EUROPEAN

COMMISSION

Brussels, 18.10.2022
COM(2022) 547 final

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE

COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE
COMMITTEE OF THE REGIONS

State of the Energy Union 2022

(pursuant to Regulation (EU) 2018/1999 of the Governance of the Energy Union and
Climate Action)

EN EN
1. INTRODUCTION AND HIGHLIGHTS

The State of the Energy Union report reviews the latest policy developments and describes
the progress made at Union level towards meeting the objectives of the Energy Union,
including the Union's 2030 targets for energy and climate. The 2022 edition of the report
takes stock of the EU’s energy policy response to the current energy crisis and elaborates
on their scope, anticipated impacts and consistency. This report is accompanied by the
proposals addressing energy prices and security of supply ahead of this winter.

Russia’s unprovoked and unjustified military aggression against Ukraine has upended energy
markets, triggering price volatility and energy insecurity across the world with impacts and
repercussions for the EU’s energy system. The EU and its Member States are dynamically
reshaping their energy strategies to reflect new geopolitical realities and to address the
need for affordable energy. This includes intensified actions to increase gas supplies from the
EU’s trusted partners. Record-high energy prices since the second half of 2021 have been
exacerbated by the conflict, with Russia’s weaponisation of energy supplies and heavily
impacted also by the record-high temperatures in the summer period. It is imperative to
accelerate the transition to clean energy and bring dependence on Russian energy to an
end as soon as possible1 and well before the end of this decade2.

A crucial new element in the European policy response to this unprecedented situation is the
REPowerEU Plan3, presented by the Commission in May 2022 and building on the full
implementation of the European Green Deal. The plan, adopted with a new Joint
Communication on EU external energy engagement4, includes a set of integrated actions to
save energy, diversify and secure energy supplies, boost renewable energy deployment
and smartly combine investments and reforms. REPowerEU increases the ambition of Fit-
for-55 legislative proposals in energy efficiency and renewables, which are currently in
advanced stage of legislative negotiations.

The REPowerEU Plan was preceded by a proposal for a Regulation on Gas Storage5,
adopted by the co-legislators on 27 June 2022, and the establishment of the EU Energy
Platform in April 2022. It was swiftly followed by emergency interventions, including the
Save Gas for a Safe Winter Communication6, a new legislative instrument and a
European Gas Demand Reduction Plan to reduce gas demand in Europe by 15% by next
spring, as well as a proposal for a Regulation on an Emergency Intervention to Address
High Energy Prices7 politically agreed at the extraordinary meeting of the Energy Council
on 30 September. Annex I provides an overview of actions taken in view of the rising energy
prices since October 2021.

The 2022 State of the Energy Union report highlights that the Energy Union will help
accelerate the implementation of the European Green Deal, foster energy security and
affordability, encourage the uptake of renewable energy and promote energy savings and
1 Versailles Declaration by Heads of State and of Government (10 and 11 March 2022), page 5, European Council
conclusions of 24-25 March 2022, point 15.
2 Communication on REPowerEU (COM(2022) 108 final – 8 March 2022), page 2.
3 COM(2022) 230 final
4
JOIN(2022) 23final
5 COM(2022) 135 final
6 COM (2022) 360 final
7
COM(2022) 473 final

1
energy efficiency measures. It also elaborates on the EU support to its neighbours and the
new partnerships that have been established to accelerate the global green and just energy
transition.

Together with this report, the Commission is publishing energy snapshots for each Member
State that provide a comprehensive overview of its energy situation. The accompanying
annexes of the State of the Energy union report 2022 will be published shortly:

- 2022 Report on energy subsidies in the EU;

- EU Climate Action Progress 2022;
- 2022 Report on the Achievement of the 2020 Renewable Energy Targets;
- 2022 Report on the Achievement of the 2020 Energy Efficiency Targets;
- Guidance on cost-benefit sharing in cross-border renewable energy cooperation
projects;
- Report on performance of support for electricity from renewable sources granted by
means of tendering procedures;
- Report on Progress on competitiveness of clean energy technologies;
- Fuel quality report;
- Report on the functioning of the carbon market (ETS).

State of the Energy Union 2022 – key findings

 Current high and volatile energy prices are having an impact on consumers across all
EU Member States, affecting not only low-income households, but also lower middle-
income households, SMEs and industries. Between 2019 and 2022 on average across EU
Member States, the energy expenditure share8 increased by more than one third, with the
share having almost doubled in some countries9. According to Eurostat's figures, about
35 million EU citizens (approximately 8% of the EU population) were unable to keep
their homes adequately warm in 2020. The surge in energy prices that started in 2021
and worsened with Russia’s invasion of Ukraine in February 2022, along with the impact
of the COVID-19 crisis, are likely to have worsened an already difficult situation for
many EU citizens.

 All Member States have implemented measures to tackle higher energy prices. National
measures related to the Commission's toolbox ‘Tackling rising energy prices: a toolbox
for action and support’ of October 202110 were adopted to avert the crisis. For instance,
regulated prices/social tariffs have been set; energy vouchers and temporary subsidies
have been introduced for private consumers and business consumers (including SMEs
and industries). The reduction of energy-related taxes and network tariffs are additional
key measures taken by Member States to cushion the impact of higher energy prices on
the end consumer. In several instances, these constitute fossil fuel subsidies that are likely
to affect the EU’s targets and commitments.

 The EU’s gas storage filling was above 91% by mid-October. 14 Member States had
already exceeded 80% by 5 October 2022 and are well in advance of the target of 80% by
1 November 2022.

8 This does not include transport fuel costs.

9
European Commission (forthcoming): Energy prices and costs report 2022.
10
COM(2021) 660 final.

2
 The share of Russian pipeline gas in EU imports went down from 41% in 2021 to 9% in
September 2022. Liquefied Natural Gas (LNG) is now a key source of supply accounting
for 32% of EU total net gas imports.

 In 2021 subsidies for oil, coal and gas showed a slight increase, while subsidies for
fossil electricity generation fell, with fossil fuel subsidies overall remaining fairly stable.
Subsidies for renewable energy were up 7% in 2020 and fell slightly back in 2021.
Energy efficiency subsidies fell in 2020 but rebounded in 2021.

 The EU has substantially surpassed the 2020 emission reduction target set under the
United Nations Framework Convention on Climate Change, achieving a reduction in
domestic net greenhouse gas emissions (without LULUCF11) of 32% in 2020 in the EU.
Provisional estimates show that emissions are expected to rebound in 2021, but still
falling compared to pre-pandemic levels.

 The EU energy efficiency and renewable energy targets for 2020 were overachieved.
Final Energy Consumption (FEC) and Primary Energy consumption (PEC) were 5.4%
and 5.8% lower than the 2020 targets, respectively. The EU reached a share of 22.1% of
renewable energy in gross final energy consumption, thus exceeding the 20% share
aimed at under the 2009 Renewable Energy Directive.

 In 2019 and 2020, the increase in the use of renewable energy substituted around 155.6
Mtoe and 164.6 Mtoe of fossil fuels respectively. This corresponds to a saving of EUR
43.5 billion from avoided fossil fuel use for the EU in 2019, and EUR 34.6 billion in
2020.

 The EU generated a record 12% of its electricity from solar from May to August 2022;
and 13% from wind. Early indications suggest that 2022 will be a record year for the
European solar photovoltaics (PV) market with annual deployment growth in the largest
EU Member State markets between 17-26%. Nevertheless, hydroelectricity production
decreased from 14% to 11% in summer 2022 compared to previous years, due to
drought-related low water levels in rivers and reservoirs.

 The share of renewables in the electricity mix is expected to grow from 37% in 2021 to
69% in 2030. Cumbersome permitting procedures, grid integration issues and
difficulties in the supply chains need to be addressed as a priority to speed up this
process.

 The EU has remained at the forefront of clean energy research, with Member States
steadily increasing public R&I investments, and the EU confirming its leading position in
technologies such as offshore wind. However, more public and private investments in
R&I, as well as scaling up and deployment activities are needed to reinforce EU
competitiveness.

