Trends in the development of EU energy policy at the present stage

Tikhomirova Karina Sergeevna ORCID: 0009-0006-4421-431X Student, Department of Foreign Regions Studies and Local History, Lobachevsky State University of Nizhny Novgorod 23 Gagarin Ave., Nizhny Novgorod, Nizhny Novgorod region, 603022, Russia ariafan1013@gmail.com Other publications by this author

Ruchina Valeriya Mikhailovna ORCID: 0009-0001-7675-3100 Student, Department of Foreign Regions Studies and Local History, Lobachevsky State University of Nizhny Novgorod 23 Gagarin Ave., Nizhny Novgorod, Nizhny Novgorod region, 603022, Russia v.ruchina2016@gmail.com Other publications by this author

Introduction

The issue of energy security and energy independence of the EU is one of the key factors in ensuring the stable development of the association. This issue has a direct impact on the stability of the structure of the union itself, mutual understanding and solidarity of all its members. The stability of energy supplies contributes to the progressive development of the economy and industry and helps to avoid social "turbulence". The EU countries are among the world's largest importers and exporters of energy resources, and therefore one of the criteria for the energy security of the union is the creation of secure logistics chains for uninterrupted energy supplies. It is also important to mention that global climate change has led to the initiative to create stable sources of "green energy". The EU is currently one of the leaders in the development of technologies for the production and use of renewable energy sources. However, despite the developed energy sector, this area is a source of numerous problems in the field of energy security that the EU is facing at the current stage of its development.     

Fundamentals of EU energy security

In general, energy security is commonly understood as uninterrupted access to energy and ensuring energy supplies at an affordable price ^{[1, p. 19-25]}. For the EU, this definition is more than relevant, because the union is heavily dependent on energy supplies, and this factor has always been one of the most important problems in energy security issues. Therefore, the EU called the necessary conditions for ensuring energy security "predictable and stable political regimes in energy exporting countries, a stable and understandable taxation system" and "the absence of unfair administrative barriers."

For the EU, one of the most important issues of energy security has always been building strong relationships with exporting countries to develop mutually beneficial cooperation. In this regard, the EU is taking several steps to resolve export and import issues: opening the markets of resource-rich countries for investment, lifting restrictions on energy exports, providing complete information on oil reserves and transparency in the management of public revenues from the sale of energy resources. Although the EU countries have huge energy potential, interdependence on the supply of raw materials from other regions of the world cannot be excluded.              

Since the beginning of the 21st century, the main directions of the EU energy security strategy have become: the development of the internal energy market and the growth of energy efficiency, an increase in national production of renewable energy and diversification of energy supplies ^{[2, pp. 21-23]}. Later, the agenda began to change, and in 2002, in a new strategy for EU interaction with external partners in the energy sector, the countries announced the following priorities in the field of energy security: reducing overall energy demand and ensuring fair competition for resources, stimulating energy conservation, energy efficiency and the development of renewable energy sources; supporting Ukraine in rebuilding the country's energy sector, preparation for further integration of the EU energy market, repair of energy infrastructure, creation of new links in the field of cooperation on the creation of "green hydrogen" initiatives ^[3].

Prior to that, the European Commission published a report on the EU's External energy involvement in a changing world, which also addressed issues of climate change and the growing energy crisis. The EU declares that the transition to green energy is the only way to ensure sustainable, safe and affordable energy worldwide. Although in the same document, the EU recognizes its energy dependence, emphasizing this with the thesis that, despite measures for diversification and internal energy security, Europe is still too dependent on a supplier who is ready to use energy as a weapon. In this context, the EU speaks so covertly, of course, about the Russian Federation. The European Commission has also provided a plan to put an end to energy imports from Russia by 2030. However, according to the document, this step requires "diversification of the EU's energy supply, increased energy conservation and efficiency", as well as accelerating the transition to "green" energy ^[3].

Green Energy is the new foundation of the EU's energy independence

Returning to the topic of green energy, which is relevant for the EU's energy security, it is worth noting that talks about the transition to environmentally neutral energy in the EU began back in 1990, when an understanding of the importance of this aspect for the union was just emerging. The EU's aspiration began to take on more pronounced outlines back in 2005, when the initiative to establish CO2 emission quotas (ETS) was introduced in the EU with the opportunity for companies to resell these quotas, thereby creating a market price for CO2 ^[4].

