Action plan to lower Europe’s energy bills

The European Commission’s ‘Action Plan for Affordable Energy’ is aimed to lower energy bills in the short term while accelerating reforms to mitigate future price shocks.

Rounding out a trio of plans to drive decarbonisation, including the Competitiveness Compass and the Clean Industrial Deal it accompanies, the plan seeks to address the high energy prices impacting both consumers and industry, with a high level of energy poverty and a growing gap in industrial competitiveness.

The plan is based on four ‘pillars’ – lowering energy costs, completing the energy union, attracting investments and being ready for potential energy crises – with a series of eight action areas, mostly for delivery during 2025, with the aim to bring immediate relief for consumers.

Lowering energy costs

Lowering the bill requires addressing its three costs components: network and system costs, taxation, and supply costs.

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Moreover, with natural gas being a significant part of the electricity mix, ensuring well-functioning gas markets that deliver market-based prices also will help lower both the gas and electricity bills.

Further energy efficiency and savings will reduce the amount of electricity that consumers buy.

Proposed actions include improving the efficiency of network costs and increasing retail competition to make bills more affordable, and to bring down the costs of electricity supply by bringing to full implementation the existing EU electricity legislation to deliver for example reduced permitting times, the expansion of the grids and interconnectors and more flexibility.

Actions for the gas market are to ensure fair competition via a market taskforce, while energy efficiency actions include access to more efficient and longer lifetime appliances.

With regard to network charges, the Commission will put forward a new design of tariff methodologies for network charges to enable users of the grids to adjust or shift energy use towards times and places where the cheapest energy sources are available and when it is the most cost efficient for the overall system. This should help reduce overall costs of the system and thus have a lower impact on the energy bill.

Hans Grunfeld, Managing Director at Royal VEMW commented: "Good that the EU Commission is introducing measures. The industry in Europe is under enormous pressure, investments are staying away, and as a result, we are falling behind economically and weakening our strategic position."

Grunfeld will be at the European Industrial Energy Days on 12 and 13 March in Amsterdam.

Completing the Energy Union

Despite the building of an interconnected energy market, a true ‘energy union’ remains a work in progress, the action plan reports, proposing several actions to deepen market integration.

These include a high level energy union task force to propose technical or regulatory adjustments along with a strengthening of the governance.

In addition, to build on the REPowerEU plan, a new electrification action plan and a heating and cooling strategy are envisaged, as is a roadmap for digitalisation and AI in the sector.

Attracting investment and ensuring delivery

In addition to a robust governance, the energy union requires substantial investment over the next decade.

A tripartite contract between governments, energy producers and energy consuming industries is proposed to create a favourable investment climate for the energy system in supporting cost effective energy production, reliable energy supply and long term economic growth for all stakeholders.

This would include sectoral contracts for certain sectors, e.g. hydrogen, synfuels, batteries, offshore wind, solar, grids, etc.

Readiness for future potential energy crises

To enhance resilience for any future energy crisis, member states need tools for effective action and the security of supply framework needs to be strengthened for price stability.

Price peaks need to be avoided during such crises with demand reduction programmes and increased cross-border activity can support access to cheaper electricity when necessary.

The action plan document states that its delivery will require the involvement of all actors, the coordination of the EU with the instrumental support of the European Parliament and Council, the cooperation of member states to implement the actions on the ground, the inclusion of stakeholders and the involvement at the highest political level through the Energy Union Task Force..

The Commission also intends to monitor and report on progress towards delivery of the plan in ‘State of the Energy Union’ reports.