6TH EUROPEAN INNOVATION SUMMIT

Slow speed of transformation towards clean energy sources and high energy prices hurt both European society and industry. New energy policy regulation seems to be the main challenge and objectives for policy makers both at EU and Member States’ levels. Our study in the Slovak Republic shows that there are only two values for investors to deliver on the energy market and that can be appraised:

  • energy itself in their form of electricity, heating and cooling
  • ability not to simultaneously produce carbon emission expressed by “green credits”

The core subsystems of the energy market are mutually interrelated and should be transforming as a coherent system in order to achieve stable and predictable investment environment, gradual reduction of carbon emissions and competitive energy prices.

Adopted EU policy favors feed in tariff principle and Emission Trading System (EU ETS) as key instruments for energy market transformation. The Cap and trade system used on ETS is based on the assumption that it is possible to make short

time economic development prediction. This assumption is in contradiction with new insights about the economy based on chaos theory which shows that short term predictions are illusions. This is probably the root cause of the high volatility of the carbon emission market. Present rules on EU ETS do not create a stable price signals which prevents investment.

Long term step by step practical transformation of already existing office building towards Plus Energy Building is used for our analysis. Studying feed in tariff policy in the market we found that this policy hides the real values delivered by investors, transform risk from investors to consumers, redistributes economic values between different investors through the market, and creates economic barriers which damage competition. All these elements are the main reasons why the energy prices have gone up during the last seven years and widely hurt the competitiveness of the EU industry. This is also one of the main reasons why speed of transformation of existing buildings into Zero or Plus Energy Building status is so slow.

Suggested regulation policy based on social cost of carbon in form of “green credits” and “tax on carbon emission” allows fair non discriminate access to the energy market of both fossil and Local Renewable Energy Sources (L-RES). This regulation

policy will create a long term stable investment environment which will attract investors to invest into L-RES and transform existing building stock into Nearly Zero Energy Buildings. Shift of District Heating Companies from position of energy suppliers to energy distributors will break the monopoly situation prevailing on the heating market. Cooperation and at the same time competition around heating distribution systems will bring heating prices down and enhance services provided.

The economic stimulus embedded directly into the energy market will drive market to clean energy, force competition, promote cooperation and reduce prices. Policy with social cost of carbon will award real values provided by investors and therefore innovations will be driven and financed by the energy market itself. This will open competition which will reduce cost down and enhance the offering of features and services provided. Innovations will shape the energy market.