The EU's initiative to switch to green energy is not surprising for several reasons. Firstly, the EU does not have sufficient deposits of natural resources capable of meeting the energy needs of the entire union, therefore, the creation of its own renewable energy sources is one of the issues of the organization's sovereignty. Secondly, in the early 2000s, the field of green energy remained not so explored, therefore, the market for green energy and technologies for its production remained free. Finally, the issue of global warming is currently a global problem, and by offering its own effective solution to this issue, the EU maintains its global authority and political importance on the world stage. In addition, it must be said that Germany and Poland remained the world's main producers and consumers of coal and oil in the early 2000s, which negatively affected the ecology of both the territories of these states and the global level of emissions ^[5].

The progressive movement of the EU towards climate neutrality is evidenced by a number of initiatives taken by the union earlier. It is worth mentioning the EU agreement on achieving climate neutrality by 2035 ^[6], issued by the European Commission in 2014, and which includes mechanisms for cross-border carbon regulation, obliging importers to buy carbon emission certificates ^[7].  The EU Energy Security Strategy of 2014 was also released, based on the classic "triad" of energy security: providing the union and its citizens with safe, affordable and sustainable energy, which implies reliable supply; energy availability or the ability to purchase energy at reasonable prices ^{[8, pp. 74-85]}.

Energy security has also taken an important place in the EU's global strategy for 2016, as one of the key aspects. To stimulate small and medium-sized businesses, as well as large producers towards climate-neutral energy, as well as the spread of green energy technologies in third countries, numerous support funds have been created, such as the NDICI program offering financial support to overcome difficulties in the economic development of third countries. Projects for the construction of solar and wind power plants are also among the areas of financing. The European Fund for Sustainable Development (EFCD) is also engaged in financing and sponsoring the construction of the necessary infrastructure for the generation of green energy in neighboring countries.               

 The transition to climate neutrality, or the replacement of coal and oil with more environmentally friendly energy sources, relied on several energy alternatives: renewable energy sources, nuclear energy, hydrogen energy and natural gas, which remains one of the most environmentally friendly fossil energy resources to this day. However, solar and wind energy were at the initial stage of their development at that time, and the reorientation of the industry required time and consistency. A big bet was placed on nuclear energy, but the experience of the Fukushima nuclear power plant in 2011 led to an extreme degree of skepticism about nuclear energy and its reliability, both among senior EU officials and among the population.

Thus, it was gas that became the main energy source of the union, supplying the organization with stable energy during the so-called "transit" period. About 50% of the gas consumed was imported from Russia through a number of pipelines, the main of which, Druzhba, passed through the territory of Ukraine ^[9], however, the beginning of a special military operation on the territory of Ukraine led to a sharp refusal by the EU to supply almost all Russian energy resources: natural gas, coal, oil, etc. Such drastic decisions and the lack of prepared ground for the union's energy autonomy led to a sharp jump in electricity prices, protests and outright panic among the population ^[10], as well as the flight of businesses from EU countries in search of more favorable conditions ^[11].  All this also affected the overall increase in prices and inflation in the euro area, which amounted to 10% in October 2022 ^{[12, p. 4-8]}.  Although the situation has stabilized, these circumstances have demonstrated that the Energy Security Strategy of 2014 required correction and revision.

Energy logistics in the EU

In order to expand its own energy grid, the EU needs to attract investors as soon as possible to develop infrastructure projects within the framework of energy. Financial support initiatives also do not meet the need to solve the problem "here and now" as soon as possible, since they imply rather long bureaucratic checks and strict regulatory rules, whereas there is a more "accommodating" sponsor on the market. Chinese investments under the Belt and Road initiative are much easier to obtain and implement. At the same time, the Chinese side provides many more finances and guarantees. Thus, in order to maintain its competitiveness and dominant position in the renewable and alternative energy market, the EU needs to explore new approaches and pay special attention to each problematic aspect.

As the first point of this problem, it is worth determining the unevenness of the union's infrastructure. There are about 14700 wind turbines in Germany ^[13], generating about 23% of the country's total electricity, while in Poland this figure drops to 453, and in most countries of Central and Eastern Europe, the percentage of wind power generation rarely exceeds 10% of total consumption. Not every state in the EU can afford to buy expensive equipment for the production of environmentally friendly energy. In addition, such a drastic switch to alternative energy sources may further exacerbate the energy crisis in some EU countries. Without establishing a stable infrastructure and diversifying supplies, not every country will be able to provide itself with enough energy to meet the production needs and needs of citizens.           

