Europe’s energy crisis has seen consumer bills for gas and electricity reach record levels. But why are we still not addressing its root causes, asks Monique Goyens? Governments must act now to speed up decarbonisation efforts and accompany consumers on that journey.
As I began writing this blog, war in Ukraine still seemed unthinkable. Energy prices have been very high across Europe over the past six months and there has been intense political activity across the EU to protect consumers from such price increases. Now, the unthinkable has become a reality and the energy prices we thought were high could be set to rise further still.
Since last autumn, national governments have adopted measures to support consumers, ranging from tax reductions and direct income support. And less than six months after publishing a first batch of recommendations on how to address the energy prices surge, the European Commission will publish on 2 March a second strategy aimed at giving relief to consumers and to the economy as a whole.
While it is welcome that the Commission intends to take stock and build on the initial recommendations, it is crucial that its upcoming recommendations provide for a holistic toolbox that takes account of the overwhelming new geopolitical context. Consumers are expected to have to face dramatic price increases, not just in the energy sector, but across their budgets, due to the inflationary consequences of these increases – the Commission should beef up its strategy to protect them properly.
Europe’s dependency on Russian gas
But we also need long-term measures to shield consumers from volatility in energy markets. The reason why we are paying high energy bills today is because Europe is too dependent on gas imports from third countries, mainly from Russia (which supplies 35% of Europe’s gas). Although Europe can import gas from other countries, for example it can import liquefied gas from the United States, this is generally much more expensive. For this reason, Russia has a great influence on European gas prices.
Hence, tighter gas supplies from Russia meant that gas prices in Europe in 2021 were five times higher than in 2020. And the latest geopolitical developments make us doubt that the situation can possibly improve anytime soon.
Faced with such developments, whose causes are largely out of our control, the only way to shield ourselves from this price volatility in the long term is to drastically reduce our reliance on gas, by speeding up our decarbonisation efforts.
The accelerated switch to renewables, coupled with energy efficiency efforts, is the only long-lasting answer to the situation. The geopolitical situation makes this even more urgent, and the European Commission and Member States should now urgently focus on how to make this happen.
Ramping up renewables
Ample evidence, including from the International Renewable Energy Agency, shows that the cheapest and fastest way to replace gas power generation is deploying more renewable energy, including getting more solar panels onto consumers’ rooftops.
Yet, our members involved in the EU-funded CLEAR-X project have noticed that there are important unaddressed barriers preventing consumers from making these investments. In Bulgaria, it can take up to three years to get approval for a grid connection for a rooftop solar panel. In Portugal and Lithuania, requesting a grid connection is still too complex for many consumers. Similarly, in Germany, the timeframe for the connection of a solar panel to the grid is often unpredictable Although grid operators in Germany are required by law to connect consumers’ solar panels immediately, in practice there are no sanctions in case of delay, which regularly happens.
The Renewable Energy Directive currently in force should have ensured that these processes are fast and easy for consumers, but many Member States still have not implemented these measures yet.
What’s more, our German member vzbv has also highlighted that there is a severe lack of accredited installers that is preventing many consumers from making home energy improvements, such as installing solar panels. Similar issues have also been highlighted from several consumer organisations across Europe.
Making it easier for consumers to renovate their homes
Speeding up our decarbonisation efforts also means reducing our energy needs, by improving the energy efficiency of the homes we live in. Today, roughly 75% of our buildings in Europe are energy inefficient and the progress on energy efficiency improvements in the past years has been quite slow.
The energy savings potential of home renovations is major. It could more than halve consumers’ heating consumption and drastically reduce energy bills. It can also bring benefits to our electricity system. A recent BEUC study showed that ambitious renovation campaigns in the period 2025-2040 could reduce the cost of operating electricity systems by €1-4bn depending on the country – savings which could be passed on to consumers.
The reason for the slow progress in home renovations is that they are often too complex for many consumers. They need to find a contractor who they can trust and can carry out the work, they need to find a bank granting them an affordable green loan and, in some cases, they may need to request a permit from their municipality.
To remedy this, the Commission should urge governments to simplify and shorten procedures for the installation of renewables at home, like solar panels, and their connection to the grid.
Strong measures are also needed to ensure consumers have access to accredited installers to undertake energy efficiency improvements and install solar panels. The ongoing negotiations on the Energy Efficiency Directive, the Energy Performance of Buildings Directive and the Renewable Energy Directive between the European Parliament and the Council should reflect this. Unfortunately, the Council is proposing to scrap measures aimed at achieving this objective that were included in the Commission’s original proposal. These negotiations should also lead to the creation of one-stop-shops, to help consumers navigate the complexity of home renovations.
Helping consumers find the funding
In addition, even if home renovations will allow consumers to make savings in the long term, as they help to reduce energy bills, they are a very expensive investment. This is an important barrier preventing many consumers, especially the most vulnerable, renovate their homes.
Consumers need financial support from governments, but this is still lacking in some countries, despite the availability of funding under Europe’s post-COVID-19 Recovery and Resilience Facility funding plan. Governments should use this funding to subsidise home renovations, both for tenants and home-owners, and should also ensure that they have access to straightforward financial products, allowing them to bear the up-front costs of home renovations.
The time to act is now
The European Commission should urge Member States to rapidly increase renewable power generation capacity and to roll out an inclusive, ambitious home renovation action plan, as it is this is the only way to shield households against price volatility in energy markets. Given the latest developments, we can no longer afford to wait.
Countries should not need to wait for Commission guidance or for the approval of new legislation before acting and should take action without delay.