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03.02.2016
There should be an EU framework for energy poverty
Christian Egenhofer, Director of the Energy Climate House
AUTHOR: Interview questions by Atanas Georgiev

Interview from the Jan/Feb issue of the UTILITIES magazine
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Mr. Egenhofer, could you please tell our readers more about your organization CEPS, as well as one of its newest initiatives – the Energy Climate House?

The Centre for European Policy Studies, CEPS as it is known is a Brussels-based think-tank, covering all EU issues including for example macroeconomics, internal security and rights, agriculture or trade. Obviously it also researches on energy and climate, which has become one of CEPS’ priorities. At the origin of CEPS in 1983 was the idea that European integration is not just a project of the elites but also needs what one would call ‘civil society’ or ‘non-governmental networks‘ as checks and balances of what governments say and do. CEPS was the first of its kind in the EU. Very important has been that CEPS, later with other EU think-tanks undertakes analyses from a European perspective, i.e. it focuses on European costs and benefits rather than on those from the member states. By doing this, CEPS always involves stakeholders in its work, notably governments from the EU and member states, business and industry, NGOs and academia.

With the creation of Energy Climate House (www.ceps-ech.eu), CEPS has acknowledged the importance of energy for the EU.

On the one hand, ECH analyses the most salient challenges facing the energy sector from a pan-European and policy-oriented perspective and addressed them in a global context. To date, Europe is home to a number of institutes specialising in energy or climate change as well as the geopolitics of oil and gas but misses pan-European analysis and networks in the field of electricity. We want to fill this gap.

On the other hand, we want to bring more focus and visibility to CEPS analysis and notably strengthen co-operation among member states. This is also why the South East European energy project is important.

What we want to create with Energy Climate House is a club for people to develop ideas, a centre for European and policy-oriented research and analysis and a tool to communicate solutions to today’s energy, climate change and geopolitical challenges.


What are the main policy challenges in the EU now in the energy and climate field?

The overriding challenge of the EU is to trigger the necessary investment to meet the EU’s objectives. This means investment first to modernize the EU energy sector and at the same time to ensure that this investment is increasingly low-carbon. As we all know, energy is essential to economic growth, competitiveness and sustainability. Achieving EU energy and climate objectives will require sustained investment across the energy supply chain: from indigenous supply and imports, through gas pipelines and electricity grids, power generation, notably from renewable energy and through distribution grids. The European Commission estimates that over EUR 1 trillion may be required until 2020. The majority of this will be needed for power generation, mostly renewables and grids.

The by far biggest majority of this investment will need to come from private investors. This will require a market framework, which rewards investment. This is currently not the case.

The year 2016 will a crucial period for the shaping this market. Among the most important legislative initiatives for energy are the EU2030 climate and energy framework, Energy Union governance and its regional focus, gas market reform and most importantly, EU Emissions Trading System structural reform and the review of EU – wholesale and retail – markets. At the political level, the outcome of the EU’s debate on ‘energy governance’ will be critical for where the EU will be heading in energy. As time goes by transport and CO2 will increasingly become important. We want to develop our own proposals in all these areas.


What could we expect from the development of the Energy Union concept? How would it affect Bulgaria and Southeast Europe in particular?

Although the term was first coined by the former Polish Prime Minister and now Council President Donald Tusk, it was Commission President Jean-Claude Juncker who, by elevating it to a Commission mission statement, succeeded in forging a new EU consensus on energy and climate change at the October European Council meeting. It is a major achievement that for the first time since the 2007-2009 climate and energy package was agreed, there is a broad consensus on energy and climate change, even if it is fragile. Essentially this was made possible by linking the internal energy market and climate change agendas to security of supply, solidarity and infrastructure. This notably meets the interests of Central and Eastern Europe as well as the peripheral member states.

Whether this strategy will work in the long run, will depend on whether the European Commission will be able to maintain this consensus and then, will be able to adopt and implement the necessary measures. By now it has become clear that although there are five so-called dimensions, the central area, or spine if you wish is the implementation of internal market legislation. If the EU does not succeed in this field, the Energy Union will have failed. The investment challenge cannot be met without an efficient market framework. This is true for all member states. Neither private investment nor EU money will flow unless there is a transparent and competitive market. Unfortunately, many countries in the EU, especially in Central and Eastern Europe are still away from this. On the other hand, there is some progress, for example in Romania.

If the European Commission wants to be successful, it is essential that it finds credible answers to a number of trade-offs, e.g. energy prices to consumers and modernisation of the energy sector, how to develop renewables while keeping costs at bay, the need for grid integration and the lack of trust between the member states. For South East Europe, one of the keys for the EU is to address the issue of energy poverty and the lack of power by the regulators including ACER. I personally believe that the EU must develop an EU-wide framework to address energy poverty even if many member states do not want it.


