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The Changing Fortunes of the EU’s Energy Market

The Changing Fortunes of the EU’s Energy Market. Antony Froggatt. EU Legislation. Directive 96/92/EC concerning common Rules for the internal market in electricity. Transposition by February 1999 Directive 98/30/EC concerning common rules for the internal market for natural gas

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The Changing Fortunes of the EU’s Energy Market

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  1. The Changing Fortunes of the EU’s Energy Market Antony Froggatt

  2. EU Legislation • Directive 96/92/EC concerning common Rules for the internal market in electricity. • Transposition by February 1999 • Directive 98/30/EC concerning common rules for the internal market for natural gas • Transposition by August 2000

  3. New Directives 2002 • The Energy Council will discuss on 25th November, next version of Directive. • This will then be sent to European Parliament for Second Reading • Then possibly to Conciliation, if difference occur between Parliament and Council

  4. Main Points of New Directive • Commission proposing to merge electricity and gas directives. • Market Opening: Non domestic by 1st January 2005, domestic 1 year later. • Legal separation of TSOs and DSOs • PSO • Electricity Labelling • Ownership

  5. Impact on Price • Electricity prices for domestic consumers fallen 2% on average in last decade; but for commericial consumers by 12% • Gas prices, increased for domestic by 15% but for commercial by 40% • In UK, wholesale price fell by 18% between 2000-1, but prices for domestic fell by 2.5%, giving retails additional profit of €600 million

  6. Employment Levels • According to EPSU, over last decade over 250 000 jobs lost in electricity sector. • Similar losses might be expected in Gas sector. • More losses in EU expected, as major firms, such EdF and GdF are partially privatised.

  7. Employment in Central Europe • The introduction and preparations for liberalisation directives is expected to have bigger impact in CEE than in EU. • In the period 1995-2001 there has been a 30% loss in jobs in Czech Republic and Hungary, compared with an EU average over the same period of 20%.

  8. Mergers and Takeovers • In past years a few companies have increased their dominance of the energy and utilities sector. • This concentration dynamic has reached a dramatic level during the last two years with acquisitions amounst largest EU companies rising from €3.5 billion to €42 billion, a 12 fold increase.

  9. Mergers in CEE • The same dominant countries are active in CEE, either directly or through strategic alliances for example with Gazprom • In many ways the region is being divided up between French and Germany companies.

  10. Security of Supply • The liberalisation of gas and electricity industry has resulted in dominance of gas in new build of electricity. • This is because, gas and inparticular Combined Cycle Gas turbines, are quicker to build, cheaper to run and cleaner than other conventional power stations.

  11. Impact on Renewables • In 2003, Member States must transpose the renewable energy directive into national law. • This set, non-binding, targets of the EU, of 12% of energy (22% of electricity) from renewables by 2010. • Wind power has been particularly successful in recent years.

  12. Despite this, renewables are not significantly increasing their share of electricity production. • Because electricity demand is still increasing • New renewables only play minor role in EU electricity • Directive, targets are ambitious, but essential

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