On December 18th, European legislators found a political agreement on the “Market Design” Directive and Regulation. This agreement marks the end of a particularly intensive year for the European energy agenda, and more broadly of more than three legislative years on the famous Clean Energy Package, which aimed to reform in depth the European energy sector. While Romania just took the rotating presidency of the Council of the EU on January 1st, 2019 will be a key year for the European Union, with the election of a new European Parliament and the establishment of new European Commission. The European Union will have to deal with the tensions in the different Member States, reform itself and set its ambition, especially on climate, in the long-term. For this beginning of the year, UFE looks back at the agreement found on the future electricity market design and the major European challenges for 2019.
After many months of negotiations, the European institutions found a compromise on capacity mechanisms, one of the most political topics of the discussions on the future market design and a core issue for all French stakeholders.
Europe chooses the energy transition AND security of supply
After several months of mobilisation with many European stakeholders, UFE welcomes the final deal. Indeed, it recognises the political responsibility of Member States to guarantee the security of supply to their citizens and gives visibility for investments and stakeholders, which is a prerequisite for the energy transition. It maintains the possibility for Member States to carry out adequacy assessments at national level, in addition to a European assessment, as a basis on which to implement a capacity mechanism. It also provides for equal treatment between capacity markets and strategic reserves with respect to cross-border capacity participation.
Some progress should also be highlighted, in particular with regard to the integration of short-term markets and the development of demand-side response, which will give the European electricity market more flexibility. However, UFE regrets the restrictive governance framework set up for the future EU DSO entity as well as the arbitrary threshold of 70% availability for cross-border capacities.
The Clean Energy Package has almost come to an end: Member States should validate the political agreement on January 18th, before a formal ratification by the European Parliament and a very last adoption by the Council of the European Union.
Maintaining a European climate ambition, a key challenge for 2019
Beyond the Clean Energy Package, several legislative files directly linked to the energy sector are still under negotiations and will be on the agenda of the European institutions in 2019. This is the case for the several Mobility Packages, the rights of Europeans consumers or sustainable finance. All those files may not be closed under the Romanian presidency.
However, the Romanian presidency will have the responsibility to lay down the foundation of a European debate to define the European climate ambition in the middle and long-term.
On the one hand, the European institutions will have to find an agreement on the future EU budget for the period 2021-2027. In particular, those negotiations will determine the level of EU spending contributing to the realisation of energy and climate targets for this period – the European Commission proposed a 25% climate mainstreaming target. They will also define the organisation of research and investments programs such as Horizon Europe and InvestEU, which are key instruments to support innovations in low-carbon technologies, infrastructures and clean mobility. On the other hand, Romania will have to initiate, in cooperation with the European Parliament, Member States, civil society and industries, a global reflection to define a European strategy to reduce greenhouse gas emissions by 2050, on the basis of the first draft published by the European Commission in November 2018. For UFE, Europe will only be able to meet its climate targets if it develops an ambitious strategy that mobilizes all stakeholders, guarantees a just transition and is based on a genuine industrial policy in favour of carbon-free solutions.
Looking for a new European momentum
The task will not be easy, as 2019 will be key for the future of Europe as we today know it. This year will notably test the ability of the EU to remain united against, for the first time in the EU history, the expected exit of one of its members. With a vote of the British House of Commons scheduled on January 15th on the draft withdrawal agreement of the UK, the prospects of a “No-Deal” have never been higher.
In a context of deep identity crisis, Member States will have to redefine a European project able to meet the expectations of the European citizens. The European Summit in Sibiu on May 9th, held right on Europe Day, will be an important rendez-vous in 2019, when heads of States will have to present detailed proposals on the future of Europe. And, of course, 2019 will be synonymous of a deep political change for the Union with the elections ongoing from May 23rd to 26th, that may reshuffle the cards between major European political parties and will require to rethink political alliances.
2019 will be a year of change for the EU but it will also lead to new opportunities, provided that all actors seize them and act in favour of a sustainable Europe. UFE will be active on all those issues, mobilized to federate European and national stakeholders that are committed to make energy, climate and digital transformations a success in Europe, with the support of European citizens.