What’s EUp? European energy policies facing the “perfect storm”

All the forecast conditions have come together: record high energy prices, uncertain gas supplies due to the Russian war on Ukraine, dramatic drought limiting the operation of thermal power plants and hydroelectric facilities, and the remaining deficiencies of many nuclear power plants. The “perfect energy storm”, which had already been brewing for several months, exploded this summer and in September 2022 to hit Europe dramatically.

Energy Cities propose to take a step back from the news of the last months to better understand the impact of political decisions on the local transition and what is to come in the next months.

An EU energy policy “big bang”

The State of the Union on the 14^th of September 2022 by President Ursula Von Der Leyen was of course very focused on climate and energy. She called in particular for a European Convention to enrich solidarity between generations in the EU founding Treaties. On the emergency front, expected new measures such as a cap on the revenues of companies that produce electricity at a low cost, measures to reduce energy consumption at peak times, and the amendment (again) of the temporary state aid framework to support utilities facing liquidity issues are detailed in a new regulation.

More importantly, President Von Der Leyen also promised “a change of paradigm, a leap into the future” in the EU energy market. The commission will work on a “deep and comprehensive reform of the electricity market” including a reflection on the dominant influence of gas on the price of electricity, in response to Member States’ demands.  

Energy Cities has long been in favor of an EU energy market reform and believes that EU policymakers should take the bull by the horns and propose a profound restructuring of the market. Energy Cities’ Board of Mayors outlines “ the European energy policy we urgently need” in this open letter which was sent a week ago to the Czech Prime Minister, as part of the rotating presidency of the European Union. It urges the EU Council to put energy sufficiency and locally-owned energy production at the core of its strategy in order to guarantee the long-term energy security of European citizens while reinforcing the EU’s core principle of social cohesion.

The letter sketches out the kind of EU policy big bang decision makers should undertake.

“Do not harm cohesion” should be more than a motto

While waiting for effective European decisions, each Member State is taking measures to prepare for the winter. All of them are facing impressive price increases, and some are also fearing supply disruptions. Measures range from energy price caps to social guarantees and calls for reduced consumption by industries and individuals. Economies and citizens are exposed to the energy crisis in very different ways.

In this context, we have observed a strong renationalization of energy policies. The European pillar of social cohesion could well be undermined by this crisis, which is widening the difference between countries dependent on fossil fuels, hit hard by the crisis, and those that are protected by social mechanisms and/or have invested in the local development of renewable energy. The “Do not harm cohesion” principle put forward by Commissioner Ferreira earlier this year must more than ever be a criterion in all policies, especially energy ones.

Where are the energy laws in the “Fit for 55” legislative package?

The “perfect energy storm” in Europe will last much longer than this winter. The reform of key energy and climate directives as part of the “fit for 55” package, which is intended to reduce our carbon emissions by 50% by 2030, could play a critical role in helping us get out of the woods (or out of the gas). Most of these texts are currently in negotiations.

The Renewable Energy Directive and the Energy Efficiency Directive, which contain key measures for local authorities on renewable production, local heating and cooling plans, etc., will soon enter a trialogue phase and are expected to be approved in the first half of 2023. The Energy Performance of Buildings Directive, which proposes mandatory retrofits for public and private buildings, supports one-stop shops, and changes the energy classification of buildings, is still under discussion in both the Council and Parliament. The two institutions should have their respective positions by the end of October and start trialogues in the following months.

Although we no longer hear about it because the current energy price crisis is redrawing all the maps, the proposed “ETS2” extension of carbon pricing to roads and buildings, as well as the associated Social Climate Fund, are now being negotiated in trialogue.

In addition, the REPOWER EU plan proposed by the Commission in May will amend the directives above, increasing the renewable EU-wide target, and the energy efficiency target and setting sector-specific targets (photovoltaic, hydrogen, biomethane, heat pumps).

In this micmac of EU legislations, are cities put forward?

Yes, because crisis management and preparation for this winter by cities is highlighted by various initiatives, including through the Cities Energy Saving Sprint of the EU Covenant of Mayors and a Factsheet drafted by the European Commission as part of its Saving Energy for a Safe Winter communication. Energy Cities is solicited and listened to by European policymakers on key issues such as the lack of staff in local authorities to carry out the energy transition (see the #LocalStaff4Climate campaign), the need to implement reforms, one-stop-shops, or integrated planning.

However, cities are not highlighted and supported enough. Mayors’ main mission is to protect citizens and ensure the prosperity of their constituency. In this crisis situation, they are again on the frontline and need to find solutions to pay their own energy bills, as they do not always benefit from the tariff shields put in place, and to protect the local economy and citizens. The impact of energy prices on every single household and every shop, every association is largely untackled and Mayors report on a wall of discontent and fear.

Cities need more financial and technical support, but also recognition in energy governance, to face this winter and the coming seasons.

In her State of the Union, President Von Der Leyen also highlighted that 700 billion euros of the Next GenerationEU should fly into our economy with the motto “Let’s get money on the ground”. Energy Cities members being “the ground” are more than willing to see this money land for their local transformation.

So who can we learn from? Spain, for example, is dedicating an important part of its Recovery and Resilience Fund to local action via different programs such as building rehabilitation, sustainable urban development, mobility, energy communities, renewable energy, etc. So, a word to the wise.

Join the conversation! In its 5 thematic hubs, Energy Cities is discussing with its members how to prepare for the coming winter and how to embrace local transformations. To exchange with other local governments facing the same challenges, please send us an email indicating also your willingness to join our hubs (if not already done).