Since the signing of the European coal and steel community in 1952, energy policy has been at the centre of European legislation. In 1995, the European commission issued an energy white paper based on three pillars: sustainability, competitiveness and security of supply. Since then, these principles have been maintained in all energy directives and confirmed in a large number of council decisions.
While there is some evidence of improved sustainability over recent years, it is hard to see any improvements on the other two aspects. Large EU energy users who are competing on global markets must now pay almost double the price for their energy supplies as their US competitors. Plus, what could highlight more our growing dependency on Russian gas than the current crisis in Ukraine? In 2013, according to the international energy agency, EU dependency on Russian gas increased to a record level of over 160 billion cubic metres. Moreover, the growing unrest in parts of the Middle East is eroding our potential to reduce dependency on Russia by buying more from that region.
The problem lies in the interlinking of the three pillars and slowness in the completion of the single energy market. Everyone supports sustainability but increasing reliance on more expensive renewable sources makes our energy intensive industries less competitive in global markets. Equally, the practice of replacing indigenous coal with imported gas, to reduce emissions by half, raises costs both financially and politically.
"In 2013, according to the international energy agency, EU dependency on Russian gas increased to a record level of over 160 billion cubic metres"
Though subsidised wind and solar power plants are of great benefit to the environment, their fluctuating nature demands back-up power which again can increase gas imports and emissions - especially when the back-up is lignite fuelled - plus subsidies must eventually be paid for by the consumer, further reducing their global competitiveness. This eternal triangle of interdependent pillars is easy to define but hard to optimise. What can be done? A big step in the right direction was to legislate for a functioning single energy market, yet the market we have is neither functioning nor single. There is slow implementation, or no implementation at all in some member states, of the legislation. The unbundling of generation, transmission and distribution has been a requirement of all three energy packages but this has still not happened in some member states. As such, not all industrial and domestic consumers have the ability to switch their energy providers and enjoy the benefits of the resultant competition.
The inability of the EU to encourage the building of gas pipelines to other suppliers has led to our increasing dependency on Russia. The Nabucco project aimed at importing Azeri gas took almost 10 years of development before being cancelled. The South Stream pipeline, designed to diversify the routes of gas supplies to the EU, has also been shelved. The progress of the trans-Adriatic pipeline project has been slow – just at the point when acceleration is needed. In consequence, the EU, especially central and eastern Europe, will continue to rely on Russian natural gas.
So the remedies we require have already been identified. We must enhance the implementation of the single energy market, invest in alternate gas supply pipelines and comply with existing legislation. We have always had energy supply at the heart of EU development but it’s high time we delivered on the policies and laws that are already in place.