Coffee House

Jean-Claude Juncker’s biggest challenge: energy

11 July 2014

‘Energy is the single biggest issue facing Jean-Claude Juncker,’ remarked a seasoned Eurocrat to me earlier this week. Europe’s energy infrastructure is decrepit and insular. Rates of cross-border interconnection, for example, remain very low – at just 8 per cent of their production capacity on average across the union according to the FT.

The Commission’s 2030 energy package aims to raise the average rate of interconnection to 15 per cent — part of a string of targets designed to complete the single market in energy. Alas, it’s going to take more than a target or two. The level of investment required is enormous (more than 1 trillion euros by the Commission’s estimate, of which only 5.8bn has been found for 2014-2020). The Commission has identified nearly 250 vital energy infrastructure projects, many of which lie in eastern and central Europe — where the network retains a Soviet flavour, with all the difficulties which that entails. According to the Visegrad Group (Poland, Hungary, Slovakia and Czech Republic):

Even though the Visegrad countries as a group are less dependent on overall energy imports than the EU average, from the perspective of security of energy supplies their import structure is actually quite unfavourable. This is because of the relatively high reliance on natural gas imports from Russia and typically (especially in the case of Slovakia, Hungary and Poland) via a single route and with very limited options of switching to alternative sources in case of supply disruption.’

Events in Russia and the Middle East over the last decade, and especially this year, have made plain Europe’s energy insecurity. The EU 2030 energy framework contains an explicit objective to increase the share of renewable energy to at least 27 per cent across the union by 2030. Renewable energy is, theoretically, internally sourced and would, therefore, reduce the continent’s reliance on dodgy sheikhs and tsars. But the renewable targets have been the subject of fierce disagreement between the 13 ‘green’ economies in western Europe and the Visegrad Group (plus Bulgaria and Romania), which are heavily dependent on fossil fuels (principally Polish coal, Romanian oil and gas and Gazprom).


To break the deadlock, the de facto leader of the Visegrad Group, the Polish premier Donald Tusk, proposed a European energy union earlier this year. His aims are: EU member states and institutions to negotiate collectively with Gazprom (rather than bilaterally), improve connectivity to enable the union to supply its own demand, and to diversify the supply of resource both internally and externally (Tusk is an advocate of European shale development and closer ties with energy producers in the Causasus).

The British government is understood to be supportive of Tusk (although it has reservations about the role that the Commission might play). British companies are already looking to exploit Poland’s potentially healthy shale deposits (the most promising in Europe according to the IEA). The completion of the single market has been a long-term aim of the British government; indeed, it is likely that Britain will push for this throughout the Juncker commission, which is why David Cameron is so keen to send a big-hitter to Brussels. Meanwhile, the French are also supportive of Tusk. The Elysee sees a chance for EDF to expand its nuclear operations into central and eastern Europe. There are also rumours in Whitehall — and among some players in the oil and gas exploration industry — that President Hollande might reverse his opposition to shale. In which case, Poland would be a useful ally.

Tusk has, however, found lukewarm support in Berlin, the seat of power in Europe at present. As ever, Angela Merkel has hedged her bets. She is broadly supportive of the Poles and of the Commission’s commitment to increase interconnectivity. It is understood that Merkel also sees sense in diversifying energy supply both within and without the union. The sticking point is Gazprom. As Liam Halligan reported in these pages some months ago, Mrs Merkel has fostered commercial ties with Russia. This relationship is epitomised by the Nord Stream – a set of pipelines, completed in 2012, which ships Gazprom’s gas to Germany while by-passing Poland.

Mr Tusk and his allies say that the Nord Stream marks Europe’s incoherence on energy policy. He argues that it harms the consumer, especially in eastern Europe. Gazprom, the Poles say, is not run by fools: it knows which of its European customers is in a weak position and charges accordingly. The Poles want to fight back by making the European energy market transparent and to use collective bargaining power under a centralised authority to drive down Gazprom’s prices. But the Commission (and, to be fair, some western European governments) fear that this may contravene existing internal market rules. Others worry that, unless supplies are significantly diversified, Gazprom will still hold the whip-hand; therefore, collective bargaining power would not be sufficient to reduce costs or improve security. Expect a long and hard fight in Brussels and Strasbourg to settle the question.