At the moment, the largest LNG receiving points are located in countries such as Germany, France and Spain. There is also a record number of LNG reception points. Also, the largest storage facilities for liquefied natural gas are also located in Germany. The construction of such a serious infrastructure requires a lot of money and time, which often the CEE states are not ready to spend. Many Eastern European countries prefer Russian pipeline gas supplies to expensive LNG and other renewable energy sources. The issue of gas delivery facilities across the EU also plays a key role, since the pipeline network is very unevenly located: its main part is located in Western Europe: Nord Stream 1, Nord Stream 2, the Yamal-Europe gas pipeline. All of them, without branching, supply gas to the territory of Western Europe, from where it spreads throughout the union in unequal proportions. In this regard, the issue of the construction of Nord Stream 2 was considered as a danger to European solidarity, since the pipeline allows gas supplies to bypass Eastern Europe, depriving Poland and other countries of their transit advantage. Thus, although the search for alternatives for energy production is an important point for expressing solidarity among the members of the Union, however, from an economic point of view, this issue remains very unattractive due to high financial costs.              

Another important problem remains the disparate legislation of the EU countries. The member states of the Union are not ready to transfer the issue of energy consumption to the European Commission and prefer to solve it in a national manner, which leads to fragmentation of legislation and difficulties for energy transportation between EU member states. For example, the tax on the import of energy resources in Poland can reach about 10%, whereas in Romania it is 42%. These circumstances strongly hinder the EU's transition to energy neutrality.  

"Green" difficulties

The production of "green" or renewable energy also involves a number of difficulties. The EU currently has the most advanced technologies for the creation, storage and transportation of products in the field of "green energy", but the production of these technologies is extremely unprofitable from an economic point of view, and very costly in terms of resources. Energy systems based on green energy technologies, such as solar photovoltaic installations, wind farms and electric vehicles, require critical raw materials that will create new or exacerbate existing dependencies. This group also includes minerals and metals, the extraction of which requires considerable effort (and only in some EU countries these resources are available), not to mention environmental damage. In their processing, one particular player dominates the global market - China. In 2017, China supplied about 98% of the total consumption of rare earth metals to the EU. Demand for other raw materials and metals, such as lithium, is also growing exponentially (by 2050, production should increase by more than 450% to meet the demand from renewable energy technologies). According to the President of the European Commission, Ursula Von Der Leyen, "lithium and rare earth elements will soon become more important than gas and oil"; and for the long-term security of the union, it is necessary to diversify the supply of rare earth metals, as well as focus on finding alternative materials for the production of green energy.                         

The field of nuclear energy is an undeservedly forgotten energy alternative that can replace the need to use natural gas. It will help ensure the energy stability of the region. 13 of the 28 members of the European Union have their own nuclear power plants that can provide them with energy.  At the same time, the Fukushima experience became a kind of trigger in people's minds and created in their minds a strong prejudice against the field of nuclear energy. However, do not forget that 56 nuclear reactors are located on the territory of the Union, which are gradually being decommissioned, which is also an extremely time-consuming and dangerous process that can lead to a disaster at any stage. At the same time, these power units could serve, at least temporarily, as a guarantee of the energy stability of the organization. This outcome is quite workable, however, it requires educating the population and leaders of the EU countries about the use of peaceful nuclear technologies.

Diversification of supplies

Diversification of supplies is necessary to ensure the energy security of the Union, provided that the organization does not completely abandon natural gas. Besides Russia, Algeria, Norway and Azerbaijan remain the main suppliers of natural gas to the EU. Their energy imports would be sufficient to meet about 40% of the EU's demand in the event of an increase in production capacity. However, within the framework of domestic energy exports in Europe, a country like Norway cannot expand supplies, and currently supplies "more than ever" energy resources to the EU ^{[14, p. 2-16]}. Expansion of supplies from Azerbaijan is possible, but unlikely primarily for political reasons. Expanding supplies from Algeria through the Medgaz pipeline seems to be a good alternative, but the EU's calls to increase natural gas production in African countries are perceived extremely negatively by the latter, since not the entire African continent is fully provided with energy and electricity in general. To resolve these contradictions, it is worth taking measures to subsidize African states, facilitating their transition to alternative energy resources, thereby creating new initiatives to finance wind and solar power plants. This issue requires a thorough review of the mechanisms of functioning of existing funds and their restructuring. 

The diversification of gas supplies will also depend heavily on the liquefied natural gas sector. Some countries have already invested heavily in infrastructure to develop the production and supply of liquefied natural gas (for example, Lithuania and Poland), while others are currently just preparing the ground (for example, Germany, which announced that two LNG terminals will be built "as soon as possible").  The total volume of LNG imports to the EU is 157 billion cubic meters. m per year is enough to meet about 40% of its total gas demand. In 2021, gas imports through LNG used only half of these capacities (about 80 billion cubic meters. m), therefore, there is potential for further optimization. However, most LNG import terminals are relatively isolated and insufficiently connected to other EU states (for example, in Spain).

