The Letta report: What’s in the box for Europe’s energy sector

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A deepening of Europe’s Energy Union is a key priority, along with several targeted recommendations on how to transform Europe’s energy sector, according to a report by former Italian Prime Minister Enrico Letta, set to be presented to EU leaders on Thursday (18 April).

National governments and the European Commission tasked Letta to prepare the report, and it is expected to have a large influence on the EU’s political direction after the June elections.

Europe’s energy market and infrastructure are a key focus, with Letta declaring that “the Single Energy Market can well be Europe’s best asset to ensure its success in a novel global order.”

The report makes specific recommendations which, if implemented, would dramatically reshape parts of Europe’s energy sector.

Cross-border joint auctions for additional renewable energy

The report says neighbouring EU countries should start holding cross-border auctions for additional renewable generation to achieve efficiencies and reduce costs.

It also encourages “cross-border flexibility schemes,” in which power grid managers turn to generators in neighbouring countries for help when local electricity demand is high.

Grid expansion

Many voices across Europe call for a massive expansion and reinforcement of Europe’s grids and Letta maps out how strengthened European coordination and funding can help deliver on this vision.

Europe already has four ‘High-Level Regional Groups’, which provide some technical cross-border coordination. Letta argues these groups should “engage more on a political level” with a rotating presidency and annual meetings.

Letta wants a boost to the ‘Connecting Europe Facility’ in the bloc’s next long-term budget and foresees ‘green bonds’ to secure the necessary capital in the longer term.

He also references the need for a new European hydrogen grid.

Security of supply: gas and nuclear fuels

The Letta report calls for a more systematic review of Europe’s security of gas supplies, “taking into account the new realities of the LNG market.”

With preventive measures like gas storage unevenly distributed across Europe and the resulting “difficult discussions and even disputes”, he recommends that neighbouring EU countries develop a “coordinated approach” on who will pay for what.

The report also warns of “emerging dependencies on nuclear fuels”.

Global cleantech competiton and critical raw materials

When it comes to Europe’s future clean technologies, Letta urges caution. With an eye on China, he warns of “the risk of sabotage or unauthorised data transfer” and calls for cybersecurity measures which should be “rigorously incorporated in procurement for new infrastructure or generation assets.”

Similarly, Letta stresses that the EU’s recent foreign subsidy probes in strategic sectors should continue to “ensure that third countries’ investment in key energy infrastructure or assets may not pose a risk to public security or public order in the future.”

Letta also says that China’s “assertive strategies” risk undermining Europe’s attempts to diversify its critical raw materials supply. So, the EU should work more closely with “reliable partners” like the US.

The report also proposes joint procurement actions by EU governments to secure critical raw materials.

Green diplomacy

Large cross-border projects should be used to foster goodwill with “reliable energy partners”, Letta argues. He cites the North African gas and hydrogen pipeline connection to Italy and argues that the 30+ EU candidate countries should get early (but gradual) access to the single energy market.

For Africa, increasingly courted by “other global players,” the EU needs a fresh proposition, Letta says. This should be based on “local value,” building up “green industry” value chains to complement the traditional mineral extraction.

Implementation – a new Clean Energy Delivery Agency

Letta calls for the creation of a new implementation, which would have four main responsibilities: (1) Supporting hydrogen and other nascent technologies; (2) disbursing grants for cross-border grid projects; (3) overseeing subsidy programmes for renewables and nuclear; and (4) acting as a one-stop shop for certifications and general permitting support.