REPowerEU: “Killing two birds with one stone?”

The European Commission’s recent RepowerEU package seeks to hastily end the continent’s dependency on Russian gas as well as accelerate the expansion of renewables and green gases. Listen to a discussion on the long, expensive road ahead, and why not everyone welcomes plans to boost the region’s gas infrastructure. Will the new measures ease the permitting logjam for green energy or could a more targeted approach work better?

 Host: Richard Sverrisson, Editor-in-Chief, Montel
 Guests: Ilaria Conti, Head of Gas, Florence School of Regulation
 Dries Acke. Director, Solar Power Europe

Transcript

Richard Sverrisson, Editor-in-Chief, Montel: 0:06

Hello listeners and welcome to the Montel Weekly Podcast, bring You Energy Matters in an informal setting. This week we discussed the Repower EU plan. The European Commission launched last month. We've had several weeks to digest the content. So in this episode, we'll delve into the details. Can Europe cut two thirds of Russian gas consumption this year and fully by 2027? What will be the cost and who will pay what's achievable in the short term and what can be done over five years and where will we be by 2030? Helping me, Richard Sverrisson to discuss this and much, much more. Ilaria Conti of the Florence School of Regulation, our warm welcome Ilaria.

Ilaria Conti, Head of Gas, Florence School of Regulation: 0:46

Hello. Thank you very much for inviting me,

Richard Sverrisson, Editor-in-Chief, Montel: 0:48

Dries Acke of Solar Power Europe. Also a warm welcome to you Dries.

Dries Acke. Director, Solar Power Europe: 0:52

Thank you. Thanks for having me.

Richard Sverrisson, Editor-in-Chief, Montel: 0:54

So I, I want to talk about the main idea behind the repower EU plan. What is the main idea? Is it just to end the eus dependency in Russian fossil fuels? Dries, if I could start with you.

Dries Acke. Director, Solar Power Europe: 1:05

Absolutely. This is in fact a new agenda for Europe in Versailles A couple of months ago, the European Council agrees. To look at reducing Russian fossil fuels as soon as possible. And now what we see with Repower EU is the commission's concrete agenda towards that. So it's quite a turning point, I should say. The green transition to some extent is actually recognized now for its security merits. The political attention is certainly increasing accelerating renewables and efficiency has become a matter of national security.

Richard Sverrisson, Editor-in-Chief, Montel: 1:37

What's your view here? Ilaria? Can, is it realistic to be able to stop using Russian gas by 2027 and cut two thirds by the end of this year?

Ilaria Conti, Head of Gas, Florence School of Regulation: 1:46

Let's say it's the ambitious plan that the commission seem to have displayed with the Repower eu. Actually we've seen a series of very interesting and ambitious publications and targets released in the, since the beginning of the energy crisis. The Repower EU is certainly one of them. And in my view is the scope here is really. Almost killing two birds with one stone because what the commission says is that the scope is to reduce rapidly the dependence on Russian fossil fuels by fast forwarding the clean transition. So it's actually pursuing two targets at the same time, which we imagine is not easy, but that's precisely what the Repower EU wants to do. And the main instruments are diversification saving energy. That this will be actually a very important one, sometimes a bit neglected. And also speeding up the transition with investments and reform. All good ideas ambitious, as I said. And to reply your question. I think it will be possible to cut Russian supply by the end of the year by two thirds. That's the plan. The question is how at what cost? And I think the general agreement is that it it won't be painless. I don't agree with those who say that it will be a bloodbath, but certainly we have to take into account the social costs of, accelerating and doing without Russian gas.

Richard Sverrisson, Editor-in-Chief, Montel: 3:07

Perfect. I'd like to return to that point a little bit later, Ilaria, but if I can ask you, theres, to see how we've had the sort of flurry of different packages over the last two years. We have the 50 fit for 55. Sorry, the green deal, the recovery plan. What, how does this fit in repower you into that big picture? Is it taking different parts of all the packages or is it a separate package altogether?

