Affordable energy and competitiveness

Competitiveness of European industry is becoming an increasing concern, inter alia in the face of energy prices which are higher than in other parts of the world. High energy prices also impact commercial and residential energy consumers.

With regard to non-residential consumers, in his report, prof. Mario Draghi indicated that “EU companies still face electricity prices that are 2-3 times those in the US and natural gas prices paid are 4-5 times higher”. Prof. Draghi then identified several root causes of this gap, including the EU’s dependency on gas imports and exposure to spot markets, the impact of marginal gas (and coal) prices on electricity prices, the delays in developing long-term contract solutions (like Power Purchase Agreements) hindering benefits from increasing renewable energy sources (RES) roll-out, higher carbon costs than other regions in the world, the length of permitting processes both for power plants and network elements, and the higher and non-homogeneous taxation on energy.

High energy prices also negatively impact households, increasing the spread of energy poverty. The share of Europeans unable to keep their homes adequately warm increased by more than 50% in two years, from 6.9% in 2021 to 10.6% in 2023, before slightly reducing to 9.2% in 2024.

To tackle the current situation, prof. Draghi identified two objectives to be pursued in parallel:

• the reduction of the cost of energy for the final user;
• the acceleration of decarbonisation.

To achieve these objectives, prof. Draghi formulated a number of recommendations:

1. related to the natural gas market, including:
   (i) encouraging a progressive move away from spot-linked sourcing;
   (ii) reinforcing joint procurement; and
   (iii) limiting the possibility of speculative behaviours; and
2. related to the electricity market, including:
   (i) simplifying and streamline permitting and administrative processes to accelerate renewables, flexibility infrastructures and grids deployment;
   (ii) fostering network upgrades and investments in grids to address the electrification of the economy and avoid bottlenecks;
   (iii) decoupling the remuneration of RES and nuclear from fossil-fuel generation though long-term contracts (PPAs and two-way Contracts for Difference) to limit the impact of price of natural gas on electricity prices.

To respond to the challenges highlighted in the Draghi report, in January this year, the Commission presented the Competitiveness Compass, providing a new strategic framework to rekindle economic productivity and secure the EU’s competitive edge. Then in February it published two policy proposals directly or indirectly addressing prof. Draghi’s recommendations in the energy sector: the Clean Industrial Deal and the Affordable Energy Action Plan.

During the energy crisis in 2021-2023, many EU governments intervened partially to offset the impact of higher energy prices on EU consumers by reducing taxes and levies charged on energy bills. However, a more structural approach is needed, recognising the need to address the competitiveness and affordability challenges without distorting the price signals to promote an efficient use of energy.

In this context, during the summer the Commission formulated recommendations in three areas: (i) to accelerate the deployment of new types of renewable energy; (ii) to speed up the procedures for the rollout of grids and storage; and (iii) on electricity network charges. These recommendations were accompanied by three Commission Notices providing guidance in these areas.

Against this background, this Workshop will discuss the content of these notices and how the related policy and regulatory actions could be best pursued.

The Workshop will be correspondingly structured in three sessions:

– Session I, in the morning, will look at the prospect for innovative renewable energy technologies (such as ocean energy and floating offshore wind) being tapped in, as well as to innovative forms of deployment of renewable energy (such as agrisolar, floating solar and vehicle-integrated PV). Session I will also look at the way in which Member States could develop clear regulatory frameworks, providing legal certainty, thus facilitating the uptake of innovative renewable energy technologies.

– Session II, also in the morning, will focus on the urgent expansion and reinforcement of the energy grids, combined with the accelerated deployment of storage solutions, in order to support the growth in renewable energy generation, electricity demand and the removal of grid constraints.

– Session III, in the afternoon, will discuss the way in which energy regulators should design tariffs that reflect the needs of the electricity system and make the best use of the existing infrastructure by incentivising flexibility and encouraging consumers to use electricity when it is cheap to do so

Kindly note that this event is by invitation only.