Wrapping up the Estonian Presidency: Energy Ministers strike difficult deal on Clean Energy Package

The Estonian Presidency ends its mandate striking a General Approach agreement at the Energy Council on 18 December on the remaining four (and most divisive) legislative proposals covering key elements of the Clean Energy Package for 2030, proposed by the European Commission in November 2016:

• the renewable energy target
• the governance of the Energy Union
• the functioning of the new European electricity market

The General Approaches will facilitate EU negotiators in meeting the challenging timeline for the adoption of the CEP in 2018, although significant divisions between the Member States and the European Parliament will have to be addressed in the trilogues. Moreover, the European Parliament (ITRE Committee) has struggled to reach a tiny majority on the revised Energy Efficiency Directive and the Governance, while the vote on the Electricity Market Design proposals has been postponed to 21 February.

Renewable Energy Directive. Member States have confirmed the mandate of the European Council in 2014 endorsing a 27% renewable energy binding target at European level. However, they reviewed the Commission’s original proposal by adding several degrees of flexibility and making the ‘gap-filling’ mechanism non-binding, meaning the Commission will have limited options if Member States are not on track to meet the 27% target.

Member States have agreed to achieve an indicative annual 1% increase in the share of renewable energy in the heating and cooling, taking fully into account the different current national situations. For the transport sector, the renewables target for 2030 is set by the Council at 14% for each Member State, with a sub-target of 3% for ‘advanced biofuels’(down from the Commission’s proposed 3.6%)). Electric vehicles get a firm boost, with the introduction of a 5x multiplier for renewable electricity in transport. On the 7% flat cap on first generation biofuels towards 2030, Member States who introduce a lower cap may deduct the difference from their renewable transport target.

The level of ambition of the overall renewable target is lower than the one adopted by the ITRE Committee of the European Parliament on 28 November, which endorsed a 35% target, albeit leaving it binding only at EU level.

Regulation on the Governance of the Energy Union. The Council has set an indicative trajectory towards Member States’ achievement of the EU’s renewable energy target (27% by 2030), based on three non-binding milestones: 24% in 2023, 40% in 2025 and 60% in 2027, which would be the reference at both EU and national levels. These values are calculated on the basis of the 20% renewables target set for 2020 as the starting point (“0%”) and the 27% 2030 target as the end point (“100%”).

Member States will submit their draft energy and climate plans to the Commission. Should the Commission identify Member States’ ambition gaps towards the 2030 target, it can issue non-binding recommendations to increase their voluntary contribution to the EU’s target. A list of criteria has been included to measure the initial level of ambition of Member States in their planned contribution for 2030 and to allow the Commission to assess gaps in the national policy measures.

On 7 December, the ITRE/ENVI Committees of the European Parliament adopted the report of C. Turmes and M. Rivasi (Greens) on the proposed Governance regulation with 61 votes in favour and 46 against.  The report sets a tighter timeline for Member States to submit their energy and climate plans (June 2019 and every five years) and asks the Commission to take remedy measures to ensure their contribution to the EU’s targets. Moreover, it establishes a clear link between the national plans and the “zero net emissions” target endorsed by the Paris Agreement. Finally, it requires Member States to address energy poverty by setting a specific national target.

Electricity Market Design Directive & Regulation. After a lengthy controversial negotiation, EU Ministers finally agreed upon a General Approach on the two legislative proposals on the electricity market design (directive and regulation).  The new framework aims at making the EU’s electricity markets fit for boosted renewable energy, more cross-border electricity flows, strengthened competition and consumer participation in the market. The European Parliament is still striving to find an agreement on the many divisive proposals and the vote in the ITRE Committee has been postponed to 21 of February.

During the Council’s marathon discussion (lasting from 9:30am to past midnight), most disagreement among Member States has concerned the European Commission’s proposal to put a limit to regulated electricity prices (capping prices for consumers). While France, Hungary, the UK and Romania were in favor of price regulation, Germany, the Netherlands, Sweden and others firmly opposed them. The final agreement, however, has no limit to capping energy prices and has not been particularly welcomed by Commissioner M.A. Cañete.  

The other most disputed issue has been the Commission’s proposal to set an emissions limit of 550 grams of CO2/KWh on power plants that can receive financial support for security of supply reasons. The final compromise increases the target to “more than 700 kg CO2 on average per year per installed kW” and new power plants will be eligible to participate in capacity mechanisms after 2025 only if they meet those standards. Between 2025-2030, such financial support should fall by 5%  a year.

Finally, Member States have redefined the remit of the Regional Operation Centers proposed by the European Commission by renaming them Regional Security Coordination Centres, leaving decision-making power to the Member States on issues such as capacity calculation for interconnectors, security of supply and risk preparedness.

The General Approach on the Electricity Market Design has been opposed by 9 Member States “for different reasons”: Belgium, Croatia, Czech Republic, Hungary, Luxembourg, Netherlands, Romania, Slovenia and Slovakia.

The next steps will be the plenary vote on the Renewable Energy Directive, the Governance Regulation and the Energy Efficiency Directive (January/February) and ITRE vote on the electricity market design (21 February). All of which could have unexpected outcomes. Afterward, trilogues between the Council, the Parliament and the Commission will start, aiming at a final decision.