Dries Acke. Director, Solar Power Europe: 3:29

It's important to understand the different starting points of these packages. The Green Deal and the FIT 4 55 agenda are primarily climate agendas, looking to accelerate clean energy transition from that point of view. The green deal also looks at these socioeconomic context around that environmental justice just transition and all of that. The Repower EU is very different from a context. This is about. Energy security and it's part of the European Union's response to the Russian aggression and the war at its borders, if or on its continent, if you will. So in a way, the packages do align surprisingly well from the point of view that's renewables and efficiency are. Also helping us with the energy security measures. So basically we see those two agendas coming together and we see, we are realizing the security merits of things like solar winds, electrification, and efficiency. Of course the repower EU because of its different entry points as because of the fact that it's not. It's hard to climate agenda as has uglier elements as well, if I may put it that way. For example, a return to gas import infrastructure. Some of that's, most of that's completely unnecessary and of, and above all. I would also highlight the international messaging from the commission as part of its repower eu package being very much around. Gas drill, baby drill. That's what the world hears from the commission. So it's quite dominated by a coal for gas outside of Russia, and that's a signal that is. Difficult to ignore and it's actually a wrong signal to some of the developing nations looking at developing their country based on some economic pillars. And we see that, for example, in Africa, the message is really picked up as saying okay, Europe will need our cast so we can safely explore that. While actually the message is that Europe is reducing tremendously its fossil fuel use and gas use in the next years. So it's a bit of a paradox that we need to be on top of, and the commission will have to manage that carefully within the context of international climate negotiation as well.

Richard Sverrisson, Editor-in-Chief, Montel: 5:42

So you're saying there's a bit of mixed messages going out here?

Dries Acke. Director, Solar Power Europe: 5:45

Yeah, I think so. Almost paradoxical messages if you are. If you are in Mozambique, yeah. The message you get is Europe will be a trustworthy, stable demand pool for your gas resources that you never knew whether or not to develop.'cause it was a big investment. Will there be a return? And now it feels like Europe will be that stable imports place and that stable pool and partner. And that's just misleading.'cause Europe is gonna reduce enormously air, fossil fuel use and may leave some of these developing countries into the resource rep and into choosing wrong pillars for its economic development. The commission is aware of that's for sure, but it is a message that they will need to manage going forward very strongly.

Richard Sverrisson, Editor-in-Chief, Montel: 6:33

And it's not just gas, obviously. There's also South Africans are trying desperately to find new sources to, to export to Europe for that coal supply that is Ilaria, what's your view here about the mixed message that Dries is talking about?

Ilaria Conti, Head of Gas, Florence School of Regulation: 6:46

Not sure I agree. I see this element as well, of course, but I, I also heard very clearly France erman the Commissioner Erman saying that, what we are trying to strike now with this alternative countries, with these countries diver by diversifying supplies is a sort of short term deal for fossil fuels so far. Call for gas for whatever we need. At the moment we are all aware that we are working under exceptional circumstances. That the the likely shortage in supply we are going to face next winter is something exceptional. It was not foreseen. It's something to. Cope to that we have to cope with urgently. And therefore that's why we are looking for immediate resources faster, the fastest resources we can get. And these are unfortunately fossil fuel, but we are also at the same time trying to negotiate already with the same countries a longer term deal. That's, these are really the words of Tim Iman short term deal for. Immediate for, to cope with the immediate emergency and then a longer term deal with the same countries trying to ensure imports for Europe of renewable sources so that we will have in the medium, longer term we can, we will be able to continue the sustainability policies that we have. Quite rightly put in place in in previous years before the the start of the war. So I think that's the plan. And to me it sounds very good because in the longer term, the only possibility we will have of being really independent energy wise for Europe, it'll be renewables, investing in renewable sources so that we will be able to cover our energy demand as much as possible with internal domestic production.

Richard Sverrisson, Editor-in-Chief, Montel: 8:25

You you talked about the cost of the repower EU plans. Yeah. Have you got any figures at hand here and who actually pays for these plans?

