EU Energy Policy Blog

The international oil markets have been quite turbulent for the past several months. The wave of protests sweeping the Arab world and the loss of Libyan sweet crude have fueled fears of shortages and have driven oil prices higher. Last week, on June 23, the western industrialized countries therefore decided to play their trump card: the strategic oil reserves. Over the course of the coming month, 60 million barrels of oil will be released onto the market from the emergency supplies of the United States, Japan and some European countries.
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Rising demand for power in developing countries combined with concerns about carbon emissions from coal-fired power plants in developed countries have created a bonanza for carbon-light technologies including nuclear, renewables and natural gas plants. This, in turn, has put upward pressure on price of natural gas in key markets while resulting in shortages in critical components for building renewables and nuclear reactors. Globalization of the power industry means that pressures in one segment or one region translate into shortages and rising prices everywhere else.
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Under the former regulated utility regime and regulatory arrangements, many of the risks associated with power plant construction costs, operating performance, fuel price changes, and other factors were borne by consumers rather than investors. The current context for new nuclear build in power markets is significantly different with producers bearing much of the risks unless some are transferred onto other stakeholders through long term contracts and/or innovative financing arrangements.
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There is a broad consensus in Brussels on the need for an external energy policy to diversify suppliers and routes and loosen Russia’s grip on the European natural gas market.
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Today’s European electricity markets are still wrapped up with long-term vertical contracts and liberalization has not changed much this traditional sales pattern. Due to their ambiguous effects on competition and welfare in the long run, long term contracts are a key issue of competition law enforcement and we cannot but notice that economic theory remains far from providing precise guidance to competition authorities.

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While its primary goal is to save abatement costs, the Clean Development Mechanism is considered by many as a key means to boost technology transfer and diffusion to developing countries. Is there empirical evidence on this secondary effect?

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Everything needed to build a power plant or a transmission line, it seems, costs a lot more than it did only a year or two ago, including raw material, customized fabricated parts and components and, of course, labor and transportation costs.

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Under the proposed renewables Directive, Member States would commit to delivering additional renewable energy so that, collectively, they would generate 20% of energy from renewable sources by 2020. How was the EU to deliver the 20% renewables target while: (i) ensuring efficient use of the resources available across Europe; and (ii) allocating the burden in a fair manner across Member States?
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How should we be thinking about the problem of climate change? What is the state of the negociations that begun at Bali? What should we do about the most important piece of the negociations which is the relationship with China and Chinese growth? I recently addressed these three questions in a conference. Here is the videopodcast.

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France’s antitrust authority recently ordered the electric utility EdF to offer rivals on the deregulated small-consumer market access to installed capacity in nuclear power generation. An initial auction for allocating 500 MW took place in March. 1000 other MWs will be allocated in the remaining of the year. Did the authority’s decision go far enough? Or did it go too far?

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