In this atmosphere where national interests openly compete across the union, a wheeler-dealer like Jean-Claude Juncker might not be a bad presence at the head of the Commission. Much, though, will depend on his commissioners. What is needed is robust free-marketeers with enough ‘bottom’ and personal charm to make progress in difficult circumstances. Of the likely British candidates (listed by James yesterday), Michael Howard fits the bill. He is, unquestionably, a free-marketeer with significant political clout. As for charm, Howard is infamous for having ‘something of the night’ about him; but, a former colleague from the Thatcher and Major years rubbishes that view: ‘Michael is a man of hidden depths. Just look at his wife.’

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  • AlecM

    Here’s an interesting snippet:

    ‘Last Tuesday, July 8, the Swiss online Blick here reported meteorologists were predicting snowfall down to 1800 meters elevation (6000 ft.), warning that up to 50 cm (20 inches) of snow in the Canton of Valais. Blick writes that the snowfall presented a problem for grazing cattle, which would either have to be brought down to lower elevations or housed in mountain shelters stocked with feed.’

    This global cooling isn’t supposed to be happening.

  • Bonkim

    There is no authority to plan generation and transmission across the EU. With a privatised industry it will not be possible to coordinate investment in transmission and generation either. With different plant and transmission systems – this would be a huge task – No chance it will happen.

  • Winston Burchill

    Cameron doesn’t know what he’s doing.

    • berosos_bubos

      Yes he does, he does what Ms Sheffield says.

  • the viceroy’s gin

    “Rates of cross-border interconnection, for example, remain very low – at
    just 8 per cent of their production capacity on average across the union”


    I read a couple paragraphs down from this whopper, lad, but you failed to support it, so I quit. It’s only your blind assertion, then. You need to support it with data and analysis, and not just assert it and begin jabbering about the political squabble required to enact your assertion. I get it that you Speccie kids are advocating for the borg in all its forms and activities, but you’ll have to realize that there are people out here who deal with these industries for real, and not just in an empty-headed blogging sense. You’ll be scorned as just another EUSSR apparatchik, unless you provide something more than bleating political advocacy.

  • dalai guevara

    The message was crystal clear.
    It was delivered on these very pages two years ago:

    1- upgrade your systems to remain competitive
    2- UK cost for the generation of electricity (before tax) is the highest in Europe
    3- UK plant and infrastructure is the most outdated plant and infrastructure the developed world has ever seen
    4- modern CCGT plant will fix that
    5- modern USC coal plant with optional carbon capture tech will fix that
    6- modern grid infrastructure will fix that
    7- an increase of local renewables generation will fix that
    8- find a way to make the citizenry partake in the energy generation game

    All you did was:

    A- talk and panic
    B- panic about nuclear and its cost implications
    C- panic and increase diesel STOR back up. Diesel STOR!
    D- pay silly subsidies to landowners/aristocrats, not people.

    Now weep and reap what you’ve sown.

  • itdoesntaddup

    I see the steam rising from the Eggborough cooling towers, but I see no head of steam towards a sensible EU energy policy. The idea that renewables will cut it is quite laughable with present technology. That way lies poverty and industrial retrenchment. Likewise, the idea of power grids is flawed. Why spend vast sums to transport power when you could build a power station close to the centre of demand in the first place, and save at least half the cost? The main reason for power grids at present is to try to disperse unwanted surplus power from German solar panels at midday in midsummer, despite the mess it makes of grid systems and the economics of power provision needed to cover when the sun doesn’t shine.

  • Alex

    “The level of investment required is enormous (more than 100bn euros by the Commission’s estimate…)”
    Isn’t the UK planning to spend £100 bn on subsidising ludicrously expensive offshore wind farms over the next 15 years? That’s over 100bn euros.
    So here’s a plan. Why doesn’t the UK lend it to the rest of Europe instead, charge them a reasonable amount of interest, and not build the windfarms but exploit shale instead.
    We get cheaper energy AND a return on our investment.
    The rest of Europe get the money they need for interconnection.

