A REVIEW OF ENERGY POLICIES IN EU COUNTRIES

Source: IEA (International Energy Agency)

Austria: Austria’s energy policy rests on three pillars: security of supply, energy efficiency and renewables. The country’s efforts to decarbonize the economy have progressed as renewable energy use has continued to grow, while use of fossil fuels has decreased. Greenhouse gas emissions from energy use, which peaked in 2005, still need to be further reduced, and the transport sector offers prime opportunities for this. In the context of EU negotiations on an energy and climate policy framework to 2030, Austria should develop a strategy that closely integrates security of supply and internal market dimensions. Closer cross-border integration of both electricity and natural gas markets and systems is required to build a single European market. This calls for increased co-ordination and co-operation with neighbouring countries. Austria should also encourage investment in networks, optimize demand response and integrate variable renewable energy supply in a cost-effective and market-based manner. A well-functioning internal market  can help reduce the growing concerns over energy prices and costs, both for industry and for citizens. Austria could address these concerns also by implementing more energy efficiency measures and facilitating greater retail market competition.Note: Austria’s two remaining coal-fired power stations will be closed by 2025, as per its plans confirmed by the country’s environment minister. It has suggested accelerating its phase-out plans and moving the cut-off point to 2020, though this has yet to be confirmed.

Belgium: Belgium has made progress in increasing competition in the electricity and gas markets. It has reduced the use of fossil fuels and increased the share of renewable energy. The country’s economy is also becoming less energy intensive. Belgium has excellent gas transport infrastructure, and its gas market is well-integrated with those of its neighbours. The country’s emergency oil stock levels are also high. A major challenge for Belgium is to decarbonize the economy while ensuring security of supply and affordability of energy. A long-term approach is required, and, given that responsibility for energy policy is divided between the federal and regional governments, the authorities must work decisively together to form a national energy strategy. Nuclear energy accounts for around half of Belgium’s electricity generation. The current policy is to close all nuclear power plants between 2022 and 2025, but this could seriously challenge Belgium’s efforts to ensure electricity security and provide affordable low-carbon electricity. As part of efforts to make up for lost generation capacity from nuclear power, the government plans for an expansion of natural gas and renewables generation and enhanced interconnections with neighboring countries. To attract critical investments in the energy sector – especially in electricity generation – the government should follow closely the principles of transparency, predictability and regulatory certainty.

Czech Republic: The Czech Republic approved a new National Energy Policy (SEP) aiming to reduce energy consumption and improve the economy’s energy intensity. However, reaching the targets of the SEP will require greater effort if the country is to play its part in the global energy transition. The SEP broadly seeks to strengthen security of energy supply and build a competitive and sustainable energy sector. While the Czech Republic has experienced strong growth in the renewable energy sector- notably solar PV- policy changes have created uncertainty and resulted in a sharp drop in new installations. Coal dominates the power sector, is the largest source of carbon emissions and poses a substantial threat to local air quality. The Czech Republic has no official plans for pollution control changes or the decommission of its coal-fired plants.  Energy intensity in the Czech Republic, driven by the industrial sector is higher than either the IEA average and the IEA Europe average. The last in-depth country review, in 2016, finds that natural gas supply security remains strong and the country is expected to remain a net exporter of electricity. The expansion of nuclear power is one of the main pillars of the SEP, and will play a greater role in coming years. The SEP also establishes key targets for energy security, emissions, energy savings, electricity generation and affordability.

