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Transcript of 1 The Changing Fortunes of the EUs Energy Market Antony Froggatt.
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1
The Changing Fortunes of the EU’s Energy Market
Antony Froggatt
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2
Unrestructured Electricity System
Regulator
Generation Transmission Distribution (Integrated Utility)
Customers
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3
Restructured System
Regulator Electricity
Exchange
Transmission System Operator
Customers
Distribution System
Retail
IPP Utility Producers Electricity
Import
Municapal Utility
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4
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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5
Opening of Energy Markets in EU
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Austri
a
Belgium
Denmar
k
Finlan
d
Franc
e
Germ
any
Greec
e
Irelan
dIta
ly
Luxe
mbo
urg
Nether
lands
Portu
gal
Spain
Sweden UK
Market opening -Electricity
Market Opening - Gas
Minimum Requirement -Electricity
Minimum Requirement - Gas
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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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9
Development of Energy Prices in EU - 1991-present
0.05
0.06
0.07
0.08
0.09
0.1
0.11
0.12
1991
Jan-Ju
n
1991
Jul-D
ec
1992
Jan-Ju
n
1992
Jul-D
ec
1993
Jan-Ju
n
1993
Jul-D
ec
1994
Jan-Ju
n
1994
Jul-D
ec
1995
Jan-Ju
n
1995
Jul-D
ec
1996
Jan-Ju
n
1996
Jul-D
ec
1997
Jan-Ju
l
1997
Jul-D
ec
1998
Jan-Ju
n
1998
Jul-D
ec
1999
Jan-Ju
n
1999
Jul-D
ec
2000
Jan-ju
n
2000
Jul-D
ec
2001
jan-
Jun
2001
Jul-D
ec
2002
Jan-Ju
n
Eu
ro/k
Wh
3
4
5
6
7
8
9
10
Eu
ro/G
igaj
ou
le 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 Employment in EU Electricity Sector
0
100000
200000
300000
400000
500000
600000
700000
800000
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Job
s
UK
Sw eden
Spain
Portugal
Italy
Ireland
Germany
France
Finland
Denmark
Belgium
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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
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
1995 1996 1997 1998 1999 2000 2001
Czech Rep.
Hungary
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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
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
1996 1997 1998 1999 2000 2001
Mill
ion
€
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16
Electricity Market Shares in Western Europe 1998-2002
20 20 20 19 19
7 7 9 10 12
8 89 9
1110 10
9 884 4 3 6
83 3 2
4
4
3 3 44
4
3 3 43
4
3 3 33
3
39 39 37 3427
0
10
20
30
40
50
60
70
80
90
100
1998 1999 2000 2001 2002*
Other
Iberdrola
Endesa
Electrobel
National Pow er
Vattenfall
ENEL
EoN
RWE
EdF
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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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18
Investors into Energy Sector in Prospective EU Members
0
5
10
15
20
25
30
Edf/Gdf RWE Eon/Ruhrgas Vattenfall InternationalPow er
Tractobel Gazprom
No
of
com
pan
ies
Slovenia
Slovakia
Poland
Lithuania
Latvia
Hungary
Estonia
Czech Republic
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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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20
Capacity of New Power Plants within the EU in August 2002
62220
2012 8002659
1000
0
10000
20000
30000
40000
50000
60000
70000
CCGT Coal Gas Cogen Nuclear
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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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Wind Power Cumulative Capacity in EU
629 8441211
16832515
3469
4772
6458
9645
12822
17319
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
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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 essential
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24
Development of Renewables in EU Electricity
12
12.5
13
13.5
14
14.5
1991 1992 1993 1994 1995 1996 1997 1998 1999
%