Have you ever heard the story of long-term contracts withering away, washed away by the emerging competition in regional, if not global natural gas markets? And have you really believed that in an industry characterized by multi-billion US-$ investments, “perfect competition” should assure long-term supply security? Ten years ago, when I started to work on long-term contracts in the natural gas industry, I believed in these stories too. Until I started to collect data and assembled what is now the largest database on long-term contracts world-wide. Continue reading »
The energy sector is no exception to the current weakness of the European political system, and also of national systems, marked by pervasive short- termism and an increasing tendency for European countries and citizens to look inwards. The immediacy of politics and financial profit outweigh all other factors. Countries are isolating themselves due to the structural issues affect- ing Europe, which run much deeper than European institutional challenges. The European people are afraid of globalisation and of the future. Under pres- sure from political events and economic and social uncertainty, they are losing the feeling of having a common heritage – of living and of knowing how to live together.
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The International Energy Agency released its annual World Energy Outlook 2014 in mid-November with the usual fanfare. As always, it is worth a read, for its breadth and depth even if parts read repetitive of prior projections. The overwhelming message, now repeated enough number of times by enough forecasts of the future, is the clear bifurcation of global energy demand growth among the haves and have nots, the north and the south, with China rapidly joining the former.
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There’s a lot of talk in California these days about imposing fixed monthly charges on residential electricity bills. The large investor-owned utilities in California have small or no fixed charges,instead collecting all of their revenue from households through usage-based charges, called volumetric pricing.
No EU policy can be perfect – it will inevitably be a compromise between a good cause and a due cause. However, we are now at a critical turning point, as several pillars of former Barroso’s EU energy policy have already collapsed, prompting an update or an entire overhaul.
EU policies to integrate energy markets, promote renewable energy, and diversify supply are aiming at a competitive and sustainable European power sector. The resulting dynamics should largely affect the systems of electricity generation, transportation and storage in Europe: With increasing market integration come new new competitors; coal and gas power plants face new renewable challengers domestically and abroad; and diversification towards new suppliers will bring new trade routes and infrastructure. All in all, EU policies to integrate power markets, promote renewables, and diversify supply will thus profoundly reshuffle national energy assets. The impact of the three EU policies is thus likely to have considerable ‘geopolitical’ implications for individual member states and affect their capability to negotiate, agree on, and/or implement further measures. We conduct a thought experiment which explores potential benefits and losses for individual member states implicit to Europe’s ‘energy transition’, and the political concerns which may be expected to arise as a consequence. Continue reading »
Eight years ago, shortly after German and Russian leaders agreed on the construction of Nord Stream, then Polish defence minister Radoslaw Sikorski called it “the Molotov-Ribbentrop pipeline”. Sikorski compared the project to the 1939 pact between Nazi Germany and the Soviet Union, which partitioned East-Central Europe. Nord Stream, he argued, would allow Germany to secure its gas imports from Russia while Moscow simultaneously turned off the tap and blackmailed governments in East-Central Europe. However, contrary to Sikorski’s predictions, during the current crisis in Ukraine the pipeline has allowed Germany to take a tougher stance towards Russia than most EU member states. Continue reading »
European power markets are being confronted with an unprecedented transition process toward a low-carbon power system. The speed and complexity of this shift are raising serious challenges and operational difficulties. The successful increase in the deployment of variable renewable electricity technologies is bringing the EU objective of raising the share of these technologies in its energy mix to 20% by 2020 closer to an attainable reality. But there are deep concerns about the continuing impacts of this transition, especially as it is further expanded to include a substantially larger share of renewables by 2050.
In essence, effective and efficient energy law and policy will balance energy economics, energy security and climate change mitigation to deliver the best outcome to society. However, if one examines energy law and policy in more detail often it is just one of these points that dominates the energy agenda; more often than not it is economics.
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In order to better integrate their electricity markets, regions must first have confidence that when push comes to shove during times of capacity scarcity, their neighbours will continue work with them, and not against them. That means paying more attention to the rules for security of electricity supply. If you can’t count on your neighbours in times of need, you want to make sure that you have enough steel on the ground in your own jurisdiction. But with this kind of mindset, markets can’t just function properly.