…continued from PAGE 1
“Fourth, Europe should make full use of the fossil fuels available, including coal and shale gas. In the EU’s eastern states, Poland among them, coal is synonymous with energy security. No nation should be forced to extract minerals but none should be prevented from doing so – as long as it is done in a sustainable way. We need to fight for a cleaner planet but we must have safe access to energy resources and jobs to finance it.”
“Fifth, we should reach out to our partners outside Europe. The global gas market is a recent creation. In the years of the Coal and Steel Community, gas could not be transported by ship; today, thanks to technological progress, we have the tools necessary to create a single European market. Signing agreements with emerging suppliers could transform the situation on the European energy market. One possibility is the US, where shale production has taken off in recent years. Another is Australia, a rising star of liquefied natural gas exports.”
Tusk ends his piece with the statement that “The seed of the EU was planted by a simple vision: common control over – and a common stake in – steel production and coal mining. It is time to strengthen the community in the field of energy. Now that new technologies allow it, and old challenges demand it, we can hardly afford not to.”
One-way street
Let’s start with Tusk’s first and most important point, the idea that we should counter Russia’s dominance with a Super-Monopoly based in Brussels which would take care of all of the EU’s gas business. Where has Mr Tusk been for the past 15 years? Is he not aware that the EU has been countering the “dominance” of Russia and other suppliers by attempting to create a liberalised gas (energy) market?
Is he not aware that, in Western Europe anyway, where competition and markets are taken seriously, energy trading and “distribution” is engaged in by private businesses, which have certain legal protections? His suggestion that we should break up “bilateral agreements” and “strip” them of “any secret and market-distorting clauses” flies in the face of the rule of law that I believe the EU is supposed to stand for – not some kind of “solidarity” to be decided on and doled out by politicians.
“Solidarity” is a solidly one-way street in Mr Tusk’s world
Who does Mr Tusk suggest anyway would run his “Energy Union”? Mr Oettinger? Bureaucrats in Brussels would “ensure” our gas supply from now on, set the prices, decide which member state gets how much, where the gas should be bought and at what price? Fortunately, most policymakers in Brussels are far too wise to be even tempted by such a far-fetched notion.
However, Mr Tusk’s “Energy Union” only goes so far. When it comes to coal and shale gas, he states that “No nation should be forced to extract minerals but none should be prevented from doing so”. In other words, Poland has coal and will keep using it, no matter what the rest of the EU wants. “Solidarity” is a solidly one-way street in Mr Tusk’s world. I must practise solidarity towards him, but he will not let himself be bothered by my concerns.
Many of Mr Tusk’s other “recommendations” are simply standard EU policy and practice. “No nation should be forced to extract minerals but none should be prevented from doing so” – that right is laid down in the EU treaty. “The EU should support the building of adequate energy infrastructure” – the EU has been doing this for years, with some success. We “should reach out to our partners outside of Europe”, “signing agreements with emerging suppliers” – that’s what has been going on for some time, Mr Tusk – but not controlled by some kind of bureaucratic monstrosity in Brussels that you seem to envision.
Note, incidentally, that Poland is not very dependent on imported (Russian) gas at all – gas supplies just 13% of Poland’s energy mix, of which 60% comes from Russia. Mr Tusk’s proposal, therefore, does not solve any problem – it merely tries to seize an opportunity presented by the sad developments in Ukraine. He apparently sees a chance in the Ukraine crisis to increase his powers. To “fight” Russia by adopting the mirror image of the Russian system – which would then be controlled by European politicians and bureaucrats.
I think the 20th Century has shown us what “common control” over resources and technologies really entails. Certainly the Polish people have experienced this kind of economic system first-hand. The idea of the EU, in my view anyway, is not based on common control but on economic freedom. And that includes the energy business.