Ilaria Conti, Head of Gas, Florence School of Regulation: 8:34

Quite, to put a big question there, Ilaria. It's, yeah, it's, it is. I don't have the ambition to to have the the right answer for that. What I can see is definitely that there have been a number of measures good measures, I would say put in place, or at least proposed. Of course, now we are discussing about proposals from the commission, and now most of these proposals are in the hands of the parliament of the European Parliament and the council. So if let's say that there is a a speed implementation and acceptance of such measures, we will be fairly covered with fairly covered, partly covered with social costs. We have the social climate fund, we have the Repower EU has, already planned for 300 billion Euros investments for for, to sustain this this targets the achievement of this target. We are not talking about peanuts, to be honest. So I think these are all good measures and they are the commission is well aware of the cost, and this is also demonstrated by the fact that it has started engaging in some industry related initiatives as Dries. I'm surely knows the. Use Solar Industry Alliance, but also the e electrolyzer declaration. So it seems that the commission is aware of the cost. It's trying to involve the industry as much as possible so that there are investments in going in the right direction. I have to be less or a little bit more critical towards, instead the shorter term measures that were implemented by the member states as to compensate, as to mitigate. The rise in energy prices. We know that these measures were suggested already with the toolbox in October short term measures, aiming to provide relief to consumers, to vulnerable consumers to startups as well. But they were all meant to be targeted and accurately designed. This has rarely happened, I must say, in the member states. What we have seen as has been rather. Blankets, totally blanket subsidies, caps, grants, tax cuts that they were not they were not targeted, but they were really extended with and this, we know that is something detrimental. Which waters down the effectiveness of of such measures, of course. So hopefully this pattern will change and there will be. Measures that are more targeted, really trying to support the, those parts of the economy that need the support the most.

Richard Sverrisson, Editor-in-Chief, Montel: 10:54

Absolutely. And what's your view, Dries, do you think that member states will work towards more targeted measures? It's as Ilaria said, maybe it's the easiest is to do just the blankets, just as a subsidy that covers all kind of industries, although that will have the unforeseen consequences. What do you think?

Dries Acke. Director, Solar Power Europe: 11:10

No I very much agree with what was setting out there. One would hope that's there's a move towards more targeted measures.'cause for the moment we see a bit more of the blanket checks. Now it's not an easy time to be a politician. That's for sure. Inflation is is very high. It's unprecedented. So at least it's been multiple decades that we've seen this. But it's gonna be really important to keep the focus on the structural solutions. So that's Plan mostly worried about, that's the short term interventions app piece. Let's say the tensions and make politicians feel like they tick the box. Yeah. Actually the structural solutions to hedge ourselves against the volatility of fossil fuel prices.'cause that's really what we're looking at, is to accelerate the fossil free solutions. Yeah. So to really make sure that solar winds and electrification also from a tax regime, we really need to see that tax shifts away from taxing electricity. Like with the free electricity as much as possible from taxation burdens and actually shifted that to the more fossil heavy and carbon intensive alternatives that we use now. Renovations, heat pumps electric vehicles. That's where the structural solutions slide. These things can scale relatively quickly. Like we're really talking a couple of years, and then we are in a world where we are structurally resilient against those kind of shocks going forward. So that's a perspective that I'm hoping politicians are not losing because they've done a short term intervention. That's gonna be the challenge.

Richard Sverrisson, Editor-in-Chief, Montel: 12:40

Yep. I think you pointed out clearly. Politicians have a very tough time at the moment. And it's not easy. And at the same time, they're voted in by their own national electorates, not by regions or by, by across eu. And I think maybe that's at the core of some of the issues here in terms there's talk of an energy purchasing platform. How would this work in in, in practice? Certain countries who are very dependent on Russian gas or gas for their industry will do it utmost to, to go out there and do their own thing, whereas the commission wants to force countries to work together. How do you see this working out in practice? Ilaria?

Ilaria Conti, Head of Gas, Florence School of Regulation: 13:19

There's not enough information yet to understand how this platform will work. In practice. What we read in the repower EU is that this platform should serve the purpose of in, at a second stage, it should serve the purpose of facilitating joint purchasing of not only of gas, but also hydrogen. So it is, in principles, it would have an extended scope, but at the moment, how it'll work in practice, it's a bit difficult. I have I have to some, I have some reserves, I would say reservations on this platform. Because I think that while it's it's definitely something which sounds very good, so I fully understand the political value of proposing a mechanism by which member states can join and show the strength of Europe when it comes to negotiating energies. Just this is often the comparison which is made just like in the case of vaccination. So in in COVID Times Europe managed to actually join forces for the purchasing of vaccines. But I think it's extremely dangerous to make such comparison because we are talking here about very different things. We are talking about, for example, in the case of gas, I'm not leaving aside hydrogen, which is. Still a nascent market, so anything is still very much open. But for gas, what we have is already a European single market for gas, which has proved to work very well, and gas is re regularly purchased. By companies, so by private entities. Member state for member states, it would be a first time that after market liberalization that take the initiative and take the role of becoming actors on the market. So for me, this at the moment includes more question marks than real guarantees for success, particularly as, I believe that's in this situation the it'll take time also for to set up such a platform and to start for member states start starting to do something which is not really in their core. I believe that for this platform should be really carefully designed in order to be to be successful and not to lead. To detrimental effects on the market, particularly for citizens who will then eventually have to pay for an infrastructure that might. Not bring any benefit in in in costs, in, in terms, in financial terms for them.

