internal market, with several Member States facing severe energy shortages for several days.

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5

Efficient pathway (GHG emissions) in “Low-carbon economy Roadmap” (March, 2011):

-40% in 2030

-60% in 2040

0%

20%

40%

60%

80%

100%

1990 2000 2010 2020 2030 2040 2050

0%

20%

40%

60%

80%

100%

Current policy

Power Sector

Residential & Tertiary

Non CO2 Other Sectors

Industry

Transport

Non CO2 Agriculture

The climate change challenge

Reduction of GHG emissions by 80-95% by 2050

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The investment challenge

Total investment needs in the electricity and gas sector between 2010-20: over € 1 trillion

Power generation: ~ € 500 bn Transmission and distribution: ~ € 600 bn

Distribution: ~ € 400 bn

Transmission: ~ € 200 bn

Renewables: ~ € 310-370 bn

Investments of over € 1 trillion will be needed by 2020 to replace obsolete power plants, to modernise and adapt infrastructure to the latest technologies and to cater for demand for low carbon energy.

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Where are we today? (1)

Reduce greenhousegas levels by 20%

Increase share of renewables to 20%

100%

Reduce energyconsumption by

20%

-10%Current

trend to 2020

-20%

20%

Current trend

to 2020

Current trend

to 2020

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Where are we today? (2)

Energy markets remain highly concentrated:• need to encourage new entrants and independent suppliers• need to encourage consumer switching

Only 3% of EU electricity traded across borders

Several regions still disconnected from the rest of the EU

Investment challenge is huge and uncertainty amongst investors very high while the current investment cycle should be the one which transforms Europe's energy system

EnergyEnergy

. Implementation of the Energy Efficiency DirectiveEnergy efficiency obligation schemesExemplary role for public sector (buildings)Smart metering and billing

. Pursuing eco-design and energy labelling measures

. Reinforced financing schemes and programmes

1 - Achieving an energy-efficient Europe

EnergyEnergy

2 - Building a truly pan-European integrated energy market

. Communication on the Internal Market for Energy (October)

» Take stock on the way to completing the IEM by 2014 and encourage MS to step up efforts

» In depth analysis of energy markets and country-by country assessment

. Communication on Renewable Energy Strategy (June)

» Accelerate development and look beyond 2020

» Consider market design and infrastructure

. Progress towards adoption of Regulation and funding framework for energy infrastructure post-2013 (CEF)

EnergyEnergy

Infrastructure priorities for 2020-2030

Baltic Energy Market Interconnection

Plan

Electricity & Gas

North-South Gas Corridorin Western Europe

North-South GasInterconnections

& Oil Supply

South Western Electricity Interconnections

Central / South Eastern Electricity Connections

SouthernGas Corridor

North SeasOffshore

Grid

Gas

Electricity

Electricity and Gas

Oil and Gas

Smart Grids for Electricity in the EU

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3 - Achieving the highest level of safety and security

. Proposals to improve the regulatory framework for nuclear safety (late 2012/early 2013)

» Conclusion of stress test process

» Revision of Nuclear Safety Directive

» Proposal on nuclear liability and insurance

. Interinstitutional discussions on proposal on offshore oil and gas safety

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4 - Extending European leadership in energy technology and innovation

. Launch of a Smart Cities and Communities Initiative (Communication in July)

» Engage business & regional/local public authorities in technological demonstration and testing programmes

. Communication on Carbon Capture and Storage (late 2012)» Analyse main reasons for delays and encourage Member

States to step up efforts

» Explore options for accelerating CCS demonstration

. New Communication on Energy technologies & market deployment of energy innovation (1st quarter 2013)

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5 - Strengthening the external dimension

. Implementation of actions from the Communication on international energy relations and security of supply, including:» Continuation of progressive integration of Southern

and Eastern neighbours in EU energy market and cooperation with key suppliers

» Discussions about proposed information exchange mechanism on agreements with third countries

» further diversify sources and routes (e.g. Southern Corridor )

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The Energy Roadmap 2050 as a basis for developing a long-term policy framework

Supported by scenario analyses

. EU objective for 2050 – GHG emissions down to 80-95% below 1990 levels

. Looks forward to elaboration of a low-carbon 2050 strategy – a framework for longer-term action in energy and related sectors

. Give more certainty to governments and investors

. Explore routes towards a low-carbon energy system by 2050 which improve competitiveness and security of supply

. Basis for developing the 2030 policy framework and concrete milestones with MS, EP and stakeholders

European Council Aim of the Roadmap

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Energy savings throughout the system are crucial

Primary energy consumption until (in Mtoe)

1000

1100

1200

1300

1400

1500

1600

1700

1800

1900

2000

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Range for current trends scenarios

Range regarding decarbonisation scenarios

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15%

20%

25%

30%

35%

40%

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Range for current trends scenarios

Range regarding decarbonisation scenarios

Electricity plays an increasing role

Share of electricity in various scenarios (in % of final energy demand)

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0%

25%

50%

75%

RES Gas Nuclear Oil Solid fuels0%

25%

50%

75%

RES Gas Nuclear Oil Solid fuels

2030 2050

Renewables move centre stage – but all fuels can contribute in the long-run

Decarbonisation scenarios - fuel ranges (primary energy consumption in %)

2005

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Decarbonisation is possible and can be less costly than current policies in the long-run

Source: European Commission |

In all decarbonisation scenarios, total costs are similar to current policies (CPI scenario)

Capital expenditure increases steadily over time, throughout the system

Fuel costs drop in long-run

Investment expenditure goes into the EU economy rather than to non-EU for energy imports0

5

10

15

20

Average energy system costs (p.a. 2011 to 2050 as % of GDP)

2005

Range of scenarios, CPI most

expensive

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The paths to take – towards “no regrets” actions

Priorities emerging from Roadmap

Need energy efficiency gains throughout Need to invest in more electricity interconnections and

storage Renewables – need to aim at least half of gross final

energy consumption in 2050, at least 60% in electricity Need modernised intelligent infrastructure, with active

role for consumers and demand-side flexibility Need an efficient internal market, with more electricity

and, at least in the transition, gas

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