WWF Climate & Energy Blog

By Adam White, Climate and Energy Research Coordinator at WWF European Policy Office

EU climate and energy policy makers are being bombarded by a new adversary. Seeing that their lobbying is not gaining sufficient ground, the CEOs of 10 of Europe’s biggest fossil fuel companies (Enel, Eni, E.On, Gas Natural fenosa, GasTerra, GDF Suez Iberdrola, RWE, CEZ and Vattenfall) have joined forces last week to see if strength in numbers can win the day.

Certainly the strength of their arguments is insufficient. Like a super-power that has rested on its laurels for too long and failed to reinvent, or even update itself, this group of companies are scrabbling for a safe haven even as the once impenetrable walls of their market dominance are crumbling.

Essentially, these companies are constructing castles made of sand which stand little chance in the face of the inexorably rising tide of renewable energy. Their arguments, as presented recently at the European Parliament, even fail the basic test of internal consistency.

On energy bills:

The energy companies say:

“the rules of the game to which investors sign up cannot be subject to change halfway through for short-term political reasons” but go on to say that “energy consumer bills should reflect as far as possible the market based cost of energy” and not be “a vehicle for financing other policies”.

The reality:

Removing taxation from energy bills would be a huge change in the “rules of the game” which would only be done “for political reasons”.

The energy companies say:

The energy consumer bill must reflect as far as possible the market based cost of energy and that it cannot be a vehicle for financing other policies.

The reality:

If energy bills no longer include a component that finances other policies, such as renewable energy support the less mature renewable technologies that will be an important part of Europe’s future energy mix would go unfunded.

The energy companies say:

‘Public support for renewable electricity production should be adjusted to reflect ‘electricity market needs’.

The reality:

These companies fail to make clear what they think these ‘needs’ are, or if they differ from the EU’s high level objectives of competitiveness, security of supply, and sustainability.

The energy companies say:

Focus support on ‘push’ R&D funding and not ‘pull’ production subsidies.

The reality:

Many studies and much market experience show that this strategy will fail – wasting money on R&D for technologies that will not then have a viable route to market. Both push and pull support is needed.

 

On guaranteeing a reliable electricity supply:

The energy companies say:

The EU should utilize “all existing power capacity” in order to guarantee a reliable electricity supply.

The reality:

This is a huge oversimplification in their own interests and an attempt to stifle new competition. In 2010 total installed electricity capacity in the EU was 875,018 gigawatts. If run at full capacity (x24 hours a day x365 days a year) this installed capacity would produce 7,665,158 gigawatt hours of power. In 2010 the EU consumed 3,183,337 gigawatt hours of power. Installed capacity never runs at 100%. If these power companies have built too much of the wrong kind of capacity, then that is their problem.

An example is the extreme slowness with which RWE has invested in renewable energy. RWE Innogy (its dedicated renewable energy vehicle) was only launched in 2008, and with only with 1GW of power. The first German Energy Act came into force in 2000 and by 2008 Germany already had over 90GW of renewable energy installed capacity. It seems that RWE simply missed the renewables boat and can only have itself to blame.

The energy companies say:

The EU should enhance the diversification of gas supply by routes and sources, notably, through domestic energy production, including unconventional sources.

The reality:

The development of ‘unconventional sources’ of domestic energy, such as shale gas and shale oil, is very uncertain – both in terms of the size of the potential resource and the cost of its extraction. This uncertainty, along with other market factors, make dependence on shale gas and oil a very risky and questionable social and economic bet for Europe – even before the impact on increasing CO2 emissions is considered.

 

On Europe’s climate ambition

The energy companies say:

The EU should give a new impetus to, and fundamentally strengthen the European carbon market.

The reality:

Their position on ‘reforming’ the ETS is vague, and it is not clear what the impact is intended to be. By contrast the power industry association EURELECTRIC is very concrete in calling for the ETS’ linear reduction factor for emissions to fall by 2.3% a year. EURELECTRIC members also consider that a retirement of European emission allowances is necessary to re-establish market confidence in the short term.

The reality is that Europe and the world can and must be powered by 100% renewable energy by 2050. This will take significant efforts to develop new and existing renewable power technologies as well as big improvements in energy efficiency. But given that this action will end up saving us trillions of dollars the direction of travel is inevitable.

Europe’s energy companies can either turn their forces around and join us to fight the good fight, or they can accept their fate – falling by the way-side in the wake of a quicker, more innovative, and better targeted opponent.

 

 

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