 There is a substantive increase in funding options at EU and national level for the
European hydrogen value chain. Under the Important Projects of Common European
Interest mechanism, EUR 10.6 billion of public investments in the hydrogen value chain
have been approved as incentive to crowd-in private investment in the hydrogen sector.

11
Land use, land use change and forestry.

3
 Approximately EUR 10.6 billion will be available under the Recovery and Resilience
Facility to support hydrogen projects. Electrolyser manufacturers in Europe committed to
increase their capacity to manufacture electrolysers tenfold: to 17.5 GW by 2025.

 Member States are implementing measures to boost energy efficiency across all sectors.
In industry, businesses are now obliged in some instances to implement energy audit
recommendations when the payback period is less than 5 years. Measures to utilise waste
heat are reaping significant savings potential. Member States are implementing energy
renovation measures, including programmes dedicated to social housing and to tackle
energy poverty, upgrade of public buildings notably schools, universities and health care
infrastructure.

2. ENHANCING ENERGY SECURITY, DIVERSIFICATION AND ACCELERATING THE EUROPEAN

GREEN DEAL

Gas and electricity prices have hit all-time highs in 2022. Over the past year, electricity
prices in Europe have rapidly risen to a level much higher than in recent decades. This
dynamic is intrinsically related to the high price of gas, which increases the price of
electricity produced from gas fired power plants. Prices started rising rapidly during the
second half of 2021 when the world economy picked up after COVID-19 restrictions were
eased. Subsequently, Russia’s invasion of Ukraine has exacerbated this situation.

At the same time, electricity generation in the EU has been below usual levels. Record-
breaking temperatures this summer have driven energy demand for cooling and have
added pressure on electricity generation due to droughts (challenging hydro production) and
high water temperatures (challenging nuclear production). The extreme weather conditions
and its consequences on water have thus contributed to energy scarcity and high energy
prices, constituting a burden for consumers, businesses and industry and dampening the
economic recovery. Additional supply pressures on energy and food commodity prices are
feeding global inflationary pressures, eroding the purchasing power of households and
the economy.

Figure 1. Wholesale and retail gas and electricity prices and carbon prices in the EU. Sources: Platts,
VaasaETT

4
The 14 September Commission proposal for a regulation on an emergency intervention to
address high energy prices received the political agreement of the Energy Council in record
time, on 30 September. It sets out a target for an overall reduction of electricity demand
from all consumers with a focus on reducing demand during peak price hours, a revenue cap
for inframarginal technologies and a solidarity contribution on excess profits generated
from activities in the oil, gas, coal and refinery sectors. The revenues would be collected by
Member States and redirected to energy consumers, in particular vulnerable households,
hard-hit companies, including SMEs, and energy-intensive industries. It also expands the
Energy Prices Toolbox available for Member States to help consumers, which would allow
below cost regulated electricity prices and expand regulated prices to also cover small and
medium-sized enterprises.

Further to this action to reduce electricity prices, the Commission proposed a set of measures
on 18 October to dampen the price of natural gas and to strengthen solidarity between
Member States. The Commission proposed to equip the EU with the legal tools to jointly
purchase gas, ensure gas flows where it is needed and to boost the EU’s ability to react
swiftly in case of emergency by setting default rules on bilateral solidarity agreements for
those Member States that have not concluded them yet. To dampen gas prices, ACER would
be tasked to develop a new, complimentary benchmark for LNG purchases. Moreover, in
order to respond to the ongoing energy crisis, the Commission proposes to put in place a
mechanism to limit prices via the main European gas exchange, the TTF, to be triggered
when needed.

The Commission is closely monitoring and discussing with Member States’ the progress of
the ongoing adequacy assessments that should provide an overview of concrete risks for
this winter. These assessments are based on the most up to date measures and the state of
generation sources over the winter, and the actions needed to tackle the concrete risks. Such
action should fully respect the internal market, as cross-border trade is not only an essential
element of the internal market but also a key feature of European solidarity in electricity and
gas. Any undue restriction may therefore jeopardise the security of electricity supply
of Member States, regions, and the EU.

2.1. ENERGY SUPPLY

Since the start of Russia’s invasion in Ukraine, Russia has been manipulating gas
supply with the aim of undermining EU solidarity and energy security. Overall, 13
Member States are directly affected by partial or total supply reductions12 with five
Member States (Bulgaria, Poland, Lithuania, Latvia and Finland) no longer receiving any
gas supply from Russia. Gazprom has gradually reduced gas flows by Nord Stream 1 to
zero by the beginning of September, and the recent incidents regarding Nord Stream 1 and 2
have been another wake-up call for the EU to strengthen security of supply and to increase
preparedness to tackle serious disruption scenarios. The EU energy system is robust,
including with respect to hybrid threats. However, beyond energy security of supply, we
need to continue the work on protection of critical infrastructure and cybersecurity. The
continuous manipulations of gas supply to the EU has led to a considerable reduction in the
Russian share in our pipeline imports. While the Russian Federation supplied 41% of EU's
natural gas imports in 2021, Russian pipeline gas imports have decreased to 9% by
September 2022.

12
BG, PL, DE, FI, DK, NL, IT, FR, AT, CZ, SK, LV – and LT who decided on its own to stop all imports from Russia.

5
With the implementation of the REPowerEU Plan and the EU External Energy Strategy, the
steady drop in Russian supply since the start of the war has been compensated by an increase
of alternative gas supplies thanks to successful efforts to reach out to our international
partners. Between January and July, non-Russian deliveries via liquefied natural gas (LNG)
increased by 19bcm and 14bcm via pipelines. LNG now is a key source of supply and
accounting for 32% of total net gas imports. Norway and the USA are the EU’s main
suppliers.
The Commission also decided to act on a major element of preparedness for winter: gas
storage. The Storage Regulation set a target of at least 80% of gas in storage by November
2022. Today, the EU gas storage filling level was above 91% by mid-October and 14
Member States had already exceeded 80% by 5 October 2022. The Member States are all in
line with their storage trajectories and the Commission is continuing its work on
implementing the Regulation to ensure that none will have difficulty in achieving these
targets.
The EU’s electricity supply has also been affected by some other disruptions. While the
EU generated a record 12% of its electricity from solar from May to August 2022 and 13%
from wind, the share of hydropower13 fell from 14% to 11% compared to previous years,
due to low water levels in several rivers and reservoirs related to the summer droughts.

In 2020, nuclear power plants generated around 24.6 %14 of the total electricity produced in
the EU. However, the EU’s nuclear fleet is ageing, and until new investments are coming
online, its total output is set to temporarily decline until the end of the decade15.
Droughts and high temperatures have led to a lack of cooling water for nuclear power plants
and to low water levels which have hampered production and the transportation of nuclear
fuels. This has resulted in lower production in 2022.

Since March 2022, tightness and even shortages of some key petroleum products (mainly
diesel, jet fuel and fuel oil) have been observed, mainly due to increasing demand and
self-sanctioning by EU operators in anticipation of EU wide measures. This was aggravated
during the summer by incidents in some EU refineries as well as by some logistic
difficulties, driven by the low water levels on the Rhine and Danube, which are key
waterways for transporting fuel. This prompted some Member States to release emergency
oil stocks to compensate for the shortages in petroleum products. Developments are
continuously monitored by the Commission in close cooperation with the Member States and
the European Oil Coordination Group.

2.2. DIVERSIFICATION OF EU ENERGY SUPPLY

The EU, as the biggest importer of natural gas in the world has a long strategy to diversify
sources and importing routes of natural gas. This includes connecting EU with new
sources of supply, for instance via the Southern Gas Corridor and new sources of LNG in
the Mediterranean area. Diversification efforts have accelerated recently, for instance with

13 Within the Copernicus Programme, the Copernicus Climate Change Service (C3S) offer support to the renewable energy
sector with dedicated products targeting near-real-time PV, wind and hydropower production (historical, near-real-time
and projections under different scenarios).
14
Latest Eurostat data: Nuclear energy statistics - Statistics Explained (europa.eu)
15
Nuclear energy is projected to have 16% share in gross electricity generation by 2030 (‘Fit for 55’ modelling) and 15%
share in power generation by 2050 (Communication ‘A Clean Planet for all’ and the Climate Target Plan).

