Message Loud and Clear
January 30, 2014
By Paweł Olechnowicz Chairman, Board of Directors, Central Europe Energy Partners
Central Europe Energy Partners (CEEP) had its voice heard in 2013. Our position concerning “backloading”, energy prices and the need to re-industrialize Europe was widely quoted and commented on by the media. We made our views known during seminars and panel discussions held in Bratislava, Vilnius, Katowice, and Krynica-Zdrój, as well as during the Coal Days in Brussels event held at the European Parliament, where Poland’s Deputy Prime Minister Janusz Piechociński presented his views on EU energy policy in the presence of an audience of MEPs, ministers, European Commission officials and specialists. The role of Central Europe Energy Partners as a co-organizer of regular meetings in the German parliament to discuss the effects of the so-called Energiewende policy should also be mentioned. CEEP speaks out for a balance between the EU’s economic and climate policy, and for invigorating Europe’s economic growth. More specifically, an energy policy that fails to take into account differences in economic development is detrimental to the countries of Central Europe. That’s why it is important to convince and draw the attention of governments, parliaments and the general public in the European Union to the fact that climate policy objectives, especially in terms of a reduction in CO2 emissions, should be modified so that the economic balance and social costs, especially those in Central Europe, are properly considered. If we believe in a strong and competitive Europe, we should allow EU member states to use the cheapest and most readily available indigenous sources of energy, with a simultaneous and stable reduction in CO2 emissions.
Energy price growth
In mid-April, we took part in the GLOBSEC 2013 Conference (Global Security Forum) in the Slovak capital, Bratislava. It was an important event, held as part of the Polish presidency of the Visegrad Group. What Energy, Price, Growth? report, compiled by the Roland Berger consultancy firm for Central Europe Energy Partners and presented at GLOBSEC, highlighted the differences between the EU15 countries and the countries that joined the EU after 2003, known as the EU11. It was noted that Brussels is proposing a uniform energy policy that will produce only one noticeable effect—a steady increase in energy prices. This, in turn, will effectively inhibit economic growth in Central European countries. That is why it is so important for the countries from the CE region to use all available opportunities to diversify the sources and means of energy production. To satisfy the energy policy guidelines for 2020, Central Europe needs to invest anywhere from 400 billion to 460 billion euros in efficient electricity generation and transmission. This is huge spending. Its costs will have a major effect on the price of electricity and push it dramatically up. We estimate that electricity prices for industrial customers in the EU11 could rise between 40 and 60 percent. This will undoubtedly impact our individual consumers. “We have absolute confidence that the economies and societies of Central European countries will not accept this situation,” the report says.
European Economic Congress
In May, Central Europe Energy Partners organized a panel discussion entitled “The role of energy in a competitive Europe” during the 3rd European Economic Congress in Katowice. According to the panelists, reducing the use of fossil fuels in the EU11 region will take a lot more time than people think. This is not opportunism: this is a simple statement of fact that the transformation will be very expensive for the region. The panelists agreed that we need to revive and develop industry in order to stimulate economic growth and generate new jobs. This will not be possible if the costs of energy keep on climbing. Lessons learned from the recent crisis in Europe clearly indicate the need to redefine the EU’s climate policy and put it “in sync” with the EU’s social and economic policy. The panelists warned that, unless such a policy alignment happens, “we will never restore our economies to the path of growth, and never rebuild our potential.” The key to the economic upturn in the United States was the shale gas and shale oil boom, which had a radical impact on energy prices, pushing them down to levels not recorded anywhere in the world. Now the American economy is more competitive; it is booming, and new jobs are being created.
Single-minded about energy in Europe
One of the key events during the Lithuanian presidency of the European Union was the ‘29+1’ CEEP debate in Vilnius in May. This format had been successfully tested in Budapest in 2012. The key concept underlying such meetings is to develop a common position of companies from Central Europe’s energy sector on major issues of EU energy and energy security policy. Participating members have an opportunity to freely present their views and discuss their problems with Günther Oettinger, the EU’s Commissioner for Energy, under the Chatham House Rule format. A major component of the debate was a discussion of the key findings from the Roland Berger report. The main message conveyed to Commissioner Oettinger was that low energy prices and the use of indigenous raw materials are key factors in determining the development of Central Europe and the EU as a whole in the current macroeconomic situation. The philosophy of growing economies through the development of services is no longer valid. A healthy industrial component remains an anchor for economic growth.
