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by Jerome a Paris
Wed Apr 5th, 2006 at 09:33:18 AM EST
The EU Commission is launching another assault against countries that do not respecte the "letter or the spirit" of the energy directives, and has sent warning letters to 17 countries, including, yes, Britain. As there is little detail on the individual grievances, it's hard to know who's blamed for what, but what's blamed on France and Spain has certainly been leaked, as it's all over the newspapers.
The UK would undoubtedly like to see its model forced upon other EU states. But it is far from clear that this would solve Britain’s own problem. London has been quick to blame soaring UK gas prices on “continental cartels” gaming the market, but slow to acknowledge the role played by inadequate UK planning and investment.
The above is from the editorial of the FT. Look closer, and they acknoweldge all the points I have made earlier, but fail to make the "right" (because contrary to dominant ideology) conclusions.
- there is an increasing energy dependency crisis in Europe. Well, sort of. It's a crisis in the UK, whose oil & gas is running out and which seems not to have planned for it. It could yet turn into a crisis in Germany, as the country abandons nuclear, cannot go back to coal (too polluting) and thus has to switch to gas-fired plants, with gas coming essentially from Russia;
- there are price differences between countries. Only - the lowest prices are in the non-deregulated markets of continental Europe, not in the liberalised markets, and the more expensive markets (read: the UK) want access to cheaper electricity;
- there are interconnection issues. Some of it is technical (lack of capacity), and some of it is obviously more complex, as the existing capacity, such as the gas Interconnector between the UK and the continent is not used. Both are blamed, with little element of proof, on the lack of liberalisation of the continental markets.
Ironically, energy security can increase with scale. For deregulation could enable a multinational market such as the EU – if its national grids and pipelines were properly linked to each other (which they are not) – to manage with less spare capacity. In a single market countries could depend more on each other’s spare capacity.
The issue, as outlined by the FT editorial makes sense - except that what they are really advocating is that those markets that have invested to have spare capacity (read: the continental market) bail out those that have not (the UK, Italy) - which, strangely enough, are the most liberalised ones... So we are talking about the liberalised markets freeriding on the reserves of the others. Now THAT's markets in action.
As to the commercial fact that continental companies choose not to take advantage of the higher prices in the UK, it means either of two things: (i) they are stupid, selfish and ugly and would rather lose money than sell gas they have to the Brits, (ii) they are doing it on purpose (to spite the Brits?) as suggested by the FT which writes that "Gaz de France failed to supply volumes into the Interconnector, or (iii) they have existing obligations to their clients and are fulfilling those rather than cancelling them to make a quick buck. I wonder which it is... But it underlines the use of having a national company which gives priority to national/existing clients, maybe, and validates the point that security of supply is best ensured by your own measures and not by the "markets". If the gas isn't there (or committed elsewhere), no price will provide it.
And who will build the interconnectors? Who will ride roughshod over the local and environmental obstacles? Who will pay for the infrastructure if the indispensable-to-finance-them long term contracts are a big no-no?
- The EU then raises the issue of "unbundling", i.e. the legal separation of transport networks from the production companies. It is said discreetly that the EU will push for unbundling directives - because the fact is that such unbundling is NOT in the existing directives, or at least not to the extent desired by the liberalisers (but it's presumably in the "spirit" of these directives, right?).
To sum it up, these articles and procedures are full of innuendo, grand sounding principles, and hot air.
Energy supply is both cheaper and more reliable in "protectionist" markets than in liberalised markets, or, to use better terminology, in secure markets than in chaotic markets. And there is no reason today for the secure markets to pay for the fecklessness of their neighbors.
Maybe Blair and Barros should read La Cigale et la Fourmi
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