Europe’s Energy Position – Markets and Supply

The European Union has issued a publication entitled „Europe’s Energy Position – Markets & Supply“, which provides an overview of the energy position of the EU with a close look at oil, gas, electricity market developments over the past two years, with an emphasis on the promotion of renewable energy source production capabilities.

An extract of the introduction section of this report states provides this summary of this useful publication:

„While, after years of growth, the EU had managed to stabilize its energy consumption in 2006 and in 2007, EU energy demand fell between 2008 and 2009.

Gross inland consumption for oil fell by 1.5 % in 2008 compared to 2007 and by almost 6 % in the first semester of 2009 compared to the same period in 2008. The consumption of electricity was down by more than 5 % in the first semester of 2009 compared to the same period in 2008. In this period, the consumption of natural gas declined by 10 %.

In the second quarter of 2009, EU monthly electricity consumption recorded its lowest levels since 2003, the first complete year of common statistics for the 27 Member States. Year-on-year, consumption fell by more than 10 %, 6 % and 5 % in April, May and June respectively. As of June 2009 consumption was down by more than 23 % compared to the beginning of the year. EU consumption of gas fell by 16 % in the second quarter of 2009 with respect to the same period of 2008. In April 2009, it was about 30 TWh below the lowest level ever recorded (2003) and almost 25 % below the corresponding 2008 value.

2. This dampened demand resulted in a decline in greenhouse gas (GHG) emissions in the EU: as a result of lower CO2 emissions from fossil fuel combustion in the energy, industry and transport sectors, it is estimated that emissions of GHG in 2008 were about 1.5 % lower than in 2007. In the verified emissions from the EU Emission Trading Scheme (EU ETS) for 2008, total EU-27 emissions of GHG decreased by 3.9 % between 2007 and 2008. It is anticipated that CO2 emissions of the EU energy sector will further decrease in 2009. Given the fall in emissions in 2008, the carbon price on exchange markets in 2008 fell from EUR 23/ton in January to EUR 16/ton in December. During the first semester of 2009, the carbon price ranged between EUR 13 and 16/ton.

3. Energy prices experienced a period of high volatility. By the end of the observed period, they reached 2007 levels. Using monthly averages, the crude oil price (Dated Brent) fell from approximately USD 140 per barrel in mid July 2008 to around USD 70 per barrel by the end of June 2009. At the beginning of 2009 the monthly average price was as low as USD 43 per barrel. Between January 2008 and June 2009:

– The gas price decreased by 57 %, from EUR 24.54 to 10.54/ MWh, on the NBP spot market and by 25 %, from EUR 25.50 to 19.25/MWh, on the year-ahead NBP forward market. Taking into account the highest and the lowest recorded prices, the gas price fell by 65 % on the NBP spot market (EUR 29.93/ MWh in September 2008 and EUR 10.45/MWh in May 2009) and by 54 % on the NBP forward market (EUR 39.90/MWh in July 2008 to EUR 18.49/MWh in March 2009).

– The electricity price decreased by 45 %, from EUR 66.78 to 36.54/MWh, on the spot market (Platts Pan-European Power Index) and by 6 %, from EUR 60.24 to 56.90/MWh, on the forward market (DE Y+2). Taking into account the highest and the lowest recorded prices, the electricity price decreased by 65 % on the spot market (EUR 95.83/MWH in September 2008 and EUR 33.88 MWh in May 2009) and by 40 % on the forward market (DE Y+2) (EUR 82.36/MWh in July 2008 and EUR 49.75/MWh in February 2009).

4. Investment in new energy infrastructure has been severely hit and financing conditions have weakened. Companies with a strong balance sheet are still investing but some companies have announced a review of their investment strategies both in the EU and in producing countries. Many infrastructure projects have been delayed or cancelled. For RES, new investment only rose by 2 % in 2008 and it was expected that 10 to 15 % of wind energy projects would be delayed or cancelled in 2009.

The structural transformation of the EU energy system, and consequently of the EU energy mix, is at risk of slowing down. Dampened demand due to the economic crisis provides a window of opportunity in terms of time gains to re-direct many investment projects towards low-carbon projects. However, as a result of this crisis, the price of carbon dioxide and of fossil fuels has decreased and the positive side effects of the EU Emission Trading Scheme (which allows for the exchanges of CO2 allowances) and of high fossil fuel prices, such as stimulating investment in new and/or in low-carbon capacities, appear temporarily diminished. Up to now, national support schemes for RES have cushioned the impact of the crisis to a certain extent.

Given the marked impact of the economic recession, temporary factors prevailed over structural changes in the EU energy system. This was already the case in 2007 when mild weather and high energy prices played a major role. Without the implementation of the additional measures and policies proposed and enacted by the EU, energy demand and energy imports are therefore likely to rise again when the economy will rebound. During the observed period, the EU has adopted major decisions which pave the way for the evolution of the EU’s future energy position and its energy markets. Three important milestones were:

  • In December 2008, the ‘Climate/energy package’ was approved, setting out the EU strategy to reduce greenhouse gas emissions and increase the share of RES; in this context, the Commission stressed the importance of energy savings.
  • In March 2009, the ‘Third internal market package’ for gas and electricity was approved with a view to foster functioning and competitive energy markets which will eventually enhance Europe’s energy security.
  • In April 2009, the ‘European Energy Programme for Recovery’ was adopted by which the EU dedicated EUR 4 billion to support new energy infrastructure (2). Projects, among which off-shore wind, carbon capture and storage demonstration sites as well as gas and electricity inter-connectors, will foster security of supply, competitive internal electricity and gas markets and the transition to a low carbon energy system.“

Read the full publication here in PDF format.

Citation: Europe’s energy position – markets & supply, Luxembourg: Publications Office of the European Union, 2010, ISBN: 978-92-79-14175-1, doi: 10.2768/20104, © European Union, 2010


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