Wednesday, September 07, 2005

Interview with Andris Piebalgs - EU Energy Comissioner

Interview with Andris Piebalgs

Published: Tuesday 3 May 2005

Interview with Andris Piebalgs

In Short:

In an exclusive interview with EurActiv, Energy Commissioner Andris Piebalgs discusses the problems facing the EU in terms of diminishing oil reserves, rising energy prices and the viability of the nuclear option.

Since the Green Paper in 2000 on security of energy supply, has the EU improved its energy situation five years down the line?

There have been attempts to improve. I think there has been a substantial legislative effort. There has been a legislation of energy efficiency in buildings passed that will come into force in member states next year. Right now we have accomplished the legislative process for an Eco-design Directive. So there has been development and progress in energy efficiency. There have also been good developments in renewable energy. Even if progress has been slow and we are missing the intended 22% target on green electricity by 2010, the process has been in place.

We have also managed to diversify dialogue with producer countries and therefore taken more care to consider a wider range of energy sources – not only with traditional partners like Russia, but also other countries in the world. The results might not be what we had hoped to achieve by 2005, but you must consider that oil prices have been low at the beginning of the 21st century so the drive was not too strong and measures on the energy efficiency side have only been partially implemented. Despite good initiatives, there hasn’t been a European wide policy. Now all the suggestions from the Green Paper in 2000 are valid and the need to implement the measures foreseen in the Green Paper is still strong.

How do you plan to differentiate yourself from the work of your predecessor Loyola de Palacio?

I don’t think I ever started my position analysing what I could do to differentiate myself, or what I should do differently to my predecessor. When I came into office here, I made a study about where we were, what measures needed to be taken and what should be the priorities. I think that there has been a natural continuation of the work carried out by Miss de Palacio, and the priorities have been very carefully selected in order to complete the work on the internal market as well as on energy efficiency, renewable energies, achieving a better link between environmental research policy and energy policies, work with producer countries and nuclear safety and security. In all these areas there has been something done. Perhaps there has been a need to do more work on energy efficiency and strengthen in this area but in other areas the policies have been carried out successfully. This applies to Loyola de Palacio’s time as well.

So would you say there needs to be more emphasis on energy efficiency?

I would say there needs to be more emphasis on energy policy on the whole. With oil prices rising and global demand being so strong, the situation and interest in energy policy in the European Union has grown. The development of the internal market for gas and electricity (4.33) (is also Commission row) is stronger and responsibility for this Commission in the energy sector has grown. So this has been the biggest change. However, my work has essentially been a continuation of that carried out by my predecessor.

Do you feel that your energy department is taken seriously enough at EU level? You mentioned the rising oil prices. Does the EU pay enough attention to the underlying structural reasons? You talked about the growing world demand. Yet the capacities of oil producers has diminished and there is dependency on unstable geopolitical regions like the Middle East. Some say we have limited availability of primary energy sources. There is a big debate going on about 'the end of oil' being led by people with a good background in energy policy. I have never seen the EU reflecting on those issues.

I wouldn’t agree with your statement. I think the Green Paper published in 2000 was an example of a good clear analysis on the challenges facing the EU energy policy. In the current legislation for energy, community competence is not even mentioned, but we use different treaty articles, networks, the internal market and mandates given here and there by member states. Only now is there a collective EU energy policy.

Before there were the energy policies of 25 different member states. As an area it remains the responsibility of member states but there is growing need for co-ordinated action at EU level. So I think the EU has taken action, and regarding the issue of energy efficiency, the EU was the first group out of all the international institutions to say that this is the way forward for developed countries. Now we hear the same message coming from the International Energy Agency and the International Monetary Fund. So that is our confirmation. In a way, we could say that the EU has moved further on. In other nations, where is the legislation on eco-design or on the energy performance of buildings? So the EU has responded reasonably well.

Could I give you a few examples of where you could do more? The 7th Framework Program for research, the proposal of which was on the table just a few weeks ago now, I see that 2.9 billion euros is earmarked for energy research whereas the EU is going to spend 12 billion on ICT. That is six times more. Is ICT technology six times more important than energy policy when we have these challenges on the table?

That is a good comparison, but if you consider what we spent on the fifth and sixth framework program, the increase percentage-wise in funding is the same for both energy policy and the ICT policies. You can allocate a lot of money to one particular policy area but you must also take consumption capacity into account. For my services I believe that, considering consumption capacity, a 60% increase is sufficient to accommodate all the projects that will come up.

Can you explain what you mean by consumption capacity?

