Vice-President Šefčovič on the 'State of Play of Energy Union'

Speech by Vice-President Maroš Šefčovič on the "State of Play of Energy Union - Outlook and Priorities" in the Embassy of the Slovak Republic in Germany

State Secretary Baake

Mr Kapferer,

Mr Rolle,

Our host, Ambassador Lizák,

Distinguished guests,

I recognise in this room many familiar faces from the Berlin-based diplomatic corps, from Germany's political establishment, investors and entrepreneurs, civil society and research institutions.

Let me thank all of you for your interest in the Energy Union and in the important role Germany is playing in it. Your interest and presence here today is yet evidence to the fact that our energy policies are more inter-connected than ever been before, that decisions taken in one European capital have significant implications on all others. By the same token, our ability to address energy-related challenges (from fighting climate change to ensuring energy security) are much more effective when our solutions are coordinated across borders.

In other words it is evident that an Energy Union is more needed than ever. And that is precisely why the Energy Union was one of the highest priorities of this Commission right from the start.

To make sure we're all on the same page, let me remind you that what we call the 'Energy Union' is in fact much more than the traditional energy policies. For the first time, this Commission put in place an integral policy to address energy at the broadest senses: as a cross cutting policy issue which is strongly tied together with related questions like transport, agriculture, research and investment, competition and consumer rights, regional and urban planning, etc.

This might sound easy in theory; in practice it means a lot of work. It's now been almost two years since we announced the Energy Union Strategy; two years which have been very intense.

Several months after unveiling the Strategy, we put forward our first legislative package addressing energy efficiency labelling of electric appliances, legislation to empower energy consumers, and revision of Europe's carbon trading system, which I will get back to in a few moments. We then complemented these efforts before this summer with our 'effort sharing system', with proposed targets for all Member States in sectors which are not covered by ETS, like agriculture, buildings, and transport.

In this sense, the EU i did not wait for the Paris Agreement to be reached, signed, nor ratified. We moved ahead on our own very ambitious targets. In parallel, we played a decisive role in crafting the global Agreement, in bringing other countries on board, and finally, it was the EU which successfully triggered the Agreement into force. This is something that Europeans should feel very proud of.

The Commission is encouraging this transition, among others, through our Digital Single Market Strategy and we welcome the national and regional initiatives such as 'Smart Factories' in the Netherlands, the UK's High Value Manufacturing strategy, and the Industrie 4.0 here in Germany.

The measures foreseen under the Digital Single Market Strategy are essential in assisting European manufacturing companies to successfully transit to the new era of the industrial economy, characterised by advanced manufacturing, the inter-twining of manufacturing and services, the digitalisation of industry and clean products and production processes.

Ladies and Gentlemen,

Over the course of last year, I travelled to the Member States in order to meet with their governments, industries, and civil society organisations in order to campaign for the Energy Union, explain what it could offer for each country and hear back what the priorities are for them. This led to the first State of the Energy Union which we presented last year, an exercise we will soon follow for the second time.

Early this year we marked another major milestone with the adoption of the Security of Energy Supply legislative Package. This time the emphasis was on securing Europe's energy supply at competitive prices and addressing the efficiency of our domestic consumption for heating and cooling. And before summer we introduced the Effort Sharing

Another major legislative package is now being finalised, including measures on Renewable Energy, Market Design, Governance of the Energy Union, and Energy Efficiency.

Once it is out, we could proudly say that the year of 2016 was indeed the Year of Delivery; the year of transition from fragmentation into integration, from energy precarity to energy security, from energy waste to energy efficiency, to taking responsibility to stopping global warming. Without sounding over-optimistic, I believe we are facing tremendous opportunities, which we must recognise and seize.

And we can already see concrete results, especially here in Germany where a major part of renewable energy is produced by citizens, using renewable energy sources and smart software; where some of the greatest technological breakthroughs are taking place, as I witness each time that I visit this country.

So yes, your 'Energiewende' attracts a lot of interest in Brussels. Over the last two years, I attended the Hannover Messe to appreciate the latest innovations in the field of energy; what you call industrie 4.0 and what I would like to become Europe 4.0.

Let me add that the 'Energiewende' also looks good from outside Europe. During last year's Hannover Messe I was accompanied by Chancellor Merkel but also by the Prime Minister of India who came with a very large delegation to see how the Indian economy highly interested in European technologies including smart grids, virtual power plants or renewable energies and in connecting the remaining fourth of their population to electricity (some 300 million people). Germany and Europe therefore still have a competitive advantage in global markets when it comes to high value-added products and services.

Yet, maintaining the global competitiveness of Europe's industry requires continuous modernisation of the industrial fabric, increasing productivity, and achieving adequate levels of investment. It requires improving the business environment and ensuring that workers have the skills industry needs.

