The European Commission yesterday presented the REPowerEU Plan, its response to the hardships and global energy market disruption caused by Russia's invasion of Ukraine.
According to the Commission there is a double urgency to transform Europe's energy system: ending the EU's dependence on Russian fossil fuels, which are used as an economic and political weapon and cost European taxpayers nearly €100 billion per year, and tackling the climate crisis. By acting as a Union, Europe can phase out its dependency on Russian fossil fuels faster.
85% of Europeans believe that the EU should reduce its dependency on Russian gas and oil as soon as possible to support Ukraine. The measures in the REPowerEU Plan can respond to this ambition, through energy savings, diversification of energy supplies, and accelerated roll-out of renewable energy to replace fossil fuels in homes, industry and power generation.
Energy savings are the quickest and cheapest way to address the current energy crisis, and reduce bills. The Commission proposes to enhance long-term energy efficiency measures, including an increase from 9% to 13% of the binding Energy Efficiency Target under the ‘Fit for 55' package of European Green Deal legislation. Saving energy now will help us to prepare for the potential challenges of next winter. Therefore the Commission also published today an ‘EU Save Energy Communication' detailing short-term behavioural changes which could cut gas and oil demand by 5% and encouraging Member States to start specific communication campaigns targeting households and industry. Member States are also encouraged to use fiscal measures to encourage energy savings, such as reduced VAT rates on energy efficient heating systems, building insulation and appliances and products. The Commission also sets out contingency measures in case of severe supply disruption, and will issue guidance on prioritisation criteria for customers and facilitate a coordinated EU demand reduction plan.
Diversifying supplies and supporting our international partners
The EU has been working with international partners to diversify supplies for several months, and has secured record levels of LNG imports and higher pipeline gas deliveries. The newly created EU Energy Platform, supported by regional task forces, will enable voluntary common purchases of gas, LNG and hydrogen by pooling demand, optimising infrastructure use and coordinating outreach to suppliers. As a next step, and replicating the ambition of the common vaccine purchasing programme, the Commission will consider the development of a ‘joint purchasing mechanism' which will negotiate and contract gas purchases on behalf of participating Member States. The Commission will also consider legislative measures to require diversification of gas supply over time by Member States. The Platform will also enable joint purchasing of renewable hydrogen.
The EU External Energy Strategy adopted today will facilitate energy diversification and building long-term partnerships with suppliers, including cooperation on hydrogen or other green technologies. In line with the Global Gateway, the Strategy prioritises the EU's commitment to the global green and just energy transition, increasing energy savings and efficiency to reduce the pressure on prices, boosting the development of renewables and hydrogen, and stepping up energy diplomacy. In the Mediterranean and North Sea, major hydrogen corridors will be developed. In the face of Russia's aggression, the EU will support Ukraine, Moldova, the Western Balkans and Eastern Partnership countries, as well as our most vulnerable partners. With Ukraine we will continue to work together to ensure security of supply and a functioning energy sector, while paving the way for future electricity and renewable hydrogen trade, as well as rebuilding the energy system under the REPowerUkraine initiative.
Accelerating the rollout of renewables
A massive scaling-up and speeding-up of renewable energy in power generation, industry, buildings and transport will accelerate our independence, give a boost to the green transition, and reduce prices over time. The Commission proposes to increase the headline 2030 target for renewables from 40% to 45% under the Fit for 55 package. Setting this overall increased ambition will create the framework for other initiatives, including:
- A dedicated EU Solar Strategy to double solar photovoltaic capacity by 2025 and install 600GW by 2030.
- A Solar Rooftop Initiative with a phased-in legal obligation to install solar panels on new public and commercial buildings and new residential buildings.
- Doubling of the rate of deployment of heat pumps, and measures to integrate geothermal and solar thermal energy in modernised district and communal heating systems.
- A Commission Recommendation to tackle slow and complex permitting for major renewable projects, and a targeted amendment to the Renewable Energy Directive to recognise renewable energy as an overriding public interest. Dedicated ‘go-to' areas for renewables should be put in place by Member States with shortened and simplified permitting processes in areas with lower environmental risks. To help quickly identify such ‘go-to' areas, the Commission is making available datasets on environmentally sensitive areas as part of its digital mapping tool for geographic data related to energy, industry and infrastructure.
