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The Warsaw Voice » Business » May 28, 2013
Central Europe Energy Partners
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Europe of Coherence and Expectations
May 28, 2013   
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Energy sector security and the price of energy was the main focus of the opening seminar at the Global Security Forum held in Bratislava, Slovakia, April 18-19.

Central Europe Energy Partners (CEEP), an association of Central European energy and fuel companies that aim to strengthen their position in the European Union, was a partner of the forum. Forum discussions featured experts including Beata Stelmach, undersecretary of state at Poland’s Ministry of Foreign Affairs, and Peter Burian, secretary of state at the Slovak Ministry of Foreign and European Affairs. Stelmach said that an “efficient use of European raw materials is a key step towards sustainable development and security,” while Burian applauded the conference’s role in presenting the position of Central European states on energy security in the region. “Even though our perspective on different aspects of the energy sector and climate policy may not be the same, our countries need to foster greater cooperation and present a joint position internationally,” Burian said. “CEEP’s efforts are of the utmost importance.” He added that Slovakia “supports initiatives aimed at the development of a uniform EU energy policy,” but such a policy should “provide a response mechanism” if there are “threats to the security of the electricity supply.”

The Bratislava Report

Forum participants argued that the European Union’s unified energy sector policy does not take into account differences in the economic development of individual countries or the specific nature of their energy sectors. As a result, this policy is damaging to Central European countries, they said, as its only visible effect is a constant increase in energy prices. This will effectively inhibit the growth of the countries that joined the EU after 2003, forum participants said, adding that these countries use all available means to diversify the sources and means of energy generation.

This is also the most important message of the What Energy, Price, Growth report produced by Roland Berger Strategy Consultants for CEEP, which was presented in Bratislava. The report illustrates the differences between the EU15 states, that is “old” EU members, and the countries which joined the EU after 2003. It also says that meeting the established climate objectives will be a major challenge and a great burden for the “new” member states.

Paweł Olechnowicz, president of the CEEP board of directors, who took the floor at the opening of the Bratislava conference, said, “As the demand for energy increases, concerns related to energy security will become increasingly important. To ensure stable economic growth and maintain industrial efficiency, energy has to be both easily available and affordable. It should also come from reliable sources which can resist all kinds of short- and long-term disturbances, as energy supply interruptions cause massive losses. No one doubts, and no one should doubt, that we need several energy sources – both now and in the future. Without them, we cannot maintain real energy sector security.”

The Bratislava Report says that, in order to embrace the EU’s energy sector policy by 2020, the countries of Central Europe would have to invest anywhere from 400 billion to 460 billion euros in energy production, transport and efficiency. Heiko Ammerman, a partner at Roland Berger Strategy Consultants, said, “These projects are huge and they will affect the price of electricity, making it rise dramatically. We estimate that for industrial customers in EU11 countries, prices will increase by 40 to 60 percent. At the same time, we know that upwards the surge will affect the entire population of the region, but to a lesser extent. To conclude, we are absolutely certain that the economies and the people of the Central European states will not accept this.”

Discussion participants cautioned against an oversimplified approach to methods for solving problems related to the interplay of industry, energy, the natural environment and climate protection. In their comments, they stressed that industry accounts for 32 percent of the new EU member states’ GDP, compared with 24 percent in the old EU member states.

Expectations and opportunities

Olechnowicz said that there are indications that “European economies are pulling out of the recession, so it is a good time to find out which factors are conducive to the recovery and which hinder it. This would help restore the value and significance of social and economic coherence throughout the EU. An essential element of this coherence is dynamic industry growth, which is an effective tool in eliminating differences. This is the only way to raise the funds necessary for investment projects and effectively reduce unemployment. Those responsible for energy sector policy must not overlook the gap between the economies of the old and new members of the European Union, and so I believe that there is a need to develop an appropriate program for the EU15.”

Friedbert Pflueger, director of the European Centre for Energy and Resource Security at King’s College, London, said that the report compiled for the CEEP by Roland Berger is the real voice of Central Europe. “There is no other solution or other means than a more dynamic elimination of differences in the growth rates through cohesion policy in the area of economy and the energy sector, as well as climate,” Pflueger said. “Otherwise, we will not be able to maintain Central Europe’s thrust for faster growth. Fortunately, thanks to CEEP’s activities, the states of this part of the continent are able to clearly formulate their own opinions and protect their interests.”

Competitiveness through energy

The price and availability of energy sources is one of the key factors behind the choices made by both investors and consumers. In the last several years, the United States has been an excellent example of this. Thanks to dynamically growing production of shale gas, the price of this gas in the U.S. is now nearly four times lower than in Europe. As a result, not only an economic upturn but reindustrialization is taking place in the U.S., which has also been enabled by European companies, such as chemical companies and steel manufacturers. Most analysts expect that U.S. prices will remain low in the following decades.

“And in Europe, we have one of the highest energy prices,” said the Polish Foreign Ministry’s Beata Stelmach. “This is what effectively inhibits our growth. Therefore, we need to make bold decisions—decisions measuring up to those that triggered the shale revolution in the United States.”

The U.S. example is the best proof that unconventional hydrocarbons may give Europe a competitive edge, Stelmach added. However, the development of local energy sources is no less important, she said. “By using these effectively, we contribute to sustainable development and security,” Stelmach said.

Ian Brzeziński of the Atlantic Council think tank and public policy group in Washington, said, “The diversification of energy sources should be viewed as Central Europe’s priority, as with the geopolitical stability of the entire region. The strong and decisive voice of CEEP is a significant element in transatlantic relations and current discussions. Only from the perspective and experience of the region can we see the importance of the stability and independence of Azerbaijan, Georgia and the Ukraine, the links between these countries and Europe, as well as the future relations between Russia and China regarding the energy sector. Each of these factors has an impact on European energy security.”
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