6
the Baltic Pipe, supported by the Trans-European Networks for Energy, inaugurated on 28
September 2022. The Baltic Pipe enhances the diversification of gas supply in Central-
Eastern Europe and the Baltic States by opening a new import route from the North Sea to the
EU. It will make it possible to import up to 10 bcm of gas annually from Norway to Poland
and to transport 3 bcm of gas from Poland to Denmark. Also recently, the Greece-Bulgaria
interconnector, a game changer in the diversification and resilience strategy, was inaugurated
on 1 October.
Faced with today’s energy supply pressure, the Commission and Member States set up the
EU Energy Platform as voluntary coordination mechanism supporting the purchase of
gas, LNG and hydrogen, and aimed at helping to diversify gas supplies. The EU Energy
platform builds on three pillars: aggregating gas demand for joint purchase, optimising
infrastructure usage in the EU to support change in flow patterns and coordinating outreach to
international partners.
The Platform fast-tracked agreements with reliable and trusted energy partners to
diversify and secure the EU energy supply over the short and medium term. On 15 June 2022,
a trilateral agreement between the EU, Egypt and Israel was concluded in Cairo to support
the export of gas supplies from Israel to the EU via Egypt’s LNG terminals. On 18 July 2022,
the EU and Azerbaijan signed a Memorandum of Understanding (MoU) on a Strategic
Partnership in the Field of Energy. The new MoU will support doubling the capacity of the
Southern Gas Corridor up to at least 20 billion cubic metres annually as of 2027 in line with
the REPowerEU plan while continuing to ensure attractive and stable conditions for natural
gas supplies to the EU, reflecting the long-term nature of the energy partnership between the
EU and Azerbaijan. In addition, the EU has intensified dialogue on increasing gas supplies
with its trusted partners including the US, Norway and Algeria. It has also intensified
discussions with Canada for possible supplies in the medium-term.
In its direct neighbourhood, the EU has taken the bold and unprecedented step to support the
emergency synchronisation of the Ukrainian and Moldovan with the continental European
electricity network thereby preserving grid stability and creating the conditions for mutually
beneficial electricity trade.
As the inputs from companies in the gas market is key for this mechanism to be successful,
the Commission is also establishing an Industry Advisory Group16. This group will advise
the Commission on the practical implementation of the joint purchasing and on the technical
specifications for joint purchase in line with industry needs. It will look at arrangements such
as joint tendering and the creation of joint ventures for gas purchase.
Cooperation with industry is already leading to results. For instance, the implementation of
the REPowerEU Action plan on bio-methane has attained an important milestone with the
official launch of the Bio-methane Industrial Partnership (BIP). The action plan will
facilitate achieving the 35 bcm annual EU production of sustainable bio-methane by 2030.
The Bio-methane Industrial Partnership will support the implementation of the action plan
through several task forces, made up of experts from industry, the primary sector public
authorities, academia, and civil society.
Furthermore, five Regional Groups have been established under the Energy Platform
involving the Commission, the Member States and the Energy Community countries
identified. They will create a better understanding of potential gas demand, which will feed
into the joint purchase scheme, once established.

16
https://ec.europa.eu/transparency/expert-groups-register/screen/expert-groups/consult?lang=en&groupID=3865

7
The diversification of routes needs to be accompanied by a diversification of energy
sources, for example by boosting renewable energy, accelerating renewable hydrogen
uptake, scaling up sustainable biomethane, reducing fossil consumption in industrial and
transport sectors where GHG are hard to abate and speeding up permitting and innovation.
As regards the use of domestic sources, 202117 saw a record of 36 GW newly installed
renewable power generation capacity. With the increase of renewable energy, the EU
substituted around 164.6 Mtoe and 155.6 Mtoe of fossil fuels in 2020 and 2019
respectively, compared to the level of use of renewable energy in 2005. This corresponds to a
saving of EUR 43.5 billion for the EU collectively from avoiding fossil fuel use in 2019, and
EUR 34.6 billion in 202018. Fossil fuel savings from deploying renewables, which would
strongly increase when meeting the proposed 2030 target of 45% renewables, would allow
the EU to steadily reduce to zero dependence on fossil fuel from Russia by 2027.
The EU’s well-advanced policies to deploy renewable energy sources have been given a
significant boost since the adoption of REPowerEU, helping renewables to grow massively
also in all end-use sectors. Early indications suggest that 2022 will be a record year for the
European solar photovoltaic market with annual deployment growth in the largest EU
Member State markets between 17% and 26%19. All in all, the share of renewables in the
electricity generation is expected to grow from 37% in 202120 to 69% in 2030.
With the Hydrogen Accelerator proposed in the REPowerEU Action Plan, the Commission
has provided an estimate of the investment needs and additional costs with specific focus on
replacing natural gas use. In her State of Union address before the European Parliament in
September, the President of the Commission announced the setting up of the European
Hydrogen Bank. The Hydrogen Bank aims to move the hydrogen market from niche to
scale by accelerating the production and the use of renewable hydrogen and connecting these
by developing the necessary infrastructures in a coordinated manner.
As regards nuclear energy contribution to the security of electricity supply in the coming
years, Member States need to take timely decisions regarding investments in the long-term
operation of existing nuclear power plants, and appropriate safety and efficiency
improvements, including in climate adaptation measures. Moreover, to help mitigate the
risks in some Member States21 related to security of supply of Russian nuclear fuel and
nuclear fuel cycle services, as well as equipment and technology, the Commission and the
Euratom Supply Agency (ESA) are stepping up efforts in collaboration with Member States
and their authorities to ensure the availability of alternative fuel supplies from the EU and
reliable international partners.

2.3 ENERGY DEMAND

Improving energy efficiency and reducing energy demand is key to shield against
potential supply disruptions and minimise their impacts and costs. This can often be the
cheapest, safest, and cleanest way to reduce our reliance on fossil fuel imports from Russia,

17https://www.iea.org/news/renewable-power-is-set-to-break-another-global-record-in-2022-despite-headwinds-from-higher-

costs-and-supply-chain-bottlenecks
18 https://www.eurobserv-er.org/pdf/20th-annual-overview-barometer/
19 Global Market Outlook For Solar Power 2022-2026 - SolarPower Europe
20 European Electricity Review 2022 | Ember (ember-climate.org)
21
Out of 13 EU Member States generating nuclear energy, four Member States are fully and one partially dependent on
supply of Russian nuclear fuel. Some of these countries are especially vulnerable as nuclear energy represents a large
proportion in electricity production (up to 53.8%) and their dependence on other Russian energy supplies (gas, oil) is high.

8
while contributing to reducing GHG and air pollutant emissions, contributing to fight climate
change.

Figure 2: Reduction in Final Energy Consumption in industry, transport, households, and services. Source:
Eurostat, 2022.22

In May 2022, the Commission proposed a set of initiatives starting with the EU ‘Save
Energy’ plan to guide Member States to design the best tailored measures to cut energy
consumption. The Commission also proposed a new legislative tool and a European Gas
Demand Reduction Plan in July 2022 in order to reduce gas use in Europe by 15% by next
spring and Council adopted the Regulation on reducing gas demand on 5 August 202223.
Member States are now implementing demand reduction measures, which will be factored
into the update of National Emergency Plans due at the end of October 2022.

In line with the objectives of the REPowerEU plan and the Save Gas for a Safe Winter
package, most Member States have adopted measures to encourage energy savings in
buildings, industry and transport in the short-term. Many introduced communication
campaigns. Several Member States implemented measures to set maximum heating and
minimum cooling temperatures in specific categories of buildings and recommendations to
lower the highway speed limit. Some Member States have also adopted more
comprehensive and structural measures, which will already have an effect in the upcoming
winter season, either by strengthening existing regulations or topping up the existing
support schemes for buildings, industry, and transport.
Additionally, the Commission proposed an increased EU 2030 energy efficiency target of
13% to raise private financing for energy efficiency. In 2023, it will also launch a high-
level European Energy Efficiency Financing Coalition with the financial sector.