    • HookesLaw

      I don’t know if £100 billion is correct but the strike rate (£140 per MW/hr) is bringing investment of £110 billion with it and 200,000 jobs.
      There are subsidies for other power investment as well and whatever it is its paid for out of our bills.
      I would rather the subsidy went on nuclear.

      • the viceroy’s gin

        It is, laddie. Your hero Call Me Dave the socialist signed off on a massive giveaway to the communist Chinese warlords, for overpriced nuclear. Thus begets your Camerluvvie global warmingism lunacy.

      • Alexsandr

        why not burn coal in existing power stations. we have some big ones in the aire valley. or convert them to fracked gas, or the technology to get gas from unextracted underground coal.

      • berosos_bubos

        Got you !
        So you’re not a conservative then ? Subsidies always destroy more jobs than they create, through higher taxes.

    • Alexsandr

      why do we care about interconnection. we just frack for our own domestic market. its our gas – lets keep it for us.

  • saffrin

    Maybe Juncker can use the same tactic as his predecessor, pick a fight he can’t possibly win and antagonize the biggest energy supplier in Europe.

  • Martin Adamson

    No chance. On this, as with all issues, the primary purpose of the EU bureaucracy is to consolidate more power for itself, not to resolve the problem they have been given. Any British citizen who wishes to maintain a first-world standard of living beyond 2020 would be well advised to buy a back-up generator and build a large subterranean tank to stockpile diesel.

  • Denis_Cooper

    “To break the deadlock, the de facto leader of the Visegrad Group, the Polish premier Donald Tusk, proposed a European energy union earlier this year.”

    “The British government is understood to be supportive of Tusk.”

    And how could this be consistent with not passing more powers to the EU?

    • you_kid

      Yeah, why bother with the EU, hey?
      Britain’s only IN the EU, not the Dollarzone, nor are we a member of the Warsaw Pact or part of the Kingdom of Norway, lad.

      • Inverted Meniscus

        Well your sock puppets are all sponsored by the EU laddie so we know whose pocket you are in. Does that include the Goat?

        • you_kid

          Yeah, sure – but you are still as dumb as ever, laddie.
          Why ever change that when it works for you?

          • Inverted Meniscus

            Is that the view of all your sock puppets laddie? Difficult to tell when they are spouting gibberish.

            • you_kid

              Yes, the sock muppets line up as usual. Nice.
              Tell me lad, are you in the Russian coal business, do you sell Norwegian gas or are you a Colombian drug dealer?
              No, you are just dumb, arentcha.

              • Inverted Meniscus

                Is there a socialist nutter who can translate this nutter’s socialist nutter gibberish?

                • you_kid

                  A brief interview with Inverted M
                  – powered by the you_kid –

                  you_kid: welcome Inverted M, how are you?
                  IM: dunno
                  you_kid: oh, okay – well let’s get on with this then shall we? Have you ever invented/conceived/produced anything of merit?
                  IM: dunno
                  you_kid: not to worry, have you ever experienced/been in contact with superior intelligence?
                  IM: dunno
                  you_kid: Fine, we get that. But when it comes to energy you are a savvy chap, aren’t you? Where do you buy your energy from?
                  IM: British Gas. Because it’s British.
                  you_kid: IM, thank you very much for this chat.

                  That was a brief interview with Inverted M.
                  – brought to you by the you_kid –

                • Inverted Meniscus

                  You have serious problems with your socialist nutter gibberish laddie. Try Cyrillic.

      • the viceroy’s gin

        …what is your army of sockpuppets in, lad?

  • Rhoda Klapp8

    Can we say I told you so yet? Can we ask how they got into this predictable state? Can we remove everyone who contributed to the mess from having any say in the future?

    • Alexsandr

      EU interfered with our energy by putting in green cr@p, so we turned off base load power power stations like Didcot. now we are short of power and need to import. We should have told the EU to take a running jump and kept the necessary generating capacity.

      • telemachus

        Any excuse to lambast Europe
        Better French Nuclear energy than destroy the planet

        • Alexsandr

          tell that to the people in Japan.

          and its not the people of Europe, iits the useless, undemocratic overbeurcratic EU. Keep up.

        • itdoesntaddup

          But German nuclear energy should be shut down?

        • greggf

          Not Europe tele, the EU. But you’re spot on about French nuclear energy.

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