Revisiting the EU Energy Plan - and its coverage.

Jerome also asks that folks please also read his most recent post on the topic: The Economist on European energy: wishful thinking and outright lies

[editor's note, by Chris Vernon] We have two articles today on the EU energy plan. Luís's take on it can be found here: A New Energy Policy for Europe

Now that the dust has settled and that the topic is already out of the news (displaced by Iraq, Beckham going to LA or the fact that oil prices are at record lows), it's time to revisit the EU energy proposals, by taking a look first at the original material (their press release and their attempt at responding to expected questions or objections on their sector enquiry and on climate change goals) and then at press commentary (Google selection, summary articles from Le Monde and the Financial Times, other coverage collected by Fran in the Salon thread).

Somewhat predictably, the EC dutifully, and valiantly, focused on climate change as the main priority, and that garnered most of the coverage from the superficial media (TV, press agency releases) which have understood that climate change "sells." However, the real action (identified, possibly, by the fact that the core documents are only available in English) focuses on energy markets "reform" and in particular the need for unbundling and other trustbusting measures to ensure competition. The more serious papers focus only on that aspect, ignoring the boring and expected climate change stuff - just like the stock market does not focus on the news of the day, but on how they were different from expectations. And the business world could not care less about climate change (except if it imposes financial costs on them) but does care about the juicy opportunities to be provided by unbundling, corporate resturcturing and the like.

(From the European Tribune. an earlier "live" discussion thread by kcurie can be found here)

The press release:

Commission proposes an integrated energy and climate change package to cut emissions for the 21st Century

The European Commission today proposes a comprehensive package of measures to establish a new Energy Policy for Europe to combat climate change and boost the EU's energy security and competitiveness.

Climate change is mentioned explicitly in the title, and agian first in the measures. Security and competitiveness seem like reasonable goals for an energy policy within the climate change combat. So far, so good.

The package of proposals set a series of ambitious targets on greenhouse gas emissions and renewable energy and aim to create a true internal market for energy and strengthen effective regulation.

This is where the trouble begins: there are targets for climate change and renewable energy, but the action will be on the internal market, which shows up quite early on, unfortunately.

The real priorites show up a bit further down, with the list of the "3 pillars" of policy. The first one (and, in practice, the only one) is again the (capitalised) Internal Energy Market.

The package proposed by the Commission today seeks to provide solutions to these challenges based on three central pillars:

1. A true Internal Energy Market

2. Accelerating the shift to low carbon energy

3. Energy efficiency

And that's what the papers of record focus on:

FT: EU readies for energy battle

Brussels to crack down on national power groups

Kroes may resort to antitrust legislation

Germany and France geared up for a battle to save their powerful integrated energy companies from being broken up after Brussels published plans on Wednesday to tackle “serious competition problems” in the sector.

The crackdown on the power giants is part of an energy policy aimed at boosting competition, fighting global warming and cutting Europe’s “addiction” to oil and gas imports from countries such as Russia.

The European Commission wants to break the market grip of national energy incumbents, which it believes are stifling competition and deterring new market entrants, including suppliers of renewable energy.

Just a mention of climate change en passant: the focus is on the break up of the evil French and German utilities. Same perspective in Le Monde, with a French angle:

Bruxelles veut obliger les géants de l'énergie à plus de concurrenceLa Commission européenne a jeté un pavé dans la mare, mercredi 10 janvier, afin de relancer le marché intérieur de l'énergie. Pour lever les blocages qui entravent la diversification de l'offre et la production d'énergies nouvelles, le collège recommande aux Etats membres de dissocier les activités de production et de distribution de gaz et d'électricité détenues par les principaux groupes européens, comme EDF, GDF, en France, E.ON et RWE, en Allemagne. Après de longues tractations, c'est l'option la plus radicale qui a été retenue en dépit des avertissements répétés de Paris et de Berlin. Brussels wants to force more competition on the energy giants.The European Commission threaw down the gauntlet, this Wednesday, in order to relaunch the internal energy market. To eliminate the obstacles that prevent diversification of supply and investment in new supplies, the Commission recommends to government to unbundle production and distribution of gas and electricity and split the large European energy groups, lie EDF, GDF in France, or RWE and E.On in Germany, accordingly. After tense negotiations, it's the most radical option that was chosen, despite repeated warnings against it from Paris and Berlin.

The whole article does not say a single time 'global warming' or 'climate change', if you can believe it.