22
The graphs for households and services have been corrected to take into consideration climate conditions. The climate
correction factor is obtained by dividing the Heating Degree Days (HDD) measured in each year with the average HDD in
the 1980-2004 period.
23
https://www.consilium.europa.eu/en/press/press-releases/2022/08/05/council-adopts-regulation-on-reducing-gas-demand-
by-15-this-winter/

9
With REPowerEU, the Commission also proposed to ensure that all new buildings are
designed to optimise their solar energy generation potential as part of the ongoing
revision of the Energy Performance of Buildings Directive (EPBD). This revision aims at
fully decarbonising the European building stock by 2050, minimum energy performance
standards to trigger energy efficient renovation of buildings, increasing the rate of
renovations by 2030, phase-out fossil fuel based heating, and maximising the potential for
solar energy in buildings. Such measures will be important for vulnerable households,
especially in the current context of high energy prices.
Reviewing and updating existing regulations for energy-related products constitutes the main
body of work of the ecodesign and energy labelling working plan24, with heating and
cooling appliances being the priority. At the same time, an ambitious revision of the
Ecodesign Directive is ongoing25.

2.4 JUST TRANSITION, AFFORDABILITY AND SUSTAINABILITY

Just transition and affordability

The policy framework to advance the just energy and climate transition targets regions,
sectors and businesses with high GHG intensities or high dependency on the extraction of
solid fossil fuels. Coal, peat and oil shale and carbon intensive regions most affected by
the transition to climate neutrality can receive funding from the Just Transition
Mechanism. The Commission aims to adopt all Territorial Just Transition Plans by the end
of 2022 and supports all regions through the Just Transition Platform and the Coal regions in
transition initiative. The Council Recommendation on ensuring a fair transition towards
climate neutrality, adopted on 16 June 2022, provides an additional joint framework for
comprehensive and coherent employment, skills and social policies to ensure no one is left
behind, in line with the European Pillar of Social Rights.
The impact of high and volatile energy prices on consumers, SMEs and industries across
all the EU Member States is deeply worrying. Between 2019 and 2022 on average across EU
Member States, the energy expenditure share26 increased by more than one third, with the
share having almost doubled in some countries.27 There is a risk that a larger group of
households could not be able to pay their energy bills, affecting not only low-income
households, but also lower middle-income households and potentially beyond in some
Member States. This risks aggravating a situation of energy poverty in which 35 million EU
citizens (approximately 8% of the EU population) were unable to keep their homes
adequately warm in 2020. Therefore, it has become even more urgent for Member States to
address both the immediate and “root causes” of energy poverty, combining targeted
emergency measures with longer-term actions, such as energy efficiency measures, and
lowering any possible negative impacts from climate and energy policy. In May 2022, the
Commission set up a Coordination Group28 on energy poverty and vulnerable consumers
which will help Member States to exchange experiences addressing energy poverty.
Moreover, high energy prices are unevenly impacting businesses and industry, in addition to
households, creating significant energy affordability issues for some enterprises and sectors.

24 C/2022/2026, OJ C 182, 4.5.2022, p. 1–12

25 https://environment.ec.europa.eu/publications/proposal-ecodesign-sustainable-products-regulation_en
26 This does not include transport fuel costs.
27 European Commission (forthcoming) Energy prices and costs report 2022.
28
https://ec.europa.eu/transparency/expert-groups-register/screen/expert-groups/consult?lang=en&groupID=3849

10
In line with REPowerEU, the amendment of the Temporary Crisis Framework for State
Aid refers to the possibility of granting aid for fuel switching. In particular, the Temporary
Crisis Framework is extended to cover measures that accelerate the rollout of renewable
energy, and facilitate the decarbonisation of industrial processes. The latter entails that
Member States can support investments in industry, to phase out fossil fuels and create a less
volatile business environment, through electrification, energy efficiency, and the switch to the
use of renewables and electricity-based hydrogen.

A wide range of support measures have been put in place by Member States, including
measures based on the Energy Prices Toolbox. Among others, Member States provided direct
income support, reductions in taxes, levies and rebates on consumers’ energy bills, and
measures to support energy efficiency and on-site renewable production. Member States also
intervened in retail prices for electricity and gas. As part of the March 2022 REPowerEU
Communication29, the Commission provided Guidance on the application of State
intervention into price setting, for the supply of electricity, ensuring they benefit consumers
during this current crisis and enhance competition to the benefit of consumers over the longer
term. In addition, as set out in the Communication on Short-Term Market Interventions and
Long-Term Improvements to the Electricity Market Design, the Commission presented
legislation to allow retail price regulation for SMEs and households below cost. This was
politically agreed at the extraordinary meeting of the Energy Council on 30 September.

As regards international engagement and outreach, the EU has made important progress in
the implementation of the Global Methane Pledge and the Just Energy Transition partnership
with South Africa, as a follow-up to the announcements made at COP26.

Sustainability
Further reducing air pollution is imperative to reach the ambition set out in the Zero
Pollution Action Plan and to respond to the continued high number of premature deaths
linked to air pollution. The REPowerEU as well as the update of the National Energy and
Climate Plans plan provide an opportunity to further cut emissions of air pollutants
when bringing forward improvements in energy efficiency and through the shift towards non-
combustible renewable energy sources, notably solar and wind. At the same time,
diversifying supply and energy sources, even if only on a temporary basis, entails risks linked
to increased reliance on coal and bioenergy, which would result in higher air pollution.
The overall effect on air quality is likely to vary geographically, and this will be looked at
in the Third Clean Air Outlook report30 as part of the wider Zero Pollution Monitoring
and Outlook report. Such analysis can help guide Member States in their implementation
choices to avoid that short term needs undermine long-term public health objectives.
Work is well underway on the revision of the Ambient Air Quality Directives, to align
European air quality standards more closely with the revised air quality guidelines adopted by
the World Health Organization in 2021, and a legislative proposal is expected to be adopted
by the end of the year. This will bring further improvements in air quality everywhere in the
EU and make close coordination across policy fields more necessary than ever, to ensure that
different policies are mutually reinforcing.

29 COM(2022) 108 final

30
to be adopted by the end of 2022.

11
Whilst a shift from steam turbine technologies to renewable power generation from solar and
wind resources will reduce the overall consumption of freshwater, there will be additional
fresh water needs due to the enhanced roll-out of renewable hydrogen production, especially
at local level. It is therefore important to comply with the Water Framework Directive in
considering the location for the roll-out of additional electrolyser capacities.

3. PROGRESS WITH THE ENERGY UNION – STOCKTAKE ACROSS ALL

DIMENSIONS OF ENERGY AND CLIMATE POLICY

3.1. Decarbonisation and greenhouse gas emissions

The latest reports by the Intergovernmental Panel on Climate Change (IPCC) confirm that
fast and transformative action must be taken at global level if we are to meet the goals of the
Paris Agreement and avoid dangerous climate change. The EU has firmly committed to limit
global warming and is setting tangible policies in line with the 2030 targets and the goal of
climate neutrality by 2050. The EU also put in place financing mechanisms to ensure a
sustainable, socially just and cost-efficient transition, as well as an ambitious climate
adaptation strategy.
The EU has substantially overachieved its 2020 reduction target of 20% greenhouse gas
(GHG) reduction compared to 199031. Total GHG emissions32, excluding land use, land use
change and forestry and including international aviation, decreased by 32% in the EU
compared to the 1990 base year: a reduction of 1.55 billion tonnes of CO2 equivalent by
2020. However, provisional estimates show that EU GHG emissions are expected33 to
rebound in 2021 compared to their exceptionally low 202034 level as the economy recovers
from the pandemic and exceptional high gas prices have caused a temporary switch from gas
to coal.

