Re-power the EU: vital perspectives in energy security

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The European “REPowerEU Plan” is aimed at rapid reduction of EU-27 dependence on Russian fossil fuels by fast-forwarding the clean energy transition and adapting member states industrial and manufacturing sectors, as well as infrastructure to different energy sources and suppliers. The plan is based on additional investments of €210 billion during coming five years (i.e. up to 2027) in order to phase out Russian fossil fuel imports, which are currently costing European taxpayers nearly €100 billion per year. 

The plan was presented by the Commission on 18 May 2022; according to the plan, the new EU’s initiative – REPowerEU – will respond to the EU-27 new priorities through energy savings, diversification of energy supplies, and accelerated roll-out of renewable energy to replace fossil fuels in homes, industries and power generation. Besides, the EU green transformation will strengthen economic growth, security, and climate action for the EU member states and its partners.
At the center of the “re-power” strategy is the EU’s Recovery and Resilience Facility (RRF), which provides additional EU funding for the national recovery/resilience plans (RRPs); the latter shall include in their national strategies a new chapter on “re-powering” socio-economic development.
From the EU side, the EU planning mechanism will include in the 2022 European Semester cycle some country-specific REPowerEU recommendations for each EU member state. Member States can use the remaining RRF loans (currently €225 billion) and new RRF grants funded by the auctioning of Emission Trading System allowances, currently held in the Market Stability Reserve, worth €20 billion, for the following national development spheres:
• boosting energy efficiency in buildings, and decarbonising industry;
● increasing the production and uptake of sustainable biomethane and renewable or fossil-free hydrogen, and increasing the share of renewable energy;
● addressing internal and cross-border energy transmission bottlenecks and supporting the electrification of transport infrastructure, including railways;
• accelerated requalification of the workforce towards green skills;
• boosting value chains for the production of key materials and technologies linked to the green transition; and
• improving energy infrastructure and oil and gas facilities for immediate security of supply.

Priorities in financing REPower EU program
Among main directions in financing re-powering project up to 2030, there are the following:
First and most vital direction is towards developing active use of renewables (with €86bn support) and key hydrogen infrastructures (€27bn); total financial support – €113 billion.
A massive scaling-up and speeding-up of renewable energy in power generation, industry, buildings and transport will accelerate our independence, give a boost to the green transition, and reduce prices over time. The Commission proposes to increase the headline 2030 target for renewables from 40% to 45% under the “Fit-for-55” package.
Setting the increased renewable ambition, the following frameworks and initiatives are created, including: a) a dedicated EU solar strategy, which is going to double solar photovoltaic capacity by 2025 and install 600GW of electricity; b) a “solar rooftop initiative” with a phased-in legal obligation to install solar panels on new public and commercial buildings and new residential buildings; c) doubling the rate of deployment of heat pumps, and measures to integrate geothermal and solar thermal energy in modernised district and communal heating systems.
The EU has set a target of 10 million tones of domestic renewable hydrogen production and 10 million tones of imports by 2030, to replace natural gas, coal and oil in hard-to-decarbonise industries and transport sectors, the initiative which would accelerate the deployment of hydrogen market. The Commission also published two “delegated acts” on renewable hydrogen production to ensure the process of total decarbonisation. To accelerate hydrogen projects, additional funding of €200 million is set aside for research; the assessment of the first Important Projects of Common European Interest will be completed during summer 2022.
A vital role in renewables plays the EU “bio-methane action plan”, which includes new bio-methane industrial partnership and financial incentives to increase production to 35bcm by 2030, including through the Common Agricultural Policy.
Besides, the Commission recommended the states to tackle slow and complex permitting for major renewable projects, and a targeted amendment to the Renewable Energy Directive to recognise renewable energy as an overriding public interest. The EU member states have to put into national development “areas for renewables” with simplified allowances for areas with lower environmental risks: i.e. Commission assists the states to quickly identify such environmentally sensitive areas as part of its “digital mapping tool” for geographic data related to energy, industry and infrastructure.

Second in importance is energy efficiency and heat pumps, with €56 billion.
Third, is financing the adaptation process of the EU member states’ industry to use less fossil fuel, with €41 billion.
Fourth, in increasing biomethane production in the member states with €37 billion.
Fifth, is to financing the power grid structures to enable greater electricity use with €29 billion.
Then, a couple of smaller financial injections in the member states development:
a) financing import of sufficient LNG and pipeline gas with €10 billion, and
b) provision of adequate security of oil supply with about €1,5-2 billion support.

Sources of “re-powering” European strategy and “smart investment”
– European Cohesion policy funds: Increase in voluntary transfer to the RRF of up to 12.5% of Member States’ national allocation under these funds. Build on the already available 5% transfer possibility and add a 7.5% transfer possibility (additional €26.9 billion) to be spent exclusively on REPowerEU objectives. Under the current MFF, cohesion policy will support decarbonisation and green transition projects with up to €100 billion
– European Agricultural Fund for Rural Development: new voluntary transfer to the RRF of up to 12.5% of Member States’ national financial allocation under the fund (additional €7.5 billion)
– Connecting Europe Facility: New call for proposals for Projects of Common Interest with €800 million complementing funds supporting infrastructure Projects of Common Interest.

Besides, additionally, both the EU and the member states have to foresee the following financial options: – the EU Innovation Fund with the idea of double 2022 funding to €3 billion; – national and EU funding in support the REPowerEU objectives; – additional national fiscal measures; – private investment sources, mobilised via InvestEU Program; and – huge European Investment Bank initiatives for the member states projects and plans.

Delivering the REPowerEU objectives requires an additional investment of about €210 billion between 2022-2027 as a kind of European “down-payment” for energy independence and security; besides, cutting Russian fossil fuel imports can also save almost €100 billion per year for the EU and the states’ budgets. To support REPowerEU, €225 billion is already available in loans under the RRF: the Commission adopted legislation and guidance to the states on modifying and complementing national RRPs in the context of REPowerEU.
In addition, the Commission proposes to increase the RRF financial envelope with €20 billion in grants from the sale of EU Emission Trading System, ETS allowances currently held in the Market Stability Reserve. In order not to disrupt the market, the ETS would not only reduce emissions and the use of fossil fuels but also raise necessary funds to achieve energy independence.
Under the current long-term EU budget, MFF the Union’s cohesion policy will support decarbonisation and green transition projects with up to €100 billion by investing in renewable energy, hydrogen and infrastructure. An additional €26.9 billion from cohesion funds could be made available in voluntary transfers to the RRF.
A further €7.5 billion from the Common Agricultural Policy is also available through voluntary transfers to the RRF: the Commission will double the funding available for the 2022 from the Innovation Fund to around €3 billion.
The Trans-European Energy Networks (TEN-E) is aimed to help the states in creating resilient and interconnected EU-wide gas infrastructures: additional investment of about €10 billion will be targeted to complement the existing Projects of Common Interest (PCI) and fully compensate for the future loss of Russian gas imports. The substitution needs of the coming decade can be met without locking in fossil fuels, creating stranded assets or hampering our climate ambitions. Accelerating electricity PCIs will also be essential to adapt the power grid to European future needs: hence, the EU’s Connecting Europe Facility will be a supporting instrument with a couple of proposals with a budget of €800 million during 2022-early 2023.
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