- Setting a target of 10 million tonnes of domestic renewable hydrogen production and 10 million tonnes of imports by 2030, to replace natural gas, coal and oil in hard-to-decarbonise industries and transport sectors. To accelerate the hydrogen market increased sub-targets for specific sectors would need to be agreed by the co-legislators. The Commission is also publishing two Delegated Acts on the definition and production of renewable hydrogen to ensure that production leads to net decarbonisation. To accelerate hydrogen projects, additional funding of €200 million is set aside for research, and the Commission commits to complete the assessment of the first Important Projects of Common European Interest by the summer.
- A Biomethane Action Plan sets out tools including a new biomethane industrial partnership and financial incentives to increase production to 35bcm by 2030, including through the Common Agricultural Policy.
Reducing fossil fuel consumption in industry and transport
Replacing coal, oil and natural gas in industrial processes will reduce greenhouse gas emissions and strengthen security and competitiveness. Energy savings, efficiency, fuel substitution, electrification, and an enhanced uptake of renewable hydrogen, biogas and biomethane by industry could save up to 35 bcm of natural gas by 2030 on top of what is foreseen under the Fit for 55 proposals.
The Commission will roll out carbon contracts for difference to support the uptake of green hydrogen by industry and specific financing for REPowerEU under the Innovation Fund, using emission trading revenues to further support the switch away from Russian fossil fuel dependencies. The Commission is also giving guidance on renewable energy and power purchase agreements and will provide a technical advisory facility with the European Investment Bank. To maintain and regain technological and industrial leadership in areas such as solar and hydrogen, and to support the workforce, the Commission proposes to establish an EU Solar Industry Alliance and a large-scale skills partnership. The Commission will also intensify work on the supply of critical raw materials and prepare a legislative proposal.
To enhance energy savings and efficiencies in the transport sector and accelerate the transition towards zero-emission vehicles, the Commission will present a Greening of Freight Package, aiming to significantly increase energy efficiency in the sector, and consider a legislative initiative to increase the share of zero emission vehicles in public and corporate car fleets above a certain size. The EU Save Energy Communication also includes many recommendations to cities, regions and national authorities that can effectively contribute to the substitution of fossil fuels in the transport sector.
Delivering the REPowerEU objectives requires an additional investment of €210 billion between now and 2027. This is a down-payment on our independence and security. Cutting Russian fossil fuel imports can also save us almost €100 billion per year. These investments must be met by the private and public sector, and at the national, cross-border and EU level.
To support REPowerEU, €225 billion is already available in loans under the RRF. The Commission adopted legislation and guidance to Member States today on how to modify and complement their RRPs in the context of REPowerEU. In addition, the Commission proposes to increase the RRF financial envelope with €20 billion in grants from the sale of EU Emission Trading System allowances currently held in the Market Stability Reserve, to be auctioned in a way that does not disrupt the market. As such, the ETS not only reduces emissions and the use of fossil fuels, it also raises the necessary funds to achieve energy independence.
Under the current MFF, cohesion policy will already support de-carbonisation and green transition projects with up to €100 billion by investing in renewable energy, hydrogen and infrastructure. An additional €26.9 billion from cohesion funds could be made available in voluntary transfers to the RRF. A further €7.5 billion from the Common Agricultural Policy is also made available through voluntary transfers to the RRF. The Commission will double the funding available for the 2022 Large Scale Call of the Innovation Fund this autumn to around €3 billion.
The Trans-European Energy Networks (TEN-E) have helped to create a resilient and interconnected EU gas infrastructure. Limited additional gas infrastructure, estimated at around €10 billion of investment, is needed to complement the existing Projects of Common Interest (PCI) List and fully compensate for the future loss of Russian gas imports. The substitution needs of the coming decade can be met without locking in fossil fuels, creating stranded assets or hampering our climate ambitions. Accelerating electricity PCIs will also be essential to adapt the power grid to our future needs. The Connecting Europe Facility will support this, and the Commission is launching today a new call for proposals with a budget of €800 million, with another one to follow in early 2023.