The EU speaks about the reduction of supplies from the Russian Federation and the excessive dependence of the European energy structure in almost every document devoted to energy security issues. To achieve this initiative, the EU has developed a "REPowerEU" plan, which proposes, for example, to reduce gas demand by replacing it with renewable or low-carbon energy sources. The EU speaks about the reduction of supplies from the Russian Federation and the excessive dependence of the European energy structure in almost every document devoted to energy security issues. To achieve this initiative, the EU has developed a "REPowerEU" plan, which proposes, for example, to reduce gas demand by replacing it with renewable or low-carbon energy sources. It will also be necessary to reduce energy consumption and implement an energy saving policy and diversify suppliers and supply routes ^[15]. Despite the introduction of the EU's REPowerEU plan in May 2022, the level of natural gas supplies from Russia continued to remain at a fairly high level until mid-2022, second only by 1% to the same level of supplies from the United States, while accounting for 23% of the total volume. ^[16].  At the same time, the latest data provided by the statistical service of the European Union indicate a significant share of the decline in Russian "green fuel" in the EU energy sector - the share of exports from the Russian Federation fell to 13%. But even this fact does not detract from Russia's role as one of the key energy hubs of the association. With record low levels of supplies to EU countries, Russia continues to retain its place in the top five largest suppliers of natural gas in the world.

It is worth noting that after Russia's withdrawal from the European energy market, the United States and their LNG supplies naturally took its place. The fruits of this maneuver in the energy market are quite obvious. By forcing the EU to abandon its "dependence on Russian energy resources," the United States has become the largest partner of the association in this regard, exporting 56 billion cubic meters of LNG (compared to 22 billion cubic meters in 2021) and making it its priority in this direction, which accounts for more than 52% of LNG supplies ^[17].

A significant share of gas purchases in the EU takes place within the framework of exchange trading, while over-the-counter (bilateral) remains a little behind. In this regard, it is important to note that such major companies in Europe as National Balance Point (Great Britain) and The Title Transfer Facility (Denmark) and The German Trading Hub of Europe are responsible for the practice of forming market exchange prices for natural gas as an exchange commodity (Germany), which are under the wing of the American InterContinental Exchange, Inc. (ICE), namely the ICE Clear Europe division. The latter assumes the status of the central authority in all transactions, guaranteeing the fulfillment of all contractual obligations. It is the presented "energy hubs" that are the key intermediaries between the end user and the seller. Given the above, the conclusion involuntarily suggests itself, which is why a ban was imposed on Russian pipeline gas, in addition to the obvious political background. It should be noted that the technology of LNG production and transportation is much more expensive and complicated than using a built-up network of gas pipelines and pumping natural gas through them. The situation is such that the EU is becoming even more dependent on the United States. 

The forced reduction in energy supplies in the light of the existing geopolitical crisis demonstrated the inability of the EU to immediately abandon the transportation of "pipeline gas" without serious consequences for the union. In support of the presented thesis, it should also be said that almost simultaneously with the appearance of the European plan "REPowerEU", paradoxically, Brussels announced the inclusion of the aforementioned natural gas in the "green taxonomy" along with nuclear energy. That is, acting in the wake of the environmental conservation agenda, declaratively increasing the importance of low-carbon resources, the EU is at the same time curtailing economically beneficial cooperation in this regard with Russia, while having a long-established main gas pipeline infrastructure.

It is quite obvious that in the process of energy transition, the EU still remains sensitive to other Russian natural resources. As you know, nickel is also one of the key elements of the "green economy". This is an integral component of all modern technology and the most important component of the high-tech defense industry, so it is difficult to apply the sanctions policy against Russia here. As of August 2023, the Eurostat data speak for themselves, Russia retains its leading position as a nickel exporting country to the EU, leaving behind the United States, which is in second place - 21% against 18% ^[16].

Brussels "succeeded" in something else rather when, by the summer of 2022, it adopted a partial oil embargo on fuel from the Russian Federation. Such a policy is consistent with the anti-Russian orientation, as well as the narrative of non-use of hydrocarbons, which the EU is so eager to achieve in implementing a climate-neutral program. However, not all EU members, as can be seen, share this approach. The sixth package of sanctions, which significantly limited the transportation of Russian oil, provided for some exceptions in the form of its supply via pipelines to the Czech Republic, Slovakia and Hungary.