Progress with European climate action

The EU has made substantial progress in delivering the European Green Deal. In July 2021,
the Commission proposed a comprehensive package of climate and energy legislation
(further strengthened by the most recent REPowerEU Plan), which is currently being
negotiated by the European Parliament and the Council, to ensure that the EU policy
framework is fit for the EU’s increased 2030 climate target. The European Scientific
Advisory Board on Climate Change was appointed in 2022 to provide independent
scientific advice on EU measures and climate target. The Commission has also adopted
climate proofing guidance and updated its better regulation instruments to ensure it takes
the same approach when assessing whether draft measures are consistent with climate-
neutrality and progress on adaptation, as set out in the Climate Law.

In 2022, the EU also strengthened its policy action in key sectors with a legislative proposal
for a new F-gases Regulation to achieve additional cumulative emission savings by 2050. A

31 https://unfccc.int/sites/default/files/resource/European%20Union-BR4_C_2019_8832_and_SWD_2019_432_2.pdf
32 Within the Copernicus Programme, the Copernicus Atmospheric Monitoring Service (CAMS) provides near-real-time
emissions monitoring data and products, assisting in the assessment of emission reductions, and distance to target with
respect to EU regulations and International legally binding policy instruments (Paris Agreement).
33
The 2021 approximated estimates for GHG Emissions will be published by the EEA at the end of October 2022 and
reported in the EEA report on “Trends and projections in Europe 2022” and in the Climate Action Progress report.
34 As set out in the EU’s 2022 GHG inventory submission to the UNFCCC. Provisional data will be provided together with

the Climate Action Progress Report 2022, to be published by end of October 2022.

12
further legislative proposal to strengthen CO2 emissions standards for heavy duty vehicles
is due by the end of 2022.

Renewable energy
In 2020, the EU reached a share of 22.1% of renewable energy sources (RES) in gross
final energy consumption, exceeding the target level of 20% set for 202035. The overall
renewables (RES) share increased by 2.2 percentage points from 2019 to 2020, facilitated by
lower energy consumption due to the COVID-pandemic. The RES shares in 2020 vary
widely across Member States. Sweden achieved the highest share in 2020 (60.1%), followed
by Finland (43.8%) and Latvia (42.1%). Considering national deployment and currently
notified statistical transfers, all Member States except France achieved their 2020 national
target36. Belgium, Ireland, Luxembourg, Netherlands, and Slovenia used statistical transfers
to achieve their RES target in the RES Directive.

Figure 3: Overall RES shares with and without statistical transfers vs. 2020 RES targets. Source: Eurostat
SHARES; RED I Directive

With a contribution of 37.5% in 2020, the relative share of renewables is largest in the
electricity sector. The share of renewables in the heating and cooling sector reached 23.1%
in 2020. For the transport sector, the shares are relatively lower and reached 10.2% in 2020.
Bioenergy continues to be the main source of renewable energy in the EU, with a share of
58.1% of the total in 2020. In Europe, bioenergy remains largely the main renewable energy
source (around 60%). In view of decreasing carbon sinks and the need to preserve
biodiversity, the Commission proposal to revise the Renewable Energy Directive in the Fit
for 55 package reinforces the sustainability criteria for the use of biomass for energy and
includes an obligation to Member States to apply the cascading principle in their support
schemes.

The proposal on increasing the overall ambition for RES to 45% and speeding up
permitting procedures is currently being discussed in the Council and the European
Parliament. A swift adoption as part of the RED II revision would be a key element to boost
35
By Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of
energy from renewable sources.
36
France achieved 19.1%; missing its target by 3.9% percentage points.

13
the further deployment of renewable energy. To achieve the new, higher proposed target of
45% from REPowerEU, a steep increase in the deployment of renewable energy will be
required, almost tripling the average annual increase over the last decade. For the
decarbonisation of transport advanced biofuels37 can contribute in a sustainable way together
with Renewable Fuels of Non-Biological Origin to achieve such a target. RED II sets a
3.5% target in 2030 for the share of advanced biofuels. Since 2016, EU production has
more than doubled to 1224 ktoe in 2020. In addition, the RED II revision also proposed a
target for Renewable Fuels of Non-Biological Origin of 2.6% in 2030.

For transport, the Sustainable and Smart Mobility Strategy lays the foundation for how the
EU transport system can achieve its green transformation. Several actions of the Strategy
have been completed - the Commission proposed to boost the production and uptake of
sustainable aviation and maritime fuels through the FuelEU Maritime and ReFuelEU
Aviation initiatives, and to increase the deployment and use of renewable and low-carbon
fuels and related infrastructure through the Alternative Fuels Infrastructure Regulation.
Urgent and full transposition of the 2018 Renewable Energy Directive RED II is key for
the success of the energy transition, since it lays the foundation for a wider rollout of RES.
The Commission is currently checking transposition and has launched infringement
procedures against all Member States, which are at different stages.
3.2. Energy efficiency

Bearing in mind the unique situation of COVID-19, the 2020 targets for both primary and
final energy consumption were achieved by the EU. Primary energy consumption in the
EU amounted to 1236 Mtoe, 5.8% lower than the 2020 target. Primary Energy Consumption
decreased for the third consecutive year and was 8.7% lower than in 2019 reaching 907 Mtoe.
Final Energy Consumption was 5.4% lower than the 2020 target, with a decrease of 8%
compared to Final Energy Consumption in 2019. This was the second consecutive year of
decrease after six years constantly increasing. For primary energy consumption all Member
States achieved their 2020 national contributions except Belgium, Bulgaria, and Poland. For
final energy consumption Belgium, Bulgaria, Germany Lithuania, Austria, and Sweden did
not achieve their national contributions.
As regards Article 7 of the Energy Efficiency Directive, the cumulative energy savings over
2014-2020, available from 24 Member States, amounted to 197.5 Mtoe, which is equivalent
to 103% of the sum of the cumulative end-use energy savings obligations for 2014-2020
(191.7 Mtoe) – and 97.5% (202.5 Mtoe) for 27 Member States. Depending on the final
achievements by the three missing Member States, the sum of cumulative savings required
for the 27 Member States could be met. Out of the 24 Member States that submitted the
complete data regarding their final achievement, 14 Member States fulfilled their energy
savings obligation, whereas ten Member States did not meet their energy savings obligation.

37 Feedstock included in Annex IX of the Renewable Energy Directive.

14
Figure 4. Evolution of the EU Final and Primary Energy Consumption from 2005 to 2020 (the dots represent
the 2020 EU Energy Efficiency Targets). Source: Eurostat, JRC, 2022.

Energy consumption in 2020 was undoubtedly influenced by the COVID-19 pandemic.

This exceptional situation led to a slight growth in energy consumption in the residential
sector due to the increased time spent by people at home (lockdown and teleworking) and a
decrease in energy consumption in the transport, industry and service sectors. The transport
sector had the most accentuated decrease in consumption driven by the steep decline in
activity, mainly due to travel restrictions during the Covid-19 pandemic.
In the period from 2005 to 2020, EU energy consumption followed a general downward
trend, as depicted in Figure 4. The decrease in energy consumption was accompanied with
an overall drop in energy intensity and energy consumption per capita, reflecting a possible
increase in competitiveness.
Regarding progress towards the 2030 targets, the EU’s primary energy consumption was
7.2% above (and final energy consumption was 9.6% above) the 2030 energy consumption
targets levels. This represents a reduction of 32.5% compared to the 2007 reference
scenario baseline. Nevertheless, far more effort is needed if we are to achieve a structural
reduction in energy consumption and meet the new target of 13% proposed in REPowerEU.