Denmark: Denmark has a long tradition of setting ambitious world-leading national energy targets. The country aims for renewables to cover at least half of the country’s total energy consumption by 2030, and by 2050, Denmark aims to be a low-carbon society independent of fossils fuels. The country is moving convincingly to meet these world-leading targets. Electricity generation in Denmark has changed fundamentally over the past two decades. Coal generation has eroded, and the bulk of power generation now comes from wind and bioenergy. Denmark currently has the highest share of wind in both total primary energy consumption and electricity of any IEA country. Supported by a flexible domestic power system and a high level of interconnection, Denmark is now widely recognised as a global leader in integrating variable renewable energy while at the same time maintaining a highly reliable and secure electrical-power grid. The heating sector is also critical for Denmark’s low-carbon ambitions. Denmark’s large-scale use of combined heat and power plants with heat storage capacity, and the increasing deployment of wind power offer great potential for efficient integration of heat and electricity systems. However, policies and regulations need to be aligned to realise that potential, especially finding the right levels of energy taxation. Denmark has successfully decoupled its economic growth from greenhouse gas emissions, thanks to a combination of energy efficiency improvements, and fuel switching to renewables. As in all countries, more needs to be done to limit emissions from transport. In signing to the Powering Past Coal Alliance, a coalition of countries and organisations dedicated to eradicating coal-fired power, Denmark committed to phasing-out its use of the fuel by 2030. This target has come under fire from Danish NGOs, however, which claim the government has not been ambitious enough.

Estonia: Estonia is on the brink of a major energy transition that will involve a substantial reduction of the role of domestically produced oil shale in the country’s future energy mix. The transition will require Estonia to carefully balance social, environmental, economic and energy security considerations. Estonia has a unique energy mix among IEA member countries. Domestically produced oil shale, an energy-rich sedimentary rock that can be either burned for heat and power generation or used for producing liquid fuels, dominates energy supply. This gives the country a high degree of energy independence but also the highest carbon intensity among all IEA countries. In 2018, oil shale accounted for 72% of Estonia’s total domestic energy production, 73% of total primary energy supply and 76% of electricity generation, which is a significant drop over the past 10 years. Estonia has already achieved its mandatory emissions reduction and renewable energy targets for 2020. However, total final energy consumption started increasing again in 2016. In most IEA countries, energy consumption has been decoupled from economic growth and population, but this is not yet the case for final energy consumption in Estonia. Looking to 2030, for the first time is required to reduce its emissions rather than merely containing their growth. As with most IEA countries, Estonia’s main challenge is the decarbonization of its transport sector, which is currently not on track to meet its short-term emission and energy efficiency targets.

Finland: Finland is continuously decarbonizing its energy sector, mostly in power generation thanks to large shares of nuclear, hydro and bioenergy. Since 2007, Finland’s supply of biofuels increased by 30% whereas oil supply dropped by 9% and coal, natural gas and peat supply declined by almost 50%. The country is a global leader in producing second-generation biofuels from wood and by-products, notably biodiesel. Global demand for Finland’s forest-based products is growing and, as a consequence, so is the supply of these wood-based energy sources. The country has aligned its climate and energy policies with a goal of climate neutrality by 2050 and ambitious climate targets for 2030, such as cutting oil consumption in half and achieving 30% of renewables in transport by 2030. Transport is a key sector for the country’s ambitious national climate targets. As an Arctic country, Finland faces rapid changes in its climate, with potential consequences for, among others, forest growth and the occurrence and strength of winter storms. Finland’s most recent National Climate Change Adaptation Plan was adopted in 2014 and a range of measures have been pit in place to strengthen the resilience of the electricity distribution networks. Finland has been a leader among IEA countries in public and private spending on research, development and demonstration. A longer-term policy framework to underpin the 2050 goal will be pivotal to guide investments in clean energy technology innovation, a critical factor for reaching decarbonization goals.

