Energy priorities for Europe

Presentation of J.M. Barroso,

President of the European Commission, to the European Council of 22 May 2013

New realities in the global energy market

Impact of the financial crisis Fall in private investment, tight financing conditions Shale gas
US oil and gas production
Unconventional gas Unconventional oil mboe/d 25
20 15 10 5

Fukushima

Conventional gas Conventional oil

Some countries phase out nuclear power production

Rising demand rising prices By 2030, world economy set to double and energy demand to rise by 1/3

1980

1990

2000

2010

2020

2030 2035

Source: IEA

Presentation of J.M. Barroso to the European Council, 22 May 2013

Prices affect competitiveness

Trends in energy price indexes 2005-2012
Gas price index

Industry

Gas price index

Households

35%

EU

-66%

US

45%

EU

US
3%

Electricity price index

Electricity price index

Industry

Households

38%

EU

-4%

US

22%

EU

US
8%
Source: IEA

Presentation of J.M. Barroso to the European Council, 22 May 2013

Energy-intensive industries are most exposed

Share of energy in % of production costs selected sectors in Germany (2010)
Cement, lime and plaster Clay building materials Basic iron and steel Pulp, paper and paperboard Glass Basic pharmaceuticals Non-ferrous metals (incl. aluminium) Wood and cork Average manufacturing Furniture Automotive Consumer electronics
0 5 10 15 20 25

% of total production costs

Presentation of J.M. Barroso to the European Council, 22 May 2013

Source: European Commission

Europe's dependence is set to increase

Net oil and gas import dependence by region
2010 Gas imports
100% 80%

2035

Japan

European Union
60% 40% 20% 0% China United States

India

Gas exports

20% 20%

40%

60%

80%

100%

Oil imports
Presentation of J.M. Barroso to the European Council, 22 May 2013
Source: IEA

Our energy mix will evolve

EU gross inland consumption 2030 (scenario)
Renewables Solid fuels Solid fuels Nuclear

EU gross inland consumption 2011

Renewables

10% 14%

17%

Nuclear

18%
12%

14%

24%
Gas

35%
Oil Gas

22%

33%
Oil

Presentation of J.M. Barroso to the European Council, 22 May 2013

Source: European Commission

Massive investments are required

Total energy investment needs between 2010-2020: over 1 trillion

Power generation: ~ 500 bn

Transmission and distribution: ~ 600 bn

Renewables: ~ 310-370 bn

Distribution: ~ 400 bn Transmission: ~ 200 bn

Presentation of J.M. Barroso to the European Council, 22 May 2013

Source: European Commission

Will there ever be cheap energy for Europe?

Energy costs to rise in all scenarios but Europe will benefit most from decarbonisation
(in % of GDP, annually until 2050)
Fuel imports Investment in infrastructure
16%
EU in 2050: energy costs at around 14% of GDP in both scenarios 14% 12% % of GDP 10% 8% 6% 4% 2% +1.9% investment in infrastructure and efficiency EU today

Other energy purchase (domestic) Investment in energy efficiency

-1.4% imports

0%

Business-as-usual Business-as-usual scenario scenario 2050

Decarbonisation Decarbonisation scenario scenario 2050

Presentation of J.M. Barroso to the European Council, 22 May 2013

Source: European Commission

A "no regrets" scenario for Europe

Competitiveness

Smart infrastructure

Competitive markets

Diversified supply

Energy efficiency

Security of supply

Renewable sources

Sustainability
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Presentation of J.M. Barroso to the European Council, 22 May 2013

Priority 1. Boosting energy efficiency

Benefits of EU energy savings target of 20% by 2020

2.6 billion
barrels
Barrels of oil the EU does not have to import per year

193 billion

Money saved at conservative 73 EUR/barrel per year

1 000 fewer coal power plants

GDP of Finland
(in 2012)

Presentation of J.M. Barroso to the European Council, 22 May 2013

Priority 2. Completing the internal energy market

Estimated effects of opening gas & electricity markets
(in % of GDP - ranges)
% of GDP

1,0% 0,8% 0,6% 0,4%

Effect on GDP

0,2%
0,0% -0,2% -0,4% -0,6% -0,8% After 1 year After 5 years

Effect on employment

Effect on inflation

After 10 years

Presentation of J.M. Barroso to the European Council, 22 May 2013

Source: European Commission

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Priority 3. Smarter infrastructure

Gas
Rank Country
Baltic Energy Market Interconnection Plan

Rank

Country

Electricity Electricity and gas Oil and gas Smart grids for electricity in the EU

North Seas Offshore Grid

Electricity & Gas

Central / South Eastern Electricity Connections North-South Gas Corridor in Western Europe North-South Gas Interconnections & Oil Supply Southern Gas Corridor South Western Electricity Interconnections

Presentation of J.M. Barroso to the European Council, 22 May 2013

Source: European Commission

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Priority 4. Cost-effective use of renewable sources

Production costs versus subsidies for renewables
(averages, in /MWh, latest year available)
Subsidies over production costs Production costs Subsidies below production costs

Wind energy on-shore

/MWh
140 120 400

Solar energy (photovoltaics)

/MWh
500 450

100
80 60 40 20 0
SE UK IE LV DK NL EE MT RO ES CZ PL LT PT SI SK BG IT HU CY LU FI EL FR BE AT DE

350 300 250 200 150

100
50

0
ES MT CY PT EL IT BG RO FR HU AT SI SK LV EE LT PL CZ DE IE LU DK NL UK BE SE FI

Presentation of J.M. Barroso to the European Council, 22 May 2013

Source: Fraunhofer

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Priority 5. The external dimension

The example of the Southern Corridor
Corridor opening options (2018 - Shah Deniz II)
Nabucco-West Trans-Adriatic Pipeline Trans-Anatolian Pipeline & South-Caucasus Pipeline

Corridor enlargement
Extension of transport routes & new transport routes

Presentation of J.M. Barroso to the European Council, 22 May 2013

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