José Manuel Dur ã o Barroso
P resident of the European Commission
" European Energy Policy for the 21 st century"
Berlin , 24 June 2009
ladies and gentlemen,
many thanks for asking me today to the BDEW Congress, and to talk about the major challenges that we face on energy now and in coming years, and particularly in relation to security of supply.
The challenges are real, and unfortunately immediate. In January this year, gas coming from Russia across Ukraine was interrupted for nearly three weeks. Almost one fifth of the EU's total gas supplies were cut off. Half the EU was directly or indirectly affected. So when we talk about European energy policy, security of supply is today our foremost concern.
Together, Commission and Member States, governments and private sector, together we weathered those three weeks. We managed to restore the flow of gas and to limit the social and economic damage from the interruption. And we stuck together – there was consistency in our line and solidarity shown to the most affected Member States. So I want to thank German industry and the German government – and Angela Merkel in particular - for the prominent and proactive role Germany played in the joint European effort to solve the crisis.
Today we are again facing a difficult situation, though once again we are determined to address it. Ukraine is having difficulty to pay for the gas it buys from Russia. If it stops paying, and Russia switches off the gas, it is very likely that the European Union will again be affected.
I have discussed the situation with industry (E.on and RWE, among others) and I have discussed it with Chancellor Merkel and the other European leaders at the European Council last week. Our common view is that we are indeed facing a potentially serious situation. We want to make that the conditions are in place for all commitments and contracts to be honoured and thereby ensuring gas transit to Europe.
What we don't want is a repeat of the events of last January. Our line of action is twofold: to prevent, and to prepare. As I have said before, we have to hope for the best, but prepare for the worst.
Prevention means engaging effectively with Russia and Ukraine to avoid problems escalating. In order to address the urgent Ukrainian situation, I have asked senior officials to examine whether an emergency loan package can be put together to which the international financial institutions and perhaps also Russia would contribute. Of course, it will not be easy but it's a good sign that everyone is willing to enter into this discussion.
We are also working to strengthen our relationship with Russia and Ukraine. A new Agreement is being negotiated with Russia that must contain a substantive energy chapter. We are talking to Russia to strengthen further the "early warning mechanism" that was put in place to warn each other in advance in case of supply disruptions.
We are also negotiating with Ukraine her accession to the Energy Community. The Energy Community already includes most of our neighbours in the Western Balkans. The deal would be that Ukraine adopt EU rules for its energy market. This is our best chance for building a stable and viable gas sector in Ukraine. Indeed, only last March, the Commission held a conference to push for an investment package to modernise the Ukrainian pipeline system.
So, we are deeply engaged with both Russia and Ukraine to help prevent problems in the future.
But prevention is not enough: we need also to better prepared in case things go wrong. We are in discussion with Member States and gas industry to work out what may happen if gas supply through Ukraine is again cut, and how to coordinate measures to mitigate such a supply cut. I count on German industry to play – once again - a leading role in a possible crisis response. The experts are meeting again in the Gas Coordination Group on the 2 nd of July.
In order to put emergency preparedness and crisis response on a sound footing for the future, I intend to propose in the next few weeks a revision of the EU's directive on the security of gas supply. Member States have just agreed a few weeks ago a new Directive on emergency oil stocks that will make these stocks more reliable and more accessible in case of emergency. We need to develop the same resilience in the gas sector. Not necessarily by building up more storage as for oil, but by ensuring that we have alternatives ready when we lose a big supplier or supply route: other pipelines, access to Liquified Natural Gas (LNG), storage, etc. And that we also need to have procedures, or routines, in place to respond quickly, also at the European level. The January crisis showed us major supply incidents are very likely to affect more than one company, and more than one Member State. Good coordination is therefore essential.
But once again, rules and procedures are not enough. We also need better infrastructure to bring the oil and gas and electricity to the places where it is needed. Our national markets need to be interconnected. We signed last week a Memorandum of Understanding among the Baltic Sea Member States, including of course Germany, to develop several new interconnections. The Baltic States must not remain "energy islands". Next year the Commission will develop a similar strategy for the region of the Danube river, as agreed in the European Council.
Projects to diversify sources and routes of gas supply also deserve our support. I am thinking of strategic projects in the Southern corridor, such as Nabucco, to bring gas from the Caspian region; and projects such as Nordstream, to link Germany and its neighbours to new gas sources in northern Russia.
A number of those interconnections and supply routes will be able to get financial support from the EU budget. A total of nearly 4 billion euro has been earmarked for a list of key energy infrastructure projects starting construction in 2009 and 2010. They will help economic recovery in Europe and at the same time improve our security of supply.
I am pleased that the Commission and Member States have been proactive in addressing the gas supply challenges, but clearly we have to keep up the pressure.
