Energy ministers from the 27 EU member states will on Tuesday (28 April) hold their first talks since the coronavirus outbreak, discussing both emergency measures to ensure supply security and longer-term plans for the recovery phase.
Meeting over video link on Tuesday, the ministers will assess short-term measures taken at national level to ensure energy security during the coronavirus crisis.
Border shutdowns decided at the beginning of the outbreak have disrupted the energy sector, causing the oil price to crash, and disrupting value chains across the whole sector.
“The industry has implemented exceptional business arrangements to ensure the 24/7 continuity of essential energy operations, whilst protecting the health and safety of staff,” according to a background note circulated in advance of the meeting.
“Now is the time to consider preparedness measures for different scenarios, including prolonged or renewed waves of restrictions with disruptions to the mobility of energy workers and supply chains,” the note says.
Matters up for discussion include special travel arrangements for staff employed in maintaining infrastructure and measures to ensure a smoother functioning of supply chains for the manufacturing of components and spare parts of energy networks.
“The current disruptions and logistic bottlenecks are causing delays in works that are part of renewable and interconnection projects with impacts on flexibility and generation capacity the following year,” the note says.
“If these difficulties persist, this would weaken the resilience of electricity, gas and oil supply in the event of additional incidents, shocks or unfavourable conditions the following winter or thereafter,” it adds.
On the consumer side, energy companies have made arrangements with governments at national level in order to protect vulnerable customers, with measures including a moratorium on disconnections, and deferrals on the payment of bills.
“Liquidity crisis”
Altogether, these crisis measures are taking their toll on the finances of energy companies, which are now more exposed to hostile foreign takeovers.
“It is important to recognise the financial impacts of these measures in the longer term,” the note says, adding that EU guidelines on foreign direct investment and the protection of Europe’s strategic assets “should be noted and possibly used in the energy sector”.
Indeed, the immediate priority for energy companies is to avert financial losses that could lead to layoffs, or worse, bankruptcy.
In the very short term, governments and central banks are providing grants and loans “in order to support companies’ liquidity and avoid layoffs and insolvency,” the note says, warning that “there is a clear risk of the liquidity crisis turning into recession”.
One of the questions up for debate at today’s ministerial meeting is whether such loans and credit lines should also contain “provisions related to their repayment favouring the green transition,” the document says.
Recovery programme
In any case, the liquidity crisis caused by the coronavirus calls for “a large scale recovery programme” to stimulate energy investments after the crisis, the note says.
These could be based on three main strands, the document says: 1) The building renovation wave, announced as part of the European Green Deal, 2) renewable energy projects and infrastructure, and 3) the Just Transition Mechanism aimed at assisting regions most affected by the transition to low-carbon energy.
Meanwhile, EU countries have circulated notes highlighting their policy priorities for the recovery phase.
For France, the crisis has highlighted the need to introduce a carbon price floor in order to counter ultra-low oil prices that don’t reflect the “true cost” of fossil fuels for the climate.
Poland, for its part, has highlighted the liquidly crisis which is stifling investments in clean energy, while the Dutch have recommended using the EU’s green finance taxonomy to guide investments into new infrastructure.
“The Energy Ministers, while having the first talks about recovery, should acknowledge that the clean and just energy transition needed to avoid dangerous climate change is the only path to sustainable recovery and growth,” said Wendel Trio, the director of Climate Action Network Europe, an environmental pressure group.
“This can be achieved if energy efficiency measures such as building renovations are prioritised and energy infrastructure planning supports the transition to a 100% renewable energy system,” he said calling for “stronger targets and policies” to achieve climate neutrality.
background note energy council> Read the full background note below or download here.
