Ursula von der Leyen seems to be the most likely candidate for the next Commission President, but no one can be sure. Would you like to take her place? What steps would you take in her shoes?
My steps would probably be a bit bigger, but not faster. Whoever the President of the Commission is, he or she needs to be sure that this path of transforming our economy is safe for our households and industries.
The power sector already started its transformation several years ago. But what about the cement sector or steel production? They are responsible for around 16% of global GHG emissions and are difficult to decarbonise. What about the modern rapidly developing energy-intensive technologies like data centres, AI and others? According to IEA forecast, their power consumption could increase from 460 TWh in 2022 to 620-1050 TWh in 2026. We need to power them with green energy, either in the form of renewable electricity or clean fuels. Each sector needs its own set of steps or, if you like, a decarbonisation plan that is acceptable to financial institutions and supported by public funds where necessary.
How would you describe the state of play of the EU’s climate policy? What was achieved by the outgoing Parliament and Commission?
The co-legislators negotiated and adopted Fit for 55 legislation and had to quickly react to the energy crisis and consequences of the Russian full-scale invasion of Ukraine.
In general, we are satisfied with the fact that, alongside ambitious targets, there remains a level of flexibility for Member States. Moreover, we are very satisfied with the result of the latest Electricity Market Design reform, which strikes the right balance between market-oriented principles and the need to deliver predictable prices for our customers.
Soon, we also expect new initiatives. In this context we must not forget that the energy transition should help us to ensure the competitiveness of the EU’s economy and support European industry and manufacturing. There’s a saying that every crisis is an opportunity. The pandemic and the Russian invasion of Ukraine disrupted global supply chains and, as a result, many companies realised the importance of reshoring their production back to the EU. We must continue to pursue such policy. According to a study by Capgemini, in the next 3 years, companies will spend around USD 3.4 trillion in reindustrialisation in the EU and the US.
What are your thoughts on 2040 climate target?
Implementing a 90% emission reduction target by 2040, as proposed by the Commission, will be more challenging than everything that we have achieved so far in terms of climate and energy.
I believe that it is crucial to have the full picture of the challenges and costs for the individual Member States. In implementing the 2040 climate target into binding legislation, the co-legislators must consider the different starting points of EU economies by setting the necessary preconditions to achieve it.
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Dariusz Marzec is President of the Management Board of PGE Polska Grupa Energetyczna S.A
According to the Commission’s impact assessment, the electricity price for the industry is roughly the same under each of the scenarios, which span from 80 to 95% of the reduction target, which is a huge difference and reaches around EUR 130 per megawatt-hour in 2040.
Under a 90-95% emissions reduction scenario, the final electricity price for the residential sector is around EUR 288 per megawatt-hour (MWh) in 2040 and the electricity price for services is as high as EUR 249 per megawatt-hour (MWh) in 2040.
How can we persuade people across the EU to support the energy transition, let alone companies to stay in Europe, with such high electricity prices after investing on average 1.5 trillion of euros each year until 2050 in our energy systems to achieve our targets? We often compare the EU’s industrial policy with the US. According to IEA, the average wholesale electricity price in the US was USD 46 per MWh, while for Europe it was USD 115.
What else – apart from the target and energy prices should be addressed?
We need to expand distribution grids that will manage to distribute the power from renewable energy sources: the gross electricity generation from RES will increase from 1285 TWh in 2030 to almost 2300 TWh in 2040. This is around a 78% increase in just a decade. The recent study “Grids for Speed” by Eurelectric confirms the huge scope of such challenges challenges. According to the report, from 2025 to 2040 we must double our investments in grid. The EU, together with Norway, will need to invest EUR 67 billion annually from 2025 to 2050 in grid infrastructure to enable the energy transition. This is not the whole picture: energy storage will be necessary to stabilise power systems across Europe and support the development of renewables.
In 2023, PGE invested around EUR 1 billion for this reason, but a further EUR 18 billion is needed for distribution network investments across whole Poland by 2030. By the end of 2028 we will build approximately 4000 km of all voltage lines and another 16,500 km will be modernised, including programmes of underground cabling and smart grid development. So, we have already followed that direction.
Finally, we should also remember about the social dimension and the impact of the energy prices on the citizens. We must secure funds and make sure they are attractive for financial institutions, whilst at the same time protecting consumers from rising prices.
Do you count on the EU funds in implementing your investment agenda? What should be addressed in the next Multiannual Financial Framework beyond 2027?
Public spending alone will not be sufficient to cover the costs of the energy transition. The cost of debt servicing of the NextGeneration EU could claim up to 40% of the future Multiannual Financial Framework. ETS revenues will not be sufficient either: for the whole EU in 2031-2050 period, these revenues will cover only 11% of investment needs of power sector only. Apart from already mentioned issues relevant for distribution, what is often overlooked is the heating sector, especially district heating.
What would be your final message? What should be the most important climate and energy issues for the newly elected MEPs?
The lesson learnt from the current political term should be that instead of focusing our discussion on the level of targets, we need a much broader debate on the tools needed to achieve these targets. This approach should be applied in the context of “the New Competitiveness Deal” and the next Multiannual Financial Framework. We believe that all these concepts should be defined by the new Industrial Deal, which should complement the energy transition policies.