In general, this station policy caused serious damage to the energy security of the union, since the entry into force of the sixth package of sanctions was immediately followed by a sharp increase in oil prices. Its cost in equivalent per barrel reached a record level by June 2022 and amounted to about $ 122 ^[18] according to the Energy Information Administration agency. A number of oil-producing States have been influenced by these processes. The general rise in the cost of production costs for oil production contributed to speculation in the energy market, the main players hoped to make a profit ^{[19, p. 23-25]}.  The current situation also shows that the EU has made life more difficult for the domestic energy market by deciding to abandon Russian resources.

The interim results of the implementation of the REPowerEU plan cannot be called successful, since attempts to diversify supplies and the suspension of close cooperation with the Russian energy sector led to problems of energy security of the union. Thus, according to the European Socio-Economic Committee (SEC), in 2022 9.3% of EU citizens were unable to provide their homes with sufficient heat. The EU advisory body made it clear to the leaders of the association: "It is obvious that the measures taken so far have not worked. We need a new deal, a new agreement backed by strong political will, where all levels of government will move in the same direction."^[20]  

Green hydrogen

The last aspect worth paying attention to in this issue is the use of hydrogen energy, which is becoming increasingly popular among the most important political players. Such major players in the energy sector as China, Russia and the EU are already developing strategies for the introduction of hydrogen energy. In this aspect, the EU member states have advanced the furthest. At the moment, France and Portugal have signed an agreement on the creation of the world's first hydrogen pumping pipeline, and a hydrogen-powered railway line is planned to be launched in Germany. Hydrogen energy can become a new word in the energy security strategy of the Union, as well as a unique product that distinguishes the EU from the entire market of energy producers. However, the issue of creating a suitable infrastructure for the creation and pumping of large volumes of hydrogen, as well as the issue of financing these projects remains open.                                                                                       

Energy security, therefore, is now one of the most pressing issues on the agenda of the European Union. Issues related to the diversification of energy imports due to the refusal of supplies from the Russian Federation, the building of a stable and secure logistics infrastructure, and the development of green energy initiatives have become the most important provisions in EU energy security documents. The initiative to implement the REPowerEU plan turned out to be almost unsuccessful, as attempts to diversify supplies and suspend close cooperation with the Russian energy sector led to problems with the energy security of the union. The EU was heavily dependent on Russian exports, and in the context of the Ukrainian crisis, such a sharp transition to supplies from other logistics hubs had a negative impact on the economies of some countries and forced them to very high costs for establishing new trade routes. The transition to the use of liquefied natural gas has also exacerbated the energy crisis in the EU member states. In this regard, it should also be said that the technology of LNG production and transportation is much more expensive and logistically difficult to implement than using an existing network of gas pipelines (mainly in the Russian Federation) and pumping natural gas through them. In this situation, the EU has become even more dependent on the energy resources of the United States and the Middle East, which does not allow it to talk about a complete and independent infrastructure of its own.                      

The development of green energy initiatives has proved to be an impossible task for some countries due to the weak economic situation. The construction of the necessary infrastructure for the production of renewable energy sources is a very expensive process, and many EU countries do not have such large financial resources. Some EU countries have the most advanced technologies for the creation, storage and transportation of products in the field of "green energy", however, the production of these technologies is extremely unprofitable from an economic point of view, and a complete transition to renewable energy will only worsen the energy crisis. Thus, energy systems based on green energy technologies that require critical raw materials will only create new or exacerbate existing dependencies. In addition, renewable energy sources will not be able to fully provide the EU with the necessary amount of energy resources needed to develop and maintain infrastructure and meet the needs of citizens.

Conclusion

The issue of EU energy security is extremely multifaceted. It includes not only the diversification of energy carriers, the search for new stable suppliers and the provision of the European Union infrastructure for the transportation of energy resources, but also the issues of the lack of a unified energy legislation that does not allow full control of the energy situation of the EU as a whole, and not its individual parts. There is also a competition issue within the European Union, which often prevails over the desire for cooperation, which not only negatively affects eurosolidarity, but also significantly hinders the development of necessary projects and the energy industry. These circumstances do not allow the formation of a unified energy policy and lead to the emergence of numerous declarations and memoranda, which in fact are not respected by all members of the organization. It is the lack of unity in the current policy, including energy policy, that prevents the union from uniting and acting actively. That is why it will be a long time before we see a truly unified EU energy policy. The lag of the Baltic and CEE countries will be undeniable, encouraging them to pursue their own policies, as, for example, in the case of Hungary, which has signed a new contract for the supply of gas from Azerbaijan. In general, energy security will continue to remain a kind of wedge within the framework of European solidarity, receiving its development in Western Europe.