SPECIAL REPORT/ The boss of the UK’s largest electricity generator and distributor has warned of imminent electricity price rises across Europe, due to the perceived demands of moving towards a low-carbon economy.
Asked how that transition could be paid for, Vincent de Rivaz, chief executive of EDF Energy, told a meeting in the European Parliament on 19 June that there was “an urgent need for new capacity” in many countries, especially in Britain.
“It would be a mockery to deny that the price will go up,” he continued. “It is impossible to invest £110 billion [€134 billion] in electricity generation with no impact on prices in the short term.”
The UK’s Department of Energy and Climate Change said that up to £110 billion would need to be invested in power generation and transmission by 2020 when it unveiled its Electricity Market Reform in May.
Announcing the move, the energy and climate change Minister Ed Davey said that energy bills were “likely to increase over time, driven primarily by rising fossil fuel prices,” rather than low-carbon investment.
One energy liberalisation expert contacted by EurActiv, Stephen Thomas of the University of Greenwich, said he did not believe that funding for clean energy projects had had an impact on household electricity costs so far.
“I think that’s a convenient excuse,” he said. “If you look at the quantities involved, it would be very hard to argue that the price rises we’ve seen in the UK could possibly be attributed to low-carbon sources.”
The UK’s draft energy bill was condemned by environmentalists who say it will allow gas and coal plants to produce more carbon dioxide emissions than today until 2045. They says it neuters the EU’s ambition to reduce carbon use by 2050 to 80-95% of its 1990 level.
But de Rivaz insisted that the British government was “doing the right thing” with its reforms, on the grounds that they would reduce the currently high costs of capital.
He was less sympathetic towards politicians who were “beating around the bush and not being honest enough about the cost issue,” he said. “If we are not honest enough in the first step, we will never build trust, and without that there will be no solution.”
“It will be the same problem with smart meters when the time comes to invest tens of billions in [them],” de Rivaz added.
Smart meters are digitised systems that can allow customers to consume electricity away from peak energy times, for example, programming washing machine and spin dryer cycles to run in the middle of the night when grid demand is lower.
EU countries are required to prepare a timetable for the roll-out of the technology by the gas and electricity directives of the 2009 third energy package, which liberalised Europe’s energy market.
At least 80% of Europe’s electricity customers are supposed to be equipped with smart meters by 2020.
This will dovetail with a decade-long blueprint drawn up by the European Network of Transmission System Operators for Electricity (ENTSO-E) to expand Europe's power grid to accommodate an increased share of renewable energy in the mix.
It has been estimated that around €104 billion will be needed to finance some 51,500 km of high-voltage power lines in the next eight years.
Internal market communication
All the measures needed to complete Europe's internal market are due to be in place by 2014, although Energy Commissioner Günther Oettinger has cast doubt on whether this target will be met.
A communication on the implementation of the EU’s energy liberalisation commitments had been due for release in the second quarter of 2012, according to an EU Roadmap, but Brussels sources now say it will not appear until the autumn.
Jan Panek, an EU official responsible for coal and oil markets, told a meeting at the European Parliament that the communication would be a stock-take of the energy liberalisation programme’s progress so far.
“It will hopefully stimulate reactions from the member states and the [European] Council and Parliament, as well as numerous stakeholders,” he said.
The document will address problems related to harmonisation of market rules, inadequate funding of energy infrastructure programmes, and the application of state aid and competition rules in the energy sector.
Eighteen member states are currently facing infringement proceedings for failure to transpose the package into their national legislatures.
To complete the internal energy market, a third package of gas and electricity directives was adopted in 2009, including 'unbundling' guidelines requiring energy transmission networks to run independently from the production and supply side. (Read EurActiv LinksDossier on energy liberalisation)
A compromise allowed former state monopolies such as GDF in France and E.ON or RWE in Germany to retain ownership of their gas grids. However, their management had to be passed to an independent subsidiary, the transmission system operator (TSO), which had "the power to independently adopt its annual investment plan and to raise money on the capital market, in particular through borrowing and capital increase".
Then-EU Energy Commissioner Andris Piebalgs told EurActiv in January 2007 that he thought energy liberalisation would eventually pay off for consumers.
But liberalisation also brought a potpourri of co-existing regulated prices and market prices to many EU countries, creating confusion for customers and uncertainty for businesses wishing to break into national energy markets. The EU executive currently believes that monopolies still wield to much uncoordinated power.
- July 2012: European Commission expected to release communication evaluating the national implementation of the energy liberalisation directives.
- 2014: Internal Market due to be completed
- European Commission: Single market for gas and electricity
- European Commission: Roadmap for Communication on internal energy market
- EDF Energy
- Consumer Focus: Energy