What I mean by consumption capacity is that there are a sufficient number of projects to justify the allocation of money. For example in the sixth framework there was one billion euros allocated to the programme. This doesn’t completely answer your question, but a 60% growth for energy research in the 7th Framework is reasonably good.

There was a DG research advisory group on energy that called for a quadrupling of the overall energy budget for research because they looked at the last 25 years and realised that the budget for research and energy has gone down by a factor of four?

It was decreased but now there is a 60% increase and that is the best we could achieve at this stage. That is a reasonable increase because some of our projects could also be financed by the environmental budget. For energy research projects you do not only spend money allocated under the heading energy. There are other related areas. For example, the CO2 capture and storage project. It’s not just an energy issue, it’s also an environmental project. Lots of agreements could be made between different areas. There is also one particular feature to the 7th Framework – the research council. That could also contribute to energy in terms of research. So we have other parts of the budget funds allocated.

So the question is – does the Council support the 7th Framework Group Program on the scale that it is proposed? A 60% increase I’m sure you will agree is very reasonable. Quadrupling the budget or having ten times more to spend would be nice, but you must be realistic about what could be achieved with the money. I think it is also very important that the EU, especially in energy policy, should be the catalyst, but not in the sense that it provides all the resources, because a certain amount of responsibility lies on the member states and with industry.

The goal of 3% allocation for research is attainable not only through EU spending, but also national spending, and most importantly through the money spent by industry. As long as we keep thinking that the 3% allocated to research comes through taxpayers' money we will fail. We should have considerable contributions from industry. Only then will all these projects become viable and the results will be there. So I think this is also a very important feature. It should not only be the money from the 7th Framework Program that goes towards reaching our objectives.

Of this 2.9 billion euro, do you have any idea of the breakdown between the different headings. EurActiv notes that you have research money earmarked for hydrogen, renewables, energy efficiency etc?

Not yet. My services are working on it, so I could tell you at a later stage. The real priorities are the ones that are mentioned. We need lots of industry plans, so there should be technological platforms. Also in research for nuclear waste, there should be a joint enterprise where private businesses can invest.

The EU has set up a target of 12% share of renewables for 2010. Do you think the EU is actually on track to meet this target? Recently MEP Mechtild Rothe said that the EU spends less than it did four years ago on research for renewables. Are there any improvements envisaged in this area?

I think these are two separate questions. One is how to reach this target of 12%. For electricity I already mentioned 22%. And we are currently going to 18 or 19%. Still there is a considerable increase in green electricity. Where I think we have underperformed is biomass. So that is why we are now preparing an action plan on biomass, with special attention being placed on heat and cooling. I also intend to look at how the directives for renewables, especially electricity, have been implemented. The same goes for biofuels and how they have been implemented. Perhaps our proposals are not good enough and we have to improve them?

So yes there has been progress made, but not a sufficient level to reach our target. The problem with indicative targets is that indicative is still just an indicator. That is why we are indirectly aiming to introduce mandatory targets for our proposals on energy efficiency and fuel. It helps member states to adopt consistent policies which they can continue. As for the projects, I think it is premature to say that we will spend less on research for renewable energy in the 6th Framework compared to the 5th Framework as this is still in progress.

However, I made a note of what Mrs. Rothe said and I demanded an explanation for my services why at this stage we are lagging behind. Does it mean that there are not enough good projects? There could be different reasons. It could be that some projects are still in a state of implementation, that shouldn’t be so and clearly infringe upon official EU policy. Therefore we should analyse these reasons and if the projects are not at a satisfactory level, then we should find out how to stimulate them. I am concerned about what has happened, as some projects do not fit the criteria of EU policy. Our only consolation is that it is still too premature to say whether or not money has been spent correctly. Nevertheless, it is a positive sign that people’s attention has been drawn to these issues and the need for action to be taken has been recognised.

One of your main priorities is energy efficiency. You will be presenting a Green Paper on this area soon. Can you tell us any of the main policy ideas we can expect from this paper?

I am unable to disclose the content because I have a draft but it is yet to be finalised. The aim of this paper is definitely to push ahead with our proposals. Firstly to conduct an investigation into what has been achieved and what could be achieved and what targets we should set ourselves. We also need to draw up a list of proposals which could contribute towards the Lisbon strategy, security of supply and the fight against climate change. So it will include a broad range of different proposals and in some cases to alert the attention of member states to the implementation of existing legislation such as the energy performances of buildings, because the savings made could be greatest in this sector. We also have the opportunity to finance this through the EIB or through EBRD activity. In this respect we also contribute strongly towards the fight against climate change.

