Ladies and gentlemen,
Thank you for inviting me to speak today.
We are looking at a fundamental shift in our energy system. Every aspect will be impacted in some way.
But when it comes down to it, there are three main trends I see: decarbonisation, decentralisation, and digitalisation.
Each poses a challenge. But each is also an opportunity to help move towards our climate and energy goals as part of the Green Deal:
- a climate neutral Europe by 2050.
- and a reduction of at least 55% in emissions by 2030.
If we get these three right, not only will we reach these goals, but we will reach a fully integrated energy system. Last July, the Commission presented its strategy on this very topic. Our vision is a modern integrated system that is more electrified, more efficient, more flexible and uses infrastructure more wisely. And it’s also a system that involves renewable and low-carbon fuels, especially where we cannot electrify as easily.
So as these trends underpin our future energy system, I want to go into detail on each one for you today.
We know that the production and consumption of energy is responsible for the vast majority of emissions in Europe.
And so logic dictates that there is no credible path to climate neutrality without decarbonising our energy system.
In this new decarbonised world, electricity will be the most important energy source. It is set to meet around half of our energy demand by 2050.
Compare that to around a quarter (23%) today, and you realise how far we need to go.
And the pace of change won’t be even. In certain sectors, electrification will be very fast. In households, for instance, we foresee the share of electricity in total energy consumed increasing from 26% to 41% by 2030.
How do we get these higher numbers?
Europe is expected to double its installed capacity of renewables by 2030 – moving from around 420 GW in 2020 to 840 GW by 2030.
Though, it won’t be all plain sailing. This new context will bring new challenges as well.
Ensuring that the grid can absorb this volume of electricity will be one of the biggest. It will require major investments in grid reinforcement – including cross-border, between European countries and with our neighbours, but also at local level.
These kinds of investments should form a key part of the Recovery and Resilience Plans being submitted by EU Member States. And they will go a long way to not only decarbonising but also driving economic recovery beyond the pandemic.
Second, is decentralisation.
New technologies for producing and storing energy, especially at a decentralised level, will change the way we produce energy.
We will need new, smarter ways to manage our energy system - to ensure that supply matches demand at all times and to keep down costs of the energy transition.
Flexibility in innovation and investment is key here. This particularly applies to storage, demand-response, and more flexible electricity generation units.
Inevitably, consumers will have an essential role in achieving flexibility. We want to see passive consumers transform into active participants.
Developing demand-side flexibility provided by consumers across Europe can dramatically reduce total energy costs. Demand-side flexibility is both an extremely valuable resource to the European electricity system and a remarkably untapped one.
We estimate that, with a proper policy framework in place, demand-response can account for 57 GW by 2030, thus reducing peak demand and the need for back-up capacities in the electricity market.
It is in our interest to support demand-side flexibility. But flexibility will not develop on its own - it needs to be rewarded.
We believe that the best tool to do that is flexible prices, which signal where and when electricity is most needed. Storage solutions, demand response and flexible generation can develop quickly, if market prices reward consumers and generators.
Increasingly, electricity will not be seen in isolation, but rather as fully integrated with other sectors of our energy system. The entire energy system will contribute to greater flexibility, in many ways.
Whether that’s through the rapid deployment of electric vehicles, heat pumps, smart district heating systems, electrolysers for the production of hydrogen, or more electrified industrial processes.
The third trend I mentioned is digitalisation. The opportunities are vast:
- a more efficient management of energy networks
- data driven energy services
- the integration of distributed renewables in the grid
- and again, increased participation of energy consumers in the energy transition.
There is a lot of positive that we can address in the upcoming Digitalisation of Energy Action Plan, as announced in the Energy System Integration Strategy. But as we digitalise our system more and more, and as a larger portion of renewable electricity capacity will be connected to the distribution grid, they become more vulnerable and exposed to new, specific threats.
Protecting our critical infrastructure will be even more important and even more complex all at once. This requires a greater focus on resilience.
Last December the Commission adopted a package on cyber security and critical infrastructure.
- a new ambitious EU cyber security strategy;
- a legal proposal for the revision of the network and information systems directive;
- …and a legal proposal for a new directive on the resilience of critical entities.
The package includes a framework to support Member States to ensure the resilience of vital sectors including energy. Within this framework, we are currently considering dedicated, complementary energy-specific initiatives to further enhance the resilience of our critical energy infrastructure.
We also plan to adopt a network code to strengthen the cyber security of cross border electricity next year.
Of course, that’s not the only risk we face.
The pandemic also tests our resilience of the electricity system.
But I’m glad to say that there was no threat to supply over the past year. Our system was resilient. And I want to take a moment to say thank you to the TSOs and DSOs. Thanks to yours efforts in these difficult times, the system has proven its resilience under the exceptional circumstances.
So, these three: decarbonisation, decentralisation, and digitalisation are the three biggest shifts as I see them. But, they will not happen without a strong driving force behind them.
Last year we brought forward a number of strategies to consolidate these three trends across the entire energy spectrum. From energy system integration, to hydrogen. And from buildings renovation, to offshore energy.
Right now we are preparing the legislative ground for our climate targets. This is what we call the Fit for 55 package that we will adopt in July.
In total it will have 12 legislative proposals, including:
- the revision of the energy efficiency and renewable energy directives,
- the strengthening and extension of the emissions trading scheme,
- the revision of the energy taxation directive,
- ..and a carbon border adjustment mechanism, among others.
Later in the year, a second set of initiatives will follow in the energy field with:
- legislation on hydrogen and the decarbonisation of the gas markets,
- a proposal for reducing methane leaks,
- …and one on strengthening the energy performance of buildings.
This is one of the most ambitious policy overhauls in EU history. At the same time offering us a way to tackle climate change and boost our recovery.
To end, ladies and gentlemen, I want to say that even though we are seeing huge change in our system, there is also one constant: the importance of networks.
Today, your work underpins our energy system across Europe. And that is set to continue as we move towards the energy system of the future.
The role of grids and system operators will be crucial in our success.
And we count on you and your continued support as we move forward.
Thank you for listening.