Speech at the House of the European Union, "Európa Pont" in Budapest [Check against delivery]
Thank you for your interest and for your warm welcome here today!
As you probably know, I came to Budapest as part of the Energy Union Tour which I recently started, with the aim of conveying in person what the Energy Union is about and why it matters so much. Not only at a European level but also to each and every one of the Member States, given its particular needs, challenges, and opportunities. It is important for me to be able to explain to Hungarians what the Energy Union could bring to them.
For those of you who are not familiar with the Energy Union, its overarching objective is to bring Europeans energy which is secure, competitive, and sustainable. This will be achieved by building an internal energy market, built on solidarity and trust among Member States, on free flows of energy across borders, on putting energy efficiency first, on decarbonising our economy, and on staying ahead of the curve by investing in research and innovation.
The need to act now is clear. The current situation is non-sustainable in every sense of this term:
- The ongoing instability on our eastern borders has sent an alarming reminder that our energy security is unsafe as long as we don't diversify our energy sources and supply routes (Hungary's energy consumption is 80% natural gas – all imported from the same supplier: Gazprom).
- climate change is manifesting its devastating and irreversible effects, obliging us to act now, collectively;
- No less than 10% of Europeans suffer from "energy poverty", meaning they cannot properly heat their houses in winter;
- We are losing precious energy resources we cannot afford due to inefficient usage. 75% of Europe's housing stock, for example, is energy inefficient!
- Investment levels have not picked up, compared to pre-crisis time. This slows down technological progress and our efforts to make Europe a global leader in renewables.
- We are enjoying an unprecedented support to bring about this change. This has been manifested by President Juncker who made this top priority of his Commission; the European Council in its October 2014, March 2015 conclusions; most groups of the European Parliament who expressed their support; stakeholders and civil society organisations who have been publically endorsing the Strategy.
Several weeks ago, during a citizen dialogue in Riga, I was asked by a student what was different this time. Andris Piebalgs, who happened to be in the room, took the floor and said that when he was Energy Commissioner (until 2009) there were various energy policies, yet this is the first Commission to present a comprehensive inter-disciplinary energy strategy.
Indeed, our strategy ranges from transport to research, from smart cities to smart financing, from digital technologies to climate action, etc. We consciously and deliberately broke the silos within the decision making process in order to deliver on President Juncker's promise that this Commission would be 'big on big things'. This means tackling the most strategic and acute problems which can be best addressed at European level through a compressive cross-policy approach.
But it's not only about connecting the dots. For example, the Energy Union strategy brings energy security at a much higher level:
- we will amend the Security of Gas Supply Regulation so that we have a common plan in place for an emergency. And we will propose an EU wide strategy for liquefied natural gas and storage to improve flow.
- By bringing more transparency to contracts and intergovernmental agreements, we will be able to reach better purchasing deals which will trickle down to lower retail prices for consumers.
We cannot go on with the uncertainty of constant energy supply throughout winter, every year.
In February, we presented a Communication on how to reach the 10% electricity interconnection among Member States. Other than interconnected infrastructure, the Energy Union will not be a reality unless we build a true internal energy market in which the EU legislation is fully applied. The Commission will continue to make sure EU law is correctly applied and enforced, and will use infringement procedures more vigorously to make this happen.
As part of our communication on the new electricity market design, we are also looking into ways to reinforce ACER, and the integration of renewables, including consumer-generated renewables, into the electric grids. Consumers are in fact at the heart of the new market design, as they will play a much more active role.
The 'Efficiency First' principle will be applied; ensuring energy efficiency indeed comes first – before exploration of new energy sources; allowing it and demand response to compete on equal terms with generation capacity. How?
- by updating the energy efficiency labelling, by a heating and cooling strategy, and by a Circular Economy package.
- I know investors see great potential in renovating inefficient housing. We, on our side, will make sure access to finances will be made easier through the "Smart financing for smart buildings" scheme.
With regards to our commitment to decarbonisation - I cannot predict what will be the outcome of the COP21 conference in Paris in December. What I can tell you is that Europe will do everything to make it a success. This includes proactive climate diplomacy to ensure all governments share the responsibility. It also means setting example and respecting the EU's objectives, set last year by the European Council.
