Transcript The Changing Fortunes of the EU’s Energy Market

The Changing Fortunes of the
EU’s Energy Market
Antony Froggatt
1
Unrestructured Electricity System
Generation
Transmission
Regulator
Distribution
(Integrated Utility)
Customers
2
Restructured
System
IPP
Utility
Producers
Electricity
Import
Municapal
Utility
Regulator
Electricity
Exchange
Transmission System Operator
Distribution System
Retail
Customers
3
EU Legislation
• Directive 96/92/EC concerning common
Rules for the internal market in electricity.
• Transposition by February 1999
• Directive 98/30/EC concerning common
rules for the internal market for natural gas
• Transposition by August 2000
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Opening of Energy Markets in EU
100%
90%
80%
Market opening -Electricity
70%
60%
Market Opening - Gas
50%
Minimum Requirement Electricity
40%
Minimum Requirement - Gas
30%
20%
10%
UK
Lu
xe Ita l
m y
Ne bo
th urg
er
la
n
Po d s
rtu
ga
l
Sp
Sw ain
ed
en
Au
st
Be ria
lg
De ium
nm
a
Fi rk
nl
an
Fr d
a
G nce
er
m
a
G ny
re
ec
Ire e
la
nd
0%
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New Directives 2002
• The Energy Council will discuss on 25th
November, next version of Directive.
• This will then be sent to European
Parliament for Second Reading
• Then possibly to Conciliation, if
difference occur between Parliament
and Council
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Main Points of New Directive
• Commission proposing to merge electricity and
gas directives.
• Market Opening: Non domestic by 1st January
2005, domestic 1 year later.
• Legal separation of TSOs and DSOs
• PSO
• Electricity Labelling
• Ownership
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Impact on Price
• Electricity prices for domestic consumers
fallen 2% on average in last decade; but for
commericial consumers by 12%
• Gas prices, increased for domestic by 15%
but for commercial by 40%
• In UK, wholesale price fell by 18% between
2000-1, but prices for domestic fell by
2.5%, giving retails additional profit of
€600 million
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0 a e
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02 ul- un
Ja De
n- c
Ju
n
Euro/kWh
0.12
10
0.11
9
0.1
8
0.09
7
0.08
6
0.07
5
0.06
4
0.05
3
Euro/Gigajoule
Development of Energy Prices in EU - 1991-present
Elec - Industry
Elec - Domestic
Gas - Industry
Gas - Domestic
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Employment Levels
• According to EPSU, over last decade over
250 000 jobs lost in electricity sector.
• Similar losses might be expected in Gas
sector.
• More losses in EU expected, as major firms,
such EdF and GdF are partially privatised.
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Level of Em ploym ent in EU Electricity Sector
800000
700000
UK
Sw eden
600000
Spain
Portugal
Jobs
500000
Italy
400000
Ireland
Germany
300000
France
Finland
200000
Denmark
Belgium
100000
0
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
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Employment in Central Europe
• The introduction and preparations for
liberalisation directives is expected to have
bigger impact in CEE than in EU.
• In the period 1995-2001 there has been a
30% loss in jobs in Czech Republic and
Hungary, compared with an EU average
over the same period of 20%.
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Employment Levels in Czech and Hungarian Energy Sector
45000
Czech Rep.
Hungary
40000
35000
30000
25000
20000
15000
10000
5000
0
1995
1996
1997
1998
1999
2000
2001
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Mergers and Takeovers
• In past years a few companies have
increased their dominance of the energy and
utilities sector.
• This concentration dynamic has
reached a dramatic level during the last
two years with acquisitions amounst
largest EU companies rising from €3.5
billion to €
42 billion, a 12 fold increase.
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Combined Acquisitions of EdF, Eon, RWE, Enel, Vattenfall, Endesa
and Electrabel, 1996-2001
45000
40000
35000
Million €
30000
25000
20000
15000
10000
5000
0
1996
1997
1998
1999
2000
2001
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Electricity Market Shares in Western Europe 1998-2002
100
90
27
80
39
39
37
34
Other
70
60
50
40
30
3
3
3
3
4
10
3
3
3
3
4
10
3
4
4
2
3
3
3
4
4
6
9
8
9
9
3
4
4
4
Iberdrola
Endesa
Electrobel
8
National Pow er
8
Vattenfall
ENEL
11
8
8
7
7
9
10
12
20
20
20
19
19
1998
1999
2000
2001
2002*
EoN
RWE
EdF
20
10
0
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Mergers in CEE
• The same dominant countries are active in
CEE, either directly or through strategic
alliances for example with Gazprom
• In many ways the region is being divided up
between French and Germany companies.
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Investors into Energy Sector in Prospective EU Members
30
25
Slovenia
No of companies
20
Slovakia
Poland
Lithuania
15
Latvia
Hungary
Estonia
10
Czech Republic
5
0
Edf/Gdf
RWE
Eon/Ruhrgas
Vattenfall
International
Pow er
Tractobel
Gazprom
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Security of Supply
• The liberalisation of gas and electricity
industry has resulted in dominance of gas in
new build of electricity.
• This is because, gas and inparticular
Combined Cycle Gas turbines, are quicker
to build, cheaper to run and cleaner than
other conventional power stations.
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Impact on Renewables
• In 2003, Member States must transpose the
renewable energy directive into national
law.
• This set, non-binding, targets of the EU, of
12% of energy (22% of electricity) from
renewables by 2010.
• Wind power has been particularly
successful in recent years.
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• Despite this, renewables are not
significantly increasing their share of
electricity production.
• Because electricity demand is still
increasing
• New renewables only play minor role in EU
electricity
• Directive, targets are ambitious, but
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essential
Development of Renewables in EU Electricity
14.5
14
%
13.5
13
12.5
12
1991
1992
1993
1994
1995
1996
1997
1998
1999
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