Investment needs in the European energy sector for the period 2012-2035 amount to USD $2.6 trillion, according to estimates by the International Energy Agency. To undertake these investments, governments must ensure stable and predictable regulatory frameworks, able to attract private capital. However, in some European countries regulatory uncertainty and the absence of a clear energy policy, as well as increasingly excessive fees and fiscal charges, are adversely affecting the sector and jeopardizing the fulfilment of energy policy targets.
In countries such as the UK the regulator has warned that the reserve capacity margin is at historically low levels and that the country is risking power shortages in coming years. Other countries, like Germany, have encouraged and incentivised certain solar technologies and are massively importing coal, thereby increasing prices and emissions.
In Spain, coal and renewable energies are subsidized and levies on emission-free generation such as hydro and nuclear technology have been introduced, while gas-fired plants, with emissions representing about one-third the cost of coal and five or six times less than some solar technologies, remain idle.
In parallel, there has been an increase in electricity prices for consumers and businesses –with the consequent loss of competitiveness and the relocation of major European industries to countries like the United States, where energy costs are 50% lower compared to EU countries– and an increase of CO2 emissions despite the huge investments made in renewable technologies.
There is a proposal to increase industry´s contribution to European GDP to 20% by 2020; a figure still far from the current 15.3%. The rise of European energy prices originates neither from the cost of generation nor from the cost of networks. High energy costs are primarily due to the fact that in many European countries electricity bills do not reflect the conditions of the energy market but have become vehicles for financing social, fiscal, environmental or territorial policies which impact prices without justification. These items account for over 50% of consumers’ bills in many EU countries, while in the United States they do not reach 10%.
In the case of Spain, a report recently published by David Robinson, senior researcher at the Oxford Institute for Energy Studies, attributes the greatest impact on rate increases to the politicization of the bill by the so-called “government wedge” that includes taxes, levies and other public policy costs in the price of electricity.
Europe must adopt a coherent energy policy to prevent the relocation and closure of industries that cannot compete in international markets due to high energy costs. Electricity prices are a decisive factor for the competitiveness of our companies, the vast majority of them being SMEs, and for the economy as a whole. The problem is common to European countries and, therefore, the solutions will also have to be taken at European level.
On this basis, the system should be rationalized and a common energy policy defined, based on three basic areas: elimination of all tariff costs not related to energy production and distribution; balancing security of supply, competitiveness and environmental sustainability; and strengthening the energy market in Europe through a single regulator to promote a stable, predictable and balanced framework, and ensure Member States comply with the norms.
In addition to these common challenges, in Spain we need to resolve the financial problems created by past errors in energy planning and the promotion of non-mature technologies. Since this is a financial problem, the solution should be also financial, as in the real estate and toll-way sectors.
Europe is taking the first steps in the right direction and Iberdrola, a Spanish company among the top four European electricity utilities by market capitalization and the world’s largest investor in renewable energy, is ready to contribute to the achievement of these common objectives.
