European Council acts on oil as it looks to REPowerEU

This week’s EUCO yet again focused on energy, delivering weighty decisions for the European energy sector: one being a ban on Russian oil and other petroleum product imports, another, the endorsement of the Commission’s REPowerEU plan, and the last, a call to continue optimising the EU electricity market.

First, ban oil

It has taken six rounds of sanctions, but this time around, the EU approved the move to ban Russian oil imports - along with other petroleum products - to the bloc. Albeit effectively a partial ban.

As reiterations of condemnation for Russia’s war in Ukraine, progressively harsher rounds of sanctions have been levied on the country. The ban on oil and petroleum product imports to EU Member States is the latest and most hard-hitting to the oil heavyweight, who relies greatly on oil revenues to fill its war chest.

But there is the caveat that, for now, the ban only applies to imports by sea. The decision to continue imports via pipeline – constituting roughly 30% of imports - will be revisited “as soon as possible”, according to the Council Conclusions. Still, the ban demonstrates the willingness across Member States to direct Europe’s energy system toward greater independence.

Flourish, REPowerEU

Regarding independence, the bespoke Commission brainchild – REPowerEU – was a no-brainer endorsement for reinforcing the sixth round of sanctions.

REPowerEU is a quasi-restatement of the Fit for 55 package released last July. Yet, it adds the objective of energy independence through rapid reduction of dependence on Russian fossil fuels and fast-tracking the green transition. For the Council, the elements of the plan it advocated for were:

• Further diversifying supply sources and routes as a short-term priority
• Accelerating the deployment of renewables, which ‘will require immediately speeding up permit-granting procedures’ for renewables
• Improving energy efficiency and savings
• Completing and improving the interconnection of European gas and electricity networks

The endorsement of this plan goes to show that, although energy has been a volatile topic over the past months, support for the objectives of the Green Deal has not wavered. In fact, the war has demonstrated to the EU that more needs to be done on the home front.

Also, market optimisation

Along with sanctions and repowering the EU plans, the Council called for the Commission to “swiftly pursue work on optimisation of the functioning of the European electricity market”.

The perfect storm of the past months has culminated in exorbitant prices for electricity, leading some to question the design of the electricity market. However, ACER’s Final Assessment of the EU Wholesale Electricity Market Design thinks the market is well-designed and suited to lead Europe through this period of high price volatility.

To echo this, the Council’s call aims to ensure that the market “is better prepared to withstand future excessive price volatility, delivers affordable electricity and fully fits a decarbonised energy system, while preserving the integrity of the Single Market, maintaining incentives for the green transition, preserving the security of supply and avoiding disproportionate budgetary costs.”

These three decisions taken amid Russia’s accelerated tap-turning on EU Member States’ gas supplies serve as a signal to the energy sector that Europe wants to, and will be, energy independent - we just need to act together.