Tomorrow, Thursday, 25 June, the Council of EU Ministers will formally, finally, adopt new rules strengthening the internal energy market – the so called "Third Internal Market Package". The main objective of the Third Package is to strengthen the regulatory framework needed to make market opening fully effective in the interest of achieving the lowest possible energy prices and better energy security. This is the product of nearly two years hard but cooperative endeavour.
The new rules will strengthen competition by separating the production and sale of energy from transmission. I know that these so-called "unbundling" provisions have been difficult for German companies to accept but I hope that the compromise solution we have found together will be workable and effective, and I am happy that Germany therefore has therefore supported this package.
Besides unbundling, the new rules will bring greater transparency and better regulatory oversight. The new 10-year investment plan for EU energy grids will promote security of supply and enhance the EU market. These innovations will directly benefit German companies not only at home but in particular in other Member States. This is where our interests come together: to interconnect the internal market to give more choice to consumers, to give alternative energies better chances to develop, and to improve security of supply throughout the EU.
But we also have to look forward. What are the next challenges for energy policy?
In the European Council last week, I laid out my ambition for Europe for the next five years. As part of this vision I would like to see a competitive and prosperous Europe which fosters an advanced and high-value added industrial base and nurtures excellence in our services sector; a Europe which maintains global leadership in fighting climate change and promoting energy security, while entailing European companies to pioneer the development of a low carbon economy.
Let me single out two concrete examples for action in the energy field: energy efficiency and electricity generation.
Doing the same with less energy is arguably the best way to reduce our carbon footprint and to reduce dependency on foreign oil and gas. We have taken a number of energy efficiency actions such as "Ecodesign measures" to set minimum standards for energy using products from refrigerators to light bulbs. The savings they will generate are impressive. But much more can be done for example to make heating and cooling in buildings more efficient. The issues are well known. The question is how best to stimulate innovation and investment in low-energy living and working. Buildings have a long lifetime so the sooner we start the better.
Secondly, preparing to decarbonise carbon electricity production by 2050 should be a key priority for the next Commission. Just like buildings, investments in electricity infrastructures last for decades. It is therefore high time to start thinking about where we should be by 2050 – and agreeing on how to get there. In doing so we should not forget the transport sector – it has too long been the black sheep of the family when it comes to reducing CO2 emissions. The transport system's exclusive reliance on fossil fuels must also change radically in the decades to come. One aspect of this transformation is tighter links with the electricity system. A better integration of the energy and transport systems will, together with a much, much stronger effort on renewables and on energy efficiency, be key in bringing us onto a truly sustainable path where the needs for energy services can be met without putting the global climate, the environment and the prosperity of our grandchildren at jeopardy.
Just as one good example of this, I was pleased to see the recent announcement of a large scale joint venture, involving important German companies, aimed at exploiting the immense solar resources available in North Africa. Projects of such ambition and boldness will help bring to life the vision I have for Europe of a low carbon opportunity society. It also represents an opportunity for a positive joint development project with Europe's southern neighbours. This and other projects will require leadership and cooperation at the European level to put in place the "supergrid" and the "intelligent grids" needed to plug renewable energy into the European electricity system.
Our low carbon energy agenda for the future needs investment. A lot of it. But it's investment in the technologies which will give the EU a competitive edge in growing international markets – wind, solar, photovoltaic, biomass and biofuels, carbon capture and storage – and nuclear, where countries so decide.
These are great commercial opportunities, and we should grasp them. Germany has a proud tradition for excellence in engineering and technology and a formidable industrial and manufacturing capacity. It has global leadership in renewable energy deployment. You master many of the technologies and skills that will become ever more necessary in the future - not just in Europe but worldwide. The German energy and water industry is better placed than many others to take on this challenge and make the best of it – to the benefit of its shareholders, of its customers, of the German and European economy – not to mention the benefits for the global climate.
So while the challenges we face are daunting, the future is also bright. Constructing the low carbon economy represents nothing less than the industrial opportunity of this century! Let's seize this opportunity together.
Ladies and gentlemen,
Just a few years ago energy policy was the "parent pauvre" of the EU's policies. But climate change, oil prices, and supply problems have pushed energy to the top of the EU's agenda.
My Commission, with strong leadership from Andris Piebalgs [and Matthias Ruete] has tackled the very real challenge to energy security on all fronts. We have set in place the most ambitious political vision for a secure, competitive and sustainable energy future. The centrepiece is to transform the EU into a low carbon economy. We are already committed to reducing greenhouse gas emissions by 20% by 2020 and increasing the share of renewables in our energy mix to 20%. We must also improve energy efficiency by 20%, by 2020.
But let me close by paying tribute to Chancellor Merkel's personal efforts, including as President of the European Council, in driving this agenda forward over the past few years. This has been a real partnership between Commission and Member States and long may that continue, as we confront the challenges together.
Thank you very much.