Kadri Simson, European Commissioner for Energy: “Arcelor’s decarbonisation in Asturias can be a good showcase for Europe”

Kadri Simson, European Commissioner for Energy: “Arcelor’s decarbonisation in Asturias can be a good showcase for Europe”

“The reduction of energy consumption by 5% is achievable without a negative impact for the industry because member states will have room for maneuver”

The historian and political scientist Kadri Simson, born in the Estonian city of Tartu (1977), is at the helm of European energy policy at a time when the fear of a Russian gas cut conditions all EU actions and has 27 in suspense. In July, Simson was going to attend the forum of the European coal regions in transition in Oviedo, but a change of agenda in the European Parliament prevented him from traveling to Asturias. The Commissioner for Energy spoke at the congress by videoconference and promised to attend this newspaper later to talk about the coal regions in transition and the current issues of her portfolio. Despite the hectic summer, he fulfills the commitment.

– Will coal regions be the big losers of the energy transition?

The transformation we seek will be more difficult for some regions than others. That is understandable and no one claims otherwise. Across Europe we have different starting points for this change. Whether in Asturias, in Silesia, in the Irish Midlands or in my home region of Ida-Virumaa in Estonia. This is why it is so important to ensure a socially just transition. It has been a priority for this Commission since we started work three years ago. The goal of our Just Transition Mechanism is to leave no one behind.

– And how will it be achieved?

We are not starting from scratch. Many coal regions can rely on a strong business and manufacturing backbone and are well-equipped in energy-related infrastructure. Smart and energy-efficient technologies developed here may have export potential both in the EU and beyond. We should work together to stimulate it.

– Do you see potential?

According to our estimates, by 2030 the potential for clean energy jobs in the EU’s coal regions will reach almost 200,000 jobs that are currently related to coal. By 2050, job creation may more than double that figure. That is our goal, and Asturias is part of it. With this we can ensure that no region is left behind.

– What will the EU do to help these regions?

Cooperation between member states and regions is at the heart of an inclusive and sustainable energy transition. The European Commission is facilitating dialogue and with the Just Transition Mechanism the Green Deal will reach a new dimension. With its three pillars, it will mobilise up to €60 billion to support the transition process of coal-intensive regions across the EU. Overall, we are well equipped to embark on this challenging journey. We know that some regions will have more challenges than others. We are here to help with knowledge sharing, technical assistance and money.

– Will the Just Transition Funds have the capacity to transform regions such as Asturias?

Efforts at European level alone will not make the transition a success. We need everyone on board to define regional and local strategies, and to design projects that have the potential to generate positive and lasting change in the regions. This, of course, also includes funding at local, regional and national level, as well as from the private sector. The Just Transition Fund is not to finance the entire transition, but to help mitigate the expected socio-economic and environmental impacts. The Fund can, for example, help address transition challenges because investments are needed to implement technology and infrastructure for affordable clean energy, greenhouse gas emissions reduction, energy efficiency and renewable energy.

ArcelorMittal plans an ambitious decarbonization of its steel plant in Asturias with the massive use of green hydrogen that will be produced by the HyDeal consortium. Is that the kind of projects the EU supports to help regions in transition?

This project is a very good showcase for Europe on how to decarbonise carbon-intensive industrial processes through the use of green hydrogen. We need a clear ambition from industries such as cement, chemicals, fertilisers and, as in this case, steel to decarbonise their production. Moreover, this transformation process is supported by the EU. But above all, it must be the industry itself that intends to transform itself and we very much welcome ArcelorMittal’s ambition to do so. Also with regard to the growing “green steel” market. It would be great if the Asturias plant could be one of the pioneers in this development.

– When can green hydrogen be an economically viable alternative?

Our estimate is that we will see a substantial increase in both production and demand for green hydrogen, combined with an expansion of renewable energy sources to produce it, electrolyzer capacity and storage infrastructure. Given the competitiveness of electricity generated from renewable energy sources, the carbon footprint, the dependence on natural gas imports and the increasing availability of hydrogen applications in industry, we expect a significant expansion of the market with greater price competitiveness of green hydrogen. Interestingly, we see the shift to green hydrogen earlier in carbon-intensive industries than in the energy sector itself, as demand is expected to increase faster than supply.

Now, with the crisis caused by the war in Ukraine, the priority is to contain the high prices of all energy…

We have been dealing with high energy prices since last fall and both the situation and our solutions are constantly evolving. Unfortunately, summer has not offered a break from the energy crisis. Gas flows from Russia have declined further since July. Manipulation of supplies is tightening the market and pushing gas prices to record highs. These tensions are having a domino effect on the electricity market. And this has been compounded by other challenges, including an extraordinarily hot and dry summer that gives us insight into the impact of climate change. As a result, electricity prices are at unsustainable levels. This is hurting our people and the industry.

– What measures should be taken in the short term?

Member states continue to take measures to protect consumers and support energy companies experiencing liquidity problems. But given the scale of this crisis, coordinated intervention at EU level can be added. This is the basis of the proposals that the European Commission presented to the general public on September 14 with the aim of reducing the electricity bill of Europeans.

– Which ones would you highlight?

