Draghi Report on the Future of EU Competitiveness: Energy Chapter
Europe lacks clear priorities, is wasting common resources, and fails to coordinate where it’s most needed. This is the harsh verdict of the Draghi Report, a study on the future of EU competitiveness presented this morning by the former President of the European Central Bank. The document, requested by the European Commission last year, provides a detailed analysis of the challenges facing industries and businesses in the Single Market, identifying critical pain points.
The report pulls no punches: “If Europe fails to become more productive, we will be forced to make choices,” it warns. “We cannot simultaneously be a leader in new technologies, a beacon of climate responsibility, and an independent global actor. Nor will we be able to fund our social model. We will need to scale down some, if not all, of our ambitions.”
How to Act? The Draghi Report focuses on three key areas: innovation, security, and energy, providing a series of recommendations across ten economic sectors and several horizontal policies. The findings are expected to contribute to the drafting of the European Commission’s new plan for sustainable prosperity and competitiveness in Europe.
Let’s take a closer look at the Energy chapter.
Report on the Future of EU Competitiveness: Energy Chapter
“Energy is a key factor in the competitiveness gap between the European Union and other regions of the world,” the report states. “This has been evident since the early 2000s, but the gap has recently worsened due to the energy crisis. At the core of this gap are structural reasons that have intensified over the past two years.”
This competitiveness gap is not solely tied to high energy prices (although they play a critical role), but also to the level of volatility and unpredictability. The higher the cost of energy, the greater the impact on overall investments, with a cascading effect on the entire economy.
At the root of this gap are multiple issues, ranging from the availability of internal resources to infrastructure development and market regulations.
Where to Act to Increase Competitiveness
To address the competitive challenges facing the EU, the Draghi Report suggests that the bloc should pursue two parallel objectives. First, it should lower the cost of energy for end-users. The cost benefits of decarbonization should be anticipated and passed on to all consumers.
Second, it should accelerate decarbonization. To achieve this, all available technologies and solutions (e.g., renewable energy, nuclear, hydrogen, batteries, demand response, infrastructure development, energy efficiency, and CCUS technologies) must be utilized, adopting a technology-neutral approach and developing a cost-efficient overall system.
Proposals for the Gas Sector
- Establish long-term partnerships with reliable trade partners (short term).
- Move away from spot market dependence (medium term).
- Strengthen joint procurement (short term).
- Improve strategic infrastructure and storage management (medium term).
- Enhance data quality and forecasting (short term).
- Limit speculative behavior through financial position limits and EU trade regulations (short term).
- Gradually decarbonize gas through hydrogen and green alternatives (long term).
Proposals for the Electricity Sector
- Streamline administrative processes to accelerate renewable energy deployment (short/medium term).
- Modernize the grid to support electrification (short/medium/long term).
- Separate renewable and nuclear energy pricing from fossil fuel electricity generation (short/medium term).
- Support power purchase agreements (PPAs) for industrial users (short term).
- Encourage self-production for energy-intensive users (short term).
- Enhance system integration, storage, and demand flexibility (short/medium term).
- Maintain nuclear supply and develop new nuclear capacity (short/medium/long term).
- Promote carbon capture, utilization, and storage (CCUS) as a key tool for the green transition (medium/long term).
Horizontal Energy Policies
- Reduce energy taxation and use strategic fiscal measures to lower energy costs (short/medium term).
- Harmonize price support and avoid Single Market distortions (short/medium term).
- Promote innovation in the energy sector (medium/long term).
- Develop governance for a genuine Energy Union (medium term).
These proposals aim to support the drafting of the EU’s new sustainable prosperity and competitiveness plan.
Download the report “The futureof European competitiveness”.