Filenews 3 March 2025 - by Andreas Poullikkas
The REPowerEU plan adopted by the EU in 2022 to tackle the energy crisis has made the EU's energy system more resilient by boosting energy efficiency, developing clean energy production and diversifying its energy supply.
In 2024, the installed capacity of wind and solar systems reached 78 gigawatts and more than 3 million heat pump units have been installed, with renewables generating 48% of electricity needs in the EU.
However, according to the European Commission, for the EU to achieve sustainable long-term solutions it needs to complete the Energy Union through three key enablers, such as, (i) a fully integrated energy market, supported by an electricity grid and digitalised and a common integrated regulatory and regulatory framework, (b) a decarbonised energy system, with a significant increase in clean energy production and electrification and with a focus on energy efficiency, and (c) as gas remains part of EU energy consumption, a more transparent, competitive and well-functioning gas market is needed, while continuing efforts to diversify and reduce its use.
Simply put, only by accelerating investment in clean energy and infrastructure, ensuring a rapid acceleration of electrification, increasing energy efficiency and bringing transparency to the gas market will it be possible to make energy affordable.
With this in mind, on 26 February 2025, European Commission President Ursula von der Leyen announced the EU Affordable Energy Action Plan, which aims to highlight the true value of the Energy Union in ensuring affordable, efficient and clean energy for all European citizens.
In the above Action Plan, coordinated action by the EU, Member States and industry is proposed:
(a) to reduce energy costs,
(b) completing the Energy Union;
(c) to attract investment
and (d) preparedness for future energy crises.
It is stated in the plan that most actions will be implemented in 2025, focusing on actions that bring immediate relief to energy consumers.
Tax reduction
On reducing energy costs, the European Commission, bearing in mind that significant funds are needed for investments in modernising and extending electricity grids, will propose a concrete design of pricing methodologies for network usage charges (if necessary, present a legislative proposal to make it legally binding). At the same time, it will prepare guidelines to explain how Member States could use their national budget to reduce network usage charges to cover additional costs arising from measures to accelerate decarbonisation and energy market integration, such as electricity interconnectors.
Also, because high taxes on electricity tariffs (e.g. VAT and other national taxes) increase bills, lower taxation of electricity and removal of non-energy cost components from bills are needed.
The European Commission recalls that Member States can reduce national taxes and levies on electricity tariffs towards the minimum rates of excise duty provided for in the Energy Taxation Directive for businesses, apply the reduced VAT rate allowed by the VAT Directive for a minimum rate of 5%, abolish non-energy levies and transfer contributions that finance energy policies to the general state budget.
In addition, the European Commission will propose a package of measures to reduce supply costs by increasing competition in the retail electricity market, aiming to increase consumer participation in the energy transition and strengthen the social dimension of the Energy Union.
It will provide guidance to Member States on removing existing barriers so that consumers can save money on their energy bills by switching suppliers and/or changing electricity supply contracts.
This will include ensuring consumers' understanding of the bill through clear information and data on energy consumption, prices to enable consumers to switch to electricity at lower times and enabling consumers and communities to generate, use and sell renewable energy on their own terms; including through energy communities.
The role of natural gas in prices
Bearing in mind that high and volatile gas prices increase electricity prices, it is necessary to decouple electricity tariffs in the retail market from gas prices. This is why the European Commission will provide guidance to Member States on long-term electricity supply contracts, in particular for energy-intensive industries, by supporting national schemes and introducing risk reduction tools.
When it comes to reducing licensing times for new clean energy supply infrastructure, grid projects, storage projects, infrastructure that can provide flexibility to the electricity system and electric vehicle recharging points, authorities need to make significant efforts to speed up procedures, as outlined in the Draghi report (Mario Draghi, former president of the European Central Bank). The European Commission will present legislative proposals to accelerate the licensing of the above and will evaluate existing licensing practices for the development of new nuclear energy technologies, such as small modular reactors (SMRs) and publish a Communication on the matter.
Electrical interconnections
Finally, building on the actions of the Network Action Plan adopted in 2023, the European Commission will present a European electricity grid package, consisting of legislative proposals and non-legislative measures to strengthen and further develop trans-European energy networks, ensure cross-border integrated project planning and implementation; in particular for electricity interconnectors.
Four examples of such missing flagship interconnections include:
(a) establishment of an integrated offshore electricity grid in the North Sea;
(b) enhancing and ensuring the security of cross-border energy infrastructure in the Baltic Sea region with Central and Northern Europe;
(c) increasing the capacity of the electricity interconnection of the Iberian Peninsula with the rest of Europe;
and (d) increasing electricity interconnectivity and completing the internal electricity market between South East and Central Europe.
The benefits of these flagship projects will extend beyond the Member States hosting the projects. Therefore, only by designing new energy projects and accelerating and completing existing ones can the Energy Union be realised. Given the scale and impact of these projects, the EU will continue to provide sufficient funding to support the completion of electricity interconnectors to implement the Energy Union both across borders and nationally.
Investing in the EU's decarbonisation objectives and removing barriers to implementing the Energy Union offers the EU the opportunity to lower energy prices, increase its energy security and take a leading role in clean technologies.
In conclusion, the EU Affordable Energy Action Plan sets out concrete short-term measures, to be implemented in 2025, to create a genuine Energy Union for competitiveness, affordability, security and sustainability. The implementation of this transformative Action Plan will require the involvement of all actors, such as the European Commission to ensure an effective and realistic legislative framework, close cooperation of Member States in implementing actions, active involvement of stakeholders such as industry, businesses, innovators and citizens.
- Professor of Energy Systems – Frederick University
