EVENT
Chair Lieve Fransen, Senior Advisor, EPC, opened the Dialogue by giving some background to Šefčovič’s work and inviting him to deliver the keynote speech. He began by welcoming the launch of the Task Force and saying that he hoped to see some concrete deliverables coming out of it. The EU wants to be number one on renewables, creating innovative technologies which will help to grow the economy and using this process to also improve the standards of living of EU citizens. He then explained the importance of the social dimension of the Energy Union, stating that a society is measured not only by its development and innovation but also by its ability to care for its most vulnerable. He recognised that the transition to a low-carbon economy will mean the potential for certain sectors to grow and benefit, but the EU must also be responsive to sectors where jobs will be lost in the process. As such, the green economy will be one of the engines of the EU’s economic transformation.
He highlighted that for all Intended Nationally Determined Contributions (INDCs) committed to at the Paris Climate Conference (COP21) to be fulfilled, there would need to be approximately €3.5 trillion of investment in clean and renewable technologies. The EU is positioned well to meet this challenge, being the only region in the world that has grown economically while also reducing greenhouse gas emissions. However, so far the EU has not found the best answers to respond to the dramatic changes that are taking place in Europe: there are a lot of people living in energy poverty, as well as a lot of young people who are well educated but do not have the best job skills for the energy transition. A lot more needs to be done to improve communication between educational establishments and industry to ensure that young people are learning the right skills, allowing them to contribute more to economic growth. He said that those who have already graduated and are on the job market should be given a second chance to acquire new skills because this will be key in the 21st Century.
On energy poverty, he said there are a lot of statistics, but not always conclusive ones as there is not one methodology used throughout the EU. Although Europe is probably the most egalitarian continent in the world, at least 10% of EU households are living in energy poverty and in some EU countries this is higher than 30%. This means older people sleeping in kitchens as this is the warmest room in the house, young people being unable to study effectively and a number of premature deaths. Even in the larger economies such as Germany, 350,000 households had their electricity cut off temporarily in 2015 due to being unable to pay their bill. This reality should be taken into account when policies are made, both at a national and EU level.
On EU actions, he highlighted that the Commission aims to put in place the right methodologies and common definitions so that reliable and comparable data can be gathered, which has been set out in the Commission’s July 2015 Communication ‘Delivering a New Deal for Energy Consumers’. The launch of an EU Building Stock Observatory is also being planned, which will include indicators on energy poverty – which is very often closely linked to the energy efficiency of buildings. He stressed that while data is important, this should not be an excuse for “wait and see” policies. The Commission will need to take actions when opportunities present themselves. On social policies, although the main responsibility lies with member states, regions and local communities, there is a European dimension to all of this.
He stated that 2016 is the year of delivery for the Energy Union. The Commission will table a review of the electricity market design, and reviews of the Energy Efficiency Directive and the Energy Performance of Buildings Directive. The aim of these reviews and upcoming proposals is to change the energy and climate policies landscape in the EU. All legislative proposals will also be drafted with the social dimension of the policy in mind. He argued that more can be done in the area of energy disconnections. While 17 member states have some restrictions on energy disconnection due to non-payment, 11 member states do not. While not wishing to ban disconnections and recognising that there is a cost to energy, he stated that there should be safeguards in place before someone is disconnected, sharing best practices from those countries who have effective restrictions. He said that there is no “one size fits all” solution to these issues and welcomed practical ideas to come from the Task Force on the best way to approach this at EU, regional and national level. The Commission is also working on market design to ensure that there are the right price signals for the most efficient and clean use of energy and that investment in the energy sector is attractive. However, where the market is liberalised, this also implies a level of responsibility.
In addition to safeguarding disconnections, he highlighted other mechanisms that can be used to alleviate energy poverty, including: empowering consumers through clearer bills and making it easier to switch supplier; ensuring a competitive and well-functioning internal energy market, which will result in better prices for customers; using financial vehicles to improve the efficiency of residential homes and ensuring member states respect their obligation to protect vulnerable consumers.
On financing, he stated that this is an area in which the Commission can act more vigorously than it has done in the past, in order to help address the challenge of energy poverty. Because renovating homes and investing in smart energy efficient devices is expensive, it will be important for energy efficiency policies to be able to help those with limited resources or difficulties to get a loan. He noted that the European Structural and Investment Funds are the largest sources of EU funding for energy efficiency in buildings– approximately €18 billion for the period until 2020 – which will significantly contribute to the deep renovation of buildings across the EU, including social housing. The new green mainstreaming in the Commission’s budget cycle up to 2020 will mean that 20% of the budget must be allocated to energy efficiency policies, which amounts to €180 billion over seven years. With these sums, the EU will be able to do a lot to effectively make the transition to a low carbon economy. Additionally, some of the first projects funded by the European Fund for Strategic Investment are focused on energy efficiency, including projects for the renovation of social housing – in France and Denmark, for example. The Commission’s 'Smart Financing for Smart Buildings' initiative also aims to simplify investment in the energy efficiency of buildings and make it more accessible to small-scale projects in cities and regions. He also highlighted the importance of sharing best practice on financing, as well as on addressing energy efficiency and energy poverty in general.