But, whereas the FT largely embraces the point of view of the Commission, Le Monde, of course, gives (slightly) more room to the French and German positions - not so much to support them, but at least to provide more context and more analysis of the conflict.

Neither newspaper, nor any other as far as I can ascertain, points out the contradictions in the stated goals of the EU, despite these being flagged by the EU itself!

Indeed, as I noted in the thread yesterday, the European Commission at least asks some of the right questions:

How is competition compatible with environmental goals?

How is competition compatible with security of supply goals?

I'll get to their answers right below, but they at least point towards the direction of the serious debate that would be needed. But nobody followed up - not that I could see anyway (I'll be happy to be contradicted by readers of other sources).

But let's go back to our two questions, because they are at the heart of all the things we discuss here on ET:

How is competition compatible with environmental goals?

Competitive energy markets will play a major role in developing and deploying new environmentally friendly technologies. Strong competition in the electricity market has a positive effect on the efficiency of power generation, because market players want to minimise costs and invest in efficient technologies. Renewable technologies would be better served by an increase in transparency, and by open, competitive markets. The larger the internal market, the more economies of scale can be realised.

As I wrote yesterday, all the above is just incantations, and does not constitute an argument. Two things are not addressed:

  • Renewable energy would not be served by "open, competitive markets", it would be served by regulation that forces other forms of production to internalize externalities or, failing that, by support mechanisms. These can be done within market mechanisms or outside them, but the pre-requisite is the internalisation/support, not the markets.
  • More fundamentally, as I've said many times, the issue of the cost of financing is totally ignored. Technologies that require lower initial investments but have higher running (fuel) costs will have lower needs for financing. Conversely, those with high upfront investments will see the cost of their electricity be influenced most of all by the cost of financing. Pushing for market solutions here structurally favors the first kind of technology, as private sector funding costs are higher than those of public sector, or at least public-supported financing. And the first kind of technology includes gas-fired plants and coal-fired plants, whereas nuclear and most renewables are of the second kind. Thus the market can be expected to build gas-fired power plants, or coal-fired ones. and that's exactly what it does.

The internal energy market does nothing to internalize externalities, in particular those associated with global warming, and it actually favors the wrong kind of technologies (high carbon) for structural financing-related reasons.

Thee points are addressed nowhere.

How is competition compatible with security of supply goals?

Europe needs stable relationships with the main producers outside the EU. But this does not and must not prevent us from ensuring an integrated competitive market inside the EU. An open and competitive, liquid and interconnected, single EU market will guarantee a secure provision of energy in the future, as it will make the European market attractive for external suppliers. Such a market will also be open to new energy mixes.

Again, incantations without arguments. Two points again:

  • No commentary on the fact that open markets encourage (as shown above) the construction of gas-fired plants, thus naturally increasing the demand for gas, and the need to import gas, and the reliance on Russia.
  • The focus is absolutely on supply, and makes no mention of demand. As always, demand is taken as given, driven by economic activity and growth (and the perspective of lower energy prices which is dangled in front of us as the main justification for the Internal Energy Market), and not to be acted upon. Despite energy efficiency being one of the 3 main goals (with a target of 20% lower primary energy use), the link is not made here, where it would matter.

Thus one is left with the impression that the goals are just for the show, while the only thing that matters in practice is to break up companies like EDF - despite the fact that France has by far the lowest wholesale electricity prices, according to the EU's own statistics...

The response of the French minister for industry, quoted in the FT, is nicely succinct: "our system works". And as Le Monde noted (and as does the FT in one of its blogs) the hostility of the two main countries of the EU ensures that these proposals are dead on arrival, and that this whole thing is just for show.

So we are left with grand announcements and somewhat ambitious targets that go in the right direction, but an absolute impasse on the implementation, with the business world and the European Commission stuck on their mantra of "improving the Internal Energy Market" and "competition" despite the fact that these will - and already - achieve the exact opposite of what's targetted.

Nothing will happen with this Commission. We'll go on hearing the same arguments, I'll spend more time deconstructing the same stupid articles, we'll have more confrontations with Russia, with EDF or similar beasts that lead to nothing useful (but do cause a slow erosion of what made the French model work), and we'll keep on moving towards the abyss.


Excellent information. The essence seems to be: " beyond a new Energy Policy the EU still needs a new political model. . . only with clearer effective powers can the European Commission correctly achieve “one voice” Energy Policy for the EU."