France: France has a low-carbon electricity mix owing to its large nuclear fleet, yet many reactors are reaching the end of their lifetime. The country has started an ambitious energy transition under the Energy and Climate Change Law 2019 by designing a national low-carbon strategy, carbon budgets, a carbon price trajectory and a planning framework for energy investment. France plans to reduce the share of nuclear from today 75% to 50% in the electricity mix by 2035. While some nuclear reactors may continue long-term operation under safe conditions, maintaining security of supply and a low-carbon footprint while reducing nuclear energy will require investments in renewable energy and efficiency. The 2016 IEA review of France’s energy policies highlighted these and several other areas that are critical to the success of the energy transition. For example, planned growth of the share of electric vehicles and variable renewable electricity will require enhanced power system operation and flexibility, including demand-side response, smart grids and metering, and more interconnections. Recently, France is examining scenarios of very high shares of variable renewables to understand the implications for electricity security and systems operation, including in the regional context. The financing of this transition depends upon continued carbon price signals, increasingly open markets, competition, and consumer empowerment in gas and electricity retail markets. France had planned to phase-out its coal capacity by 2023 but its current government, elected after the decision was made, has not yet made any concrete policies geared towards reaching this target. President Macron has confirmed his intentions to see the goal through to fruition, however, going as far as to cite 2021 as a new deadline at both the 2017 UN Climate Summit and the 2018 World Economic Forum.

Germany: In late 2010, Germany initiated the Energiewende, a major plan for transforming its energy system into a more efficient one supplied mainly by renewable energy sources. The country has adopted a strategy for an energy pathway to 2050, which includes an accelerated the phase-out of nuclear power by 2022. In order to achieve the ambitious energy transformation set out in the Energiewende, by 2030 half of all electricity supply will come from renewable energy sources. Germany must continue to develop cost-effective market-based approaches to support the forecasted growth of variable renewable generation. Furthermore, the costs and benefits of the energy transition need to be allocated in a fair and transparent way among all sectors and end-users. In particular, emissions reductions from heat and transport require additional policy impetus. In the future, renewable energy capacity must expand in parallel with the timely development of transmission and distribution networks. Furthermore, close monitoring of Germany’s ability to meet electricity demand at peak times should continue in the medium term as coal-fired generation is planned to be phased out by 2038. Energy policy decisions in Germany inevitably have an impact beyond the country’s borders and must be taken within the context of a broader European energy policy framework and in close consultation with its neighbours. Germany has historically been one of Europe’s top coal producers with an installed capacity of almost 50GW, but by 2038 it plans to phase-out all coal-fired facilities. It marks a key element of its move towards renewable energy, following the landmark 2011 decision to phase-out the use of nuclear power by 2022.

Greece: Greece is implementing comprehensive energy sector reforms to foster competitive energy markets, create opportunities for investors, support the transformation of the energy system and provide sustainable outcomes for the environment and Greek society. Greece can leverage its economic recovery to accelerate emission reductions through energy efficiency and increased shares of natural gas and renewable energy in the energy mix. A key part of this process will be developing a strong and coherent national energy and climate plan for 2030 and beyond, as well as incorporating climate objectives into integrated energy planning. The country has seen an impressive increase in the share of renewables in electricity generation, even over-achieving the targets set for solar PV. Better exploitation of its renewable energy potential could result in a more balanced energy mix and contribute to increasing energy security. Greece should continue pursuing the implementation of ambitious energy efficiency policies, drawing on the evaluation of outcomes from past and current measures and on the lessons learned by other countries. The last IEA In-depth energy policy review of 2017 also provides recommendations for further policy improvements that are intended to help guide the country towards a more secure and sustainable energy future. Under EU pollution control laws, several coal-fired plants in Greece should be closed. The country has no plans to do decommission them however, and its government is considering proposals to open new facilities and continue burning fuel until after 2050.