We therefore need new solutions, focusing investments on integrating technology, production processes, services and design. Fragmented national solutions will not achieve sufficient scale. An EU level effort supporting the aggregation and coordination between national and regional initiatives is essential for Europe to win in the industrial leadership race.

I mentioned earlier the cross-policy approach and that is also very relevant when it comes to our approach to Europe's industries. We are aiming at better integration of our industrial competitiveness objective into other EU policies. The Commission has therefore incorporated a strong industrial dimension into several major initiatives helping to put in place the right framework conditions and lifting market barriers. The aim is creating a 'Deeper and Fairer Internal Market with a Strengthened Industrial Base'.

Another challenge that we are addressing is regulation stability, an issue that I constantly hear about from investors, all across Europe. In order to secure long term results there is a need for long term predictable frameworks - and this is one of the priorities of the 2030 Climate and Energy Policy Framework and the Energy Union strategy.

This brings me to the Emissions Trading System (ETS), and effort sharing mechanism which I mentioned earlier. They both help ensuring predictability and spurring technological development from the relevant actors.

Let me reiterate that these climate targets are ambitious but they do not need to hinder our economic growth. In fact, one of our greatest accomplishments of Europe's industry is the fact that we managed to decouple growth from CO2 emissions. Between 1990 and 2014, the GDP of the EU grew by 46% while emissions decreased by 23%. So with the right mechanisms in place, there shouldn't be a contradiction between the two!

I'd take it a step further and say that not only do our energy and climate targets compatible with boosting economic competitiveness, but they will in fact contribute to increased competitiveness of European industry.

I have mentioned before the interest of emerging economies in our technologies and services. Indeed, the transition to a low carbon economy represents an enormous opportunity for companies with new business sectors, new business models and new job profiles emerging. Putting the EU at the forefront in areas such as smart grid, smart home technology and clean transport is central to turning the Energy Union into a motor for growth, jobs and competitiveness.

One of the ways in which we in the Commission can help encourage the transition and assist our industry as by expediting the Energy Union integration. This will allow our industry to enjoy the economies of scale of a large market such as the European one.

Take for example energy prices, which are higher compared to other major economies. Yet, by building a functioning internal and electricity market we can offset this burden and make our markets more competitive.

For example, the development of key interconnectors between energy grids should abolish bottlenecks hindering offers from meeting demands. All European industries will gain from that market but also through the business opportunities enhanced intra-EU trade in energy provides.

To help create an integrated EU energy market, the European Commission has drawn up a list of 195 key energy infrastructure projects known as projects of common interest (PCIs). These are essential for completing the European internal energy market and for reaching the EU's energy policy objectives of affordable, secure and sustainable energy.

In order to ensure that our climate policy does not hinder our growth, Member States have the possibility to support Energy Intensive Industries when it comes to research and development, training, employment and indirect costs relating to the Emissions Trading System.

Another important aspect when it comes to the link between climate policy and growth is self-consumption. As you know, we are strongly encouraging consumers' energy production, as it can lower consumers' energy bills, and increase the share of renewables. We therefore call on Member States to avoid discriminatory charges for self-consumption.

At the same time, we do recognise that self-consumption can reduce the revenue of grid operators unless we adapt the regulatory framework and in particular the methodologies for setting network tariffs. Such measures of the new electricity market design will be in the upcoming legislative package.

I would like to conclude by saying a few words about research and innovation. As you may know, gross domestic expenditure on research and development has marginally grown throughout the crisis but remains insufficient and is often not used efficiently. Furthermore, funds that are spent in R&D are not necessarily relevant to business and therefore do not always contribute to growth.

Science can create jobs and growth but only under very certain conditions: these include low administrative burdens and accessible finances especially for the early stages.

There are many financial instruments available at EU level to ensure the link between research and industry is smooth and mutually-beneficial. There are the famous Juncker Funds which have been functioning very well in leveraging private investment. It is also worth mentioning the SET Plan programme which aims to accelerate the development and deployment of low-carbon technologies. And of course Horizon 2020, the biggest EU Research and Innovation programme ever with nearly €80 billion of funding available over 7 years. These programmes and funds are critical in order to ensure that our scientists and researchers can contribute to Europe's' economy.

Ladies and Gentlemen,

I strongly believe that the Energy Union will become the next major integration project of the European Union only if it is taken up by energy providers, consumers, service providers, industry and citizens across Europe. And of course here in Germany, Europe's biggest economy.

I am therefore calling on your to continue such debates here as well as in other European cities. Take a position, express your views, create platforms for exchange of views like today's. This is extremely important for the legitimacy of the process.

I have touched upon many different policies and fields but I suggest I stop here. Let me stop here so I can also listen to you and hear your thoughts about some of the issues that I've mentioned.

Thank you for your attention!

SPEECH/16/3661