EU market integration key for ‘Energy Union’

International Energy Agency praises EU’s low carbon energy progress, but presses the need for internal energy market

Despite the EU’s leadership in low carbon energy, more market integration is needed if the bloc is going to manage the costs of its clean energy shift. This is according to the International Energy Agency (IEA)’s Energy Policies of IEA Countries: European Union – 2014 report, which says that there remains much room for improvement for Europe to achieve its new Commission’s aim of ‘Energy Union’.

The IEA says that much of the integration of Europe’s energy market has been confined to northern and western Europe, and that increasing market distortion will not be addressed until interconnections are built across the whole of the EU.

The report is not all critical. The EU is praised for reducing its energy carbon intensity and taking the lead in vehicle fuel economy standards. Thanks to the EU’s ‘20:20:20’ framework, there has been lower energy intensity and an ‘unprecedented’ boom in renewable energy. To build on this success and looking at 2030, reform of the EU Emissions Trading Scheme (ETS) to support low carbon is needed, says the report.

But there are big issues in Europe: markets need to accommodate more renewables; half of the EU’s nuclear capacity is due to shut in the next ten years; and diversification of energy sources is needed to enhance security.

The IEA report reiterates the position it has taken in the past on the need for a European internal energy market. It recommends a new commitment towards this to better integrate renewables and alleviate the need for country-specific capacity markets.

IEA Executive Director Maria van der Hoeven said that an energy union ‘should not represent a buyer’s cartel,’ and that ‘the EU must better pool its resources within the internal energy market to enhance both energy security and the competitiveness of its industry.’

The EU will need to work towards a successful integrated 2030 Climate and Energy Framework focusing on energy efficiency and with a strong EU ETS, says the report. It also recommends an enhanced EU-wide cooperation on uprates, safety upgrades and lifetime extensions for nuclear plants.

• In the shorter term, European energy demand will be met this winter, according to the European Network of Transmission System Operators for Electricity. The organisation’s 2014/15 Winter Outlook shows that overall generation in Europe will be sufficient to cover demand this winter, even under severe conditions.