EU Energy Policy: The Dis-Unified Union

In Quest for Power, Nuclear Is a Disunifying Force

Pooling energy — in the form of coal — was a foundation for European unity in the early 1950s. But in their quest for energy security and low-carbon growth, members of the present-day European Union seem anything but unified.

The most striking divergence is over nuclear power. Germany shut seven reactors, left another offline, and pledged to close its remaining nine reactors over the next 11 years after the disaster at Fukushima. Nuclear power had been generating about a quarter of Germany’s electricity.

Across the border in France, where 58 reactors generate about 80 percent of electricity and where a powerful new reactor is being built in Normandy, there was frustration with a neighbor. The French prime minister, François Fillon, suggested Germany had taken a unilateral decision that undermined a collective pledge by the Union to meet targets for reducing greenhouse gases.

Because of their separate geographies, histories and cultures, European countries have long taken different approaches to energy. Even when rules have been agreed upon at the E.U. level, they have often proved complicated to implement, partly because the Union has no direct powers over the energy mix of its member states.

In Europe, “key areas of energy policy appropriately remain sovereign national decisions,” said Maria van der Hoeven, a former Dutch minister of economy and the executive director of the International Energy Agency.

Even so, she suggested there was more scope for “cooperation to pool supply sources and promote internal exchange.”

Beginning in the early 1990s, the European Union passed laws to end monopolies on national electricity and natural gas markets — but with limited results.

Then four years ago, antitrust officials at the European Commission, the Union’s executive office in Brussels, stepped up those efforts, forcing a number of large energy companies to separate their generation businesses from their transport and sales businesses.

Yet even where markets are linked, there still can be unintended results.

For instance, Germany’s decision to shut down its nuclear facilities would raise wholesale prices for utilities’ power by as much as €7, or close to $10, per megawatt hour in Germany, on average over the next decade, and by up to €5 per megawatt hour in France and the Netherlands, according to Fabien Roques, the director of European power for IHS Cera, a research and consulting firm.

“In some places we have a common market for energy, but we don’t have common procedures for generating energy that we can actually rely on,” said Mr. Roques. “You can see how this situation creates friction between countries.” (In the case of nuclear power, 14 out of 27 member states use the technology to generate 26 percent of the Union’s electricity needs, compared with 28 percent before the German shutdowns, according to estimates by the Nuclear Energy Agency of the Organization for Economic Cooperation and Development.)

Member states also can ignore E.U. rules for years before the European Commission takes them to court to force them to act.

Only one E.U. member state, Spain, met a deadline this summer to implement a law agreed to in 2009 that would smooth the way for testing storage sites for carbon capture and sequestration.

That technology involves trapping carbon dioxide from power plants and heavy industry before it reaches the atmosphere and storing it underground. As with nuclear power, public acceptance has become a significant obstacle.

Perhaps the most pressing issue in European energy is how to ensure a competitive market for natural gas when large parts of the Union rely heavily on a single exporter: Russia.

Gazprom, the Russian export monopoly, supplies about a quarter of Europe’s natural gas and exercises significant leverage over importers.

According to Adnan Vatansever, an expert on energy and the former Soviet republics and Eastern Europe at the Carnegie Endowment for International Peace, “Europe has totally lacked collective bargaining power with Gazprom.”

Last month, the European Commission raided natural gas companies across Europe, including Gazprom affiliates, and seized documents. Antitrust experts said the raids could be aimed at finding out whether Gazprom limits competition by using contracts that last too long or impede flows of gas between E.U. member states.

The spokesman for Gazprom, Sergei Kupriyanov, said the group’s “activity on foreign markets has always been in full compliance with local legislation.”

The Union also has been seeking to diversify gas supplies after disputes between Russia and neighbors like Ukraine led to cutoffs and severe shortages during the depths of winter.

But some of the most powerful energy companies in Europe are involved in competing projects.

Five years ago, the Union stepped up plans for a pipeline called Nabucco that would deliver gas to Europe from the Caspian region and bypass Russia.

RWE, a major German energy company, is among Nabucco’s backers. The project would have public support and exemptions from rules requiring it to share its infrastructure.

But there are serious doubts that it can secure firm supply contracts in a region like the Caspian, where Russia has influence.

Further doubts were cast over the viability of Nabucco when Gazprom proposed developing a much larger pipeline called South Stream with Eni, a major Italian energy company.

The mounting anxiety in Europe about Russian control over energy supplies has helped to rouse interest in shale gas, which can be tapped domestically.

Shale “could be a real game-changer,” said Maïté Jauréguy-Naudin, the director of the energy program at the Institut Français des Relations Internationales in Paris. “In particular, Eastern European countries could diminish their heavy dependency on Russian gas,” she said.

But a ban in France against “fracking” — using pressurized water, sand and chemicals to loosen shale gas from rocks — is sowing doubts about its prospects in the rest of Europe.

Health and environment campaigners concerned about contaminated groundwater now are calling for E.U.-wide restrictions.

That prospect has stirred concern among companies like PGNiG, the dominant gas company in Poland, which imports the majority of its gas from Russia.

PGNiG produced its first shale gas from a well 3.5 kilometers, or 2 miles, deep at a site near the Baltic Sea coast in September. Commercial production could begin in 2014.

Joanna Zakrzewska, a spokeswoman for PGNiG, said the depth of the well, and the precautions the company was taking, would ensure aquifers were not polluted.

“Unconventional gas could be a great chance for Poland in terms of both economic benefits and energy security,” Ms. Zakrzewska said. “A potential ban on its exploration in the E.U. would deprive Poland of new jobs and better living standards.”

Source: New York Times