HSE GROUP'S CONTRIBUTION TO 2030 CLIMATE TARGET PLAN
HSE Group welcomes current efforts put forward by the European Commission and fully supports the objectives of the European Green Deal. The power sector is committed to the clean energy transition and we can expect additional emission reductions to be driven by the implementation of the climate and energy policy and intentions of the European power sector to invest in renewables and efficient low carbon sources.
However, the discussion about possibly revising the currently agreed 2030 climate targets should be guided by carefully examining in a broad and encompassing manner all the potential consequences, including those specifically relevant for individual member states and their energy mix.
HSE Group believes the following key elements need to be considered to achieve a balanced approach and should be strongly represented in the discussion on more ambitious 2030 targets.
1. All sectors need to contribute to reaching climate neutrality by 2050
While the power sector has a great potential for cutting emissions, it is also important to acknowledge that it has already contributed a lot – in Slovenia, for example, the emissions from the power sector dropped approx. 24% between 2005 and 2017, whereas no such drop is visible in any other sector, moreover, transport emissions actually rose for 25%. Over-burdening the power sector that is already on a steep path of lowering emissions would lead to potentially negative effects on security of supply and must be avoided.
As mentioned, the challenge in the transport sector, especially, is significant and the discussion on more ambitious 2030 climate targets must acknowledge that and foster further development of new technologies in this field. Given the strong commitment by the European power sector to become carbon-neutral till 2050, the electrification of heating and cooling, industry and especially transport is crucial for the decarbonisation of the European economy and offers opportunities for society at large through developing cost-effective and innovative solutions, keeping in mind the effects of accelerated electrification on the grid – thus, a coordinated umbrella approach between electrification, decarbonisation and energy infrastructure policy in necessary.
2. Just transition should enable member states to phase-out coal at their own pace
There is a significant difference between member states regarding the importance of coal in their energy mix, so no one-solution-fits-all is possible. Most member states are on the way to adopt or have already adopted their coal phase-out strategies and they will reflect carefully the most efficient and just phase-out route tailored to the needs and specificities of individual member states. Setting a significantly higher 2030 target in the middle of this process would fundamentally affect this thoroughly thought-out process, risking the development of sub-optimal outcomes, unnecessarily accelerating the phase-out dynamics, prematurely stranding otherwise useful assets, which are crucial for the security of supply in some member states, thus leading to a transition that would be far from just, inclusive, socially acceptable, economically feasible or security of supply ensuring.
HSE Group strongly believes that a successful transformation of coal regions is key to a successful decarbonisation of the EU. Thus, the discussion on more ambitious 2030 climate targets must acknowledge the effects of these augmented ambitions on coal phase-out processes and coal regions in several member states, including Slovenia.
3. Member States should be able to tailor the transition to their potentials and carry the burden of transition according to their abilities, considering all possible RES potential
Member States must take the lead in shaping their own emissions reductions policies and strategies, which are based on national specificities. We would propose that the discussion on more ambitious 2030 targets focuses on different starting points of EU member states, as different energy potentials, conditions and energy system specificities must be considered in such a debate.
At the same time, the burden of transition should be spread across the EU Member States according to their abilities. HSE Group is convinced that the Member States should be able to assess and choose the most suitable mechanisms under their specific conditions and circumstances to achieve the currently agreed climate targets.
In Slovenia, for example, the success of measures for reducing emissions in the transport sector is crucial, since transport emissions amount to more than 30% of all emissions and doubled in the period from 1990 till 2017, which is well over the EU average. However, Slovenia is a markedly transit country, making nationally adopted measures less efficient and successful reduction of transport emissions more difficult.
Another challenge in Slovenia is its 38% share of NATURA 2000 sites – the largest of all EU member states. It is extremely difficult to develop RES projects under the circumstances when spatial planning procedures in Slovenia are not dedicated to finding solutions, but are additionally complicated by overzealously following the most rigorous guidance, not taking into account the necessity of the RES projects for reaching national energy and climate targets, practically blocking all RES projects due to NATURA 2000, even though the Habitats Directive has very clear procedures for implementing projects in NATURA 2000 sites.