Bulgaria is facing many challenges in the energy sector. One of them is the rising share and cost of renewable energy in the power mix. Is this a challenge or an opportunity for Bulgaria?

Renewables are a both a challenge and opportunity for each and every member state. However, in order that investors, consumers and technology companies can benefit from the opportunities, there is a need for an efficient, i.e. transparent and competitive framework. Many member states including Denmark, Sweden, Germany but also France and the UK have made their experiences and luckily by now, we all have a better idea on what works and for whom and what works less well.

The big challenge for countries like Bulgaria is not renewables as such, but any new investment for two reasons. First, the framework for the market is not efficient and second, any new investment will lead to an increase of electricity prices. While I can understand that politically higher prices for a big group of the population are difficult or even impossible, at some stage new investment will be required. Hence, my plea is for a framework for energy poverty.


Is there a possibility and will for regional energy cooperation in Southeast Europe? Is it viable to expect some new Energy Union institutions to be developed in the region of Southeast Europe?

I am not sure whether there is a need for new institutions. New institutions do not necessarily mean that governments change their positions. The key for progress in the region is with national governments and whether they are willing to co-operate with each other. In the past this has not been the case. It might change because the electricity and gas sectors continue to get into a more and more dire situation. Very often in the EU, member states only co-operate when there is a crisis. Look to Greece: for many years the Greek government has been reluctant to co-operate with its European partners. When it faced the choice of being expelled from the Euro and possibly as a result from the EU, it accepted hard choices. There was no alternative.

I expect a similar situation in energy in South East Europe. At some stage governments will run out of options other than to implement EU legislation and co-operate with their neighbours. They will also realize that a model that each member state tries to export electricity to neighbours will not work. Exports need to be matched by imports. EU money will flow at the moment that there is a real need for new grids and pipelines. It will not flow as long as projects are driven by motivations other than real demand or security of supply.

How long it will take for member states to reach this situation is hard to say and will also depend on the different member states. I see some changes in Romania. There may be some in Greece. This could make a difference for the region.


What would be the results from the COP21 meeting in Paris? Renewables, nuclear energy and other sectors have high expectations for growth until 2030 and forward – who will be the winners and losers in this process?

Paris certainly was a success if you measure it against expectations. Materially however not much has changed. Global reduction pledges continue to be insufficient to reduce GHG emissions to a level to make the globe a safe place. The next 5 to 10 years only will tell. What Paris has achieved was to create a framework which might allow for this, if counties so want. For the EU this means that the political atmosphere to discuss climate change policy has improved and this can make a difference in the future. For the time being I do not expect much change in the EU. There is no need to change track in the EU.

Depending on the member states, there will be different solutions; some favour renewables, others nuclear. All do energy efficiency. My recommendation for SEE countries would be to pursue no-regret policies such as improving energy efficiency, building a moderate amount of renewables in the good locations, etc. I understand however that politicians are more interested in adding further supply for reasons, which are well known.
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Christian Egenhofer is Director of Energy Climate House, a newly established think-tank, within the Centre for European Policy Studies (CEPS), dedicated entirely to energy and climate issues. From 2000 to 2015 he has been Associate Senior Research Fellow and Head of the Energy and Climate unit at CEPS in Brussels.

He is Visiting Professor at the College of Europe in Bruges and Natolin/Warsaw, Paris School of International Affairs (PSIA) at SciencesPo, Paris and Guido Carli LUISS University in Rome, where he teaches courses on energy and climate policies and regulation. Previously, Christian Egenhofer was teaching in the MBA Programme at the Solvay Business School at the Université Libre de Bruxelles (2003-2008) and MGIMO in Moscow (2013-14). From 1997 to 2010, he held a part-time position as Senior Research Fellow at the Centre for Energy, Petroleum and Mineral Law and Policy at the University of Dundee in Scotland/UK.

From 1994 to 2000, he was Director and owner of IMPACT, a consulting group focusing on EU affairs with clients from the EU institutions, business and NGOs. He had a first spell at CEPS as assistant to the head of the EU business policy unit (from 1989 to 1994) and started his career as a trainee at the Ministry of the Interior in Baden-Württemberg (Germany) from 1986 to 1989.

Christian Egenhofer holds a Master's degree in Administration from the University of Konstanz as well as a Public Law degree.

He has published 8 books on climate change, energy and issues on European integration in addition to more than 100 reports, articles and book chapters. He is lead author of “Ever Changing Union – An introduction to the history, institutions and decision-making processes of the European Union”, arguably the “shortest textbook on the EU”, which has been published in its second edition.


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