Producing liquefied natural gas at Qatargas 4
The issue of energy prices has risen to the top of the political agenda in many European countries as a new round of increases in retail gas and electricity prices gets underway this autumn. Can price controls stem the rise?
SHOULD EUROPE CAP
ENERGY PRICES? E
uropean consumers face inflationbusting increases in energy prices of up to 10 per cent this winter as energy suppliers hike prices, citing higher wholesale prices and network costs. With much of Europe still in recession and other countries just embarking on a fragile recovery, the cost of power and gas has become a big issue. Politicians from across the continent and the political spectrum have responded with pledges to tackle ever rising prices. Much discussion has focused on price controls, which even a few years ago were unthinkable given the emphasis on market liberalisation and increased competition to deliver lower prices. But the official line from the EU is that competition coupled with increased integration of national markets can still deliver. Lithuanian President Dalia Grybauskaite vowed to take action as the country took over the six-month rotating presidency of the EU for the first time on 1 July. Grybauskaite said rising energy prices were hindering the continent’s economic recovery. She blamed this on growing reliance on imported natural gas, especially from Russia, because EU countries had been too slow to invest in liquefied natural gas (LNG) infrastructure that would allow them to diversify their supplies. 8 Industry Europe
Nor has Europe moved fast enough to develop shale gas, whose development in the US has given rise to an abundant new energy resource, transforming the sector. Addressing a conference on completing the EU’s internal energy market in Vilnius on 4 November, Grybauskaite urged the EU to invest in infrastructure and indigenous energy. “Reasonably priced energy is demanded by our businesses. Rational use of energy can free funds which can contribute to our economic recovery,” she said. “More than ever, if we want to be less dependent on external suppliers, we should also invest in local options such as renewables, as well as in energy efficiency,” she added. During Lithuania’s EU presidency, she urged European countries to kickstart new infrastructure investments and to embrace shale gas – gas found in tight geological formations whose extraction requires the use of water for hydraulic fracturing. But several European countries, including Bulgaria, France and the Netherlands, have banned shale gas drilling while others like Romania and Sweden have abandoned shale gas exploration projects on environmental grounds or because suitable sites were not available. Grybauskaite said Lithuania would push ahead with shale gas exploration plans
despite fierce local opposition in order to diversify its energy sources – like its neighbours, Estonia and Latvia, the Baltic state is entirely dependent on imported gas from Russia. And she said Europe should benefit from US shale gas in the form of LNG exports. But the US is still several years way from exporting any of its shale gas, and LNG prices, in the meantime, remain stubbornly high because of high demand in Asia – especially post-Fukushima Japan. Some LNG terminals are lying idle as LNG is too expensive to displace pipeline gas.
Putting the lid on prices But even in the UK, where shale gas exploration is underway and LNG imports are already a fact of life, energy prices have continued to march upwards, prompting the leader of the opposition Labour Party, Ed Milliband, to promise to freeze energy prices for 20 months from 2017 should his party win the next election in 2015. He said a Labour government would use the time to reform the energy sector, including splitting up the ‘big six’ suppliers and replacing energy regulator Ofgem with a stronger regulator. His pledge comes against a backdrop of inflation-busting price hikes for customers not on fixed-price deals. Four of the big six