So it does not necessarily mean that there should be a lot of new proposals, because we know what needs to be done now. The priority is to focus on what could be done after legislation has been put into place and what could already be achieved now. The majority of proposals should come in the transport sector, as this is the area in which most work needs to be done. I am afraid that in the draft, there are many proposals on restrictive measures. It is not our intention to make the paper on energy efficiency into a list of restrictive measures, but I can’t disclose all the measures foreseen. The measures proposed should correspond to all three goals and does not compromise people’s standard of living. So we are not going to tell people they are not allowed to use cars. That is not the way to proceed. This would fail as people would reject these ideas as a whole. So these proposals are not easy to accomplish.

But you are going in the direction of setting higher targets. You have a target of 1% energy efficiency growth per year. Some NGOs are claiming that you could go as high as 3%. Is that your feeling too?

For me the best target would be that energy consumption per capita in the EU is stable and does not increase. It has the tendency to grow by 0.6% a year. It should even be reduced. We are using per capita 3.7 megatons of oil per year. This is half what the United States is using, but still we can’t be satisfied. It needs to be stabilised. So that is my personal target. My services are looking for a more mathematically correct target. Diminish energy consumption by 10%. That should be a target easily accepted by the population.

So you intend to set a less ambitious target?

No. The energy efficiency target is something else. You make a 1% measure of consumption for the previous year. Yet this does not necessarily mean you use less energy, because you’re spending more of it on something else. So actually, energy and use efficiency targets are helping to concentrate on the issues of energy, but in reality, they do not cut down energy consumption in the EU. That is a completely different measure. What I would like to say is, the real target should be – how much energy we should be consuming in the EU. That is where the real problem starts, as it could mean that even in countries where there is a strong energy efficiency policy, it is expected that energy consumption per capita will grow due to more cars on the road, an increased number of powerful cars and, overall, the transport sector in general. So we need to set realistic, but also achievable targets.

So we are more ambitious. Our ambition is stronger. When we enter into discussions with new member states it is even more difficult because energy consumption per capita in these member states is lower than in old member states and they are claiming that they will need more energy, more power generation and more fuels because the standard of living and demands on society will grow. Therefore imposing energy restrictions on new member states could be seen as a means of blocking their development. Yet this is not true. Yes you will need more energy, but you can also save more energy. This does not mean that you will have to add to your increasing consumption per capita. They should not make the same mistakes as all the other member states when oil prices have been cheap.

Is that a message that governments in eastern and central Europe are willing to listen to?

I think that if it is explained well enough it could be accepted. Preparing the Green Paper we also wanted to avoid a clash when presenting it so that there are 26 high level government representatives working on it, coming with their proposals. We will brief them with what we have foreseen. The paper should be on the table in the Energy Council in June which means that the Commission will need to approve it around the end of May.

The aim is that the Energy Council in June really work with it and that in the UK Presidency it is the basis for continuous work during their term. One of the main goals of their Presidency is climate change – an area where energy efficiency plays an extremely important role. So this is ambitious and we should stick to it.

While preparing this Green Paper, have you already had some feedback from the UK Presidency?

Yes, I have discussed it with the UK Presidency and politically they support it. I have their clear support. I have met with the relevant ministers in charge. Obviously there is the UK election coming up, but we can anticipate which ministers will be continuing. So the UK Presidency will definitely welcome my proposal if it is well done.

You are presenting a follow up to the Green Paper on security of energy supply in Autumn. What new focus/priorities can we expect from that new communication?

There have been some substantial changes. In 2000 everyone still thought that gas and oil resources were sufficient and there was no need to worry about it. Our only concern was which part of the world it was coming from. So that is the biggest change. There is now a real constraint on the security of supply of energy. That is one particular aspect. The second is that the current emphasis placed on renewables and energy efficiency is insufficient.

These areas still need to be strengthened. Geopolitically I think that we should also look more broadly at our supply. For the first time the situation in the world has changed and supply and demand sides have changed. So there is a need to work on this paper. I also expect that if the paper is effective, it will assist the forthcoming Presidencies in concentrating on energy issues. There is also a need to take them on board. There are issues which are related to the development of the EU energy market - what could be done and how it will influence the need for demand and supply. If the market is efficient it means we need less energy as well. That is also clear.

When you say broader supply, you mean strengthening dialogue with different regions as well?

For example not expecting that all gas will only come from Russia.

How are negotiations going on with that? Are there any developments with this diversification?

