Why energy suppliers have been given the red light

Unrealistic climate targets driving the cost of energy skywards have been blamed for a “frightening” loss of competitiveness that could affect investment in European energy.

A group of leading energy companies warned on the 10th September that the EU’s climate change strategy is having an adverse effect on Europe’s competitiveness in the energy market.

A new package of proposals was presented was to European Parliament by GDF Suez, Eni, Enel, E.ON, RWE, GasTerra, Iberdrola, Gas Natural and Vattenfall, which called for cuts to renewable subsidies.

Climate targets ‘too ambitious’

While the group emphasised that it is in favour of action to reduce emissions, it argued that Europe needs to focus on adopting realistic targets.

The proposals, which call for “ambitious but realistic” targets, were designed to sway the ongoing debate in Brussels concerning new climate change goals for 2030.

Speaking to the Financial Times, Gérard Mestrallet, chief executive of GDF Suez, said: “We have to reduce the speed at which Europe is building new wind farms and solar panels. At the moment, it is not sustainable.”

Antonio Tajani, Vice-President of the European Commission, responsible for Industry and Entrepreneurship, voiced his agreement.

Speaking to The Daily Telegraph at the Ambrosetti forum of global policy-makers at Lake Como, he said: “I am in favour of a green agenda, but we can’t be religious about this. We need a new energy policy.

“We have to stop pretending, because we can’t sacrifice Europe’s industry for climate goals that are not realistic, and are not being enforced worldwide.”

Competing against the US

Mr Tajani also warned that Europe’s idealistic race for renewables was driving the cost of electricity out of the realm of affordability.

The vast expense of energy is leaving Europe struggling to compete against the US, he argued.

The price of natural gas in the US has plummeted by 80% as the shale revolution pushes forward, leaving Europe lagging behind in the industry competition stakes.

According to a report by the American Chemistry Council, shale gas has given the US a “profound and sustained competitive advantage” in chemicals, plastics, and related industries.

Consultants IHS said that in the next six years, shale will give US manufacturing a $250 billion (£160 billion) boost.

They also predicted that US chemical output will increase twofold by 2020, while Europe’s output will drop by around a third.

President of the European council, Herman Van Rompuy, said that cutting energy costs should be the EU’s number one priority.

He commented: “Compared to US competitors, European industry pays today twice as much for electricity, and four times as much for gas. Our companies don’t get the rewards for being more efficient.”

Europe’s lack of a competitive edge is likely to affect future investment, experts have argued, which could lead to more problems in the still struggling economy.

Paulo Savona, head of Italy’s Fondo Interbancario, said: “The loss of competitiveness is frightening. When people choose whether to invest in Europe or the US, what they think about most is the cost of energy.”

Critics dub proposals ‘PR stunt’

The debate in Brussels has sparked its fair share of controversy, with the EU’s industry and environment directorates at loggerheads.

A Tweet from the chair of the UK’s Committee on Climate Change, Lord Deben, acted as a stark reminder that many will take issue with the proposals.

He wrote: “PR jargon ‘realistic’ = business as usual. ‘challenging’ = easily done. ‘unrealistic’ = inconvenient. ‘impossible’ = might work.

“Utilities worried. Inexorable march of renewables caught many unawares, stranded assets, and reduced income. PR answer: instil fear.”

Critics have been busy arguing that calls within the industry to aim for “realistic” emissions targets are another way of saying that ambition should be watered down.

Industry-led calls for practical targets will also face criticism from supporters of the goal, who insist that it has driven the rapid growth of the EU’s renewables energy sector, created new jobs and helped to reduce the cost of clean energy.

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Posted by: Jessica Odell Categories: Finance Tags: , , 1 Comment

One Response to Why energy suppliers have been given the red light

  1. Governments should be VERY CAREFUL because the population can only take so much and when it gets to the stage of HEAT or EAT and they take to the streets believe me you don’t want that to happen.