The Emission Trade System (ETS) is exemplary in its way of sharing the burden of decarbonisation. However, as we all know, the current allowance price is so low that it makes ETS ineffective. As part of the Summer Package, we will reform ETS. In addition, the introduction of the Market Stability Reserve will reduce the supply of allowances and let the market set a higher price to them. This will make technological investments worthwhile again!
This brings me to our commitment to invest in developing new technologies. Our commitment to be global leaders in renewables will require us to make significant investments.
The return on this investment, however, will be tremendous! I honestly believe that renewable energy will be the Al-Dorado of the 21st century.
In this respect, the European Fund for Strategic Investment (EFSI), which we like calling the Juncker Funds, will play a pivotal role. They will make capital accessible again and give the renewable and efficiency industries the push they need.
Back to the 'here and now'; as I mentioned I launched the Energy Union Tour because such a major transition cannot and should not be imposed from Brussels. It involves stakeholders across all levels, local, national, regional, and European.
The fact that we managed to break the silos within the Commission, and work across policy sectors, was already a major step in this direction. But now we must make sure we also win the minds of hearts across Europe.
In every country I visit, I meet with the government and discuss the implications and benefits of the Energy Union on the national market. So far, I have done so in: The Netherlands, Czech Republic, Latvia, Slovakia, and Luxembourg. In each of them there was great interest and willingness to engage.
My meeting today with Foreign Minister Szijjártó and Minister of National Development Seszták followed the same line. I presented to him our findings on the Hungarian market and congratulated him on Hungary's:
- good electricity interconnections (already fulfilling the 2020 target);
- participation in the regional wholesale electricity market;
- regional initiatives to improve energy infrastructure;
- being on tract to meeting its 2020 non-ETS GhG emissions; efficiency, and renewables targets.
I also presented to him the benefits and progress that Hungary could see as part of the Energy Union:
- The Energy Union will help in reducing Hungary's dependency on a single external supplier both for natural gas and nuclear fuel. By developing infrastructure and reinforcing electricity and natural gas interconnections in the Central and Eastern European region the risk of supply disruptions can be reduced as soon as supply routes are diversified.
- Diversification will not only reduce the risk of supply disruptions but will also enhance competition, having a beneficial impact on energy prices.
- The Energy Union will strengthen the targeted use of financial instruments for increased investments, particularly in the buildings and transport sectors, e.g. EFSI, ETS auctioning revenues
- ETS allowances modernisation fund for Member States whose GDP/capita is lower than 60% of EU avarge accounts for 310 million allowances.
- Both the Energy Union's funding programmes and EFSI will support Hungary's progress in developing low-carbon technologies, which are a major growth engine.
In the coming months I will continue this kind of exercise across Europe, each time checking our own analysis against the one of national governments, and when possible involving civil society and think tanks. By autumn, we will have a very solid picture of the gaps at European and regional level. This will focus our next steps at the most concrete and urgent obstacles.
As part of the new governance mechanism that we are currently developing, the Commission will present every autumn, starting this year, the State of the Energy Union. I will then present our analysis at European level, as well as the detailed analysis we will have conducted on each Member State (the so-called 'country-fiches').
The Energy Union – of course – does not stop at EU's borders. Let me just give one example.
Although we are aiming at diversification, the security of supply of Russian gas is still critical for many EU countries, at least in the short term. As such, it is a European interest to ensure the Minsk Agreement is respected and that gas flows undisputedly into Ukraine and continues to the European Union.
As you know, I have been moderating the trilateral talks between the EU, Russia, and Ukraine and I am very proud of our mutual achievement that there were no disruptions this past winter. The political situation is not making it any easier, especially given the escalation of violence last week but the talks will continue as long as needed.
As you can see, our hands are full, and a lot is in the pipeline. It definitely won't be easy.
Yet, the Energy Union is a mountain worth climbing. Trust me the view will be spectacular from the summit. Why? Because this is a combination of very worthy political cause, combined with a strong business case. That is why I have been calling it a triple-win strategy; we are saving our planet, creating jobs and empowering our citizens.
Ladies and gentlemen, we are in the midst of a paradigm change for everything energy-related, and I am very proud to be part of the Commission which brings it about.
Thank you very much!