Hungary: Hungary’s National Energy Strategy to 2030 is a major step in formulating a long-term vision for the sector. Its main objective is to ensure a sustainable and secure energy sector while supporting the competitiveness of the economy. Mindful of high energy costs and their impact on family incomes, the government initiated a policy of mandatory price cuts to reduce household energy bills. While the short-term impact has been a reduction in energy bills, in the long term, this policy may damage national competitiveness. Renewable energy production has increased significantly in the last decade but growth in the sector has slowed. Recent reforms and the introduction of a new support system for electricity from renewable sources could arrest this slowdown. On the other hand, measures that limit wind power developments are likely to have a negative impact on the sector. Greenhouse gas emissions have declined as the economy has become less carbon-intensive. Nonetheless, the country could adopt more ambitious targets for emission reductions. Energy security has been strengthened and there have been a number of large investments in oil, electricity and natural gas infrastructure. Further investments are expected, notably the construction of two new nuclear power generating units. In January 2019 , the Hungary’s government announced it would cease burning coal by 2030 and become fully-reliant on renewable energy sources. This marks a bold move, as it is one of Europe’s most coal-dependent countries, relying on the fuel source for 18% of its electricity as recently as 2016.

Ireland: Ireland boasted the third highest share of wind in electricity generation of IEA member countries in 2017. It has also improved its energy security through an increase in domestic gas production and a reduction of oil’s share in energy. The Irish economy has recovered remarkably from the economic crisis which started in 2008 and is the fastest growing economy among all IEA countries since 2014, when GDP exceeded pre-crisis levels. Energy use has increased with GDP growth but still remains under the 2006 peak, partly reflecting the structural shift in the economy. The shift towards an economy dominated by the services sector, and especially the government’s strategy to seek to establish Ireland as a preferred location for the global digital and data hosting industry, will potentially result in strong growing electricity demand. This makes the fast decarbonisation of the electricity system a necessity. Despite the progress made, Ireland is not on course to meet its mandatory emissions reduction and renewable energy targets for 2020. Furthermore, there are questions about Ireland’s ability to meet the 2030 emission reduction targets, though the impact of the most recent policies announced by the Government is not yet reflected in the latest emission pathway projections.Ireland joined the Powering Past Coal Alliance in March 2018, committing to 2025 as a deadline to decommission its coal plants. This builds on its government’s September 2018 decision to ban smoky coal and a bill it passed in July 2018 to sell Irish shares in the fuel, along with peat, oil and gas – making it the first country to divest from all fossil fuels

Italy: Italy has made strong progress in the development of energy policy, notably through the publication of the National Energy Strategy in 2013, which sets clear goals: reduce energy costs, meet environmental targets, strengthen security of energy supply and foster sustainable economic growth. Nonetheless, the adoption of the strategy is only a first step towards achieving the government’s ambitions. Monitoring implementation and maintaining momentum will present a challenge for the government. Italy’s energy policy is strongly pro-renewables. The country has experienced impressive growth in the renewable energy sector and has been successful in integrating large volumes of variable renewable generation. Containing costs is a priority, and policies need to focus on bringing deployment costs towards international benchmarks. Italy has also continued to progress in terms of market liberalization and infrastructure development, notably in the electricity market where transmission improvements between north and south, as well as market coupling, have resulted in price convergence throughout the country and wholesale prices tending towards those elsewhere in Europe. Development in the gas sector has been slower, and greater progress is needed if Italy is to become a southern Europe gas hub. Furthermore, institutional arrangements within the energy sector remain complex and should be reformed and strengthened. Implementation of the National Energy Strategy provides a timely opportunity to address each of these challenges in a comprehensive way. As part of its National Energy Strategy, Italy set 2025 as a target date to rid itself of coal-fired plants. This decision is reportedly not binding, however, and still requires executive action before it is carried out.

Luxembourg: Luxembourg’s strong economic and population growth are unique among IEA member countries. Energy demand and GHG emissions show signs of decoupling from GDP and the country doubled the share of renewables in the last decade. The government has adopted an ambitious target to reduce GHG emission 50-55% by 2030 compared to 2005. Luxembourg faces challenges achieving its energy sector targets. Low energy prices are a barrier to needed investments in energy efficiency and renewables. The country has a fossil fuel intensive energy mix driven by a high demand for transportation fuel, notably from transiting freight trucks and commuters. In 2019, the government modestly increased excise duties on gasoline and diesel to reduce fuel demand. Introduction of carbon pricing that accounts for socioeconomic impacts could stimulate both behavioural changes and investment needed to drive the transition to a low carbon energy system. Luxembourg is embedded in the European electricity market. Amid a fast transition in the region, security of supply is a priority and Luxembourg plans to expand renewables generation and electricity grids. The government should consider deployment of energy storage and demand side response measures, while ensuring competitive markets that foster innovation and new energy services.

