EU Electricity Security Policies Fueling Carbon Emissions
The European Union’s goal of improving security of electricity supplies is at odds with another EU goal of reducing carbon dioxide emissions. This is one of the key findings of the 9th edition of Capgemini’s European Energy Markets Observatory. The report also warns of a looming battle between the EU and Russia over gas supplies and details the ineffectiveness of the EU’s unbundling directives designed to improve competition. The report covers the full year 2006 and the winter 2006-2007.
The EEMO finds that electricity security of supply in Europe has improved on average, but 81% of planned new plants will use fossil fuels, thus increasing CO2 emission volumes.
The EU, in its ownership unbundling measures published in September 2007, has included a “reciprocity” clause that would prevent foreign investors, including Russian companies, from taking over European gas and electricity transportation assets. However, as the unbundling measures are aimed at giving easier market access to the new retailer entrants, it could even help Gazprom in its strategy aimed at dominating the end-to-end gas value chain.
With divergent strategies, one can easily predict that the EU/Russia battle for gas supply and value chain control is only beginning.
The European Commission has suggested a third “unbundling Directive” as a response to the lack of results from previous Directives on market efficiency.
The report finds that with a few exceptions, all EU Member States that have opened their electricity market to competition for more than three years are facing above EU average electricity retail prices.
Instead, Capgemini recommends measures such as simplifying administrative procedures to decrease investors risk, providing financial incentives (notably through adequate tariffs) to enable investment in interconnection electrical lines and pipelines, and extending new transmission and wholesale.
Speaking at the World Energy Congress in Rome Tuesday, the Chief Executive of Eni, Italy’s biggest oil and gas company said the EU’s “unbundling” initiatives were an irrelevance, the Financial Times reports. Although there are measures Europe can take to curb its use of gas, Paolo Scaroni said dwindling domestic production and the increased use of gas for power generation mean that Europe’s gas imports will inevitably rise.
Algeria and Russia will continue to be the pillars of our energy security for years to come.
Scaroni’s views were echoed by Alexander Medvedev, the deputy chief executive of Gazprom, Russia’s state-controlled gas company, which agreed a strategic partnership with Eni last year. Medvedev warned the congress that the plans to unbundle energy ownership from the supply business”could have serious adverse consequences for the long-term security of European gas supplies.”
The European Energy Markets Observatory report is available at the Capgemini website.
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