Questions and Answers on the State of the Energy Union report 2020 - Main contents

Source: European Commission (EC) i, published on Wednesday, October 14 2020.

1.

What is the State of the Energy Union Report?

The State of the Energy Union report takes stock of the progress made in the five dimensions of the Energy Union: decarbonisation, including renewables, energy efficiency, the internal energy market, security of supply and research, innovation and competitiveness. It is the first since the adoption of the European Green Deal. Importantly, this report is also accompanied by the individual assessment of the National Energy and Climate Plans, analysing the contribution each Member State is committed to make to the EU 2030 energy and climate targets, and the policies planned to attain these.

With the State of the Energy Union report the Commission today also adopts:

2.

What are the National Energy and Climate Plans (NECPs), why are they important, and what do the assessments cover?

Under the Governance Regulation, all Member States had to submit by 31 December 2019 their National Energy and Climate Plans, presenting how each EU country intends to contribute to the EU 2030 energy and climate targets. Providing a clear path for the period from 2021-2030, they important cover five areas: renewables, energy efficiency, greenhouse gas emissions reductions, interconnections and research and innovation.

Having adopted an EU-wide assessment of the NECPs on 15 September, the Commission is today presenting the individual assessments for all Member States. The documents cover the countries' progress in all five areas and evaluate how the Member States have addressed the recommendations made to them after the submission of draft NECPs in 2019. In the context of the COVID crisis and the proposal of the NextGenerationEU, the NECPs have become an important underlying element for the national recovery and resilience plans. They are also feeding into the just transition plans.

3.

What guidance is the Commission giving on the final NECP?

The Commission is issuing country-specific guidance supporting the swift implementation of the national objectives presented in the NECPs in the context of economic recovery. This guidance builds on i) national progress on the 2019 recommendations, ii) on the shortcomings identified in this assessment and iii) on the new priorities of the European Green Deal. The Commission invites Member States to take further steps in the following domains: greenhouse gas emission reduction, renewables, energy efficiency, buildings (in light of the Renovation Wave), security of supply, internal energy market, regional cooperation, citizen engagement, quantification of investment needs, just transition, energy poverty, energy subsidies and air quality.

4.

What is the link between the NECPs and the EU Recovery Plan?

The final NECPs constitute a strong basis to design climate and energy-related aspects of the national Recovery and Resilience Plans. In particular, mature investment projects outlined in the NECPs, as well as key enabling reforms that address investment and other barriers, would need to be frontloaded as much as possible. Today's assessment outlines, for each Member State, three key areas for climate and energy-related investment and reform measures that we would expect to be reflected in the national Recovery and Resilience Plans.

5.

What progress is the EU making in reducing greenhouse gas emissions?

The EU has set itself the objective of becoming the first climate-neutral continent by 2050, and the Commission has proposed a European Climate Law to anchor this goal in legislation and to provide means to ensure that the EU remains on the pathway to do so.

The EU has already overachieved its target of reducing greenhouse gas emissions by 20% below 1990 levels by 2020 under the United Nations Framework Convention for Climate Change. Total EU-27 greenhouse gas emissions are at their lowest level since 1990, mainly driven by the decrease in emissions from energy supply. This is reflected in a strong drop in emissions from activities covered by the EU emissions trading system (EU ETS), whereas emissions from activities not covered by the EU ETS have generally remained stable for several years.

At the same time, emissions from international aviation have continued to increase over the past 5 years (until the outbreak of the COVID-19 crisis). After a decrease in emissions between 2007 and 2013, overall transport emissions have also increased in each of the last 5 years.

6.

What progress is the EU making on renewables?

The share of renewable energy in the EU 27 energy mix reached 18.9% in 2018 and the EU is on track for reaching its renewable energy targets for 2020. Modelling projects the EU-27 to reach a share of renewable energy between 22.8% and 23.1% in 2020. The vast majority of Member States will meet or even outperform their targets, but three Member States (Belgium, France, and Poland) are at severe risk of failing to do so. Furthermore, two Member States (the Netherlands and Luxembourg) are at moderate risk of not meeting the target. The Commission will continue monitoring developments, support Member States and assess compliance with the final 2020 target on the basis of reports from Member States with final 2020 data, which will be submitted by 30 April 2022.

7.

What progress is the EU making on improving energy efficiency?

In 2018, the energy consumption trend was not on track for Europe to reach the 2020 targets. However, preliminary analysis shows that the significant drop in energy demand created by COVID 19 may lead Europe to meet the 2020 energy efficiency targets. As the reduction of energy consumption has not been driven by structural measures but by an unforeseen and exceptional economic situation, this is expected to be a temporary situation. It is therefore important to intensify efforts on Member State and EU level to increase energy efficiency and not to return to pre-COVID-19 crisis energy consumption levels. To that end, the Commission has launched the Renovation Wave and will revise the Energy Efficiency and Eco-design Directives.

8.

What progress is being made on reducing energy subsidies?

