Vienna, 14 Mach 2015
Chairman, distinguished guests, ladies and gentlemen,
According to the latest figures, the European Union imports 53% of all the energy it consumes at a cost of €400 billion per year. That’s more than €1 billion per day, and it makes us the largest energy importer in the world. Six Member States depend on a single external supplier for all their gas imports and are therefore particularly vulnerable to supply shocks: but we are all too dependent on imports, whether gas or oil, for our own good.
So, it is not surprising so see energy high on the political agenda in the EU. From the discussions about the energy mix in our Member States, to complaints about the level of energy bills, the pros and cons of 'fracking' (hydraulic fracturing) or whether people want to have wind turbines in their backyard: energy has never been more present in our political debates.
1) So, my first message today is that our energy security is inextricably connected to that of our neighbours. There have been three gas crises in the past ten years when the supplier of 44% of the EU’s gas, Russia, cut off supplies, usually in the depths of winter. All of these have impacted on our eastern neighbours as well as ourselves, and raised awareness of how our security is linked.
This is not just because many of our partners are key producers or transit countries. As energy markets become increasingly linked, we will be directly affected by energy decisions taken in countries near to us. This is true of our southern partners, as important supply and transit countries, as well as those in the east.
It is worth remembering that power systems are physically interconnected, as are power markets. These interconnected systems include our neighbours to the East and the South-East: last year’s floods in Serbia and Bosnia and Herzegovina took out several power stations and mines in both countries, but the entire European power system, generation and transmission had to adapt to this. Similarly, the entire European system was severely stretched when a falling tree took out a crucial power transmission line in Italy, and electricity had to be diverted. There are advantages to integrated power markets, but also risks that need proper preparation.
The discussion about Energy Security is too often dominated by the discussion about gas supplies. I will come back to this. But energy security is first and foremost about being able to manage your own demand and consumption.
Energy efficiency and renewables key to energy security
2) That is why my second message is about energy efficiency and renewables, which have to be at the centre of any discussion on energy security. The cheapest energy is the energy which you don’t consume, and renewable energies help us to develop resources that are readily available here in Europe, reducing the need for imports.
Both Energy Efficiency and Renewable Energies were at the heart of the (recently-launched) Energy Union. As well as the moral imperative to reduce the environmental impact of the energy sector, they both make economic sense because they aim at reducing consumption of a valuable resource, often priced at double that of our US competitors. One of the ambitions of the Energy Union is to make the EU a world leader in green technologies and many of the measures in the Energy Union strategy will help meet this ambition. This will generate wealth, reduce costs, but can also be a very strong job creator inside the EU.
Investing and promoting energy efficiency and renewable energies are just as important for our neighbours, and this is something we must support.
Take the example of Ukraine, which uses ten times more energy to produce a unit of GDP than the OECD average. It is obvious that under these conditions it is very hard to be competitive in international markets, and the deterioration of Ukraine's economy is partly due to its wasteful use of energy and lack of investments.
If Ukraine were to increase energy efficiency to the EU average level, annual energy savings would be about 34 billion cubic metres (bcm) of natural gas. That would mean it didn't have to import gas any more. In the current circumstances this clearly would not only improve the energy situation but would increase the overall security of the country tremendously.
Tackling energy efficiency means reducing the burdens of high prices, the challenges for small businesses, and can contribute to social stability where energy is in scarce supply.
Let's turn south and consider the Southern Mediterranean. Energy consumption is soaring, fuelled by rapid population growth, industrialisation and urbanisation. If this is not managed, unsustainable rises in demand will put growing pressure on supplies and social conditions. That is why we must support our Southern partners to build energy efficiency and demand management into a strategy to meet the growth in energy demand.
Renewable sources of energy are available to many of our partners – from hydro power in the Balkans to solar in the Southern Mediterranean. We already know from our own experience the high capital costs needed to construct the facilities needed to exploit these resources. We need to help support the necessary investments.
The people investing in renewable energy capacities are usually from the private sector. They need to negotiate with state-owned utilities, for instance, for access to the grid. The complicated licensing and permit procedures for renewable energy production are some of the main obstacles to building these projects. That is why it is so important to put in place a regulatory framework that can encourage investments in renewable energies – and this is another area where the EU can help.
Neighbourhood Investment Facility supporting energy sector investments
Let me say a few words about our support for investments in the energy sector in the neighbourhood. Since the launch of the Neighbourhood Investment Facility (the so-called NIF) in 2008, € 753 million of NIF funding has been approved and has helped mobilise total investments of over € 20 billion. Around 30% are in the energy sector.
For the period 2014-2020 NIF grant resources will be expanded and will continue to provide significant opportunities for leverage and partnership, both with European and International Financial Institutions and with local banking and private sectors.
Support for connectivity
As I mentioned in my introduction, the discussion on security of supply is too focused on these gas supplies. However, access to gas is essential.
With the Russians casting doubt on transit through Ukraine in the medium term, and South Stream not happening, many countries in Central and South-Eastern Europe are worried about their long-term access to gas supplies. What will happen if a supplier (and we all know which one) turns off the supply? Last October the Commission carried out a simulation exercise throughout Europe, and including the Energy Community countries, to examine their resilience to a disruption of supply.
The results showed that we are better prepared now than the last time there was a supply shock. Countries have built up storage of gas, prepared power plants to run on alternative fuels, and designed the gas network to be able to reroute supplies. The development of Liquid Natural Gas terminals in Croatia or in Lithuania also offers excellent new supply options.
But stepping up connectivity with South-Eastern and Central Europe is in all our interests. I am focussing limited financial resources on a small number of critical projects to improve transport and particularly energy links, including interconnectors between national networks.
I have been impressed at the willingness of the countries of Western Balkans to work together on subjects of common economic interest, including energy. And at the WB6 Summit here in Vienna in August, partners should be able to endorse a list of key projects. We will then be able to focus on financing construction, blending EU grants with loans from the International Financial Institutions.
The list will include electricity connections, strengthening Serbia’s role as the heart of the region’s power system. These connections will facilitate development of renewables and the exercise has a real decarbonisation element, - as well as contributing to security of supply, by allowing power to be redirected within the region in times of crisis.
Let's be clear: work with our partners in the energy sector has an important foreign policy dimension.
When we work with partners in the Western Balkans on their approximation to EU legislation through the Energy Community, or on their interconnections with the EU energy market we are sending a message. President Juncker has made clear there will be no new accessions in the next five years, but our work together in areas like this is a very concrete way of signalling to pre-accession partners that we are nevertheless preparing one day to see them as part of the EU.
And, energy will be an important part of the current review of the European Neighbourhood Policy, for which the public consultation was recently launched. This review aims to put ENP on a firmer basis by identifying much more clearly the common interests we share with our partners. And, it is hard to think of a neighbour with whom we cannot develop shared energy interests, whether because they are producers or transit countries, or simply because we have an interest in their sustainable development, free from undue pressures from outside actors.
I believe that energy security in all its forms will take a growing place in the EU's foreign policy: with candidates, pre-candidates, with neighbours and the neighbours of our neighbours, and I hope, in the next 5 years, to make my own contribution to this.
Thank you for your attention.