European Commission set to unveil new energy strategy

By bne IntelliNews January 9, 2007

Derek Brower in Brussels -

By Wednesday evening, Europeans will know whether Brussels is at last serious about tackling the EU’s three main energy problems: security of supply, competition, and climate change.

The timing of the European Commission’s Energy Review could not be more appropriate. With news Monday that Russia had shut off oil supplies destined to the EU through Belarus over a dispute about transit fees, Moscow's reliability as an energy exporter is again under the spotlight. That dependability, say Brussels insiders, will dominate the Commission’s Energy Review.

After it is presented on Wednesday, member states will begin haggling over its terms ahead of a summit to confirm or reject its recommendations in March. But publication of the Review should set the agenda for Germany’s six-month presidency of the EU, which started on 1 January.

At a recent gathering of energy policy makers in Brussels that was seen as a snap-shot of the commission’s thinking on energy, Commission President Manuel Barroso indicated the Review would include proposals on how the EU could begin to "speak with one voice" on energy – especially in negotiations about supply with Russia. That could mean a proposal to beef up Energy Commissioner Andris Piebalgs' oversight of strategic decisions that affect the continent.

A genuine common energy policy has been lacking so far. The controversial "Nord Stream" gas pipeline, for example, which would connect Russia directly to Germany through the Baltic Sea, was decided in bilateral negotiations between Gazprom and two German companies. That project will, say some, compromise the energy security of Poland and the Baltic States – but Brussels didn’t see so much as a feasibility study before the proposal went public.

Sources in Brussels Monday indicated to bne that the EU was already considering releasing oil from its strategic reserve if Belarus' dispute with Russia continues to interrupt supplies to the EU.

Liberalisation as security

Meanwhile, the Commission will reiterate its belief that further liberalisation in Europe's energy markets will help secure energy supplies – and deliver lower prices to consumers.

That will include proposals to force some of the continent's largest electricity generators, for example, to "unbundle" distribution assets.

This campaign is being led by Competition Commissioner Neelie Kroes, who has ensured that such liberalisation efforts are part of the Review. But analysts say it will face opposition from the firms that are in her sights, notably RWE and E.ON. As two of Germany’s largest companies – and biggest political donors – they will expect German Chancellor Angela Merkel to defend their interests while she presides over the EU.

Then there is the environment. Barroso says the EU must increase its use of green energy alternatives. The Review will likely contain many other well-meaning phrases about the environment, but whether it addresses the continent’s failure so far to meet its Kyoto commitments is another matter. Barroso has already said that the question of greater nuclear use in the EU "is a matter for national governments" and not for the Commission.

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