European elections: industry giants deliver energy wishlist for the new Commission

As Europe heads to the polls, future energy policy is weighing heavy on the minds of the continent’s manufacturers.

Nowhere is the failure of the EU to create a true common market more evident, according to executives at the 12th European Business Summit, than in energy.

“We have to acknowledge that producing metals is very energy-intensive – this is a problem,” said Oliver Bell, president of Eurometaux, the European umbrella association for the non-ferrous metal industry. “Europe needs good materials for our innovations. Metals [are] the starting point in the industrial value chain. It’s the element that’s made Europe strong, coming through the crisis,” Bell told delegates at the meeting in Brussels last week.

Materials industries are providing the technologies required for the transition to a low carbon economy, he added. “EU legislation, if it affects energy, is crucial for us. Europe has to provide the [right] platform for industry,” Bell said.

Tom Crotty, director of the chemicals company INEOS and member of the European Chemical Industry Council, had similar worries.  “Chemicals is a huge sector – double the size of the automobile industry. But we have a problem: energy,” he said. “We’re losing market share – from 30 per cent to 18 per cent. Shale gas [in the US] is one third the price it is in Europe; electricity is half.”

The European steel association (Eurofer) has also released an election wish list that highlights future energy policy in Europe.  

The elusive internal market for energy

Europe acquired a legal basis for regulating energy in the Lisbon Treaty of 2009. But the notion of a coherent European energy market is still some way from fruition, says Fabrizio Barbaso, deputy director for energy at the Commission.

“When a country like Germany decides to exit nuclear, without consulting, we know that we have not reached a common enterprise,” he said.

Thomas Becker, CEO of the European Wind Energy Association (EWEA), agreed. “We have 28 sets of rules, strong borders and different norms,” he said. “I cannot understand why it all hasn’t been harmonised. I think it is a serious problem that the EU is importing 54 per cent of its energy needs. This will grow. We are dependent on others,” said Becker.

In the campaign for the Presidency of the Commission, the liberal Guy Verhofstadt is advocating most strongly for integrating energy markets further.  The conservative candidate, Jean-Claude Juncker, whose party is leading the polls, has maintained time and again that national governments should set their own course on energy.

Becker is among those throwing their support behind granting more power to the Commission to legislate. “Like with trade, energy should be sole competence of the Commission,” he said.

The idea that innovation can be inspired by political leadership is neglected, Becker believes. “The TGV trains were not just built by investors. It was political will set by the French government – everyone disputed it [at the time] but who’s disputing it today?” he said.

Similarly, putting in place coherent European renewable energy targets has created half a million jobs in Europe, Becker observed.

But an integrated market is not on the horizon, with member states still intent on protecting their own industries.

“During Christmas, over the course of three days, Spain produced 130 per cent of its energy needs from wind,” Becker claimed. “This 30 per cent surplus of electricity was just sent into the open. France doesn’t want to import wind [energy] – they’re protecting their nuclear [market].”

Poor infrastructure is also part of the problem. Spain and Portugal have a host of terminals for liquefied natural gas, but there are no connectors to allow the gas to be transported onto France and the rest of Europe.

Shale gas for Europe

“The world needs about 35 per cent more energy,” William Colton, vice president of the oil company Exxon Mobil, told delegates.  “Developing countries need refrigerators and cell phones [but] our demand is quite flat. Natural gas is the grower.”

Under EU law, the Commission cannot dictate the energy mix of individual EU member states, but it is working on a framework for shale gas exploration and also regulates environmental standards.

Shale gas reserves in Europe are estimated to be capable of generating billions of euros worth of fuel and eventually helping to secure energy supply. But the fracking process – in which a mixture of water, sand and chemicals is injected at high-pressure into rock to release gas trapped there – is controversial because it raises environmental concerns.

The thesis that shale gas imports – an alternative to drilling in Europe and a meaty talking point in this week’s round of transatlantic trade talks between the EU and the US – will deliver cheaper fuel and respite for industry, is contested.

Low-price shale gas is a fantasy, in the eyes of Barbaso. “We shouldn’t dream of low [priced] shale gas. If we do import shale [gas], we will be subject to transport and global market prices. [The US] will mainly export to China. When gas comes to Europe, it’ll be close to Russian [import] prices,” he said.

Energy efficiency

Improving the storage capacity of energy-intensive manufacturers also looks set to be a big debate during the tenure of the next Commission.

The EU has so far struggled to put in place energy efficiency legislation, and member states are now behind schedule in transposing into national law what EU legislation has already been agreed.

While tighter energy efficiency measures provide opportunities for companies working on intelligent energy storage units, Bell called on restraint from the Commission when issuing new guidelines.  “I bought a house recently and insulated the windows and walls. I probably improved [its efficiency] by 50 per cent. In my industry, on the other hand, I’m happy to receive a one per cent improvement,” he said.

An ongoing search for energy efficiencies is already a day-to-day reality for businesses, said Bell. “If we didn’t work on this, we’d be out of business. If you are not in the top 50 per cent [of energy savers], you’re out anyway.”

“It must be a sector by sector approach – no one size fits all. A 20 per cent [energy saving] target for a private house, no problem, but it’s not easy for industry,” Bell added.

Crotty agreed. “Energy-intensive sectors live or die on energy efficiency. Seventy per cent of our costs are already energy. We are not asking for incentives; we need light touch,” he said.

Energy efficiency is likely to be a key strand in the Commission’s forthcoming energy security strategy, due to be published in June.

Emissions targets

Carbon emissions is another area where regulation should be kept to a minimum, according to the gathered executives, who are dubious about a Commission proposal to cut CO2 emissions by 40 per cent in 2030.

Crotty thinks that a 40 per cent CO2 reduction target is ambitious. “There’s no followers coming behind us. [Europe’s] got an impressive record in chemicals [but] if we really want to export innovation and jobs, it’s a good way of doing it.”

Bell agreed. “We want to lead the world into a low-carbon society. We need followers though. Do we have enough followers? There’s much more skepticism in the world as to whether the European way is the right way,” he said. “Is 40 per cent enough, 50 better or is 30 realistic? All the targets need to be benchmarked against our own competitiveness.”

But Becker didn’t agree. “The perception that a strong CO2 target is a cost rather than an income is the wrong one,” he said. “The future is a less carbon intensive one – no one disputes it. Those that start earlier will have a competitive advantage. The Brazilians have seen it; the Chinese have seen it.”

Europe is in the lead in wind power. “We have the wind for free,” Becker said “We can create a commodity for exporting to the world.”