EUROPEAN DIARY:Plans to tackle EU dependence on imported oil and gas remain at an early stage, writes ARTHUR BEESLEY
RESTLESSNESS SETS in. In Brussels these days, the complaint is often heard that the all-consuming debt crisis leaves scant time to tackle properly other testing questions that might otherwise dominate.
Officials relate mounting frustration that potentially big initiatives receive little play because the newspapers are crammed with news of the debt drama. But this is a reflection of political reality. Over an especially long lunch last Friday, for example, EU leaders are reputed to have spent more than four hours on the situation in the euro zone and 90 minutes on Egypt.
Nothing particularly surprising there, you might think, except that the original reason their summit was called was to discuss Europe’s energy drought. It’s been that way for a year or so, and still there’s no end in sight, as political leaders struggle to reset the shaky foundations of the single currency.
Yet the energy shortage continues to fester. Already the 27 member states import more than half their supplies of oil and gas, a proportion that would rise to 70 per cent in 2030 if nothing changes. Leaving aside the likelihood that energy prices will continue to rise, this brings its own vulnerability.
Already this is not an abstract problem. Early in 2009, millions of central Europeans were left without heat and light in mid-winter due a dispute between Ukraine and Russia over unpaid gas bills. Russia cut supplies to Kiev and went on to cut the flow into the EU after accusing the Ukrainians of siphoning off fuel passing through their pipelines.
The EU and Russia later created an alert system to warn of any impending disruption but the episode demonstrated self-evident frailty on the European side. Some 33 per cent of European oil imports and 21 per cent of gas imports come from Russia.
Two years on, EU leaders have pledged to reinforce the union’s fragmented energy infrastructure with new interconnections so gas and electricity can move more freely between member states. They have also promised to boost investment in renewable energy sources to reduce harmful emissions and to give new impetus to competition for consumers and commercial energy users.
It’s an ambitious business, expensive too, and one which raises issues for every single member state. As a small, peripheral energy market on the outer reaches of Europe’s existing energy systems, Ireland has much to gain from the effort and much to lose if it falls flat.
The plan involves the creation of an offshore North Sea electricity super-grid, an initiative already backed by Ireland and nine partner countries: Britain, Denmark, France, Germany, Norway, Sweden, Belgium, the Netherlands and Luxembourg.
Such a grid would offer connection to northern and central Europe to transport power produced by offshore wind parks to big cities and to store it in hydro-electric plants in the Alps and the Nordic countries.
In addition, there would be new electricity interconnections in southwestern Europe to transport wind, solar and hydro power to the rest of the continent.
Also involved is the creation of a southern gas corridor to deliver the fuel directly from the Caspian Sea, reducing dependence on Russian supplies.
Furthermore, the Baltic countries, at present not linked to the networks of their near neighbours, would be connected with the systems in central and southeast Europe.
From the financial perspective the figures are very large indeed. According to the European Commission, the EU needs at least €19 billion for gas pipelines by 2013 and €6 billion for electricity transmission.
In the next decade, commission chief José Manuel Barroso believes as much as €1 trillion may be required to replace old systems and cater for increased demand.
Included here is some €600 billion for energy distribution and transmission, €100 billion of which might have to come from the public purse. The possible sources of public funding include grants, equity participation, guarantees, public-private partnership loans or EU project bonds; as yet there is no agreement.
The provision of public aid for projects with a security-of-supply interest, where the market won’t come forward with investment, is something Ireland supports. Ireland is not alone on that but massive pressure on the EU budget and the finances of member states suggests a definitive deal on the way forward will be difficult to strike.
By tackling such questions in a comprehensive way, however, EU leaders hope to give as much certainty as possible to market investors. Nevertheless, the plan remains in essence at the declaratory stage. Experience shows that European agreement on targets doesn’t at all mean that those targets are met. The EU and its members are good at long-term thinking but execution is something else.