We will start with an informal dialogue on ministerial level on the 9th of June. That is one part. Working groups have been established With Russia we have a longer dialogue because with Russia the situation is perhaps more complex. Four working groups will be starting work in June as well. Then we have a dialogue with North African countries. With the North African countries we would like to establish an electricity community. Algeria is also a good supplier of gas, as well as Egypt. Some member states are putting quite substantial investments in oil, particularly the UK and Spain. This also changes the situation for supply. This is the positive side of oil and gas price changes.

You said that since 2000 there has no longer been the realisation that the oil resources and gas reserves are not sufficient anymore. Does that mean that more than five years ago we are getting closer to the point where these reserves run out, or we are encountering difficulties trying to excavate it?

I think that we should at least approach the situation with caution. What we have seen recently for all major companies is that the amount of disclosed reserves is much lower than production capacity. This is dangerous. Major oil companies will say there is nothing to worry about, but I am seriously concerned. If we look where profits go, it is not towards new exploration but on dividends for shareholders. So this makes me nervous. Perhaps it is a short-term tendency, but still explored gas and oil resources are difficult to procure, especially in regions where we have little success. And how much will it cost?

We have promising gas fields in Norway and Russia, but we don’t have an exact figure on reserves or an idea about how much it will cost to explore them. Even if we do consult the most optimistic programs for oil, the prediction is that 2050 will be the bending point. I am in no particular danger, but I have children who would be curious to know what the proposals are beyond 2050. And 2050 is the optimistic prediction. Some say that oil reserves could run out as early as 2030 or even 2015. But taking the optimistic prediction we will say 2050. For gas it is a bit longer. For coal there are generally no worries. With oil the difficulty and one of the biggest challenges is that we have now a good substitute for petrol and for transport and this is where our particular worry is. As life conditions improve in China, India and the developing world, competition for oil will also increase. That is why 2050 might be extremely optimistic. That is why I think we should make ourselves aware of the situation and invest in ways to find solutions when oil is a scarce resource and no longer sufficient to supply demand.

Coming to the reporting problems that some of the companies have had when apparently they overestimated their reserves, can the EU take some initiatives at global level so that this reporting becomes more standardised and improves?

I can’t answer that question at this stage, but I think that we are doing this. Perhaps even the first step was launching a study for an energy monitoring and observation system in the European Union. I think that with Europe at this stage, it is very difficult to understand what is real supply and demand in the European Union as a whole. There are different member states. The market we are aiming for is a united market in gas and electricity. The oil market is already there. We should establish normal observation and information systems about the stocks in the EU. How many stocks there are? What is the level of these stocks? What demand is foreseen? These are elementary things that we should do, that will also strengthen the work done by international energy agencies. At the moment there is lots of information available from the United States but insufficient information from the EU. They would also like more information from both China and India to get a better global picture. Our ambition is to set up an established system of reporting in the EU.

In answer to your question, I think it is much more of a global issue. This isn’t a question solely for the EU. I think that in a ministerial meeting at the beginning of May the question might arise, and an appropriate solution will be discussed. We should care as an international community how much the forecast is, and try to establish a good methodology for what we count as an actual resource and what is simply a deceptive statistic that is impossible to extract even with the best possible technology. For example I don’t know the extraction possibilities for off-shore depths of up to 3,000 metres. It seems technically possible, but it isn’t necessarily viable. Perhaps at this stage renewables will cost less and we should just invest in the greens. Recently I saw the calculation that if oil prices remain then wind energy will be more economically viable.

Energy prices have not touched a lot upon economic development. But now Goldman-Sachs are talking about oil prices of 105 dollars at some point. I suppose then you are getting into trouble?

I think we are already getting into trouble now. First of all, households still use energy in the same way. So if we paid more at the pump, it would not stimulate demand. We are simply paying more at the pump. Not buying something else that we could buy. The second point is a situation particular of Europe. Here in Europe we normally have high labour costs. Additionally, having high energy costs could put us in a lot of trouble.

That could create a problem for the energy intensive industry in Europe. So far they are not extremely worried as long as the market is functioning correctly. That is what they demand from the Commission. Their major concern is that a real competitive market exists in which a supplier can be chosen. But high oil prices definitely do not help them become more competitive at world level. This is where the difficulty starts, so for this reason I would say that higher gas and oil prices do not help our competitiveness.