Netherlands: The Netherlands plays an important role in Europe as a hub for global energy trade, through its open market and integrated supply chains. However, the outlook for Europe’s second largest producer of natural gas is challenging amid declining production and uncertain prospects for unconventional gas. The primary focus of Dutch energy policy is a transition to a low carbon energy system. The Climate Agreement, passed by parliament in 2019, contains a target to reduce greenhouse gas emissions 49% by 2030 compared to 1990 as the central policy measure to drive energy transition in the Netherlands. Looking to 2050 the Netherlands has set targets for greenhouse gas emissions emission to be reduced by 95% versus 1990 and for 100% of electricity to come from renewable energy. Despite successful decoupling of greenhouse-gas emissions from economic growth, the Netherlands remains one of the most fossil fuel and CO2-intensive economies among IEA member countries. The Netherlands has developed a detailed offshore wind roadmap, easing permitting procedure and aiming for 11.5 GW of total installed capacity by 2030. Strong research, demonstration and development efforts are being made in the area of carbon capture, renewable hydrogen production and sustained cost reduction of offshore wind and other renewable technologies. The Netherlands also stimulates energy efficiency and innovation in energy-intensive industries along the whole supply chain, notably in the Dutch refining, petrochemical and agriculture sectors, a practice that contributes to industrial competitiveness. The country can benefit from further interconnections with neighbouring countries to offer a route for exporting offshore wind generation. The Dutch government announced in its 2017 coalition pact all coal-fired plants would be closed by the end of 2029. This comes after three of its remaining five plants were installed in the past four years, meaning they will operate for less than half their anticipated lifetime.

Poland: Coal dominates the power sector of Poland, where it is the largest source of greenhouse gas emissions and a major employer. While the country has experienced strong growth in renewable energy over the past decade, its future role in the energy supply mix needs to be clarified. According to the draft Energy Policy of Poland to 2040, the share of coal and lignite in electricity generation will be reduced from just under 80% in 2017 to 60% by 2030. The draft policy also places priority on long-term energy security, has a strong emphasis on reducing greenhouse gas emissions and air pollution, increasing energy efficiency and decarbonising the transport system. Nuclear power could play a significant role in the country’s energy supply and the country is making plans to deploy its first nuclear generation plant. The implementation of the new Energy Policy will require significant investments to reduce the share of carbon-intensive power plants and increase the share of low-carbon energy. While the Polish energy infrastructure has been modernised, further investments are needed to strengthen integration with neighbouring markets. The latest IEA review of the energy policies of Poland from 2016 examines the existing infrastructure and makes recommendations for further improvements that are intended to guide the country towards a more secure and sustainable energy future. Five new coal power plants are under construction in Poland, which is under pressure to meet its pollution targets and has no official plans to phase-out coal

Portugal: Portugal is a world leader at integrating generation from wind and solar PV and has embraced targets of 80% renewable electricity by 2030 and a carbon neutral economy by 2050. Better interconnection with Europe and clear policy measure supporting effective markets are needed to achieve these ambitious targets. Portugal’s national energy and climate plan for 2030 and Roadmap to Carbon Neutrality by 2050 lay out ambitious plans to decarbonize the energy sector. The government needs to ensure that policy will support the development of effective markets to ensure decarbonization goals are met in a cost effective manner. A strong effort must also be placed on electricity and natural gas interconnection to unlock the potential of Portugal’s solar and wind resources and liquefied natural gas capacity to support local economic development and European energy security. Portugal must also continue with market reforms to ensure stable, transparent and efficient energy markets that can attract the investment needed top achieve its energy sector targets while maintaining affordable energy prices. Two-and-a-half years ago, Portugal’s environment minister confirmed it would be phasing-out coal by 2030. This target was reaffirmed in October 2017 as per the country’s roadmap to carbon neutrality by 2050.

