European energy security policy
Speech at the European Business Summit
Brussels, 21 February 2008
Distinguished guests, ladies and gentlemen
Is our energy supply secure? Experience has told us that answering such a question with "yes" or "no" is a risky business. So my response to today's question is "if".
If we reduce energy demand; if we increase the use of indigenous renewable energy; if we invest in sustainable technologies, sustainable production and sustainable demand; if we build up integrated networks; if we use Europe's true influence on the world stage by "speaking with one voice"... then, we can make a real difference and ensure that our energy supply becomes increasingly secure.
The supply of energy to the world's population is becoming ever more complex, and costly, for governments and companies alike. The days of "easy" energy for European oil and gas companies are a thing of the past, if they ever actually existed.
80% of the world's oil reserves and a similar proportion for gas are in the hands of state-controlled companies. The International Energy Agency predicts that global oil demand could increase over the coming years by 1.9% per annum. This means an additional 33 million barrels of oil per day by 2030. At the same time we can expect Europe's need for imported gas to rise significantly.
The EU has a unique internal energy market of almost 500 million consumers and 27 Member States. It is the world's second largest energy consumer. This should give us considerable economic and political influence on global energy markets. But today, one really has to ask whether this is the case: are for example the pipelines supplying Europe and those presently planned, a reflection of the needs and interests of the EU's citizens, or rather those of its external suppliers? Has the EU shown itself to be capable of single-mindedly and collectively perusing projects in its own interest?
Defining an energy security policy has been one of the key objectives, together with sustainability and competitiveness, which has driven the recent move towards a new European Energy Policy. Last year's agreement at the European Council on this Strategy has laid the foundations for the series of concrete measures now emerging which will, I am convinced, bring the EU major advantages in energy security and, as a consequence, competitiveness.
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The starting point of any European energy security policy has to be demand management. Rising energy demand is one of the prime drivers of energy uncertainty over the last five years. It is also key to resolving the insecurity in our own energy system.
EU energy demand is the single aspect of global energy markets which is largely within our control. We need to exploit this unused source of influence better. If you consider that, today, our trade balance in energy is 225 billion euros in the red, then reducing energy demand must have a direct positive economic and security impact. Politically too, the more we can slow energy demand, the easier our renewables and greenhouse gas emission targets will be.
And internationally, by promoting energy efficiency in our neighbours, we raise their standard of living and remove some of the pressure on international energy supplies and prices. The objective of a 20% improvement in energy efficiency in the EU by 2020, endorsed by the European Council is, in my view, the single most important energy security policy that we could take. We are now making this a reality, with the proposed revision of the ETS scheme, and new proposals later this year on labelling, buildings and minimum efficiency standards for a wide range of products.
The second driver of energy security is diversity. That means diversity in energy source - renewable, clean fossil fuel, and nuclear where so desired. It means diversity in energy supplier - Norway, Russia, the Middle East, but also Africa, America, the Caspian, Central Asia. And it means diversity in energy transport, distribution and import routes - new pipelines and LNG, decentralised and local generation.
Within the EU we need to speed up work towards a European gas network and a European electricity grid, starting with greater collaboration among Transmissions Systems Operators and more openings for new and alternative suppliers via effective unbundling. This market will help deliver the essential conditions for security of supply by creating a liquid traded and competitive market, attracting investment in Europe, new supply options and delivering long-term security of demand for external suppliers. Rapid adoption of the third liberalisation package tabled by the Commission is vital.
We also need to diversify our supply routes, both into and around the EU. This is what we are doing through our programme for Trans-European Networks for Energy and also through the nomination of coordinators for four key priority TEN electricity
and gas projects, one of which is Jozias van Aartsen, whom I am delighted to see here. May I pay tribute, Jozias van Aartsen, to your tireless commitment on the Nabucco project. This proposal calls for a uniquely sensitive co-ordination of its political, regulatory, legal and economic aspects and real progress is being made. Earlier this month, the Commission approved the new regulatory regime for the Austrian section of the Nabucco gas pipeline.