As outlined in the European Green Deal, fossil fuel subsidies should be phased out. This year, the Commission, for the first time, has prepared a comprehensive report on energy subsidies, in particular fossil fuel subsidies. The Report indicates that energy subsidies amounted to €159 billion in 2018, up by 5% compared to 2015. More than half of the subsidies support the clean energy transition. This is largely due to increased support measures for renewables in 2015-2018, despite the fact that costs for some technologies are falling.

Fossil fuel subsidies, which amounted to €50 billion in the EU in 2018 (representing one third of all EU subsidies), were relatively stable over the past decade with a peak of €53 billion in 2012. Fossil fuel subsidies started to increase again in 2015, growing by 6% until 2018. This is in spite of several international declarations and largely relates to the consumption of petroleum products. Some Member States however, such as Austria, Denmark, Estonia and Hungary, went against this overall trend and reduced their fossil fuel subsidies significantly. There is a clear need to step up efforts to reduce and redirect subsidies from wasteful energy consumption to measures promoting the energy transition. While slightly improving, data on energy subsidies remains fragmented and the reporting in the NECPs was largely incomplete.

9.

What progress is the EU making on the internal energy market?

In recent years, the EU has made good progress in strengthening the internal electricity and gas markets, although work is required to ensure that the markets are further integrated.

In electricity, the Clean Energy for all Europeans Package, and in particular the new electricity market design rules (adopted in 2019), paved the way to better cope with markets dominated by renewable energy production. These rules also improved conditions for consumer participation in energy markets. The Electricity Regulation aims to ensure further integration of electricity markets by strengthening, in particular, the rules on maximal utilisation of the electricity interconnectors. These rules will enhance cross-border trade, allowing to use energy resources more efficiently in the whole EU. The implementation of the comprehensive set of technical EU Regulations (network codes) is progressing with good results.

The internal market has made good progress towards its completion in the area of gas. Connectivity and access to different sources of gas continue to improve, as only three markets in the EU (Ireland, Denmark-Sweden, and Estonia-Latvia) had access to less than three sources of supply.

Shortcomings still exist both at retail and at wholesale level, which can increase costs for consumers and industry. For example, even though the electricity wholesale market was liberalised more than 20 years ago, many incumbents still hold a dominant position, thereby limiting the amount of competition. Fixing these shortcomings would also be a crucial aspect for a successful recovery, and the foundation for the transition of the economy towards climate neutrality.

10.

How are energy prices and costs developing?

European households' energy expenditure shares have been falling gradually in recent years. Households are now spending on energy a comparable share to what they were spending before the 2008 crisis. That said, energy poverty remains a challenge for the EU. In 2018, the Europe's poorest households spent on energy (on average) 8.3% of their total expenditure, and up to 15% - 22% in some Central and Eastern European Member States.

This year's report confirms that the EU's energy import bill in 2018 reached €331 billion - a third consecutive year where costs have risen - and is a stark reminder of the costs of the EU economy's high reliance on fossil fuel imports and exposure to volatile international markets. Provisional figures show that the bill is likely to have fallen in 2019, due to the lower fossil fuel prices that year, and will be considerably lower in 2020, due to the strong drop in fossil fuel consumption and prices prompted by the COVID-19 pandemic.

11.

What progress is the EU making on the competitiveness of clean energy?

The first ever competitiveness progress report (based on a comprehensive underpinning analysis of Clean Energy Transition - Technologies and Innovations Report), shows that EU industry has been successful in grasping the opportunity generated by the increased demand for clean energy technologies. The competitiveness of the sector is outperforming conventional energy source technologies with regard to value added, labour productivity, employment growth and penetration rates. Moreover, in terms of GDP, the clean energy sector is gaining importance in the EU's economy, whereas the importance of conventional energy sources is decreasing.

This year's report focuses on six important technologies: solar photovoltaics; offshore wind; ocean energy; renewable hydrogen; batteries and smart grids. Europe's industry benefits from a first mover advantage in the areas of wind and ocean energy and renewable hydrogen.

Efforts to catch up and build a competitive edge are needed in areas where the EU does not have (or not anymore) a first mover advantage. Solar photovoltaic and lithium ion batteries are particularly relevant given the projected increase in demand.

The Report also underlines that the full potential of the clean energy sector can only be realised if the EU drives the development of clean energy technologies, and only when it steps up public and private investment in research and innovation. The Commission is organising a high level event to share and discuss the findings of this report in more detail.

12.

What has been the overall impact of the COVID pandemic on the EU Energy market?

Firstly, the European energy market has maintained the safe and steady security of supply throughout this unprecedented crisis.

In economic terms, it is too early to gauge the overall impact of the COVID crisis on the EU energy market. Widespread lockdown measures across the EU radically changed the behaviour of hundreds of millions of Europeans. Recently published figures for the second quarter of 2020 show that economic activity in the EU suffered an unprecedented drop (down 14% compared to Q2 2019). The impact on energy demand was also unprecedented. Year-on-year comparison for the second quarter show that consumption of gas was down by 10% and electricity consumption fell by 11%. Low consumption and rising solar generation contributed to renewables taking a 43% share of the EU power mix in the second quarter of 2020, a new quarterly record - and highlighting again the exceptional impact of the crisis.