Newsletter 5.2020

Dear reader,

Welcome to the fifth EUROFUEL newsletter of 2020. In this edition, we will provide an overview of the latest developments on energy and climate policy both at EU and national level as well as describe the activities of our association during this period.

Despite the summer break, the EU policy machine has never really stopped. Making the most of a calmer institutional agenda, the European Commission has taken the opportunity to advance its work on the Green Deal by publishing a series of new strategies and launching public consultations on the revision of different energy policy files.

Developments have taken place also at the national level, where some governments have proposed new measures to accelerate the phase out of heating oil. Unfortunately, these announcements put additional pressure on our industry, forcing us to be creative and find new ideas to show the benefits of heating fuels. Initiatives from our side are not missing luckily: the web conference organised with our partners in North America on the role of liquid heating fuels in a carbon constrained world is yet another positive example of our efforts to defend the interests of our industry. A good step in the right direction to navigate the challenging times ahead!  

Yours,

Dr Ernst-Moritz Bellingen

 

European Commission pushes energy policy agenda forward

The summer season did not stop policymakers from the European Commission to put forward some of the energy policy files announced in the European Green Deal.

Major developments started in July when the Commission published two key initiatives:

hydrogen ESIS strategy

  • Hydrogen Strategy: with this strategy the Commission aims at scaling up the production of hydrogen in Europe. While the priority will be to develop hydrogen obtained from renewable energy such as wind and solar, the Commission acknowledges the role of low carbon hydrogen produced from natural gas coupled with carbon capture and storage technologies. This solution will be important especially to decarbonise hard-to-abate industrial sectors like steel and chemicals, which currently rely on fossil fuels and cannot easily switch to electricity. Hydrogen is also seen as a long-term solution for shipping, aviation and heavy-duty road transport where electrification is not feasible at the moment. According to the Commission, hydrogen could be used also for the provision of heat for residential and commercial buildings. Pilot projects are already ongoing to analyse the potential to replace natural gas boilers with hydrogen ones. This however seems rather challenging, as using hydrogen for heating would most likely need a dedicated infrastructure, costly and lengthy to build.
  • Energy System Integration Strategy: the initiative aims at linking different energy carriers, infrastructure and consumption sectors together in order to boost renewables and reduce carbon emissions. According to the Commission, this objective can be achieved applying the following principles:
    • Create a more circular energy system with energy efficiency at its core. This will lead to the review of the Primary Energy Factor (PEF), in order to fully recognise energy efficiency savings via renewable electricity and heat, as part of the review of the Energy Efficiency Directive (June 2021).
    • Pursue a greater electrification of end-use sectors. The Commission is convinced that electrification will play a central role also in buildings, in particular through the roll-out of heat pumps for space heating and cooling. To this end, the Commission will develop more specific measures for the use of renewable electricity for heating and cooling in buildings and industry through the revision of the Renewable Energy Directive and building on its sectoral targets (June 2021). To facilitate this transition, the Commission believes that is crucial to review the EU energy taxation framework, which currently applies a higher tax and levy regime to electricity compared to fossil fuels used in the heating sectors. This will be pursued through the revision of the Energy Taxation Directive.

The Commission did not wait too long before pursuing the measures announced in the strategies, making progress on the following initiatives:

  • Energy Taxation Directive: on 22 July, the Commission opened a public consultation to review the EU energy taxation framework. The consultation will feed into the Commission’s proposal for a revision, expected in June 2021. The reform might include higher taxation levels for heating fuels imposed on the ground of their environmental performance.
  • Renewable Energy Directive: at the beginning of August, the Commission officially started the revision process of this legislation, asking stakeholders’ feedback on an initial impact assessment. The Commission legislative proposal – expected in June 2021 – will focus on increasing the integration of renewables in transport, heating and cooling both in industry and buildings as well as on fostering electrification of end-use sectors.
  • Energy Efficiency Directive: at the same time, the Commission published an initial assessment on the revision of this law, also expected in June 2021. The objective is to overcome remaining regulatory and non-regulatory barriers, and market failures, which do not allow energy efficiency to be fully part of the energy systems.

The months ahead will therefore be very important for setting the direction of the EU energy policy for the coming years and decades. Key developments are already expected in September, as the Commission will publish an impact assessment on raising the existing EU’s greenhouse gases emission reduction targets. The latter will determine the ambition level of the European Climate Law – the legislation enshrining the 2050 EU decarbonisation objective into legislation – as well as of the upcoming revisions mentioned above.

 

Member States announce measures to limit heating oil

The public pressure for a ‘green recovery’ from the Covid crisis is affecting also policies at national level, as this summer some Member States have announced measures to reduce the use of fossil fuels in certain sectors, including heating.

This is the case of Denmark and France. The Danish authorities passed a new climate agreement seeking to reduce greenhouse gas emission by 70% by 2030 on a 1990 baseline. The initiative is very ambitious and will have repercussions also on the heating oil sector. Denmark is planning to phase out individual oil and gas boilers over the coming years, favouring the transition towards district heating and heat pumps.

Paris is taking steps in the same direction and at the end of July announced a ban on the installation of oil and coal boilers in new buildings from 2022. The French government also plans to ban the replacement of oil and coal boilers as from 2022. The details of the measures are however not clear yet, meaning that the use of hybrid system and low carbon liquid fuels might still be allowed.

While being clearly detrimental for our industry and for off-grid households, these initiatives force us to think at new creative ways to communicate the advantages of heating oil and the low carbon solutions that our sector is developing.

 

Eurofuel goes global

A remarkable initiative to communicate the benefits of heating fuels is the 1st European-North American Conference on the Future of Liquid Heating Fuels which Eurofuel is hosting with the National Oilheat Research Alliance (NORA), the American trade association of the heating oil industry.

Conference

The conference covers all the different aspects regarding the outlook of heating oil, ranging from upcoming policy developments to new technologies. The event is a great opportunity to build partnerships beyond Europe and to advocate the benefits and the technological efforts of our industry in developing low carbon and affordable heating solutions for consumers.

A recap of the discussions will be made available in September, so stay tuned!