Another key strategic project is the proposal to link the German, Polish and Lithuanian grids. Our coordinator, Prof. Mielczarski, has put great efforts in preparing the ground for the agreement earlier this month between the Lithuanian and Polish Transmission System Operators for a joint venture to be in charge of all the preparatory works for the cross-border transmission line between these two countries. I applaud the major results achieved by Mario Monti in revitalising the French-Spanish electricity interconnection at the recent Sarkozy-Zapatero summit. And I should also mention the efforts of Georg Adamowitsch to searching for solutions to connect wind power generators in the North to the European Grid.
Already, thanks for the work of the EU coordinators, we have seen small but crucial steps forward in key European projects. Above all, we have seen how the role of an EU coordinator has been welcomed by those involved in the projects. This is clearly an approach where the EU can play a pro-active role in enhancing supply security.
European gas supply is an area where we need much greater diversity in supply. Gas demand is rising by around 3% per year against a background of falling domestic production. The Nabucco project gives us a unique opportunity in this respect. And new Liquefied Natural Gas imports will also be key to the development of an effective gas market. We have a major opportunity to diversify, in terms of supply sources, supply routes and producers, as well as creating greater market liquidity. Both gas producers and consumers stand to benefit from these developments.
Diversity also means exploiting the huge economic potential of renewable energy. Our energy security will be considerably enhanced when we deliver our target of 20% renewables in energy demand by 2020. Already we are seeing real change.
Germany, for example, leads the world in renewable energy technology, thanks to political will and determined action. German solar technology turnover has risen within the last six years from around 450 million euros to some 4.9 billion euros. This is, I remind you, in a North European country. In transport also, we absolutely need to diversify towards sustainable biofuels to reduce dependence on oil. Oil, around 80% of it imported, still accounts for some 98% of road transport fuel. This is why the Commission stands by the 10% biofuels target.
But on technology we have to shift up several gears, and quickly. Otherwise we run the real risk of being left behind. We simply cannot afford to do lose this race to our competitors. This is why the Commission will be pushing for a strong commitment from the March European Council on our Strategic Energy Technology Plan.
The third driver of energy security is being more united and disciplined in our external energy relations. Promoting sound market principles and investment protection in our neighbour countries and beyond. And developing joint crisis mechanisms and strategic reserves.
Member States have accepted that the EU can be more effective internationally if it works together. They also recognise that the EU's concerns coincide to a large extent with national, Member State, concerns; and that national decisions have an impact on other Member States. And they also agree that the EU can help governments achieve national objectives. But we need more than recognition. We need a common voice.
Working together, the EU must invest, today, in robust, mutually beneficial energy relations, inspired by transparency and trust. But that trust must begin at home. With a common voice, the EU can show the way towards international collaboration, towards a global sustainable energy community.
This is the direction the EU is moving in with its Mediterranean partnership of 37 countries in Europe, North Africa and the Middle East. It is also what we have achieved in the Balkan region with the Energy Community. Now we need to insist on a new, genuine energy partnership with Russia based on a simple reality: interdependence and mutual self-interest.
By the end of this year the Commission will therefore be examining this issue in detail: together with energy efficiency it is the remaining issue that needs to be addressed in order to complete a European Energy Policy that really meets the three objectives of security of supply, competitiveness and sustainability.
Before I close I should mention climate change. If we are serious about tackling energy security, about tackling demand, investing in diverse and sustainable supplies for the longer term and building up international alliances, then dealing with climate change is an integral part of these challenges.
Indeed, the measures proposed by the Commission to tackle climate change represent a global standard on how to deal with global warming and, at the same time, address the underlying elements that threaten our energy security. I am convinced that, as the rest of the world comes on board and really deals with climate change, these measures: radically improving our energy efficiency and increasing indigenous renewable energy generation, will provide the EU with a real and tangible competitive advantage. Indeed, at the end of the day, our energy security policy and climate measures are working towards the same goal, a secure and sustainable energy economy for future prosperity.
Ladies and gentlemen
There is no single solution to energy supply security. And there is no easy solution. But we need to make the most of what we have. This calls for discipline, openness and solidarity. The good news is that we will have clear provisions on energy security and energy solidarity integrated in the Lisbon Treaty, once ratified.
Energy security has a price - political and economic. But we can be sure that the cost of energy security will be small compared with the alternatives - economic instability and geopolitical tension
Thank you for your attention.