PM+: Energy union a 'significant improvement'

Written by Frederik Dahlmann on 6 March 2015 in Opinion Plus
Opinion Plus

New plan should result in a more coherent approach to Europe's energy sector, argues Frederik Dahlmann.

The European commission's announcement on the promotion of an energy union strategy is a welcome step towards refocusing its efforts in a policy area where significant progress and impact can be achieved for the benefit of all European consumers.

Yet the idea behind the energy union is nothing new. From the early treaties on common markets for coal and nuclear, energy has been central to the European project from day one. Since the 1990s, we've seen increasing European Union attention on developing the internal energy market which was originally scheduled to be completed by 2014. So is the energy union simply a rebranding exercise?

In my view, the energy union concept reflects a growing understanding that the EU needs to concentrate on those areas where it has the greatest potential for positively affecting people's lives.

"The energy union concept reflects a growing understanding that the EU needs to concentrate on those areas where it has the greatest potential for positively affecting people's lives"

In times of volatile energy prices, geopolitical challenges along its borders, and Europe's self-styled leadership role in targeting climate change, the energy union symbolises renewed impetus within the commission to find better ways to integrate and coordinate different national energy policies.

Despite the traditional reluctance of EU member states to cede power on energy issues, the energy union aims to drive competition, strengthen security and encourage investment. Transforming the individual power and gas markets across the 28 member states and beyond is seen as an important measure to address affordability, inefficiencies, and environmental concerns.

For example, the intention to prioritise the implementation of the previous 'third energy package' is a first step in that direction. Also, this time both the commission vice president responsible for energy union, as well as the commissioner for climate action and energy, have been involved in developing the details behind the strategy.

This marks a significant improvement to previous efforts, which were characterised by a lack of coordination between different commission directorates and unintended consequences. The energy union should therefore result in a more coherent approach towards addressing the wide range of important issues affecting Europe's energy sector.

The process of further market integration will inevitably challenge established companies and their business strategies, but it also opens up the possibilities for innovation and new competitors. These are sorely needed to translate the high-level policy efforts into tangible benefits for European consumers, economies and the environment.

In my opinion, a reformed market design should particularly encourage new business models and services designed to improve energy efficiency and offering time-of-day pricing.

"A reformed market design should particularly encourage new business models and services designed to improve energy efficiency and offering time-of-day pricing"

Elsewhere, the proposal to provide the pan-EU regulatory body, the agency for the cooperation of energy regulators (ACER) with greater powers of decision making is potentially a further positive development.

However, the agency requires clear guidelines and governance arrangements as well as transparent communications to avoid a constant battle between policymakers, regulators and industry as to whom is responsible.

ACER needs to acknowledge the existence of different models of capitalism across the member states, intensify its work on the promising regional market arrangements and engage in an exchange of best practices with national regulatory bodies. Inevitably, this will lead towards regulation by principles rather than overly restrictive rules.

Energy union vice-president Maroš Šefčovič used a basketball analogy to promise "full-court pressing" on all the strategy's ambitious aims and targets. The commission needs endurance and a wide range of skills among its team members to deliver.

 

About the author

Frederik Dahlmann is an assistant professor of global energy at the Warwick business school within the University of Warwick

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