Richard Sverrisson, Editor-in-Chief, Montel: 15:38

Yep. It's quite a task to, to then plan and manage that kind of a common energy platform. Absolutely. You're saying, the market's run professionally by traders and by companies, and then suddenly if member states were to take that over, that's quite a task.

Ilaria Conti, Head of Gas, Florence School of Regulation: 15:51

Particularly as the, sorry, as the suppliers that the counterparty would be the same counterparties for companies that con companies usually negotiate bilateral g agreements with. That's the question is would such a platform have the power the market power to come to better agreements, better negotiations, better deals than the, nor the market companies would do normally on the market?

Richard Sverrisson, Editor-in-Chief, Montel: 16:15

Absolutely. But there are also. In the repower EU plans, there's, the targets for renewable energy is increased from 43% to 45% by 2030 degrees. That's, that's upping the ambition there. But we'll, one of the key obstacles to renewables growth, isn't it, is the very slow permitting processes. In some countries it can take up to nine, nine years to get a permit to build a wind farm. And there's probably similar ones for solar. Do you. How do you see this playing out? That this sort of speeding up the rollouts of renewables here Dries?

Dries Acke. Director, Solar Power Europe: 16:49

No, so I think it is very positive that the commission is putting its finger on an important problem, like a real world obstacle, a bottleneck. And that's, it has taken the time to bring this topic to the forefront. Yeah. With the guidance an indication of go-to areas and several other things overriding public interest it is of course true that the commission, the European Commission has limited competencies. This is a very. National competence, very distributed on even the local level. So it's multi governance level down from national, it's quite complex. But the commission has given that signal to member states to sort this out, to focus on this. Yeah. Now of course we must say that what we don't want is that this problem is becoming, is escalating. We feel that's the commission with its. Around go to areas. Exempting from environmental permitting and overriding public interest is somehow using terms that could actually increase the tension and the confrontation around this between a corporate driven renewables deployment on the one hand and more of a public perception and public engagements on the other. So we, as a solar industry, we're certainly looking at. Merging both sides of things. I think solar has a lot of benefits and options in terms of multiple use of certain lands. Be it through building, integrated or floating solar or rooftop is probably the most important one. So we rather talk in terms. Priority areas rather than go to zones. Because if you say go to zones, you almost defacto say, and all the other zones are no go to zones. And that would be, that would give a bit of a wrong signal. I think solar in particular, but also winds as a good track record of business models. That's really. Involve communities as well through community energy schemes. They come in different shades and colors where local communities, municipalities, benefits. So it's not only in terms of participation and let's say engagements having been consulted, but actual being a shareholder, being part of the revenues and seeing the benefits of that local renewables engagements. So what we want is to intensify these conversations. It's been a key topic. A key obstacle that the commission is now giving attention to. That's very positive. But the bottlenecks may lie differently. Like one bottleneck that we see, for example is locally skilled administration. Yeah. So actually sometimes the bottleneck is not more than the fact that on the local permitting level they can't follow with the amount of applications, and that just takes time. So we are talking to city networks, to local authorities, regions to actually look at. Education programs and skilling programs to make sure that even on a local level where these decisions ultimately need to be taken, that's the responsible administration is aware and skilled up to make the right decisions. Those things are probably more important to get rights than exempting renewables from environmental impact assessments. That's, that gives a bit of a mixed message that we do need to be careful about.

Richard Sverrisson, Editor-in-Chief, Montel: 19:57

Guys, I'm aware we are running out of time, so much more to discuss, but I think we've covered the main points here, Dries and Ilaria, thank you very much for being guests on the Montel Weekly podcast. Listeners, you can now follow the podcast on our own Twitter account, aply named a Montel Weekly podcast. Please direct message. Any suggestions, questions, or, let us know if you think you have a good idea for a guest on the show, you can also send us an email to podcast@montelnews.com. Lastly, remember to keep up to date with all that's happening in energy markets. On Montel News. You can subscribe on Apple Podcasts and Spotify or wherever you get your podcasts from. Thank you and goodbye.