Improving the energy market through competition

Clearly visible on the legislative radar screen of EU authorities, the energy markets liberalisation has not yet delivered the expected results. The lack of competition between national power producers has resulted in insufficient progress, causing the gas and electricity markets to remain a burden rather than a competitive advantage for EU - based industries. This situation must be addressed in order to prevent further risks of carbon leakage for energy - intensive industries.

The European chemical industry was disappointed by various unsatisfactory legislative initiatives and studies led by the European Commission on this matter.  The target of creating a competitive,  secure and sustainable European Energy supply policy (issued in 2006) has not really improved the management of the EU energy markets - as if their official liberalisation still awaits  effective implementation.

Europe is far from being an integrated energy market. National borders remain fixed. Industrial energy consumers are still forced to cope with different treatment, linked to their local status and to the different public environmental or social policies in place. For many Member States, energy remains a strategic field where they can implement their public service policies. Therefore, the free market still lacks a strong enough physical or legislative foundation enabling it to deliver benefits for consumers.

Cefic position on the missed opportunity of energy markets liberalisation 

The electricity market has proved to be more difficult to liberalise than originally foreseen. Electricity is not simply a good like any other - it cannot be stored and it requires solid cross border transmission systems that allow for the easy circulation of electricity. Cefic regrets that too many restrictions remain in place on the cross border energy trade, preventing a European pricing system from gaining momentum and credibility.

European energy market liberalisation has not instilled confidence in the minds of end users. From the chemical industry’s point of view, the current policy does not allow for an easy assessment of the return on investment. As a result, the industry may hesitate before developing further industrial and research facilities in Europe.

Cefic contribution to improving the energy market

Improving the EU energy market is all the more important when we consider that pressures such as the Emissions Trading Scheme (ETS) and the related climate policies are likely to drive prices up. The EU’s efforts to obtain 20% of our energy consumption from renewable sources by 2020 are having a significant impact on energy costs. And they run counter to the energy markets liberalisation agenda.

Cefic has pointed out these issues at the Madrid and Florence fora where energy markets are discussed. Cefic urges that corrective measures be implemented so as to create a dynamic and attractive European energy market.

Next steps

Cefic suggests that the market mechanisms be adapted to suit the very nature of electricity. One should, for example, avoid financial speculation playing on the temporary shutting-down of some plants. The capacities of power producers must also be disclosed in a transparent way. Long- term contracts must be made easier.  Integration must also be facilitated - for example by forbidding discriminatory access to grids by means of adequate unbundling. It is necessary to make easier the transfer of energy from one country to another, and to enable companies to buy their energy in another country without suffering from technical or administrative burdens.