Buildings and products

Several actions under the Renovation Wave action plan have already been completed or
significantly advanced with the aim of at least doubling the annual energy renovation rate
of buildings by 2030 and promoting deeper energy renovations.
Member States have submitted their national long-term renovation strategies, with
concrete policy measures for easier access to financing, promotion of advisory tools such as
one-stop-shops, tackling energy poverty, improving the energy performance of public
buildings and better information.38 Since the beginning of 2021, nearly zero-energy became
the official norm for new buildings in the EU.
The publication of the official Communication on the New European Bauhaus (NEB)39
marked the transition between the co-design phase and the delivery of the Bauhaus initiative
and introduced activities that will further support its objectives. One of the key instruments is
38 With a view to sharing best practices among Member States, the Commission developed a Staff Working Document
(SWD) analysing national long-term renovation strategies in Member States.
https://energy.ec.europa.eu/system/files/2021-12/swd-on-national-long-term-renovation-strategies.pdf
39
https://new-european-bauhaus.europa.eu/about/about-initiative_en

15
the NEB Lab aiming to connect people to work around concrete and tangible projects. Since
April 2022, eight measures have already started under this framework, including the NEB
Labelling Strategy, financing schemes, education, and regulation.
Eco-design and energy labelling delivers a vital and growing contribution to European
Green Deal and Fit for 55 objectives, as well as to consumers faced with high energy prices
whose bills would otherwise be much higher. The total estimated energy savings generated
by all eco-design and energy labelling measures amounted to 1037 TWh/y (or 89
Mtoe/y) in 2020, corresponding to 7.2% of the total EU primary energy consumption in
2020. Compared to the estimate for 2020 published in the latest edition of the eco-design
impact accounting report40 (EUR 60 billion), the reduction in consumer expenditure is
estimated to have roughly doubled in 2021 (reaching more than EUR 120 billion) and may
well be even higher in 202241. On 30 March 2022, the Commission adopted an updated
working plan for eco-design and energy labelling for energy-related products42, the
implementation of which represents a significant savings potential in the coming years.
3.3. Energy security

Europe’s security of energy supply has been robust despite exceptional challenges
thanks to the resilience of the existing framework, strengthened preparedness based on a
spirit of solidarity between Member States, prompt policy support over the last year and a
strong outreach to our international partners. The TEN-E Regulation has contributed
significantly to this robust security of supply by interconnecting Member States’ energy
systems through Projects of Common Interest (PCIs).
The EU has been preparing for different possible disruption scenarios, by making a
comprehensive preparedness overview and putting in place measures at national and EU level
to reinforce preparedness and security of energy supply. In these difficult times, regional
cooperation and solidarity will remain essential to guaranteeing the resilience of the EU
and ensuring that flows and access to storage across borders remain possible in all situations.
In this regard, the high-level groups, under the TEN-E Regulation, strategically coordinate
and oversee joint implementation of cross-border Projects of Common Interest (PCIs).
The sectoral European coordination groups (for electricity, gas and oil) have met regularly
and played a key role in monitoring security of supply, exchanging information and
coordinating measures, to be ready for all possible scenarios.
Regarding the implementation of the security of supply rules for gas43, all Member States
have put in place national emergency plans to prevent or mitigate the impact of gas supply
disruptions. Member States have made progress in concluding bilateral solidarity
arrangements. In the electricity sector, the implementation of the Risk Preparedness
Regulation44 has produced the first set of national risk-preparedness plans. Concerning the
security of the oil supply45, 18 Member States (including two Member States who are not
members of International Energy Agency) participated in collective action initiated by the

40
https://op.europa.eu/en/publication-detail/-/publication/568cac02-5191-11ec-91ac-01aa75ed71a1/language-en
41
See section 6 of SWD/2022/0101 final
42
C/2022/2026, OJ C 182, 4.5.2022, p. 1–12
43
Regulation (EU) 2017/1938 of the European Parliament and of the Council of 25 October 2017 concerning measures to
safeguard the security of gas supply and repealing Regulation (EU) No 994/2010
44
Regulation (EU) 2019/941 of the European Parliament and of the Council of 5 June 2019 on risk preparedness in the
electricity sector
45
Council Directive 2009/119/EC of 14 September 2009 imposing an obligation on Member States to maintain minimum
stocks of crude oil and/or petroleum products

16
Agency on 1 March and 1 April, to make emergency oil stock available. In June, the
Commission issued a Recommendation46 for Member States not to replenish the emergency
stocks to the level required by the Oil Stocks Directive at least until 1st November, to avoid
putting additional stress on the oil market.
The future energy system will require more flexibility tools, such as demand response or
energy storage. The Commission has been working on identifying key EU actions to support
the development of future-proof energy storage as a key flexibility tool.
As a follow-up to the study47 published in October 2021, the Commission has been closely
monitoring potential bottlenecks in the raw materials supply chains for energy technologies
that are critical for energy security and the clean energy transition.
3.4. Internal energy market

Against the background of drastically rising energy prices, the European Commission had
tasked the European Union Agency for the Cooperation of Energy Regulators (ACER)
with assessing the benefits and drawbacks of the EU’s current wholesale electricity
market design. In April 202248 ACER concluded that the current energy crisis is in
essence a gas price shock, which also impacts electricity prices.
ACER also concluded that, over the last decade, cross-border trade and the major efforts
undertaken to further integrate electricity markets in Europe have delivered significant
benefits for consumers. These are estimated to amount to around EUR 34 billion a year, by
enabling cross-border trade between Member States and improving security of supply across
a larger geographical area. ACER’s report highlights that those benefits have materialised
even in the current crisis, when an integrated market has helped us avoid electricity
curtailment or blackouts in certain regions.
Market coupling, which means that electricity and the interconnector capacities to transport
it can easily be traded on a common EU trading platform, has further improved, in both the
day-ahead and the intraday markets. The day ahead market coupling has been successfully
extended to all borders between EU Member States. To further optimise the use of
interconnectors, the Commission is working towards extending market coupling to the
Energy Community.
Against the background of drastically increased electricity prices, the Commission has
published a Communication on Short-Term Market Interventions and Long-Term
Improvements to Electricity Market Design 49. Acknowledging that there may be scope for
further optimising the functioning of the electricity market design, the Commission has
launched an impact assessment process and is discussing possible improvements with
Member States. It is necessary to develop more resilient and efficient long-term markets, both
to drive the energy transition and to better shield consumers and small businesses from price
volatility. This process will also be used to assess the REMIT framework50, with a view to
mitigating the risks of market abuse more effectively by improving transparency, and market
data quality and ensuring better enforcement where rules are breached.

46
Commission Recommendation (EU) 2022/867 of 1 June 2022 on the release of emergency oil stocks by Member States
following the invasion of Ukraine (OJ L 151, p. 72).
47
Study on the resilience of critical supply chains for energy security and clean energy transition during and after the
COVID-19 crisis’ ISBN 978-92-76-38453-3
48
https://www.acer.europa.eu/events-and-engagement/news/press-release-acer-publishes-its-final-assessment-eu-wholesale
49
COM(2022) 236 final of 18 May 2022
50 Regulation (EU) No 1227/2011 on Wholesale Energy Market Integrity and Transparency

17
Efforts to optimise the functioning of the electricity market design should not slow down
efforts to implement the existing framework51. This includes, improving consumers’ rights;
working towards the target that in 2025 at least 70% of interconnector capacities are
available for trade; structuring the market so that it provides the right signals to where
investment is needed; identifying and eliminating regulatory distortions and market failures,
and fostering demand-side response and storage.
To reduce the need for capacity mechanisms, the huge potential of demand side flexibility
needs to be better used. The Commission therefore called on ACER to do preparatory work
for developing a network code on demand side flexibility.
In the current geopolitical situation, the liquid and competitively organised internal gas
market has played an important role in attracting gas to Europe. We also witness gas
flowing from Western to Eastern Europe at maximum capacity these days, showing that price
signals and the increasingly interconnected gas markets which Europe has developed over the
last decade are helping to distribute gas supplies where most needed.
3.5. Research & innovation and competitiveness

