How can the EU energy system be made more efficient?

As political pressure is mounting on competitiveness, energy is back at the centre of the European Union’s policy agenda.

Europe now faces a choice between allowing its energy system to further fragment in an intra-European subsidy race, or leveraging the internal energy market to reduce prices through innovation, competition and coordination.

The economic logic strongly favours integration. Coordination may entail short-term adjustment costs, but the long-term benefits of lower system costs and increased investment certainty and innovation are substantial.

Many decisions shaping the energy system’s future are inherently cross-border and therefore better taken at the EU level. For instance, cross-border infrastructure is needed to distribute the growing share of renewable electricity across Europe but, in the absence of strong European strategic infrastructure development planning, interconnector capacity and cross-border trade have not increased at the same pace as generation capacity.

Three practical steps can help achieve a more efficient European energy system. First, radically improving data transparency. Data availability and open modelling are essential to properly inform policy choices and build stakeholder trust. Second, a move towards genuine pan-European energy system planning. Cross-border infrastructure should be planned at the EU level in a broad and transparent manner, prioritising projects that minimise system-wide rather than national costs. Third, strengthening political coordination of national plans. National Energy and Climate Plans (NECPs) should become comparable, accessible and mutually consistent to avoid incoherent investment signals.

Europe’s energy system does not lack investment – it lacks coordination. Improving efficiency is, therefore, less a technological and financial challenge than a governance one. To lower prices, strengthen competitiveness and increase energy security, a more integrated approach is needed.

Read the Policy Brief, ‘Better coordination for a more efficient European energy system’, by Alexander Roth, Simone Tagliapietra and Georg Zachmann.

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