He concluded by thanking the EPC for setting up the Energy Poverty Task Force, highlighting its importance in assisting the Commission to deliver on Energy Union in 2016, particularly on energy poverty as one of its important social dimensions.
At this stage, the panel reflected on Šefčovič’s speech, who then responded to questions from the panel and audience. Gilles Vermot Desroches, Sustainability Senior Vice President, Schneider Electric, noted that tackling energy poverty touches on the circular economy, energy efficiency, sustainability, investment and training. He asked what the role of the private sector is in contributing towards tackling energy poverty, and what plans there are to inform citizens on these issues, particularly when it comes to training. Šefčovič said that in the first place, energy companies should provide a good price and service and be more responsive to people who find themselves in problematic circumstances. He agreed that behavioural change among citizens is also important, stating that much can be achieved by publicising the fact that a lot of energy can be saved through simple measures, such as not overheating a house. The private and public sector can also work together on encouraging these behavioural changes.
Benedek Javor, Member of the European Parliament, argued that there must be a reality check on where the EU is in practice. While the EU institutions like to talk about the EU as being “number one” on renewable energy and energy efficiency, this is actually not the case. In fact this is being led by China, which has installed more new renewable capacities in 2015 than the EU and the US combined. In the US, there was 20% more new renewable capacity in 2015 than the EU. He added that while the EU invested a lot of money in the past to energy efficiency, renewable energy and the energy transition, it is not a leading player on the market. While an agreement was made at the 2015 Paris Climate Conference (COP21), it remains to be seen what the EU’s role will be in reaching the targets agreed upon. The EU is far from being ambitious enough. He also questioned whether the Commission has the capacity to address the problem of bottle-necking at member state level, as there are no binding national targets for renewables or energy efficiency.
Šefčovič responded by saying that there are different statistics that can be taken into account. He argued that the EU is number one on renewables because it is the first economy in the world that really managed to grow sustainably – while the economy has grown by 46% since 1990, greenhouse gas emissions have been reduced by 24% at the same time. He agreed that the EU should not be complacent: the EU brought what are generally considered the most ambitious INDCs to COP21 and these will not be easy to achieve. However, he stated that the EU has a strong track record and will exceed targets. Innovation will also bring a lot of opportunities to accelerate the energy transition. To take advantage of this, the EU will need to find new ways to legislate, because there is now a different set of targets. All 2020 targets for efficiency, renewables and the reduction of greenhouse gases were mandatory and divided on a country-by-country basis. The Commission will need to be creative, but will be committed to the EU remaining number one for renewables in all legislative proposals.
An audience member argued that tackling energy poverty is more about social policy than energy policy. Šefčovič stated that while there can be an academic argument over the correctness of the term, more attention is being focused on energy poverty because access to energy is so essential to citizens exercising their rights within society. Not having access to electricity and heat creates specific social problems and has an enormous impact on people’s daily lives, such as children not being prepared properly to go to school and adults not being able to access the internet to look for jobs. At the same time, citizens in the EU pay on average three or four times more for energy than people in other developed countries. Therefore, there is a need to develop a set of instruments to tackle the social issues around energy poverty.
It was asked whether the European Semester could be used as an instrument to put more pressure on member states to do more on energy efficiency. Šefčovič said that the European Semester was introduced at the EU level as a response to the need to introduce more structural reforms in member states, aiming at better governance of economies and macro-economic situations in member states. In many countries where reforms have taken place the economy is growing again. At the same time the EU has learned that in order to make the Semester process more efficient, there is a need to focus on the top priorities of reforms. The number of country specific recommendations has therefore been reduced so that there is a realistic chance that they will be delivered on. In terms of energy policy, the aim is to use the annual State of the Energy Union report to give policy conclusions on what should be done in different countries. While these policy conclusions could also be included in the European Semester, there is a need to balance keeping the European Semester functional with ensuring that member states are asked to deliver on what they can.
On the possibility of regulated prices, Šefčovič said that the Energy Union strategy supports the phasing out of regulated prices that are below the costs, to avoid discouraging investment and accruing a debt for the next generation. This is a compromise for a very complex issue, aimed at maintaining a functioning energy market while developing more targeted measures to address energy poverty. He argued that it is a reasonable approach to say that the wealthy in society should not be able to take advantage of regulated energy prices to “heat their swimming pools”. There is a lot to do, with a lot of complex issues to work through.