Many politicians and businessmen participated in a panel discussion entitled “The EU’s internal energy market: An opportunity for Central Europe?” organized by CEEP during the Economic Forum in Krynica-Zdrój on 23 of September. The most important message from this debate was that a return to a path of growth is, and should be, a priority for all European economies in the next few years. There was also unanimous consent that the creation of the Internal Energy Market (IEM) presents Central Europe with a whole set of welcome opportunities, especially in the area of cohesion policy, and specific challenges that need to be monitored and addressed as the IEM process progresses. The situation is gradually improving, but when you look at the details in individual countries, you will see significant differences. I am convinced, that the only way to ensure an economic revival and real economic growth is to strengthen European competitiveness through industrial development.
Does Europe need industry?
In early July, the European Parliament voted in favor of an intervention in the market for trading CO2 emissions. This involved the suspension of an auction for a large batch of emissions permits. The Commission’s proposal meant that, despite the crisis, and contrary to market principles, the price of CO2 allowances should increase. The adopted solution regarding ETS “backloading” is bound to undermine the competitiveness of EU industry in the global marketplace. The fast development of renewable energy sources in the EU, including CE countries, has created certain problems for the entire power system. In countries including Germany and the Czech Republic, the rapid development of renewable energy has provoked extensive debate and even political declarations aimed at reducing subsidies because the existing transmission infrastructure lacks the capacity to absorb electricity from unstable renewable energy sources. CEEP has been closely monitoring both these issues and contributing to the ongoing debate and consultations.
New members, new opportunities
Three new companies involved in the energy, metallurgical, and petrochemical industries became members of CEEP in 2013. The Lithuanian transmission grid network operator, LitGrid, was the first to join. The company not only manages a national energy grid, but also builds connections between Sweden, Poland, and Lithuania. It is one of the biggest and most important Lithuanian companies. In September, Impexmetal, a company from the Boryszew group, became a member of CEEP. One of the largest industrial companies in Poland, Impexmetal produces aluminum, copper, zinc and lead, as well as bearings, cables and tubing. Impexmetal ranks among the 500 largest companies in Central and Eastern Europe. In November, Grupa Azoty became our 21st member. Formed after the consolidation of a large part of the Polish chemicals market, Grupa Azoty, together with its subsidiaries across Europe, serves customers in 50 countries around the globe. At the end of June 2013, employment in the group exceeded 13,000. Impexmetal and Grupa Azoty though not directly involved in energy production, are big consumers of energy. They are vitally interested in all EU regulatory activities concerning energy, including CO2 emissions and other pollutants, and they see CEEP as a good platform for expressing their needs.
The main task of CEEP in 2014 will be to continue to promote and facilitate the integration of the energy sector in Central Europe. Fully supporting the EU’s “20-20-20” targets, CEEP will promote a balanced approach to achieving the EU’s climate protection goals, sustainable development and security in the energy sector. This means support for a common, wide, and comprehensive EU policy that will take into account the interests of Central Europe, such as the North-South Central Europe energy and transportation corridor. We have to examine what fosters and what blocks economic recovery. It is necessary to restore the value and importance of social cohesion and economic competitiveness across the EU. An essential and effective element in reducing economic disparities is a dynamic development of industry. This is the only way to generate funds for future investment and effectively limit unemployment. If we want to have a responsible energy policy, we cannot forget about the differences between member state economies.
Central Europe Energy Partners (CEEP)
is an association formed by a group of Polish companies from the energy and fuel sectors that aims to facilitate integration in the energy sector in Central Europe and strengthen the position of this sector in the European Union. The association was established on May 4, 2010 in Brussels. This is the first industry-specific organization from Central Europe that has a permanent representation to the European Union. At present, CEEP has 22 members—companies and research institutions from countries including Czech Republic, Lithuania, Poland, Romania and Slovakia. In June 2014, Central Europe Energy Partners will celebrate its fourth birthday. Being the first regional association representing the Central European energy sector and its companies (gas – including shale gas, coal, oil, renewables, nuclear, grids, etc.), its overriding goal is to support the integration of Central Europe’s energy sector within the framework of a common EU energy and security policy. CEEP is active in the International Energy Agency. It also works closely with the European Centre for Energy and Resources Security in London. It is taking part in consultations with EU bodies, including legislative initiatives within the Union.