However it is unlikely at present that member states will grant the EU draconian powers. And even if they did grant them, we learned a few days ago from testimony to a US Senate inquiry into energy: "it was not clear whether the U.S. could achieve energy independence even with the most “draconian” government interventions."

When I wrote that I wasn't thinking of draconian measures, I was thinking of measures solely.

Energy independency can be achieved in a different world, were life without cars and trucks is not only imaginable but also effective. And I’m saying that figuratively, I’ve nothing against cars, I want to mean a world were we use a lot less energy to do the same or similar things we do today. This morning I traveled 90 Km and spent about 3.5 Kwh.

These days the EU is functioning as a Confederation – a model that is curving on the weight of 27 member states. IMHO as we move closer to a Federation-like model, things can go much faster and change in time to energy independence.

Drive safely.

I just off the phone with Arni Benediktsson, Chief Electrical & Mechanical Engineer at Landsvirkjun.

One of the items we discussed was old plans for a 2 GW HV DC line from Iceland to Scotland. I suggested a plan for at least that much or more for seasonal exports of electricity.

Iceland's maximum demand is in the winter and maximum hydro production (about 80% hydro) is in the summer. winter hydro generation must work off of stored water.

Iceland has hundreds or thousands of good sites for run-of-river or small dams hydro generation during the summer, but these are not even evaluated since there is an average excess of 150 MW every summer that is spilled (wasted). Summer only electrical power has no value in Iceland.

Iceland may have the ultimate potential to export as much as 10 GW in the summer and 4 or so GW (geothermal + hydro) during the winter. (My guess)

An HV DC link would be for exports only in the early years but could import excess wind power (saving hydro) in the winter in later years. (Scottish & Irish wind maxes in the winter), similar to the relationship between Denmark and Norway/Sweden.

Iceland does not have enough for all the EU energy needs, but it can help the UK & Ireland with their coming electrical crisis.

The first step may be a small HV DC line (say 700 MW), let Iceland export the surplus 150 MW of today and build more dams & geothermal to fill up the line (some in the winter). Then build another line, etc.

Any thoughts from the EU ?

Best Hopes,


A Swedish part of ABB recently opened a test installation in Ludvika Sweden for 800 kV HVDC intended for 6.4 GW (2 x 3.2 GW?) links. But it is probably for high tension lines and not cabels, I dont know what the state of the art is for sea cabels but its probably less then 800 kV.

My theory with extended grids is that hydro's quick startup is used to get peak spot prices while reimporting cheap lignite power when dam levels are lower. That kind of info seems hard to access without whistleblowers like
Solution; carbon taxes.

Right Boss. I give you a lot of opportunities. You gave me about two. You wanna play this way, fine. I just figured you'd like it the other way. Me being internationally represented with the girls with the big boobs at all times. Frankie Cadillac. Relax dude. Multiple categories.

We can erase the long sentence. Yankee Doodle Dandee. Child of the Devil. You won't be barking anymore. Teenage Wasteland. Guess that movie. Gunshots.

PS - We'll talk about Oil some other time. Over BLT's.

How is competition compatible with environmental goals?
How is competition compatible with security of supply goals?

1) It is not.
2) It is NOT.

One thing has to be stated loud and clear, once and for all.

The goals of EC have nothing to do with the energy security. They have much less to do with that ridiculous idea of "saving the environment". All they have to do is with enriching certain set of entities who are watering just at the thought of acquiring the portions of utilities and the grid about to be "privatised". What can be better for these maruadeurs than replacing 1-2 well regulated monopolies with dozens of unregulated, unaccountable regional monopolies??? The user be damned, let him pay until and get polluted until he drops dead.

Capitalistic mother-f****s.


And don't forget the investment banks who get to make money on hedging price volatility which used to be absorbed by natural monopolies able to price electricity at average price + (fatter) margin instead of marginal cost + thin margin.

The irony, of course, is that the biggest winner of all these games is EDF and its owners, i.e. mostly the French government.

The report was pointless. The single material point was the proposed (and lunatic) separation of production from distribution - which appears like changing for changing sake...or even changing the relative postions of the chairs on the decks.

