Energy System Integration

I. Energy System Integration

The European Commission issued on July 8, 2020, a communication (COM (2020) 299 final) on “Powering a climate-neutral economy: An EU Strategy for Energy System Integration” (the “Strategy”).

The European Green Deal has put the EU on a path to climate neutrality by 2050 and the energy system integration is highlighted by the Commission as the pathway towards an effective, affordable and deep decarbonisation of the European economy.

Energy System Integration is defined by the Commission as the coordinated planning and operation of the energy system “as a whole”, across multiple energy carriers, infrastructures, and consumption sectors.

The Strategy is a forward-looking document that provides an insight of the key actions the Commission is envisaging to shape a new integrated energy system.

The Commission indicates that the parallel Communication “A hydrogen strategy for a climate neutral Europe” complements the Strategy.

II. Six Pillars

The Strategy identifies six pillars and indicates measures to address existing barriers for energy system integration:

  • A more circular energy system, with “energy-efficiency-first” at its core
  • Accelerating the electrification of energy demand, building on a largely renewables-based power system
  • Promote renewable and low-carbon fuels, including hydrogen, for hard-to-decarbonise sectors
  • Making energy markets fit for decarbonization and distributed resources
  • A more integrated energy infrastructure
  • A digitalized energy system and a supportive innovation framework

III. Key Actions

The key actions envisaged by the Commission to take place in the following years are outlined below.

a. Energy-Efficiency-First Principle

  • By 2021, guidance to Member States on how to make the energy-efficiency-first principle operational across the energy system when implementing EU and national legislation.
  • Further promote the energy-efficiency-first principle in all upcoming relevant methodologies and legislative revisions.
  • Review the Primary Energy Factor, to fully recognise energy efficiency savings via renewable electricity and heat, as part of the review of the Efficiency Energy Directive (“EED”).

b. Circular Energy System

  • In June 2021 as part of the revision of the Renewable Energy Directive (“RED”) and of the EED, facilitate the reuse of waste heat from industrial sites and data centres, through strengthened requirements for connection to district heating networks, energy performance accounting and contractual frameworks

Potential for waste heat goes beyond connection to district heating networks. It is crucial to scale up projects on waste heat recovery for other uses.

  • From 2021 onwards, incentivise mobilisation of biological waste and residues from agriculture, food and forestry and support capacity-building for rural circular energy communities (Common Agriculture Policy, Structural Funds and new LIFE programme).

c. Supply of Renewable Electricity

  • Ensure the cost-effective planning and deployment of offshore renewable electricity, considering the potential for on-site or nearby hydrogen production, and strengthen EU's industrial leadership in offshore technologies.
  • Explore establishing minimum mandatory green public procurement criteria and targets in relation to renewable electricity, with the support of capacity building finance under the LIFE programme.
  • Tackle remaining barriers to a high level of renewable electricity supply that matches the expected growth in demand in end-use sectors.

d. Electrification of Energy Consumption

  • From 2020 onwards, as part of the Renovation Wave initiative, promote further electrification of buildings’ heating, the deployment of on-buildings renewable energy, and the roll-out of electric vehicle charging points (EU funding, including the Cohesion Fund and InvestEU).
  • Develop more specific measures for the use of renewable electricity in transport, as well as for heating and cooling in buildings and industry.
  • By 2021, through Horizon Europe and the Innovation Fund, finance pilot projects for the electrification of low-temperature process heat in industrial sectors.
  • In the context of the revision of the Industrial Emissions Directive in 2021, assess options to support the further decarbonisation of industrial processes, including through electrification and energy efficiency.
  • Propose to revise CO2 emission standards for cars and vans to ensure a clear pathway from 2025 onwards towards zero-emission mobility.
  • Support the roll-out of 1 million charging points by 2025, using available EU funding, including the Cohesion Fund, InvestEU and Connecting Europe Facility.

“Electrification can present challenges” and “cross-border coordination between Member States will become increasingly important”.

