1 The Changing Fortunes of the EUs Energy Market Antony Froggatt

2

3

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

5

6 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

7 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

8 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 , but prices for domestic fell by 2.5%, giving retails additional profit of 600 million

9

10 Employment Levels According to EPSU, over last decade over 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.

11

12 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 there has been a 30% loss in jobs in Czech Republic and Hungary, compared with an EU average over the same period of 20%.

13

14 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.

15

16

17 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.

18

19 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.

20

21 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 Wind power has been particularly successful in recent years.

22

23 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

24