SUMMARY
Energy is a basic requirement for survival and is
central to our economy. We are therefore alarmed at the degree
of uncertainty, complacency and inertia about how an affordable
supply of secure and low carbon energy will be provided in the
European Union (EU). This, in essence, is the 'trilemma' facing
the EU.
Several factors underlie our concern: the imminent
closure of large numbers of coal plants across the EU due to environmental
rules; an investment crisis; the importance of affordable energy
at a time of economic hardship; the need for sustained and deepening
cuts in greenhouse gas emissions; the continued reliance on imports
for the supply of over 50% of the EU's energy; price volatility;
weak interconnection between many EU Member States; and the failure
of governments to boost public acceptance of new energy infrastructure.
It is far from clear, however, where the required
investment—of around €1 trillion over the period 2010-2020—will
come from. The share values of EU utilities companies have slumped.
Public money for energy infrastructure investment and for low
carbon energy innovation is insufficient. Institutional investors
hold €13.8 trillion of assets but, in order to invest in
energy projects, even at a time of historically low interest rates,
they need confidence in policy. That is why agreement on a 2030
policy framework, by 2015, must be a priority for the EU. Without
that clarity and investment, the EU will be uncompetitive and
over-dependent on elsewhere to meet its energy needs, and it will
fail to seize an opportunity to make a material and enduring contribution
to European economic recovery.
The required EU energy transformation could stabilise
consumer and retail bills. But such stabilisation will require
investment, a clear policy framework and support for innovation
into both lower carbon technologies, including carbon capture
and storage (CCS), and ways in which energy can be saved.
No country is an energy island. There are therefore
clear benefits to be derived from working within the EU on the
energy challenge. There is, however, a dilemma. It is for each
Member State to decide what mix of energy is the most appropriate
for them. But the choices of one country affect others, including
the collective need for energy security, an efficient market and
environmental improvement, and so the European Commission should
have a role in monitoring choices and their impacts.
There are specific aspects of energy policy where
a more coordinated EU strategy would be helpful. These include:
- Agreement on an energy policy framework through
to 2030;
- A revised EU Emissions Trading System (ETS) with
a floor price, accompanied by a tighter cap on the number of allowances,
a 2030 renewable energy target and, possibly, an energy efficiency
or consumption target;
- Coordinated research and development (R&D);
- Increased physical interconnection between Member
States, which will require authorities to be clear with the public
that certain choices, including 'not in my back yard', come at
a cost; and
- Reduction of regulatory obstacles towards the
completion of the EU internal energy market.
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