Navigating Clashing Interests: Meeting the Challenge of the European Energy Landscape with Consumer-Focused Sustainability

The European energy landscape faces a number of challenges and difficulties in the years to come. The need to decarbonise the industry, both in terms of primary energy sources and consumption levels, is imperative if we are to meet the climate targets set for 2050. 

However, these difficulties do not just encompass the electricity market or the energy market as a whole. The infrastructure and equipment that respectively contain and consume energy are also part of the equation. It could therefore be that, as a result of these latter variables, the decisions to be taken with regard to the energy and electricity markets may differ from what EU consumers might expect.

We have already witnessed friction in these two areas during the recent months of European debates.

Debates tackling the reform of the European electricity market were particularly noteworthy, with member states such as France or Spain clashing with European proposals, demanding changes in the directive and even reaching the point (in the case of France) of threatening to leave the European electricity market.

In terms of infrastructure and equipment, the upcoming Energy Performance of Buildings Directive (EPBD) and the new eco-design rules, also sparked controversy this past April, where stakeholders in the domestic heating sector confronted Brussels over the ban on the sale of gas boilers by 2029. A measure that proved to be particularly irritating for Germany.

Although these two events may seem distant from each other, it is appropriate to remember that heating expenditure accounts for 64,4% of the final energy consumption in the European residential sector (Eurostat, 2021). A sector mainly dominated by gas boilers, where suppliers do not intend to lose their hegemony in the face of current European electrification trends.

Nevertheless, current climate needs certainly demand a reform throughout the heating industry, as hydrogen and bio-gas networks will, most likely, only be capable of complementing decarbonisation efforts. Considering the magnitude of the problem we face, giving in to the demands of these traditional market players does not seem like an option. But, what are the options then?

At present, the purchase and installation of heat pumps is indeed expensive, generally falling in the €35.000 region per unit installed. This is a figure that the average consumer will likely not be able to afford. Hence, placing the burden of such investment on a public with decreasing purchasing power will surely slow down progress, creating discomfort along the way.

As a result, this raises the question: How can we avoid imposing the burden of replacing the existing gas boiler fleet on consumers? Well, we may not be able to avoid it, but we might just be able to alleviate it. How? The answer may be found in Circular Economy solutions.

As mentioned, the energy and heating equipment markets are directly intertwined, with a great level of influence between the two due to the large amounts of energy required for heating. However, the actual equipment is not really a product that consumers desire, but a means to an end. The end being to provide heating.

Boilers are nothing more than means to obtain heat, in the same way that light bulbs are means to generate light, or Wi-Fi routers are means to get an internet connection. As such, why make consumers purchase these goods instead of including them as part of their energy bill, for example?

Servitising these assets could open up opportunities for companies in the sector looking to create synergies and generate ongoing revenue streams beyond the one-off sale of the product, while benefiting the consumer from upgraded maintenance, repair and replacement services.

Moreover, opting for these Product-Service Systems (PSS) models gives companies the ability to offer a cohesive delivery of products and services while mitigating risks and achieving a more stable financial return.

But above all, and more importantly, it enables the market to adjust without imposing significant financial burdens on consumers.

Harnessing this kind of options is essential in order to meet the climate challenges of the future. However, if the market fails to evolve and innovate sustainably, remaining trapped in present stagnation, we will continue to witness stagnant debates focused on shaping the market to benefit suppliers rather than prioritizing consumer welfare. It is essential to break free from this cycle and embrace a dynamic approach that prioritizes consumer welfare, so as not to perpetuate an unsustainable model and ensure we do not face adverse consequences for our social and environmental surroundings.