The author is President of the European Council
With the war against Ukraine, Vladimir Putin also launched an “energy rocket” at Europe. He wants to wipe out our economies, weaken our societies and destroy our morals. We need to be clear-eyed when assessing the extent of the damage. This crisis confirms our common growth strategy and makes it an urgent necessity to create a real Energy Union. It will be an essential pillar of EU sovereignty.
Energy is like the blood that runs through the veins of our economies. But it will coagulate with Russia’s aggressive actions. Households and companies are faced with exorbitant energy costs. The EU’s energy imports in the first half of 2022 amounted to almost 380 billion euros, which is about what we normally pay for a whole year. Our energy trade deficit is expected to double in 2022, reaching around 5 percent of gross domestic product.
This situation is forcing us to reassess how to achieve our longer-term transition to carbon neutrality, which is central not only to our fight against the environment, but also to our growth strategy. Our journey to net zero has relied in part on the plentiful availability of affordable gas. This is now a thing of the past.
Last March, the EU heads of state and government agreed in Versailles to strengthen European sovereignty in the areas of defence, economy and energy. Today we recognize the need for a new energy strategy to tackle this crisis and lay the foundation for a resilient economy.
That is why I am calling for a real Energy Union. It will mean rethinking many of our longstanding beliefs and acting more collectively as Europeans. The energy crisis has exposed the cracks in a union made up of 27 energy “private reserves”.
As we have seen during Covid-19, no country can handle a crisis of this magnitude alone. We have to face the taboos of national and EU competences. A resilient energy union will not magically emerge from 27 national energy mixes – we must make them compatible. This requires strong and sincere coordination between states. And we should create the necessary regulatory framework and market conditions that best serve the interests of our citizens and businesses.
To reach a compromise, we must go back to the values and principles we all believe in. Solidarity, fairness and transparency. These are the principles that will lead us to security of supply, a level playing field, affordable prices and restore market confidence.
Our common energy strategy should have four goals. First, to reduce our consumption. This will not only be important this winter, but permanently. We have already walked this path. It will require a lot of innovation and creativity. We must be honest about the challenges ahead.
Secondly, we must ensure security of supply. We are diversifying away from Russian energy towards more reliable providers. We must not repeat the mistakes of the past by becoming too dependent on a single source. We should also shop smarter. That means making better use of our collective purchasing power through the common EU energy platform we launched in March, rather than competing and driving up prices.
A varied energy mix reduces the risk of energy dependency. These include renewable energies such as sun, wind and geothermal energy as well as hydrogen. We shouldn’t be complacent. We need to reflect our competitiveness in light of other actions, both in the green and non-green hydrogen space. This includes nuclear power, an energy source that can help ensure a reliable and flexible power system while supporting our net zero goal.
Third, we must lower prices. Our electricity market was designed for another time at a different time. If we want to reduce consumption, diversify and reach net zero, we need to invest more in research, innovation and technology. The best way to bring prices down is to take a more collective approach.
Our common energy strategy should strengthen the cohesion of our internal market. As we saw at the beginning of the pandemic, governments’ legitimate actions to protect their households and businesses can create imbalances. This gives the impression of injustice. And it ultimately jeopardizes the dynamism of the internal market, one of our most valuable assets.
The global financial crisis and the sovereign debt crisis have prompted the EU to create a banking union to ensure the stability of the banking sector. The pandemic has taught us to pool our healthcare resources. This is how we developed and produced vaccines for all EU citizens, no matter where they live.
We now have to do the same in the energy sector and build this real energy union. Doing too little too late is not an option. It’s time for a quantum leap.
https://www.ft.com/content/04e641ec-b5d8-4dc3-80c6-fde196403f9f Charles Michel: The EU needs a real energy union now