By Jason Simpkins
The European Commission yesterday (Wednesday) introduced a plan calling for a massive restructuring of power grids throughout the continent. The plan was designed to reduce the region’s vulnerability to the massive energy companies that control the production and transmission of gas and electricity.
Currently, large energy companies monopolize energy production and distribution, with little or no regulation from the EU. These companies operate at the network, wholesale, and distribution levels, keeping competition at a distance and prices vague.
Jose Manuel Durao Barroso, president of the EC told The Associated Press that “energy is the driving force of our economy,” and added that a response is needed to “achieve greater energy security and provide abundant energy at a fair price for citizens.”
The report also pointed out that EU residents and businesses supply options and that there is too much incentive for current operators to freeze out any new competition.
The Commission offered two options to proceed with, what it called, “ownership unbundling.” The first would force energy companies to sell off their transmission networks. The second would require companies to retain their respective transmission networks, but lease them to fully autonomous operators. The Commission also called for an independent EU energy agency to oversee national regulators.
The plan was specifically designed as a safeguard against Gazprom, the state owned Russian energy giant. Gazprom currently supplies 25% of Europe’s gas, and is aggressively seeking other European acquisitions. It has repeatedly used supply lines as a means of political and financial gain.
Additionally, Moscow refuses to open its energy sector up to foreign investment, even though Gazprom has full access to European energy markets. This has long been a point of contention.
If the plan is put into effect, other key European energy players will no doubt suffer. France’s EdF and Germany’s Eon are among the companies that would be broken up. France and Germany oppose the measure along with six other nations.
Barroso said in Brussels that “an open and fair internal energy market is essential to ensure that the EU can rise to the challenges of climate change, increased import dependence, and global competitiveness,” The AP reported.
As it stands now, Britain, Denmark, Spain, Belgium, Finland, Romania, Sweden and the Netherlands are on his side. Though, the likelihood of the measure succeeding remains unclear.
Related Articles and Links:
- Money Morning: Belarus Assuages EU Fears; Agrees To Pay Part of Gazprom Debt.
- Money Morning: The New “Cold” War: How Russia Has Turned Its Energy Exports Into Weapons of Diplomacy.