PM+: Energy union plans 'like a glass half full', says industry chief

Written by Chris Beddoes on 8 April 2015 in Opinion Plus
Opinion Plus

EU policymakers will need to 'fill the glass' and build on the commission's initial energy union proposals, argues Chris Beddoes.

Secure, sustainable and affordable energy is vital for Europe's 500 million consumers; it is also crucial for those European industries exposed to international markets that energy is competitively priced.

The European commission's energy union communication rightly highlights the importance of open and free energy markets and outlines some of the changes needed to help deliver such energy in the future.

Describing a long term vision for Europe's energy systems in a competitive lower carbon economy is important for a predictable investment environment and the proposed five dimensions are essential parts of it.

The commission's energy union package outlines this future, focusing on the importance of the EU internal electricity market and measures to make it work; on the importance of energy efficiency in end use; on security of supply, particularly gas; and on research and innovation.

So, how will the energy union deliver competitive energy and can it also help foster growth and reverse the decline in industrial value creation in Europe?

"In order to maintain a strong European industrial base, the fight against high energy prices should be one of the EU's absolute priorities"

In order to maintain a strong European industrial base, the fight against high energy prices should be one of the EU's absolute priorities.

The impact of taxes and levies, as well as higher energy costs in Europe, have resulted in significant energy price discrepancies between EU industry and our global competitors that must be addressed.

Meanwhile, the role of important energy products and their supply systems, such as petroleum products and refining, are often completely ignored; or worse, dismissed as involving "old technologies", implying the use of low skilled labour when the reality is in fact the opposite.

Currently, petroleum products supply over 90 per cent of the energy used in EU transport.

And, according to the international energy association, the EU will still need petroleum products for many years; and by the commission's own analyses, EU petroleum refining is very innovative and employs highly skilled labour.

With the exception of some detailed proposals for electricity, there is a huge gap between the vision laid out and the current reality of energy use. The necessary balanced and economically realistic transition steps require a lot more work to make this a real package.

To build on the commission proposal and complete the package the EU should add three elements.

First, we take the current highly reliable EU petroleum products supply system including refining far too much for granted: this is already interconnected, products move freely and wholesale pre-tax prices are based upon market signals. In essence the EU has an internal market for our products.

So, ensuring the viability of EU refining, as recognised in the European energy security strategy, will be vital in the long transition to a future lower carbon economy.

Secondly, affordable technology is a critical element in enabling energy systems to evolve.

"We had strong expectations of the energy union and so far we find it a bit like a glass half full: it is a good start, but the glass needs filling"

Strengthening market based systems that will allow energy technologies to compete on their merits without distortive mandates and subsidies as well as the means to promote consistent CO2 reduction costs across the economy, will allows the market to operate efficiently and ultimately,  deliver the outcomes at the lowest cost to society.

The emissions trading system plays a significant part in this, but it must deliver without damaging the competitiveness of our industries.

Thirdly, better describing how energy costs, especially for industry, will become more competitive not just at the end of the transition, but throughout it, starting now, is vital for such industries to invest in Europe.

We had strong expectations of the energy union and so far we find it a bit like a glass half full: it is a good start, but the glass needs filling.

We count on the European parliament and the EU's member states to fill the glass and complete the energy union.

 

About the author

Chris Beddoes is the director general of FuelsEurope

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