Why a true European energy market is the only way forward

Energy systems in the European Union are largely based on central and stable energy production, using infrastructure that was built decades ago. Across the EU its member states are struggling to adapt to the changing energy landscape. The electorate in some member states such as Germany and Belgium no longer widely support nuclear power. Another game changer is the rush for renewable energy, with targets agreed by member states at EU level in order to boost energy security, reduce emissions and to remain at the forefront of the “green revolution” across the economy. 

Ageing infrastructure, changing public opinion and a push for renewable energy should lead policymakers to make bold decisions. We need a new vision on energy, mostly electric, no longer based on purely national and protectionist policy but based on an open, market-based model. This should give our energy system the makeover it has needed for more than a decade. 

We need to move away from over-regulation in energy markets by governments and end the dominance of these markets by former state-run operators. To do this we will need to design the framework in which the market will operate to avoid failure and abuses. The energy winter package published by the European Commission in November of last year is a first step in this direction. The goals for renewable energy are no longer fixed at a national level, but are binding at EU level. This is the only way we can realise a true European single market for energy. This will assure that the most efficient investments will be made. 

We need to move away from over-regulation in energy markets by governments and end the dominance of these markets by former state-run operators. To do this we will need to design the framework in which the market will operate to avoid failure and abuses. 

Due to national goals for renewable energy for 2020, my region, Flanders, invested and gave grants for PV panels. We also constructed very expensive wind parks in the North Sea. Still, the chances are limited that we will reach our 2020 goal, despite all the investments. While there will still be a need to construct and invest in renewable energy in every member state, I believe it would be far more efficient to invest in places where there is room and where it makes sense from an economic perspective. The EU can set the goals, but let the market take care of where the infrastructure should be built.

A condition to make this EU energy market happen is boosting connections between the member states – or it will be as impossible as it would be for the single market in goods and services to function without roads between member states. And here we see that, as with services, some member states prefer to protect their own energy market. 

France is a well-known example of a bottleneck. Spain has a surplus on sunny days of renewable solar energy. Because of the limited interconnection between France and Spain, up to 20 per cent of this energy goes to waste. France has a vast and consistent supply of nuclear energy which is harder to combine with the fluctuations of renewable energy. But if we want Finnish hydropower to be combined with Spain’s solar power, we will need a super grid with interconnections. Just as with roads between member states, an intervention by (EU) policymakers could be advisable for the extra push. 

If we want a future-proof energy system we will need big investments, not just in generation but in the grid and in households. We should not let EU policymakers make all the choices. They should create a level playing field where private companies, prosumers and consumers can create an efficient and incentive-driven market.

In European Parliament prosumers is the new “it word”, suggesting that everyone should produce his or her own (renewable) energy and put it on the grid. In the EU, where more than 75 per cent of the population lives in an urbanised setting, it is obvious that not everyone will be a prosumer. People living in apartment buildings or tenants are often not able to produce energy. 

In the European Parliament some are convinced that big energy companies are a thing of the past, and that every European will be a small EDF or Engie. Of course this will not be the case. But we need to ensure a more market-based approach in our households.  Market incentives and competition between providers will lead consumers to making more informed choices about the energy they use. Therefore, the energy cost of consumers will have to be based on real-time energy pricing. 

Too much regulation about prosumers could potentially harm the rights of normal consumers. Therefore, here as well, the policymakers have to set a light framework and let all other issues be settled by the market, with national regulators having sufficient oversight to ensure the smooth functioning of these markets.

If we want a future-proof energy system we will need big investments, not just in generation but in the grid and in households. We should not let EU policymakers make all the choices. They should create a level playing field where private companies, prosumers and consumers can create an efficient and incentive-driven market.