The European Commission has presented the REPowerEU Plan

May 19, 2022

The European Commission has presented the REPowerEU Plan, its response to the difficulties and disruption in the world energy market caused by the Russian invasion of Ukraine.

There is a twofold urgency to transform Europe's energy system:

End the EU's dependence on Russian fossil fuels.
Addressing the climate crisis.

The Recovery and Resilience Facility (RRF) is at the core of the REPowerEU Plan and supports coordinated planning and financing of national and cross-border infrastructure, energy projects and reforms. The Commission proposes to make specific amendments to the RRF Regulation to integrate specific REPowerEU chapters into Member States' existing Recovery and Resilience Plans (RRPs), in addition to the large number of relevant reforms and investments already in the RRPs. Country-specific recommendations from the 2022 European Semester cycle will feed into this process.

The proposed measures include the following actions:Energy saving measures

Saving energy is the fastest and most cost-effective way to address the current energy crisis and reduce bills.

The Commission proposes to improve long-term energy efficiency measures, including an increase from 9 % to 13 % of the binding energy efficiency target under the "Fit for 55" package of the European Green Pact legislation.
The Commission has also published an ' EU Energy Saving Communication ' that details short-term behavioral changes that could reduce gas and oil demand by 5% and encourages Member States to initiate targeted communication campaigns aimed at households and industry.
Member States are also encouraged to use fiscal measures to promote energy savings, such as reduced VAT rates on energy-efficient heating systems, building insulation and household appliances and products.
The Commission also establishes contingency measures in the event of a major supply disruption, and will issue guidance on prioritization criteria for customers and provide a coordinated EU demand reduction plan.

Measures to diversify supplies

The newly created EU Energy Platform, supported by regional working groups, will enable voluntary common purchases of gas, LNG and hydrogen by pooling demand, optimizing the use of infrastructure and coordinating outreach to suppliers. As a next step the Commission will consider the development of a 'joint purchasing mechanism', which will negotiate and contract gas purchases on behalf of participating Member States. The Commission will also consider legislative measures to require diversification of gas supply over time by Member States. The Platform will also allow for the joint purchase of renewable hydrogen.

This EU external energy strategy will involve energy diversification and the creation of long-term partnerships with suppliers, including cooperation on hydrogen or other green technologies. In line with the Global Gateway, the Strategy prioritizes the EU's commitment to a green and just global energy transition, increasing energy savings and efficiency to reduce price pressures, boosting the development of renewables and hydrogen, and strengthening energy diplomacy.

Measures focused on accelerating the deployment of renewable energies

The Commission proposes to increase the 2030 headline target for renewables from 40% to 45% under the Fit for 55 package. Setting this higher overall ambition will set the stage for other initiatives, including:

A dedicated EU solar strategy to double solar PV capacity by 2025 and install 600 GW by 2030.
A solar rooftop initiative with a gradual legal obligation to install solar panels on new public and commercial buildings and new residential buildings.
Doubling the rate of heat pump deployment and measures to integrate geothermal and solar thermal energy into retrofitted community and district heating systems.
A Commission recommendation to address the slow and complex processing of large renewable energy projects, and a specific amendment to the Renewable Energy Directive to recognize renewables as an overriding public interest.
Member States should establish specific access areas for renewables with abbreviated and simplified authorization processes in areas with lower environmental risks. To help quickly identify such areas, the Commission is making available datasets on environmentally sensitive areas as part of its digital mapping tool for geographic data related to energy, industry and infrastructure.
Set a target of 10 million tons of domestic renewable hydrogen production and 10 million tons of imports by 2030 to replace natural gas, coal and oil in hard-to-decarbonize industries and transportation sectors.
To accelerate the hydrogen market, co-legislators should agree on further sub-targets for specific sectors.
The Commission is also issuing two Delegated Acts on the definition and production of renewable hydrogen to ensure that production leads to net decarbonization.
To accelerate hydrogen projects, additional funding of 200 million euros is set aside for research, and the Commission is committed to completing the assessment of the first Major Projects of Common European Interest by the summer.
A Biomethane Action Plan sets out tools including a new biomethane industry partnership and financial incentives to increase production to 35 bcm by 2030, including through the Common Agricultural Policy.

Measures to reduce fossil fuel consumption in industry and transportation

Energy savings, efficiency, fuel substitution, electrification and increased uptake of renewable hydrogen, biogas and biomethane by industry could save up to 35 bcm of natural gas by 2030 in addition to that envisioned in the Fit for 55 proposals.

The Commission focuses on the following objectives:

Implement carbon-for-difference contracts to support industry adoption of green hydrogen and targeted funding for REPowerEU under the Innovation Fund, using emissions trading revenues to further support the shift away from Russian dependence on fossil fuels.
Provide guidance on renewable energy and power purchase agreements and will provide a technical advisory service with the European Investment Bank.
Establish an EU Solar Industry Alliance and a large-scale skills partnership to maintain and regain technological and industrial leadership in areas such as solar and hydrogen, and to support the workforce, the Commission.
Intensify work on the supply of critical raw materials and will prepare a legislative proposal.

Consistent smart investment measures

Meeting the REPowerEU targets requires an additional investment of EUR 210 billion by 2027. These investments must be borne by the public and private sector, and at national, cross-border and EU level.

Regarding measures involving investment to support REPowerEU:

EUR 225 billion in loans are already available under the RRF.
The Commission has adopted legislation and guidance for Member States on how to amend and supplement their RRPs in the context of EUENP.
In addition, it proposes to increase the RRF's financial envelope with €20 billion in grants from the sale of EU ETS allowances currently held in the Market Stability Reserve, to be auctioned in a market-friendly manner.
The ETS not only reduces emissions and fossil fuel use, but also raises the funds needed to achieve energy independence.
Under the current MFF, cohesion policy will already support decarbonization and green transition projects with up to EUR 100 billion investing in renewable energy, hydrogen and infrastructure.
An additional EUR 26.9 billion could be made available from cohesion funds in the form of voluntary transfers to the RRF.
A further EUR 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 large-scale call of the Innovation Fund this autumn to around EUR 3 billion.
The Trans-European Energy Networks (TEN-E) have helped create a resilient and interconnected EU gas infrastructure.
Limited additional gas infrastructure, estimated at around €10 billion of investment, is needed to complement the existing List of Projects of Common Interest (PCI) and fully compensate for the future loss of Russian gas imports.
The replacement needs of the next decade can be met without locking in fossil fuels, creating stranded assets or hindering our climate ambitions. Accelerating electricity PCIs will also be critical to adapting the electricity grid to our future needs.
The Connecting Europe Facility will support this, and the Commission is launching a new call for proposals with a budget of €800 million, with another to follow in early 2023.We are able to help manage business regulatory risk through our regulatory monitoring and regulatory intelligence services.

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