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Clean Energy Package: Driving investment in the low-carbon economy

25 Sep 2017
Transport, Energy & Climate

Building a secure, affordable and sustainable Energy Union is one of the ten priorities of the Juncker Commission. A dozen legislative proposals were released last year alone, the most significant being the Clean Energy for All Europeans Package.

With this initiative, the Commission aims to position the EU as a global leader in the low-carbon economy transition and is pushing for a swift adoption before the end of its mandate in 2019. However, the files are complex and the issues controversial. 

US businesses operating in Europe look at this Package as both energy investors and consumers: the ultimate objective should be to drive private sector investment and continue the integration of the energy market. 

Taking decarbonisation to the next level

Today, low-carbon investments are facing significant challenges:

  • Low wholesale prices do not always provide sufficient revenue to investors;
  • The carbon price, which was set to drive investment in low-carbon technologies, is not delivering as expected for the moment;
  • Uncertainty over fuel prices adds another layer to the overall risk of such projects.

The Clean Energy Package should allow market rules to mitigate the risks associated with high capital expenditure projects. Furthermore, large-scale energy investments require price signals coming from the free flow of energy, rather than a fragmented collection of national price signals. 

Toward a more integrated energy market

Delivering on the Paris commitments while adapting to new generation and consumption patterns will be best achieved through a technology-neutral and cost-efficient transition:

  • Energy policy should be market-driven, where mature technologies can compete equally. The end of support schemes for mature technologies and scarcity pricing included in the Package are positive steps forward.
  • Capacity remuneration mechanisms should be used as a last resort and on a time-limited basis.
  • Member states should strengthen cooperation, in particular for investment in new power generation, grid capacities and interconnectors.

Ten months after the release of the Package, both the European Parliament and the Council have devoted many resources and aim to adopt their position by the end of this year or early 2018. However, many roadblocks remain, the biggest being the level of ambition. Many compromises will have to be made while maintaining the coherence of the Package.  Only by working together can these pieces of legislation deliver the right signals to drive investments in a low-carbon economy.

By St├ęphanie Brochard, Senior Policy Adviser (SBR@amchameu.eu)

Photo credit: European Commission