Presentation on energy by EC President

Energy priorities for Europe

Presentation of J.M. Barroso, President of the European Commission, to the European Council of 22 May 2013

New realities in the global energy market

Impact of the financial crisis Fall in private investment, tight financing conditions

Fukushima

Shale gas US oil and gas production Unconventional gas

Conventional gas

Unconventional oil

Conventional oil

Some countries phase out nuclear power production

mboe/d 25 20 15 10 5

1980

1990

2000

2010

2020

2030 2035

Source: IEA

Rising demand rising prices By 2030, world economy set to double and energy demand to rise by 1/3

Presentation of J.M. Barroso to the European Council, 22 May 2013

1

Prices affect competitiveness Trends in energy price indexes 2005-2012 Gas price index

Industry

EU

35%

US

-66%

Electricity price index

Industry

EU

38%

US

-4%

Presentation of J.M. Barroso to the European Council, 22 May 2013

Gas price index

Households

EU

45%

US 3%

Electricity price index

Households

EU

22%

US 8%

Source: IEA

2

Energy-intensive industries are most exposed Share of energy in % of production costs – selected sectors in Germany (2010) Cement, lime and plaster Clay building materials Basic iron and steel Pulp, paper and paperboard Glass Basic pharmaceuticals Non-ferrous metals (incl. aluminium) Wood and cork Average manufacturing Furniture Automotive Consumer electronics 0

5

10

15

20

25

% of total production costs

Presentation of J.M. Barroso to the European Council, 22 May 2013

Source: European Commission

3

Europe's dependence is set to increase Net oil and gas import dependence by region 2010 Gas imports

2035

Japan

100% 80%

European Union 60% 40% 20%

China

India United States

0%

Gas exports

20% 20%

40%

60%

80%

100%

Oil imports Presentation of J.M. Barroso to the European Council, 22 May 2013

Source: IEA

4

Our energy mix will evolve

EU gross inland consumption 2011

EU gross inland consumption 2030 (scenario) Renewables

Renewables Solid fuels

Solid fuels

10%

Nuclear

17%

14%

24% Gas

18%

Nuclear

12%

14%

35%

22% Oil

Presentation of J.M. Barroso to the European Council, 22 May 2013

Gas

33% Oil

Source: European Commission

5

Massive investments are required

Total energy investment needs between 2010-2020: over € 1 trillion

Power generation: ~ € 500 bn

Renewables: ~ € 310-370 bn

Transmission and distribution: ~ € 600 bn

Distribution: ~ € 400 bn Transmission: ~ € 200 bn

Presentation of J.M. Barroso to the European Council, 22 May 2013

Source: European Commission

6

Will there ever be cheap energy for Europe?

Energy costs to rise in all scenarios but Europe will benefit most from decarbonisation (in % of GDP, annually until 2050)

Fuel imports

Other energy purchase (domestic)

Investment in infrastructure

Investment in energy efficiency

16% EU in 2050: energy costs at around 14% of GDP in both scenarios 14%

% of GDP

12%

EU today

-1.4% imports

10% 8% 6%

+1.9% investment in infrastructure and efficiency

4% 2%

0%

Business-as-usual Business-as-usual scenario

Decarbonisation Decarbonisation scenario

scenario 2050

scenario 2050

Presentation of J.M. Barroso to the European Council, 22 May 2013

Source: European Commission

7

A "no regrets" scenario for Europe

Competitiveness

Smart infrastructure

Diversified supply

Security of supply

Competitive markets

Energy efficiency

Renewable sources

Presentation of J.M. Barroso to the European Council, 22 May 2013

Sustainability 8

Priority 1. Boosting energy efficiency Benefits of EU energy savings target of 20% by 2020

2.6 billion barrels

Barrels of oil the EU does not have to import per year

â‚Ź 193 billion

=

Money saved at conservative 73 EUR/barrel per year

Presentation of J.M. Barroso to the European Council, 22 May 2013

=

1 000 fewer coal power plants

=

GDP of Finland (in 2012)

9

Priority 2. Completing the internal energy market Estimated effects of opening gas & electricity markets (in % of GDP - ranges)

% of GDP

1,0% 0,8%

Effect on GDP

0,6% 0,4%

Effect on employment

0,2% 0,0% -0,2% -0,4%

Effect on inflation

-0,6% -0,8% After 1 year

After 5 years

Presentation of J.M. Barroso to the European Council, 22 May 2013

After 10 years

Source: European Commission

10

Priority 3. Smarter infrastructure

Gas Country

Rank

Rank

Baltic Energy Market Interconnection Plan

North Seas Offshore Grid

Electricity Electricity and gas

Electricity & Gas

Oil and gas

Central / South Eastern Electricity Connections North-South Gas Corridor in Western Europe

Country

Smart grids for electricity in the EU

North-South Gas Interconnections & Oil Supply Southern Gas Corridor

South Western Electricity Interconnections

Presentation of J.M. Barroso to the European Council, 22 May 2013

Source: European Commission

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Priority 4. Cost-effective use of renewable sources Production costs versus subsidies for renewables (averages, in €/MWh, latest year available)

Production costs

Subsidies over production costs

Wind energy on-shore €/MWh

Subsidies below production costs

Solar energy (photovoltaics) €/MWh 500

140

450 120 400

100

350 300

80

250 60

200 150

40

100 20 50 0

0 SE UK IE LV DK NL EE MT RO ES CZ PL LT PT SI SK BG IT HU CY LU FI EL FR BE AT DE

Presentation of J.M. Barroso to the European Council, 22 May 2013

ES MT CY PT EL IT BG RO FR HU AT SI SK LV EE LT PL CZ DE IE LU DK NL UK BE SE FI

Source: Fraunhofer

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Priority 5. The external dimension The example of the Southern Corridor Corridor opening options (2018 - Shah Deniz II) Nabucco-West Trans-Adriatic Pipeline

Corridor enlargement Extension of transport routes & new transport routes

Trans-Anatolian Pipeline & South-Caucasus Pipeline

Presentation of J.M. Barroso to the European Council, 22 May 2013

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