First, we are encouraging member states to continue their efforts to keep electricity consumption under control. We are boosting their efforts by setting a clear overall target of 10% for voluntary reduction and by calling for mandatory action at peak times. Member states would have to reduce consumption during the most expensive time – when gas usually sets the price – by at least 5%. Second, member states have taken steps to mitigate price increases at considerable cost to their budgets, and are looking for new ways to sustain that effort. We are proposing a temporary correction to the functioning of the electricity market, which will help them do that. Our plan would set an EU-wide cap on the remuneration of infra-marginal electricity technologies. Today, gas, or sometimes coal, usually sets the final wholesale price of electricity. A company that produces electricity
With lower costs you benefit greatly from this and earn excessive income. At the same time, consumers do not get the benefit of the growing share of affordable renewables on their bills. An EU-wide cap of €180 per megawatt hour on revenues from different technologies such as renewables, nuclear power and lignite will generate funds that can be channelled to help consumers.

-They are not the only cuts to the income of the companies that plate…

Oil, gas and coal companies, which are also making huge and windfall profits, should be part of the effort to tackle the crisis. We are therefore introducing an exceptional solidarity contribution from the fossil fuel sector that targets these surplus profits. It would be collected by member states on 2022 profits that are above the 20% increase over the average profits of the previous three years, at a rate of at least 33%. We believe that all this is fair and proportionate, leaving room for investment.

– Do you fear a negative response from electricity companies to the limit of their profits?

Companies, which are making huge and windfall profits, should be part of the effort to address the crisis. At this time it is important to help EU citizens, especially vulnerable households and businesses.

– Will the EU be strengthened by the agreed strategy? When do you expect to approve it?

EU energy ministers will meet extraordinarily again on 30 September to discuss our proposals. I appreciate that they are meeting quickly and I am sure that these new proposals will help to navigate the difficulties.

– Which of them do you consider most decisive for energy saving?

Measures must be seen as a whole and there is no silver bullet that works on its own. Over the past year, we have provided member states with many options and all of them introduced at least some measure that helped mitigate the current difficult situation. No Member State is the same, so we need different options and it is up to countries to decide what works best for them.

– Will it be necessary to cut off the energy supply to industries?

The 5% electricity reduction target is achievable without a negative impact on the industry. Member states will have very significant room for manoeuvre as to how to achieve the target. They do not need to impose all efforts on their industry and can also take steps to reduce household or public sector consumption. In addition, by organising tenders in which certain categories of consumers bid for compensation in exchange for shifting their consumption from peak to off-peak hours, companies that are interested in seeking to reduce consumption at the lowest possible cost can be easily identified.

– Will energy prices be brought under control?

Our goal is to face the energy crisis and achieve more affordable prices for the final consumer. Our proposals give member states more flexibility to achieve this and help people and businesses. Our new proposal also offers Member States the option of extending regulated retail electricity prices to small and medium-sized enterprises and states that such regulated prices may be lower than electricity costs. This provides legal clarity and certainty on what Member States can do in this area.

– And is the so-called “Iberian exception” to control the price of gas not extendable to the entire EU?

All models have advantages and disadvantages, and last week we introduced one that we believe works best for the EU as a whole. The Iberian model has a number of advantages, but it works under some conditions, such as easy access to the supply of liquefied natural gas and limited interconnections with other electricity markets, which make it not replicable at European level.

-In Asturias, the El Musel regasification plant was built ten years ago and has never come into operation. Now it wants to open up to supply Europe. Does it make sense with the limited gas interconnections between Spain and France?

To diversify gas supplies, imports of liquefied natural gas (LNG) play a crucial role. Spain has a strategic role with its six operational LNG terminals. The commissioning of the El Musel regasification plant is a decision to be taken by the national authorities and the project owner. The REPowerEU Plan underlines the importance of improving cross-border electricity interconnections with the Iberian Peninsula. Additional investments to connect LNG import terminals in the Iberian Peninsula and the EU grid through hydrogen-ready infrastructure can further contribute to diversifying gas supplies in the internal market and help harness the long-term potential of renewable hydrogen.

– Does coal regain prominence to guarantee energy supply?

The coal announcements of some member states must be seen in the context of the extraordinary circumstances in which we find ourselves after the Russian invasion and the gas supply disruptions. Relying on coal to replace some gas imports should be seen only as a short-term solution to energy security.

– Is there no reversal on the decarbonisation targets?

Coal is not a viable long-term solution either for security of supply or for meeting the EU’s climate commitments. Member states have not questioned their long-term commitments to phase out coal in the current situation, underscoring their understanding that fossil fuels have no future and there is no justification for putting a question mark over the coal phase-out plans that member states have. Renewables and energy efficiency remain our best long-term solution for energy security and for our climate ambitions and must be accelerated.

Will the war in Ukraine lead to progress towards a single energy market in Europe?

The war in Ukraine has highlighted the importance of member states working closely together to solve problems, without taking away the right of each EU country to choose its own energy mix. And only by working closely together and coordinating our responses to today’s challenges can we find the most efficient and effective solutions, whether to reduce overall dependence on Russian imports or find ways to address high energy prices.

Source: EPE