Fransen then invited Javor to present the political activities and initiatives being discussed at the European Parliament on tackling energy poverty. He said that in Central and Eastern Europe as well as member states around the Mediterranean, energy poverty is a major issue that does not only effect the most vulnerable in society. It falls on national governments to do something to address this, but many are not finding the right answers. Generally, member states follow very traditional but ineffective approaches, such as keeping artificially low energy prices. A better approach would involve approaching the issue as a social problem, recognising differences between households and helping vulnerable households to pay their energy bills. However, there is an inherent problem with both approaches because they both encourage high energy consumption. There is therefore a need to completely change the approach to understanding energy poverty. Instead of helping households to pay for high energy consumption, they should be helped to consume less energy.
This also involves renewable energy, as households can produce their own energy through solar panels and other solutions to reduce the amount of energy used from the grid. However, currently most European subsidies for renewable energy and energy efficiency investments are giving 30% non-refundable support for improvements, which means that it is only really the wealthiest who are able to take advantage of this. In 2013 in Hungary, more than 75% of the money from the country’s renewable energy subsidy programme went to the three wealthiest districts of Budapest. He argued that instead of non-refundable subsidies, there should be Energy Service Companies (ESCO) financing, where payments for households do not require any initial capital and can be paid back through the savings made on energy.
He added that with almost all of the related directives and regulations under revision at the European Parliament - including the Energy Efficiency Directive review, the renewable energy progress report and a new Renewable Energy Directive to come – it is a good time to look at how energy poverty is approached, building a strong link between energy policy, renewable energy subsidy schemes, energy efficiency financing and social problems. He noted that the European Parliament also produced an own-initiative report on ‘Energy Poverty in the EU’ in December 2015, but said that the report focuses too much on solving the problem as a social problem, when it will require aspects of social and energy policy to address the problem effectively in the long term. However, the report did point out some important issues, including how to help vulnerable households through social systems and addressing the issue of very low taxation on highly energy-intensive industries in some member states.
In terms of specific policies, he argued that there should be a moratorium on winter disconnections in the EU. While the irresponsible use of energy should not be encouraged, it is important that households are not left without energy in the middle of an extremely cold winter. He agreed with Šefčovič that the creative use of existing European cohesion and structural fundsprovide an opportunity for the Commission to change the approach and concentrate on programmes and projects that link social issues and energy poverty with energy efficiency and renewable energy programmes. However, he said that this needs clear political cohesion on what should be done at different legislative levels.
Vermot Desroches then gave some reflections on the problem of energy poverty, as well as possible solutions and new initiatives that businesses can contribute to. He said that Schneider Electric’s vision of sustainability is to first discuss with different stakeholders and then work towards new solutions. He agreed that finding solutions to energy poverty will involve a mix of energy and social policy, with experts from both fields working together.
He noted that for many companies, the big question after COP21 is what solutions need to be delivered to ensure success in a world where the level of carbon emissions and the use of energy is key. There is a need to collaborate in order to innovate and bring new solutions to the market. The organisation advocates Active Energy Efficiency, which involves giving customers innovative tools to understand their energy usage and reduce energy consumption, with the idea that energy poverty should be addressed through innovation as well as social and energy policy. There should also be a combined contribution of the public and private sector, understanding the situation of people living in energy poverty in order to innovate and find relevant solutions. He hoped that the Task Force would be able to come up with these new solutions.
Audrey Dobbins, Researcher in Energy Economics, University of Stuttgart, then presented the findings of a May 2015 study conducted for the European Commission on ‘Energy poverty and vulnerable consumers in the energy sector across the EU: analysis of policies and measures’. She said that energy poverty effects households in every single member state, with the only difference being the scale and severity across member states. There is currently no data that directly measures energy poverty at the European level.However, there is Eurostat data that measures energy poverty proxy indicators, including the inability to keep adequately warm. She said that the data shows there are regional disparities in terms of how member states experience energy poverty. The Southern, South-Eastern and Eastern member states have more difficulty with energy poverty due to the structure of their economies.
The study focused on how member states understand the issues of energy poverty and what kinds of actions they are taking to address them, in order to provide recommendations to the Commission on the positive role it could have in helping to address these issues as well. This began with reviewing the definitions used across member states for energy poverty. The wording in the Commission’s third energy package dictates that member states should provide a definition for vulnerable consumers, but not necessarily for energy poverty. There is also no prescription as to how this definition should be approached. The study found that there was large variation between member states in how they interpreted the issue of vulnerable consumers. A lot of member states have a very broad definition, applying it to all households who are recipients of social welfare while other member states have a very narrow definition, specifically targeting households that are affected by disability or health issues. This variation also has a lot of influence in terms of how member states tackle the issue, because too narrow a definition means that many people will not receive any assistance and too broad a definition means that households who are in severe need don’t receive sufficient assistance.
She argued that the definition of vulnerable consumer should not only address socio-economic