The EU is facing technological and non-technological challenges related to high energy

prices, critical raw materials supply chain disruptions, natural resources stress (e.g.
land and water) and skills shortages. As half of the 30 critical raw materials listed by the
EU are imported in proportions above 80% in volume, surging prices 52 are affecting the
competitiveness of clean energy technologies. Over 70% of EU businesses involved in
manufacturing the equipment have faced materials shortages in 2022, and 30% have also
experienced labour shortages in 2022. These trends show the growing risk of disruptions to
the clean energy supply chain.
To make EU clean energy sector more competitive, the EU will have to secure supplies and
build up strategic reserves where supply is at risk. For this reason, the Commission
announced a European Critical Raw Materials Act53, which will also identify strategic
projects all along the supply chain (extraction, refining, processing and recycling) and ensure
that these project attract private and public investments.
Reducing the EU’s dependency on raw materials, making more efforts on the circular
economy, and overcoming the shortage of skilled workforce will shape the more resilient,
independent, secure and affordable energy system needed to deliver the REPowerEU Plan.
Considering that about half of the greenhouse gas emissions reductions expected by 2050
require technologies which are not yet ready for the market54, Research and Innovation
(R&I) activities are crucial to deliver on the European Green Deal objectives.
The EU is at the forefront of clean energy research. However, more public and private
investments in R&I, and scaling up and deployment activities are needed. In 2022 the EU
has confirmed its leading position in the global wind sector R&I, as well as its position as
one of the largest markets for PV, where competition remains fierce in several segments of
the value chain. The EU is also at a crossroads for several technologies. For example, the
Heat Pumps sector will have to accelerate its already fast-growing deployment and EU
suppliers will have to ramp up production. On batteries, despite initiatives which are

51 Notably Regulation (EU) 2019/943 and Directive (EU) 2019/944

52 Prices of lithium and cobalt more than doubled in 2021.
53
As announced in the 2022 State of the Union address on 14 September 2022.
54 European Commission, Directorate-General for Research and Innovation, Research and innovation to REPower the EU,

Publications Office of the European Union, 2022, https://data.europa.eu/doi/10.2777/74947.

18
underway55, the lack of EU domestic raw materials and advanced materials productions
represent a challenge for the EU competitiveness. Even though the EU can rely on its strong
comprehensive approach to pull demand and supply, surge in electricity prices and reliance
on critical raw materials are also main challenges for the EU hydrogen production through
electrolysis.
A stronger R&I ecosystem supported by the EU funding programmes, enhanced
cooperation between Member States45, and a continuous monitoring of national R&I
activities, are crucial in order to define a successful R&I pathway, to bridge the gap between
research and innovation and market uptake, exploit the opportunities of the EU clean energy
technologies and reinforce EU competitiveness.

4. EU FINANCING FOR REPOWEREU, ACCELERATING THE CLEAN ENERGY

TRANSITION AND THE EUROPEAN GREEN DEAL

4.1. Main investment needs and available EU financing for REPowerEU

According to the Commission investment needs analysis56, implementing the full potential
to reduce dependence on Russian fossil fuel imports to zero would require EUR 300 billion,
from now until 2030. This investment needs to complement the Fit-for-55 proposals and
include57: solar photovoltaic and wind (EUR 86bn), renewable hydrogen (EUR 27bn), energy
efficiency and heat pumps (EUR 56bn), adapting industry to use less fossil fuels (EUR 41bn),
increasing biomethane production (EUR 37bn), investing in the power grid to enable greater
electrification (EUR 29bn), investment in new LNG infrastructure and gas pipeline corridors
(EUR 10bn), and oil infrastructure necessary to ensure security of oil supply (EUR 1.5-2bn).
The Recovery and Resilience Facility (RRF) will play a critical role in addressing these
needs via different measures, including the REPowerEU chapters, as part of the national
Recovery and Resilience Plans (RRPs). Both REPowerEU and the REPowerEU chapters in
the national RRPs should be also reflected in the update of the National Energy and Climate
Plans (NECPs) (to be submitted by mid-2023). The Commission will provide guidance on
these updates. The Commission proposed additional funds for the RRF, and has initiated
bilateral discussions with Member States to identify reforms and investments that could
potentially be eligible for financing under the new REPowerEU chapters.
When preparing their REPowerEU chapters, Member States will need to take into account the
Country Specific Recommendations (CSR) identified in the European Semester
exercise, which this year included energy-specific CSRs focusing, in particular, on
additional reform and investment needs related to the need to reduce energy dependencies
and to accelerate the energy transition. The European Semester framework will play a central
role in monitoring the REPowerEU measures. The REPowerEU objectives are supported by
the clean energy transition, and will also be financed from other EU programmes, and
supported via several EU initiatives (see Section 4.2). The EU funding complements other
available public and private financing, which will play a key role in delivering the investment
needed for REPowerEU.
4.2. EU financial support for clean energy transition
EU support for clean energy transition is provided through various programmes:
55
E.g. the European Batteries Alliance and Important Projects of Common European Interest (IPCEI).
56
(SWD(2022) 230 final) of 18 May 2022
57
Estimated values obtained by the modelling investment needs analysis

19
 Recovery and Resilience Facility: the climate-related investment in the 26 approved
RRPs58 are approximately EUR 200 billion59, above the 37% obligation set by the RRF
Regulation.60 The largest part of the climate investments allocation is dedicated to clean
energy, energy efficiency and building renovation measures (around EUR 88bn). Another
significant part is dedicated to sustainable transport (around EUR 70bn). Approximately
EUR 10 billion is allocated for renewable and low-carbon hydrogen.
 Cohesion policy also provides significant support to energy efficiency, renewable energy
and energy infrastructure. During 2014-20, EUR 27.5 billion was allocated for investment
recognised as a priority under REPowerEU. For 2021-27, the Commission expects
Member States will allocate further EUR 34-36 billion to such priorities. In June 2022 a
new model financial instrument to support the REPowerEU was prepared with the
European Investment Bank (EIB).
 InvestEU programme: By July 2022, already around EUR 1.6 billion of the EU
guarantee under the “Sustainable Infrastructure Window” was allocated, including for
investment in solar photovoltaic, wind energy and energy efficiency. Key initiatives
under the InvestEU Advisory Hub, cover the areas of energy efficiency and hydrogen:
o Since 2011, the ELENA facility supports the development of energy efficiency and
clean mobility projects. With a leverage factor of 33, it has an impressive capacity to
attract (‘crowd-in’) private financing. In 2021, EUR 35.8 million was allocated to 18
new projects. These are expected to generate around 500 GWh of energy savings per
year.
o The Commission is cooperating with the EIB to develop an advisory facility
supporting the renewable power purchase agreement projects, including to support
hydrogen uptake and electrification in industrial sectors.
 The Horizon Europe programme allocated EUR 15 billion to support research and
innovation in renewable energy technologies, energy efficiency, electrification of heating
and cooling and digitalisation of the energy system.
 CEF Energy is financing the better interconnection of energy networks towards a single
EU energy market and the clean energy transition. Since 2014 CEF Energy had
supported 154 projects with a total of EUR 5.7 billion. In March 2022, the Commission
launched the first CEF call for renewable energy cross-border projects. In May 2022, the
Commission launched a new call for key cross-border energy infrastructure projects for
projects included in the 5th EU list of Projects of Common Interest.
 LIFE Clean Energy Transition (CET): in May 2022, the LIFE CET Call for proposals
was published, making available EUR 98 million for energy efficiency and clean energy
projects. This Call covers REPowerEU objectives, such as reduction in fossil fuel
consumption for heating and accelerated deployment of energy efficiency solutions in
housing, businesses and public sector.
 In 2022, the first ever cross-border tender will take place under the Renewable Energy
Financing Mechanism. The tender will focus on solar photovoltaic projects. The
mechanism will help unlock the EU’s full renewable potential, and help Member States
achieve the decarbonisation objective in a more cooperative manner.

58 AT, BG, BE, CY, CZ, DE, DK, EE, EL, ES, FI, FR, HR, IE, IT, LT, LU, LV, MT, NL, PL, PT, RO, SE, SI, SK
59 The expenditures reported for the RRF are estimates produced by the Commission, based on the information on climate
tracking published as part of the Commission’s analyses of the recovery and resilience plans. The data reported cover the 25
national recovery and resilience plans that had been assessed and approved by the Commission by 17 June 2022. See:
https://ec.europa.eu/info/business-economy-euro/recovery-coronavirus/recovery-and-resilience-facility/recovery-and-
resilience-plans-assessments_en
60
In line with conditions in the annexes to the Council implementing decisions approving national RRPs.