Slovakia: Slovak Republic’s energy policies have made significant progress. Along with its neighbours and with the support from the European Union, the country has strengthened cross-border connections for electricity, natural gas and oil, improving its energy security and increasing market competition. The key objectives of the Slovak energy policy agenda are increasing efficiency in the power and end‐use sectors, reducing energy intensity, reducing dependence on energy imports, expanding the use of nuclear power, increasing the share of renewables in the heat and electricity sectors, and supporting the use of alternative fuels for transport. With these sound objectives in place, the government should now focus on the cost‐effective implementation of the adopted policies through concrete actions.  Energy policy in the Slovak Republic is driven to a large extent by EU directives and requirements, particularly with respect to liberalizing gas and electricity markets. Energy policy is also driven by high dependence on energy imports from Russia, making energy security a strong focus area. The government should focus on incorporating ambitious targets for 2030 on energy security, CO2 emissions and energy markets; continuing to decarbonize the heating sector; developing a clear and transparent program for eliminating administratively determined end-user prices of electricity and natural gas; and taking further measures to limit energy-related CO2 emissions, in particular in the transport sector.

Spain: Spain is a world leader in integration and of variable renewable energy and has built a robust electricity system with high shares of wind and solar PV. Cross-border connections are seen as essential to unlock Spain’s renewable energy potential and liquefied natural gas regasification capacity, the highest in the EU.  Spain must maintain its strong and long-term commitment to a financially sustainable electricity system. To improve investor confidence, it should also closely follow the principles of transparency, predictability and certainty when revising policies and regulations. New momentum for establishing additional cross-border connections in electricity and gas will eventually enable Spain to use its large renewables and liquefied natural gas capacity to increase flexibility, diversity and security in the European Union internal market. The government should focus on longer-term issues including energy efficiency and greenhouse gas emissions. Spain needs to implement clear long-term energy and climate policies to encourage the transition to a low-carbon energy system. Spain plans to close its last-remaining nuclear reactors and coal-fired plants by 2030, according to the country’s State Secretary for Energy Jose Dominguez. It will probably take us beyond 2030 but we will not reach 2040 – before 2040, we will have closed them, he said in a statement

Sweden: Sweden is leading the way towards a low-carbon economy. The country has already the second-lowest CO2 emissions per GDP and per capita among IEA member countries (in 2017). With ambitious targets set in the Energy Agreement and Climate Framework, Sweden aims to become a net-zero carbon economy by 2045. Sweden has the lowest share of fossil fuels in its primary energy supply among IEA member countries. Electricity generation is practically decarbonized thanks to large access to hydro, nuclear, and in recent years wind power. Space heating is also supplied with mainly low-carbon energy sources, owing to the wide use of bioenergy-based district heating and electric heat pumps. Sweden’s energy policy has successfully focused on energy efficiency and switching from fossil fuels to domestic renewable energy. Total primary energy supply (TPES) and total final consumption of energy (TFC) peaked already late last century and have remained stable, while the economy and the population have kept growing. In its energy market policy, the government aims to promote efficient and competitive markets that ensure a reliable energy supply at internationally competitive prices. Sweden was among the first countries to implement a carbon taxation, and has the highest in the world, which contributes to the energy transition. Main challenges for the energy policy is now to implement measures to meet the ambitious targets set in the Energy Agreement and Climate Framework. These include having 100% renewable electricity generation by 2040 and reducing transport emissions by 70% from 2010 to 2030. Sweden is on track to follow Ireland as one of the first industrialised countries in the world to phase-out all its fossil fuels, with its last plant set to shut down by 2022.