The UK especially and the EU have a massive problem of energy security which has three elemtns;

1. Sources - run down of indigenous sources
2. Costs - increase in exogenous sources dramatically
4. Physical security - ie bombs, political action Ukraine gas, Belarus oil, Qatar gas, etc., etc.,

None of these are addressed and fiddling with the structures of onwership is ;
1. Pointless
2. EDF and the major German blocs will simply not let their Governments alter the situation
3. The UK is beyond any help as the onwership is outside the influence and power of internal political control already - and if Ibanderol succeed in Scotland the effect of loss of control will be total.

The Forthcoming UK Energy deficit (FCUKED) much herladed is upon us and there is little we can do.

Looking at the US Oil Drum site re the Grid posting today - our problems (UK and especially Europe - see the report on the recent blackout - the largest ever in Europe) get greater every time you look at it.... and the pointless effort and expenditure on wind power become even more apparent.

Someone provide an answer to this ;

The second tanker of LNG into Milford Haven blows up !

Please Sir, what do we do now ? ... and what is more important is anybody working any sensible answers out...NOW before it happens ?

I looked at the WETO-H2 World Energy Technology Outlook 2050 study posted 9 or 10 Jan on the website after seeing that piece on the BBC. Lots of nice sounding PR, 168 pages. The key for me is the graph on the top of page 32. Conventional oil is shown from 2000 to 2050, and is assumed to show a flat peak near 100 Mb/day centered at 2035. Production is assumed to be higher than 90 Mb/day from 2015 to well after 2050. This shows me they don't have all of the message yet. Furthermore, they continue the rosy scenarios concerning alternative energy that neglect to mention the measured costs and yields of today are marginal figures resulting from infinitesimal changes to an existing petro-energy base.

In other words, this is all in the linear regime. These guys won't have got the point until they show some awareness of the inevitable nonlinear degradation that will occur as soon as the peak in _conventional oil_ is reached. Perhaps now. Perhaps 2010.

Certainly not 2035.

Political analysis of the EU Energy Plan: Behind the Green Rhetoric.

There is a good political analysis today from the site that dissects the EU energy plan very well and delves into the real reasons and priorities of the EU. Much of the faked concern about the environment is simply a mask for justifying various policies of strategic interest and to reduce its dependence on imports of hydrocarbons from various unstable regions.

You can find the article at:

It is some quotes from the article, but for those interested it is well worth reading, because it will add another dimension to the understanding of this topic in addition to the more technical one that will be found here:

Europe, with its limited and dwindling hydrocarbon energy sources, is highly sensitive to the resource wars that have erupted across the globe since the collapse of the Soviet Union in 1991. As America has launched military adventures and instigated coups in order to dominate the main hydrocarbon supplies and transit routes of the world, Europe has found itself increasingly at risk of having its energy needs curtailed. The insecurity of the European powers has been intensified by the resurgence of Russian power due to current high energy prices. Since Russia turned off the gas supply to Ukraine in January 2006, the editorial offices and corridors of power of the European capitals have reverberated with panicked talk of an energy crisis.


The “green” fanfare conceals the most essential points of the EU Commission’s plan: the deregulation of the continent’s energy markets to serve the interests of finance capital coupled with an expansion of nuclear power as a source of electricity generation.

The green credentials of the proposals are very limited. The target to have 10 percent of automobiles powered by bio-fuels will do nothing to reduce current carbon emissions because of the increasing level of car use. The main beneficiary of such a target would be European agribusiness, which can turn over large tracts of land to growing fuel crops that are likely to be highly subsidised by the EU.

AND very significant the article flags up the possibility of the use of more coal, which as we all known is counter productive to the whole notion of CO-2 targets

The “carbon burying” scheme, which aims to limit the emission of atmospheric pollution from fossil fuel burning power stations, would allow more coal-fired electricity generation. While the EU has very little oil and gas, and that which it has is fast diminishing, it still has significant reserves of coal. A shift from Russian oil and gas to Polish and Romanian coal is seen as a facet of “energy security” by the EU bureaucrats. However, coal is a little-favoured form of electricity generation among some energy industry analysts due to its dependence on highly labour-intensive deep pit mining, which raises the possibility of industrial militancy threatening energy supplies, as occurred in Britain in the early 1970s and the 1984-85 miners strike. The far less labour intensive method of open cast mining is a highly environmentally damaging process and is not suitable in many of Europe’s coalfields.

Finally the rest of the article goes on to discuss Nuclear power and how it is increasingly likely there will be a push to expand this as Blair has already signalled in the UK, and the Germans are hinting at reversing their policy of phasing out nuclear power.