2050 is the predicted year that current oil levels will last based on what the oil companies are expecting. If their reporting is not correct, are we in trouble? How much do you trust these figures and shouldn’t we apply the cautionary principle and say that maybe we will run out earlier? So in that scenario maybe we will not be ready in time with renewables or energy efficiency measures. So don’t we need a possible interim solution which for some would be nuclear again? I’m raising the nuclear question which was also a very sensitive area for your predecessor.

The nuclear question is very sensitive from all points of view. There are some member states whose entire populations disapprove of that option, such as Austria. To the extent where the country would probably prefer to live without electricity than resort to this energy source. That is why we can not claim that nuclear energy is the solution for the entire EU, but in the countries which take responsible decisions based upon the current level of security and safety for nuclear instillation, it is an option. Fortunately we are not yet living in an apocalyptic world and faced with that scenario. So there could be a reasonable combination of all resources in the EU providing enough electricity and energy.

Therefore, at this stage, we are not at a point where the perception from citizens or governments is that there should be extreme measures taken. I could mention one example in which I had my fingers burnt. I suggested in one of the German newspapers that it makes sense to have some speed limits in the EU as it saves energy and I got an angry response – not only from the media, but also the general public and political actors. And that was just my opinion, not even an official proposal. That means that their perception is not developed yet. That is why I don’t expect to come out and say by 2030 or 2050 we will have run out of oil and we should make some extreme changes to the energy structure. I don’t think anyone would believe me. That is why the Commission should base all their analysis and proposals on real facts. So I think it is premature to speculate about what is going to happen in 2050 because in terms of policy we need to stabilise consumption and develop renewables. We should also learn how to maximise use of the oil and gas resources that we have and work with the promising technologies to exploit other resources such as hydrogen for transport or nuclear fusion for electricity which we envisage for the long-term future. So nuclear fusion could be acceptable for all reasons and that is why the decision to build the heater reactor, even if met with opposition, is the right one because the reasonable technology needed could well be available in forty years. Now it’s 2005. By 2045 we could have it.

Don’t you feel there is a kind of taboo on the nuclear discussion? Shouldn’t the EU organise a stakeholder debate about what is the role of nuclear in the energy mix in view of all the challenges that you have mentioned?

But there are such types of conferences. I have spoken at a couple of them – one on nuclear energy in the 21st century. There have been quite a lot. It is difficult. Even from the industry side, those who support it feel some kind of guilt that it is wrong. That is a shame, because it is really an option. The country where people have chosen to accept it, Finland, has not met with catastrophic consequences as a result. And the decision although transpiring politically, was accepted on all levels by society and by all major parties. This is also the first case in which the debate extended to include the issue of nuclear waste storage. But for whatever reasons, member states have not been forced to organise a discussion on this topic. In my opinion, starting an official debate will not help. Countries that may need it will consider all options and decide upon it.

I still think this is a member state issue as sensitivities are so different. Compare a country like France where people are proud to have nuclear energy to a country like Germany where nuclear energy will be phased out. So two neighbouring countries whose approaches are so different. It has become a political issue and I accept that some countries will say that they refuse to burn oil in order to produce electricity. We have to acknowledge that the EU is comprised of 25 member states and there are different approaches to different energy issues.

Energy is not such a simple matter that we could just impose to produce energy from wherever and bring nuclear waste to another place. That is not the way to manage it. And this is especially important for the issue of nuclear waste. I do not think that we can enforce it to be stored anywhere in the EU. The countries that produce nuclear waste should take care to manage their own waste. That is quite clear. We can support countries where the decision is being made to use it, and even when nuclear power is not being used there are questions of nuclear safety and security of nuclear plants – this is a common challenge for the union.

MEP Giles Chichester made a statement recently in which he claimed to be amazed about the amount of oil that is still being used to produce electricity. Shouldn’t there be emphasis on getting rid of those uses for oil as a priority instead of the transport which is more vital to consumers?

In the EU, using oil for electricity is not common. That applies mostly in oil-rich countries where they really use oil. But speaking to a Kuwaiti minister recently, they are aware of the problem and they have plans to amend this. So they are also changing their attitude. Therefore there is a general tendency to decrease it. But still there is investment needed from the companies that are doing it so I don’t think we should make it a legislative obligation on EU level.

So I think we should encourage the change if we believe it is needed. However the major producers of electricity through oil are changing their decisions due to CO2 emissions, as it is quite clear that this energy source is not sustainable. Where we are now putting more emphasis are the energy issues relating to third world countries. We should help other countries not make the same mistakes as us through development programs and the new neighbourhood policy. All the instruments we use in external policies are projects we run to assist these countries.


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