20
 Carbon prices increased during 2021, and so did the total revenues from the EU ETS,
amounting to about EUR 31 billion in total. This money will support the Innovation
Fund and the Modernisation Fund.
 The Common Agricultural Policy (CAP) also supports energy efficiency, renewable
energy and energy infrastructure through the European Agricultural Fund for Rural
Development (EAFRD). Depending on the needs identified and the strategy developed
in the current Rural Development Programmes or future CAP Strategic Plans, Member
States have the possibility to support investments in the production of renewable energy
or in the improvement of energy efficiency for agricultural holdings but also for rural
businesses.
The Commission also supports the Member States through the Technical Support
Instrument, providing tailor-made technical expertise to design and implement reforms,
including on the clean energy transition. In particular, the Commission is helping Member
States to identify reforms and investments to phase out fossil fuel imports from Russia.
Active EU initiatives play an important role in mobilising financing for the clean energy
transition: These include:
 the Sustainable Energy Investment Forums initiative - a highly successful initiative
facilitating dialogue between public and private stakeholders, aiming to mobilise private
financing for energy efficiency and sustainable energy investments;
 the Energy Efficiency Financial Institutions Group, whose key mission is to identify
barriers to energy efficiency financing and to provide recommendations to policymaking
bodies and financial institutions on how to address them;
 the Investors Dialogue on Energy, launched in 2022 as a stakeholder platform bringing
energy and financial experts together to identify investment barriers for the energy
sector, assess financing policies and instruments, and propose relevant solutions.
Climate mainstreaming
At least 30% of the EU budget for 2021-2027 is allocated to climate (up from 20% in
2014-2020). Specific programmes have 30% or higher climate spending targets - European
Regional Development Fund (30%), Horizon Europe (35%), Cohesion Fund (37%), RRF
(37%), Connecting Europe Facility (60%), LIFE (61%) and the Just Transition Fund (100%).
In 2021, Member States RRPs earmarked 40% for climate investment, well beyond the 37%
regulatory obligation.

4.3. Energy subsidies in the EU

Energy markets underwent unexpected and sudden developments over the last two years,
which have had a significant impact on the consumption and prices of energy products, amid
COVID-related lockdowns, the post-pandemic recovery and the current period of extremely
high and volatile energy prices. The energy subsidies report61 to be published in October will
(i) present the final, more precise numbers on the evolution of energy subsidies during
COVID-stricken 2020, and (ii) make estimates for the impact of the global economic
recovery and high energy prices on energy subsidies in 2021.

61
Stemming from the Governance Regulation, the Commission reports every year on the evolution of energy subsidies,
particularly fossil fuel subsidies in the Member States, and on what measures countries have undertaken to present a
roadmap on their gradual phase-out.

21
Fossil fuel subsidies, after falling by more than 5% in 2020 in the EU, owing to
lockdowns and travel restrictions for people and business, remained fairly stable in 2021, as
the increase in transport and industry was compensated by the decreasing in fossil subsidies
in the energy sector. Subsidies on oil products, especially in the transport sector, fell by 12%
in 2020, whereas subsidies on coal were up 7% amid a slight decrease in gas subsidies (by
2%) year-on-year, being affected by their role in power generation. In 2021 subsidies on oil,
coal and gas showed a slight increase, and the subsidy to fossil fuel electricity generation
fell. Since autumn 2021, in parallel with increasing energy prices in European markets,
several EU Member States have taken measures to alleviate the impact of energy bills on
citizens and businesses, which have resulted in larger subsidies for energy consumption.
Subsidies on renewable energy were up 7% in 2020, as long-standing support schemes still
had a measurable impact, but they fell back slightly in 2021. Energy efficiency subsidies fell
in 2020, but rebounded in 2021. A further rise in subsidies was observed for nuclear energy,
on account of payments for the early closure of nuclear power plants in two Member States.

Figure 5. Fossil fuel subsidies in different sectors in the EU. Source: Study on energy subsidies and other
government interventions in the European Union 2022.

22
Annex I - Actions taken in view of the rising energy prices since October 2021

1. Energy prices toolbox, 13 Oct 2021

 Support consumers including through emergency income support for energy-poor
consumers; temporary, targeted reductions in taxation rates for vulnerable
households; authorisation of temporary deferrals of bill payments; putting in place
safeguards to avoid disconnections from the grid;
 Provide aid to companies or industries, in line with EU state aid rules;
 Enhance international energy outreach to ensure the transparency, liquidity and
flexibility of international markets;
 Investigate possible anti-competitive behaviour in the energy market and enhance
monitoring of developments in the carbon market;
 Facilitate a wider access to renewable power purchase agreements and support
them via flanking measures.

2. REPowerEU Communication, 8 March 2022

 Consumers: Guidance confirming the possibility to regulate prices in exceptional
circumstances, and setting out how Member States can redistribute revenue from
high energy sector profits and emissions trading to consumers;
 State aid rules: Commission consultation with Member States on the needs for and
scope of a new State aid Temporary Crisis Framework to grant aid to companies
affected by the crisis, in particular those facing high energy costs;
 Announces a legislative proposal for the Gas Storage Regulation, the RePowerEU
Plan, and assesses options to optimise electricity market design.

23
3. Gas storage regulation proposal, 23 March 2022
 Legislative proposal introducing a minimum 80% gas storage level obligation for
next winter;
 Communication setting out the options for market intervention at European and
national level, and assessing the benefits and limitations of each option;
 Regulation adopted by EP and Council 27 June.

4. EU Energy Platform, 7 April 2022

 Voluntary participation of Member States for joint purchasing of gas to ensure more
equal access across EU Member States and support security of supply;
 Establishment of an industry advisory group and five Regional Task Forces to
help to get a better understanding of potential demand to be introduced to the joint
purchasing mechanism.

5. REPowerEU Plan, 18 May 2022

 Accelerating the roll-out of renewables:
o Increases the headline 2030 target for renewables from 40% to 45%;
o Recommendation to speed up permitting for major renewable projects;
o Targeted amendment to the Renewable Energy Directive to recognise
renewable energy as an overriding public interest;
o EU Solar Strategy;
o Solar Rooftop Initiative;
o Doubling of the rate of deployment of heat pumps;
o Sets target of 10 million tonnes of domestic renewable hydrogen by 2030;
o Biomethane Action Plan.
 Saving energy:
o Increases the binding 2030 Energy Efficiency Target from 9% to 13%;
o EU Save Energy Communication encourages strengthening of energy
savings.
 Diversifying energy supplies and supporting international partners:
o EU External Energy Strategy reinforces the EU’s engagement with
international partners and strengthens its energy diplomacy ensuring
diversification of energy supply and boosting the green and just energy
transition.

6. Save Gas for a Safe Winter, 20 July 2022

 Gas demand reduction regulation (proposal), 20 July 2022
o Sets a target for all Member States to reduce gas demand by 15% between 1
August 2022 and 31 March 2023;
o Gives the Commission the possibility to declare, after consulting Member
States, a ‘Union Alert' on security of supply, imposing a mandatory gas
demand reduction on all Member States;
o Regulation based on 122 TFEU, and was adopted by Council 27 July.
 Gas demand reduction plan, 20 July 2022

24
 o Sets out measures, principles and criteria for coordinated gas demand
reduction;
o Provides guidelines for Member States to take into account when planning
curtailment;
o Encourages substitution of gas with other fuels, preferably cleaner energy
sources;
o Incentivises overall energy savings in all sectors.

7. Emergency market intervention on high electricity prices (proposal), 14 Sep 2022

 Proposes that Member States aim to reduce overall electricity demand by at least 10%
until 31 March 2023;
 Sets a temporary revenue cap on inframarginal electricity producers;
 Sets a temporary solidarity contribution on excess profits generated from activities
in the oil, gas, coal and refinery sectors, redirected to energy consumers;
 Allows below cost regulated electricity prices for the first time, and expand
regulated prices to also cover small and medium-sized enterprises;
 Regulation based on 122 TFEU, and was adopted by Council on 30 September.

25