Have the article read by OpenAI (Beta). Please note that AI translations may take some time to process.Diversifying the EU’s energy supplies, speeding up the green transition and improving the bloc’s energy security are the goals of the REPowerEU plan which celebrated its two-year anniversary recently.
On Tuesday, EU ministers gave final approval to the electricity market reform – also geared towards improving the bloc’s energy security. The reform further promotes the expansion of renewable energies and should better protect consumers from escalating electricity prices in the future.
Two years of REPowerEU
Faced with the difficulties and disruptions in the global energy market caused by the Russian invasion of Ukraine in February 2022, the European Commission launched the REPowerEU plan in May 2022. The plan foresees energy saving goals, the production of clean energy and the diversification of energy supplies – and ultimately ending the dependency on Russian fossil fuels.
Since the adoption of the REPowerEU plan, the EU has successfully reduced gas supplies from Russia. The share of gas from Russia – by pipeline and Liquefied Natural Gas (LNG) – made up 45 percent of all imported gas in 2021, but only 15 percent in 2023. The Union replaced it with gas from other third countries. Norway and the USA have become the largest gas suppliers.
Seaborne imports of Russian crude oil, refined petroleum products and Russian coal imports have been banned through EU sanctions.
Natural gas consumption: How much did member states reduce?
In 27 country reports released for the two-year anniversary of REPowerEU, the European Commission compiled member states’ performances between August 2022 and January 2024. Each country report includes a country-specific analysis on a range of points, for example on the key energy figures, diversification of energy supplies, energy price developments or the natural gas demand reduction.
The EU countries had agreed on a voluntary 15 percent reduction target of natural gas consumption and almost all countries have managed to lower their gas consumption. On EU level, the countries achieved a decrease of 18 percent.
21 countries lowered their gas consumption even further than the agreed-upon reduction target, including Denmark (-40%), Finland (-39%), Latvia (-30%), Sweden (-29%), Lithuania (-29%), Estonia (-28%), the Netherlands (-27%), Luxembourg (-26%), Portugal (-23%), Slovakia (-22%), France (-20%), Romania (-19%), Austria (-19%), Hungary (-18%) and Bulgaria (-18%), Italy (-17%), Croatia (-17%), Czechia (-17%), Greece (-16%), Germany (-16%) and Belgium (-16%).
According to the European Commission’s data, only five countries did not meet the 15 percent reduction target. Among those are Spain (-12%), Slovenia (-10%), Poland (-8%), Ireland (-4%) and Malta, the only country which increased its gas consumption by ten percent. According to the report, Cyprus does not use natural gas.
Slovenia: Cutting down on consumption, but still reliant on Russian gas
In the case of Slovenia, the REPowerEU report pointed out that while the country “has taken measures to strengthen alternative supplies of natural gas”, it “effectively remains reliant on Russian gas imported through Austria”.
Data by the Slovenian Energy Agency shows that in 2023 Slovenia imported 68.3 percent of gas from Austria and 28.3 percent from Algeria, through Italy. The agency cannot say with certainty how much of the gas imported from Austria is of Russian origin.
Even though gas importers have not had direct contracts for supply of gas from Russia for 2023 or 2024, the Energy Agency believes that the share of Russian gas was still predominant both in 2023 and in the first part of 2024.
Moving forward on renewables with room for improvement
The EU and its member states are continuously working towards becoming more sustainable and less reliant on fossil fuels. What have countries achieved so far?
In 2023, according to the European Commission, Portugal for example installed around 1.3 gigawatts of renewable electricity capacity, bringing the total to 18.4 gigawatts – in comparison to 5.1 gigawatts in 2021. Additionally, the annual growth rate of installed renewable energy capacity increased to 7.6 percent compared to 6.1 percent in 2021. However, the country’s energy mix still included 69 percent fossil fuels in 2022.
Neighbouring Spain accelerated its transition towards a decarbonised energy system. According to Spanish grid operator Red Eléctrica, renewables accounted for 65.2 percent of the Spanish electricity mix in March – an all-time high. Still, the REPowerEU Spain report states that fossil fuels continue to play a central role in the country’s energy system, representing 70.1 percent of primary energy imported in 2021.
Croatia quickly deduced its dependence on Russian gas imports by increasing its own production and intensifying the use of the existing LNG terminal. However, Croatia is still highly dependent on energy imports from countries outside the EU. Fossil fuels also continue to play an important role in Croatia’s energy mix, as they accounted for 72 percent of gross available energy in 2022.
Moving into a greener direction, the country could soon start to produce green hydrogen: INA, the leading Croatian oil and gas company, recently signed two contracts related to renewable energy projects – one for the production of green hydrogen and the other for a bio-methane production facility. The completion of the construction of both plants is expected in 2026. The green hydrogen project, together with its solar plant and logistic capacity, will be co-financed via the Recovery and Resilience Facility (RRF).
The EU’s RRF is a tool providing grants and loans to support reforms and investments in member states. It should, among other things, help member states become more sustainable, boost progress with the green and digital transition and achieve the EU target of climate neutrality by 2050.
…just hang on for a year
In Bulgaria, one of the major national energy reforms has been postponed by a year, which means the artificial maintenance of coal capacity will remain for at least another twelve months. This, in turn, could lead to the country not receiving the expected 1.3 billion BNG (around 665.15 million Euro) under the Bulgarian National Recovery and Resilience Plan which is funded under the EU’s RFF. The energy reform is a mandatory requirement.
While Bulgarian MPs justified this citing a lack of readiness to switch from a regulated to a free electricity market or funds, several media outlets and experts attributed the decision mostly to pre-election populism.
A reformed energy market for security and a green future
This week, the electricity market reform took its final hurdle after representatives from EU member states and the European Parliament had signed off on the market reforms last December.
Belgium’s Energy Minister Tinne Van der Straeten described the day as a “milestone for the EU” on the path to a carbon-free and greener future. “By adopting the electricity market reform, we are empowering consumers, ensuring security of supply and paving the way for a more stable, predictable and sustainable energy market.”
New long-term contracts between governments and electricity producers, under which the state would chip in if the market price drops below an agreed price, are central to the reform efforts.This is meant to incentivise domestic green and nuclear power production by ensuring a return on investments.
It also protects consumers who, in the future, have the right to both fixed-price contracts and contracts with dynamic prices. This would allow consumers to opt for both secure, long-term prices and contracts with changing prices if they want to take advantage of price fluctuations – for example, to use electricity when it is cheaper for charging electric cars or for heat pumps.
How does the electricity market work?
The electricity market in the EU works according to the merit-order principle, defining the order in which power plants connected to the electricity exchange are used to deliver energy and to determine the market price.
Those that can produce electricity at relatively low marginal cost, like wind farms, are used first to cover demand. But as demand rises beyond those initial sources’ capabilities, higher marginal cost sources are used.
The final price therefore depends on which sources need to be used to meet demand, as well as fluctuations in the costs of using those sources. For example, a surge in natural gas prices raises the cost of using gas-fired power plants.
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