A Sting Exclusive: EU Commission’s Vice President Šefčovič accentuates the importance of innovation to EU’s Energy Union

This article was exclusively written for the European Sting by Mr Maroš Šefčovič, Vice-President of the European Commission responsible for the Energy Union.

The role of energy in our day-to-day lives is undoubtedly crucial for the functioning of any modern society. From powering homes, our vehicles, and our industries, energy is one of the most important commodities in the world and a well-functioning energy market is critical for our survival.

It is not the question, if Europe needs the Energy Union – the question is if Europe could go on without this profound transformation of its energy market. We are the world’s largest importer of energy, with 53% of energy being imported at a cost of around EUR 400 billion yearly. Some Member States are heavily reliant on a single importer country, while EU electricity prices are about 60-70% higher than those in the US.  At the same time Europe is the leader in renewable energy technologies, which will become even more pronounced as we move towards fulfilling our highly ambitious climate action goals.

Yet we simply cannot understand the role of energy in Europe by merely looking at various gas pipelines, electricity grids, and interconnectors. These are just hardware to how energy influences Europe – or a body that is nothing without our internal consciousness.  The software of energy is innovation – it is the driving force for changing how energy is used and perceived in Europe. It is innovation that will let our citizens start taking ownership of the energy transition and to reduce their energy bills, yet equally benefiting the industry by cut their costs through new energy efficient technologies.

I strongly believe that one of the greatest advantages we have in Europe is the tremendous diversity within the same single market. This brings together a wide range of traditions, working cultures, and approaches which are complementary and we can make the most out of them. I have visited a great number of centres of innovation, such as this year’s Hannover Messe, and the 2016 European Capital of Innovation, Amsterdam, and I had the opportunity to see how we are able to pool talents in places around Europe and let them act as lighthouses for innovation and smart cities not only across the EU, but also around the world.

Our leading position in energy innovation has allowed us to begin transforming our economy and societies in line with developing smart technology and energy usage. We are at the beginning of a new era with smarter and cleaner technologies in all areas of our economy and society. We are living through a paradigm shift which some call another “industrial revolution”, a radical transformation of the way we live, interact, produce, consume, do business, and commute.

This transformation offers us tremendous opportunities. Transition to a low carbon economy with renewables is at its forefront. Furthermore, this profound energy transition will not only affect what types of energy are used across Europe, but also make a drastic change in roles of various market actors. Transition towards a more decentralised system will be a game changer when it comes to the traditional roles of consumers and energy providers.

The Paris Agreement has given both the public and private sectors the important message that further decarbonisation of the global economy must occur, yet according to the International Energy Agency’s estimates the global energy consumption will rise by 30 percent by 2040. Fortunately, Europe has clearly shown that we have managed to successfully fight climate change while also growing our economy by more than 40 percent from 1990 to 2010, despite the ambitious emission cuts that have been achieved so far. These factors produce both a significant need and opportunity for investments that are compatible with decarbonisation. It is crucial that the business community capitalises on these trends by supporting innovation and sustainable investments. Such investments mean increased transparency of climate-related risks and better integration of sustainability in investment decisions, significantly benefiting the investors in making further future investments.

Some of the support for such new projects may also come from funds within the EU budget.  For instance, the European Structural and Investment Funds (ESIF) will allocate 45 billion EUR for support of low-carbon investments during the 2014-2020 programming period, in particular in projects promoting energy efficiency, renewable energy and sustainable urban mobility. Additionally, the new European Fund for Strategic Investments (EFSI), also known as the Juncker Fund, is helping finance infrastructure and innovation projects, as well as SMEs and mid-caps. EFSI mobilises 315 billion EUR for projects boosting investment, and sustainable energy is one of its strategic priorities. The EFSI Jun has already supported 64 projects and 185 SME agreements benefitting 141,800 start-ups, SMEs and mid-caps, triggering more than EUR 100 billion of investments.

However, mobilisation of private capital is an absolute key feature for the success of funding investments in innovative and sustainable development. It is crucial to have more public-private partnerships so that we can truly seize and make the most out of the business opportunity to benefit from the energy transition that is happening not only in Europe, but all over the world.