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2011: Summer of European energy reform

This summer, Europe is making significant strides toward a smarter energy future. Recent moves by the governments of Germany and the U.K. will save more energy and increase renewables. Also, new legislation before the EU Parliament includes many specific energy-saving targets and requirements…

The proposed directive, recently sent to the EU Parliament by the European Commission, sets forth:

  • Specific energy efficiency targets.
  • Renovation targets to reduce energy consumption in public buildings.
  • Requirements for member nations to create efficient heating and cooling plans as well as certification schemes. Equivalent qualification schemes are available for providers of energy services, energy audits, and energy efficiency improvement measures — including for installers of building elements.

In Germany last week the Bundesrat (Federal Council) approved a change in Germany’s energy policy that had already been approved by the Bundestag (Parliament). It now awaits formal approval by German President Christian Wulff.

Germany’s plan to phase out nuclear energy by 2022 is driving this policy change. Germany is prepared to make this shift and is examining all the regulations which must change to make it possible. For instance:

  • Grid expansion. By 2020, Germany’s power grid and transmission system must grow geographically by 4450 km.
  • Green energy promotion and funding. €13 billion in 2011 only.
  • Building renovations. Germany will offer loans up to €1.5 billion in 2012 for energy upgrades to existing buildings.
  • New legislation. Pending presidential approval, Germany’s new Energy Economy Law will make electricity and gas more environmentally friendly, affordable, and reliable — as well as support this nation’s ambitious planned expansion of climate protection and renewable energy. Here, smart metering systems and demand response will play major roles in moving away from nuclear power and toward more distributed generation.

Meanwhile in the U.K., the Department of Energy and Climate Change has published a white paper on energy market reform. The proposed reform package includes:

  • Carbon price floor. Announced in the U.K. 2011 budget 2011, this would reduce investor uncertainty.
  • New long-term contracts. A feed-in tariff with contracts for difference would aim to provide stable financial incentives to invest in all forms of low-carbon electricity generation.
  • Emission performance standard. A proposed requirement of 450g of carbon dioxide per kWh would reinforce the existing U.K. requirement that no new coal-fired power stations will be built without carbon capture and storage. It would also enable necessary short-term investment in natural gas generation.
  • Capacity mechanism. This would include demand response as well as generation to ensure the future security of electricity supply. DECC is seeking additional input on the type of mechanism required and will report on this in 2011.

As The Guardian’s Damian Carrington observed, this proposed reform attempts to sort out the “trilemma of the three C’s” — carbon, cost, and continuity of supply.

In a comment to his article, I proposed adding a fourth “C”: consumers. Europe’s future energy consumers will be better informed and more active, thanks to the rollout of smart meters (by 2020, 80% of European households will have smart meters), smart grids, and demand response.