Paul Hunt says
Hi, Karel,
Excellent article. I think what it highlights is that Mr. Tusk is just another member of this unholy coalition of ‘stakeholders’ which wants to keep gas prices in the EU much higher that then need be or should be. It includes the renewable energy subsidy junkies, green fantasists, those who benefit politically or economically from the emission-adjusted price of gas being higher than that of competing fuels and technologies and all of the participants in the gas supply chain who capture economic rents. However, some of the big verticallly integrated players who used to profit so handsomely from cosy deals with the external suppliers (generally with the support of their national governments) which are now going sour are beginning to plough their own furrow – e.g., the Magritte Group. Change is coming, but one shouldn’t underestimate the determination of those who benefit from the current arrangements to resist.
There are two key challenges or problems that most be met or resolved. The first is the failing system of energy regulation which has been adopted and adapted from the seriously flawed British model throughout the EU. Regulators should seek to strike a balance between the interests of investors and the collective interests of final consumers. The latter are not represented effectively in the current process and, as a result, the vast majority of EU citizens are being gouged as both consumers and taxpayers. Secondly, there is an urgent requirement for a genuinely competitive market in gas pipeline capacity similar to that which operates in the US. The current system which is based on Entry-Exit and proscribes point-to-point capacity transactions is a paradise for monopolists, profit-gougers and subsidy junkies. It deters investment and restricts trade and competition in gas.
It wouldn’t require structural reforms or new primary legislation to make these changes. The established national regulatory bodies all have the powers to change their internal regulatory processes and Entry-Exit is mandated in a regulation – not by primary legislation.
SirBenfro says
At least two other ways to interpret Tusk’s bombast:
1) It’s not about Russia – it’s about Germany. Poland has not forgiven Germany for keeping Nordstream all to itself. It wants to get revenge by depriving Germany of the ability to deal bilaterally with Russia.
2) It’s about giving his mate Jerzy Buzek a leg-up in his campaign to succeed Oettinger as Energy Commissioner. If he can sell the “European Energy Union”, he can sell Buzek as the man to drive it, since in 2010 (a few weeks before Nordstream opened, coincidentally) Buzek and Jacques Delors launched the very similar sounding “European Energy Community”.
Pali44 says
I think there is a different interpretation also.
Gazprom is selling the Russian gas for very different prices for the different countries. The price is always depend on the Russian government (Gazprom is a governmental company) political intention.
In case of an open discussion about prices (not accepting Gazprom demand for secrecy) is way to avoid high differences (nowadays USD 100/tcbm) between the EU countries.
May be my mind is wrong, the basic cause for established the predecessor of EU (Steel and Coal Unio) was the same cause.
Giacomo says
It sounds to me that Mr. Tusk’s proposal would give the EU the authority to negotiate energy trade agreements with other countries, replacing the existing practice of bilateral deals between member states and third party countries. In other words, it would be a first step towards finally establishing a common European energy policy. If this understanding is correct, I cannot but welcome Mr. Tusk’s proposal, and hope that other states pick up the challenge of improving it.
Michael Knowles CEng says
I totally agree with Paull Hunt’s comments especially – “The first is the failing system of energy regulation which has been adopted and adapted from the seriously flawed British model throughout the EU. Regulators should seek to strike a balance between the interests of investors and the collective interests of final consumers.” The only thing the UK Regulator OFGEM appears capable of trying to do is to make energy users bills a bit easier to understand.. They do not seem to have a grip on the renewables market and indeed by law do not have to report on the Renewables Obligation (RO) in an up to date way. They publish the RO accounts a year in arrears so the subsidies that we are paying are known only for the accounting year 2012/13 and show the RO is costing the consumer nearly £2billion a year for the next 25 years and rising until 2017 when it is phased out in favour of the new Electrricity Market Reform feed in tariffs under contracts for differences that are for 15 years but set higher than RO levels to compensate generators/developers – e.g., Offshore wind emr cfd is £155/MWh reducing to £140/MWh in 2017 compared with the current RO level of about £135/MWh ref (2) IMechE response to DECC consultation on RO banding levels for 2013 to 2017 http://www.imeche.org/docs/default-source/public-affairs/3236-consultation-ro-banding-response-form.doc?sfvrsn=0 19 January 2012