Is a common European energy market just a pipe dream?

Posted on 16 October 2013

Europe is at the forefront of moving from a nation-based energy system to a regional one.

The integration of electric and gas networks is planned for 2014, but recent policy shifts by EU member states have cast doubt about the reality of achieving this goal. Many questions remain how these nations can overcome their different political and economic needs to reach a single energy market, the Daegu 2013 Congress told on 16 October.

“We won’t have a common market by 2014,” said Klaus-Dieter Barbknecht, an Executive Board Member of VNG, the German gas supplier. He explained that regional and national differences, including a mixture of public and private-sector utilities and varying regulations means creating a common energy market still needs more work. Barbknecht added the EU is moving in the right direction and the eventual realization of an integrated system will lead to a “common living standard in Europe.”

Unilateral energy policy decisions have “worked against the market,” said the Czech Republic’s Vice Minister of Energy and Industry, Pavel Šolc. He pointed to high subsidies for renewable energies in some nations as well as Germany’s phasing-out of nuclear power as potential threats to his country’s energy security. Šolc was unsure about future energy market integration because of possible unforeseen “politically driven” shifts in policy by the EU members. He said at the moment “there is no new investment” in the regional system because of these uncertainties.

Achieving a fully integrated network will first require the EU to reduce its dependence on foreign suppliers, according to Bruno Lescoeur, CEO of Italy’s Edison. “Europe should do its best to maximize domestic supply” as well as negotiate new long-term contracts with foreign gas suppliers, such as Russia. Lescoeur agreed that the “renationalization of energy policies” only complicates other problems with integrating unsubsidized renewable energy into the plan as well as upgrading the existing electrical infrastructure in Europe.

To achieve progress toward a common energy market, Jean-Francois Cirelli, President of Eurogas, said utilities must “raise awareness of the situation to policymakers” about the threats that national fractionalization poses to the whole European energy sector. “We are at a crossroads,” because no one knows “how the sector will attract investments.”

For some member states, particularly the UK, Belgium, and Germany, time is of the essence, warned Alistair Buchanan, KPMG’s Partner & Chairman of the UK Power and Utilities Practice. Energy supplies in the UK are “very tight,” he said, pointing to a gas shortage earlier this year. If European member states cannot reach agreement on how to integrate the energy system, he said individual governments will have to play some more “improve Jazz” to resolve their current energy security concerns.

This news story is based on the session Regional Crossroads, “Europe’s different agendas: Steps to an effective energy market integration”, at the 2013 World Energy Congress.