  • By 2021, in the context of the revision of the Alternative Fuels Infrastructure Directive, accelerate the roll-out of alternative fuels infrastructure.
  • By 2020, explore greater synergies through the revision of the TEN-E Regulation in view of possible energy network related support for cross border high capacity recharging as well as possibly hydrogen refuelling infrastructure
  • By 2021, in the context of the revision of the TEN-T Regulation, take up corresponding requirements for charging and refuelling infrastructure.
  • Starting end of 2021, develop a Network Code on Demand Side Flexibility to unlock the potential of electric vehicles, heat pumps and other electricity consumption to contribute to the flexibility of the energy system.

f. Renewable and Low-Carbon Fuels, including Hydrogen, for Hard to Decarbonise Sectors

  • Propose a comprehensive terminology for all renewable and low-carbon fuels and a European system of certification of such fuels.
  • Consider additional measures to support renewable and low-carbon fuels, possibly minimum shares or quotas in specific end-use sectors (including aviation and maritime), complemented, where appropriate, by additional measures assessed under the REFUEL Aviation and FUEL Maritime initiatives.

The Commission made clear that the support regime for hydrogen will be more targeted, allowing shares or quota only for renewable hydrogen.

  • From 2021, (i) promote financing of flagship projects of integrated, carbon-neutral industrial clusters (through Horizon Europe, InvestEU, LIFE programmes and European Regional Development Fund), (ii) stimulate first-of-a-kind production of fertilisers from renewable hydrogen (Horizon Europe), (iii) demonstrate and scale-up the capture of carbon for use in synthetic fuels (possibly through Innovation Fund).
  • By 2023, develop a regulatory framework for the certification of carbon removals.

g. Level-Playing Field across all Energy Carriers

  • By 2021, issue guidance to Member States to address the high charges and levies borne by electricity and to ensure the consistency of non-energy price components across energy carriers.
  • In the context of the revision of the Energy Taxation Directive (“ETD”), align taxation of energy products and electricity with EU environment and climate policies and ensure a harmonised taxation of both storage and hydrogen production, avoiding double taxation
  • By June 2021, provide more consistent carbon price signals, including through possible proposal for extension of ETS to new sectors.
  • From 2021 onwards, further work towards phasing out of direct fossil fuel subsidies, including in the context of review of State aid framework and the ETD.
  • By 2021, ensure that the revision of the State aid framework supports cost-effective decarbonisation of the economy where public support remains necessary.

h. Gas Regulatory Framework

  • By 2021, review the legislative framework to design a competitive decarbonised gas market, fit for renewable gases, including to empower gas customers.

i. Customer Information

  • By 2021, in the context of the Climate Pact, the Commission plans to launch a consumer information campaign on energy customer rights.
  • By 2022, improve information to customers on the sustainability of industrial products (in particular steel, cement and chemicals) as part of the sustainable product policy initiative, and, as appropriate, through complementary legislative proposals.

Markets are missing for sustainable products and services, for products such as steel, cement and chemicals produced from renewable or low-carbon fuels

j. Integrated Energy Infrastructure

  • In the context of the TEN-E and TEN-T regulations revision, ensure the full support of a more integrated energy system
  • Review of the scope and governance of the 10-Year Network Development Plans to ensure full consistency with the EU’s decarbonization objectives and cross-sectoral infrastructure planning.
  • Accelerate investment in smart, highly-efficient, renewables based district heating and cooling networks, if appropriate by proposing stronger obligations in the revision of the RED and the EED, and the financing of flagship projects.

k. Digitalised Energy System and a Supportive Innovation Framework

  • In 2021, adopt a Digitalisation of Energy Action plan to develop a competitive market for digital energy services that ensures data privacy and sovereignty and supports investment in digital energy infrastructure.
  • By end 2021, develop a Network Code on cybersecurity in electricity with sector-specific rules to increase the resilience and cybersecurity aspects of cross-border electricity flows.
  • Starting with first one in 2021, adopt implementing acts on interoperability requirements and transparent procedures for access to data within the EU.
  • By end 2020, publish a new impact-oriented clean energy research and innovation outlook for the EU to ensure research and innovation supports energy system integration.

Undoubtedly an ambitious plan for Europe’s ultimate ambition – or, better said, for Europe’s public pledge – to be carbon neutral by 2050.

The Commission considers citizens have a central role in system integration and “they should contribute to shape the implementation” of the Strategy and “advance the system integration agenda”.

It’s a call on us all. Are we ready for the next level?