Slovenia has a significant additional unused hydropower potential that could contribute significantly to reaching the national 2030 targets, but its use has been put on hold due to inadequately estimated impact of hydropower plants on NATURA 2000 sites. The recently adopted National energy and climate plan that put a hold on hydropower projects in Slovenia will present a major challenge for the HSE Group in effectively carrying out our development goals in the area of renewable energy sources and will negatively impact the level of the country’s energy self-sufficiency, the achievement of the national RES and the competitiveness of companies that hold the concessions for the energy use of water resources. We thus call on the Commission to guide the discussion with member states regarding the NECPs evaluation in a way to encourage the member states to consider all the necessary RES potential to achieve the 2030 climate targets.
4. Investment stability is necessary
Investments in the energy sector, needed to implement ambitious climate and energy targets, are long-term and possible only under proper market conditions based on a stable and reliable regulatory environment. Continuous reform of key EU legislation does not offer stability, necessary for investors in the power sector to carry out huge investments, needed for achieving the climate targets.
To implement a potentially revised 2030 target, amendments to the Emissions Trading System (ETS) Directive, a recast Effort Sharing Regulation, amendments to the Land Use, Land Use Change and Forestry Regulation, and reviews of the CO2 emission performance standards for cars and vans, the Energy Efficiency Directive, the Renewable Energy Directive, and the Energy Taxation Directive, to name a few, would be needed.
Parts of the mentioned legislation are not in force for a significant period of time; thus their impacts are difficult to assess – what is more, the new, revised EU ETS will only apply from 2021 onwards, but the power sector is already facing an overhaul of the system, probably through increase of the LRF. We thus call on the Commission to consider the effects the revised target will have on the investment potential of the power sector that needs regulatory stability to effectively plan and implement the necessary investments.
CLEAN ENERGY FOR ALL EUROPEANS – winter package of measures
Position of the HSE Group
At the end of November 2016 the European Commission (EC) proposed an extensive package of measures which demand considerable changes in all fields of the energy legislation in the European Union (EU). The Clean Energy for All Europeans package (also known as the winter package) looks to enhance the functioning of the market and reach the climate and energy goals of the EU by introducing a new concept of the power market both in the retail and wholesale segments. The rules of operation in all segments of the power market are being changed significantly, which significantly affects the operations of the HSE Group, which is why the HSE Group is actively involved in the final drafting of the new legislation by putting forward amendments to the proposed measures, which are in our opinion necessary for an efficient functioning of the power market in the EU after 2020
In the opinion of the EC, such an extensive overhaul of the energy legislation is needed because of:
- the inefficient functioning of the energy market,
- the transition to a low-carbon society, which demands a new concept of the power market after 2020.
The Clean Energy for All Europeans package (also known as the winter package) thus looks to enhance the functioning of the market and reach the climate and energy goals of the EU by proposing a new concept of the power market both in the retail and wholesale segments.
The proposals from the winter package thus significantly change the rules of operation in all segments of the power market, and have a significant impact on the operations of the HSE Group, which is why the HSE Group is actively involved in the final drafting of the new legislation by putting forward amendments to the proposed measures, which are in our opinion necessary for an efficient functioning of the power market in the EU after 2020
An overhaul of the existing legislation is certainly needed, because the business environment in which energy companies operate has changed. Wholesale prices of electricity have dropped strongly, while prices for end users are increasing, in part because of ineffective support schemes for renewable energy. Renewable energy has also affected the (non)functioning of the European Union Emissions Trading Scheme (EU ETS). Due to a higher share of variable renewable energy, the energy market is facing the need for reliable resources which are always available, while the market does not provide adequate incentives for such resources.
Investments in the energy sector which are needed to attain the ambitious objectives until 2030 that have been proposed, will be implemented only under the assumption of market feasibility and while providing safe and reliable electricity supply. In order to ensure economic feasibility of projects, without which an investor will not decide to invest, the state may contribute to improving the investment conditions under which it would be easier to implement an investment by means of certain mechanisms: capacity mechanisms, effective support scheme, proportionate burden on market players, improving the efficiency of siting procedures. Ensuring a stable policy and regulatory framework, which is of key importance for investors, has a special importance in this respect.
The HSE Group will strive for the following principles to be taken into account in the overhaul of the EU legislation:
- ensuring equal treatment and rules for all participants on the market;
- ensuring technological neutrality in all fields of operation of the power market;
- facilitated integration of renewable energy in the market after 2020;
- capacity mechanisms are a measure to ensure reliability of supply – capacities which are included in them should meet the same environmental and other conditions applied for other capacities on the market;
- the EU ETS system must become a key mechanism for attaining the objectives of the climate and energy policy of the EU;
- ensuring a stable and predictable framework for the participants on the market;
- the proposed measures must not be retroactive.