Energy poverty discussed at the annual conference of the European Renewable Energy Council – EREC2013

Research associate Sergio Tirado Herrero participated in EREC2013 in Brussels last week, where he discussed energy poverty in a session about heating and cooling market action. Here is his account of some relevant aspects of the discussions that took place in the conference.

Last November 28th I went to Brussels for EREC2013 – the annual conference of the European Renewable Energy Council (EREC). Being a primarily policy-focused event, it attracted an audience mostly coming from EU institutions, think-tanks, lobbies and corporations of the energy and the industrial sectors. Though the discussion was primarily aimed  at the status and prospects of the renewable energy sector, some of the elements discussed – summarised below – were also identified as relevant for our research on energy vulnerability in Europe.

The morning high-level opening session started with the input of DG Energy. In her intervention, an official speaking on behalf of commissioner Günther Oettinger pointed at energy security as a main policy driver of the development of the EU’s renewable capacity. It was made clear that the union’s 400 billion Euro imported fossil fuels bill (3% of the EU’s GDP), which explains the EU’s weak position as a pricetaker in global energy markets, remains a concern for the commission. A number of other speakers in the morning session made reference to this 400 billion figure, which was labeled ‘the single largest wealth transfer in the world’ by green MEP Claude Turmes. In similar terms referred to the issue of import dependency Anni Podimata, vice-president of the EU Parliament, who advocated for investing in renewable capacity with EU borders to keep money flowing in the EU economies instead of leaking out. She also referred to renewables as an industrial policy that has managed to contribute to net job creation even during crisis years. All in all, it seems that the in the view of EU institutions, investing in renewables is primarily justified not on climate grounds but by its contribution to the economies of Member States.

The expansion of the EU’s renewable generation capacity was acknowledged as a success story in the light of the progress achieved in regard of the 2020 Climate and Energy Package objectives. However, developments so far were assessed quite critically too. The representative of DG energy pointed that large sums have been invested in previously immature technologies, with the EU bearing the cost of bringing this technologies up to where they are now. Overcompensation of renewables through price mechanisms like feed-in tariffs was pointed as a problem, with Paula Abreu Marques (head of the Renewables and CCS unit at the European Commission) presenting the German case of solar PV feed-in tariffs as an example of price support mechanisms not keeping pace with the rapid reduction in the cost of the technology. To avoid this, she advocated for flexible support schemes with automatic support reduction mechanisms when certain thresholds are reached, as well as more transparency about technology costs. This discussion was justified, on the on hand, on the acknowledgment that resources are now scarcer in an Euro crisis context, and, on the other hand, on concerns (not shared by all speakers) about the impact of renewable expansion on the cost of energy for final users. Costs were explicitly pointed by DG energy as a main concern related to the development of renewables, as it was acknowledged that neither EU nor Member States have managed to effectively prevent substantial energy prices increases in the recent past. This has effects on the competitiveness of EU economies, with only Anni Podimata (vice-president of the Europan Parliament) referring to the impacts of heating and transport costs on the life of EU citizens. No explicit mention to energy poverty or vulnerable consumers was heard in any of the high-level interventions and discussions of the morning sessions.

The future of the EU policy framework for renewables was another element highlighted by the morning session, as discussions are currently taking place on the 2030 framework. There seems to be a consensus around the need of targets such as the ones set by the 20-20-20 by 2020 package, which have successfully served as policy drivers in Member States.  How ambitious those targets for renewables should be is a matter of debate, with proposals ranging between 35 to 45% of energy generation based on renewable energy. In relation with this, the UK’s plan to expand its nuclear power generation capacity by an inflation-indexed guaranteed minimum sale price of over 100 Euro per MWh was regarded by some participants, and especially by green MEP Claude Turmes, as an uneconomic policy decision hindering the mid-term development of renewables.

The afternoon break-out session on ‘Heating and cooling market action’ started with my presentation titled ‘Sustainable domestic energy options for Europe. Addressing the energy poverty challenge’, in which I introduced energy poverty/vulnerability as one of the Europe’s main energy challenges, discussed the focus of policy measures on domestic energy prices rather than on structural causes of energy poverty, and made the case of climate investments (based both on energy efficiency and renewables) as multi-objective interventions. The latter point was illustrated with results of my PhD dissertation evidencing the relevance of health and comfort energy poverty-related co-benefits of climate investments in the Hungarian residential sector. The panel discussion that followed was chaired by Fiona Riddoch (managing director of Cogen Europe) and participated by Werner Weiss (AEE INTEC), Federica Sabbati (Association of the European Heating Industry), Helena Charlton (UK DECC) and myself. The discussion acknowledged the lack of a clear strategy on renewable heat in the EU (in contrast with the much more defined action plan existing for renewable electricity) and revolved to a large extent around heating in the domestic sector. In this regard, the transition towards a nearly-zero building stock was soon brought forward because it is expected to drastically reduce the demand for space heating of households, which will have an impact on heat distribution networks like district heating systems, challenges the capacity of manufacturers to produce small size domestic heating equipment, and opens the door to the further electrification of the residential sector. The suitability of up-scalable, effective small demonstration projects for bringing about real changes on the ground was also discussed at various points. In connection with this and other elements of the debate, the importance of financing was almost unanimously pointed by all panelists as a main – if not the main – challenge for progressing with the implementation of climate technologies in the heating sector. However, it was pointed that financing housing retrofits with loans repaid through energy bills may not effectively reduce the energy cost burden of energy poor households.

The differences between heat and electricity supply were also pointed as the former usually consists of local markets and therefore is more fragmented than the latter. Supply vs. demand approaches were debated as the chair inquired the panelists about the existence of potential trade-offs between measures aimed at each end of energy networks given the long timescales required to improve the performance of energy-using infrastructure. In response, the need for direct support measures to domestic consumers via energy prices was debated, and the effects of the liberalisation of national energy markets on domestic energy prices was questioned. The discussion also highlighted at different points the relevance of consumer behaviour in the design of effective interventions.

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