On 23 November 2017, the European Commission published its third Report on the State of the Energy Union, an analysis of the progress in reaching the Energy Union objectives. The Report is supplemented by an Annex on policy observations. The Commission provides an important insight into the functioning of the Energy Union.

The Annex is focused on five mutually-reinforcing and closely interrelated dimensions of the Energy Union, presented in the Commission’s Communication “A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy,”establishing the Energy Union in 2015, namely Energy security, Internal energy market, Energy efficiency, Decarbonisation, Research, innovations and competitiveness, and National energy and climate plans (NECP).

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As regards energy security, the EU continues in successful diversification of sources, routes and suppliers of energy. However, a number of EU Member States are still dependent on one single source/supplier, notably Bulgaria, Estonia, Finland, Hungary, Latvia and Slovakia which are dependent on a single gas supplier (Russia). The EU’ gas supply diversification strategy builds on transparent, flexible and liquid LNG market, the Southern Gas Corridor and Mediterranean gas hub. New interconnections and LNG terminals have significantly contributed to the improvement of security of gas supply. Nonetheless, the trans-European gas networks have to be accelerated. The Commission considers the Southern Gas Corridor as a strategic priority project and expects gas to flow from new suppliers by 2020. Special attention is given to the recent discoveries in the Mediterranean region, the EU will seek to develop mutually beneficial commercial as well as technical cooperation with countries concerned (Israel, Egypt, Cyprus, Lebanon). In order to more effectively face export curtailments or export bans, the Commission highlights the need for common rules for preventing, preparing for and handling electricity crisis with more solidarity and transparency.

The Commission’s observations on the internal energy market revealed that 17 Member States were already above 10% interconnection target for 2020 in 2017. The completion of the trans-European electricity networks is essential for successful integration of renewables. As regards the wholesale energy markets, 30 out of the 42 EU borders already participate in day-ahead market coupling. According to the Commission, implementing market coupling on all remaining European borders would render significant social welfare benefit. This requires closer coordination between neighbouring transmission system operators and regulators. A number of Member States have made good progress in opening up their wholesale markets to competition. Generally, in the EU Member States where the electricity and gas markets have been opened to competition, this led to lower prices and improved energy security. Nonetheless, uncoordinated state interventions still increasingly distort market and investment signals, this is translated into unnecessary costs for consumers. In addition, energy poverty should be addressed more effectively at the Member State level.

Energy efficiency first is a central principle of the Energy Union strategy. Significant progress on energy efficiency in recent years has resulted in the decoupling of economic growth and energy consumption. The EU is well on track to meet its 2020 energy efficiency target (to improve the EU's energy efficiency by 20 %). The Commission calls for further improvements of energy efficiency in the transport sector, including measures promoting electro-mobility and collective transport means. Special attention is given to the renovation of the EU building stock (it accounts for about 40% of energy use in the EU).

As regards decarbonisation, the EU is well on track to meet the 2020 greenhouse gas emissions targets. Only a few Member States will need to put in place additional measures, notably Austria, Belgium, Finland, Germany, Ireland, Luxembourg and Malta. According to the Commission, Member States earned nearly € 15.8 billion from the auctioning of EU ETS allowances over the period 2013-2016. Approximately 80% of this revenue has been used or is planned to be used for climate and energy purposes. Balance between supply and demand for allowances in the carbon market should be strengthen by the creation of a Market Stability Reserve. It will become operational in 2019. The Commission has observed steadily growing use of renewables. The EU is on track to meet its 2020 target to increase to 20 % the share of energy from renewable sources. With respect to the national targets of particular Member States, established by the Renewable Energy Directive, 25 Member States (all except France, Luxembourg and the Netherlands) are on track to reach their renewable energy targets. Renewable energy should be further addressed by regional cooperation fora, such as Baltic Energy Market Interconnection Plan or Central and South-Eastern Europe Gas Connectivity. However, investor’s confidence has been significantly undermined by radical regulatory changes across the Europe. The EU should endeavour to keep its regulatory framework stable and predictable. Auctioning tenders for support of renewables were successfully used in Denmark, Germany, the Netherlands and the UK. Another trend observed by the Commission relates to decentralization of energy production, in Germany, for example, 50% of the generation capacity is owned by private individuals. Deployment of renewables is considerably driven by local initiatives (more than 7500 cities from the EU and beyond are engaged in the Covenant of Mayors initiative).

The EU is a leader in low-carbon research and innovation (EU companies and citizens hold 35% of international patents in renewables). The Commission calls for bringing these innovations to the internal and export markets and turning them into growth and job opportunities. Therefore, the EU launched the SET (Strategic Energy Technology) Plan which aims to accelerate the development and deployment of low-carbon technologies. Similarly, the STRIA (Strategic Transport Research and Innovation Agenda) outlines transport R&I priority areas for future decarbonisation of the transport’s sector.  

The EU Member States have started drafting their NECPs for the period from 2021 to 2030. Since several Member States are still in a preparatory phase, the Commission calls for stepping up efforts in finalisation of the draft national energy and climate plans.

The gLAWcal Team