“The Urgent Need to Review Europe’s Energy Market to Protect Energy Security and Industrial Competitiveness”

In terms of energy, the European Union is still seeking its industrial policy and
takes the risk that its Green Deal is made in China or in the USA

Since 2021, Europe has been facing a unprecedented energy price crisis. THE reasons are structuralwith among others the fundamentally liberal organization of the energy market, called Market Design, Germany’s exit from nuclear power and its corollary, dependence on Russian gas. They are also cyclical : the post-COVID recovery, with electricity and gas prices that have soared on European markets and are reaching unbearable levels for both businesses and citizens. The Russian-Ukrainian crisis has only aggravated the crisis, by doubling this price crisis by a risk of shortage due to the growing tensions on the security of Europe’s energy supplies.

In many European capitals, the emergency has led to measures to tariff shields as protective as they are welcome, and financial support mechanisms for companies, but often in a dispersed order at the risk of creating real distortions of competition between the different European economies. The German plan to support the economy of 200 billion euros is the perfect illustration of this.

But if this crisis were to last, despite the lull experienced at the start of 2023, the States would then have great difficulty in perpetuating these systems in view of their cost for public finances. At the risk of no longer being able to avoid the industrial debacle which would result from a lasting gap in energy competitiveness between Europe and the rest of the world, because it is only in Europe that energy prices have soared to such an extent. It is then the relocation of industries, in particular the “energy-intensive”, which could get carried away. An industrial catastrophe coupled with a social crisis… without forgetting the abandonment of economic sovereignty.

The Director General of the International Energy Agency has already expressed his concern about next winter, which could be even more complicated than the previous one in terms of the security of Europe’s energy supplies.

So there is urgent need to go beyond ad hoc measures and thoroughly review the European energy market.

The President of the European Commission has acknowledged this herself. The market is dysfunctional and it must be repaired, even if it means calling into question thirty years of liberal dogma in Brussels, but resistance is numerous, in the services of the Commission as in some countries which swear only by free trade. Let us remember that the market guided solely by free and undistorted competition is not an end in itself, and in the energy sector, a more than rigorous application of the law of the market can cause us to miss the essentialnamely building a long-term vision that ensures supply security and carbon neutrality.

This is the challenge for the next few months: reorient the European construction of energy to leave the dogma of the market and return to the priorities of any energy policy, taking into account in particular that with the digitization of our economies and our societies electricity is more than ever an essential good in the general interest. Because the future of European industry and the economic prosperity of the continent are at stake.

Climate ambition, which is vital, cannot overlook the issue of energy security. There Europe’s energy security will probably and logically be one of the subjects to come from the European elections in the spring of 2024. But according to the announcements made by the Commission on March 14, the reform of the energy market risks giving birth to a mouse… and even more , since some Member States are taking refuge behind the current lull in the energy markets to try to reduce the reform to its bare minimum.

Admittedly, the European Commission published this spring the Net Zero Industry Act ou NZIA as response to the American plan called IRA ou Inflation Reduction Act, which aims for nothing less than green protectionism. Promoting the European renewable energy industry, including gas, in the face of this American green protectionism, is a step in the right direction. All the more so, one would be tempted to say, that across the Atlantic, the term green encompasses many low-carbon technologies, including nuclear, since the IRA will subsidize a wide range of nuclear investments.

Yes, the NZIA is going in the right direction. But in Europe, green ideology continues to reign supreme in Brussels: the NZIA evokes the nuclear lip serviceand the President of the Commission did not hesitate to say that nuclear power was not not strategic in Europe. She seems to have a short memory since the Euratom Treaty, one of the founding treaties of the Union, stipulates that the EU must promote nuclear investments. Worse, by doing so, the Commission opens a boulevard to theUS nuclear industry to conquer the markets of Central and Eastern European countries. Many of these countries, eager to build, expand or renew their nuclear fleets, are looking for a partner on whom they can count over the long term to help them technologically and financially. Some, including the Poles, know they can count on their American allies. Others, like the Hungarians, know they have to rely on their former Russian masters, who have remained very present in the energy field.

Beyond nuclear power, let’s not lose sight of the fact that it is also American LNG that has been flooding the European continent for more than a year.

So what is Europe doing, while the American eagle and the Russian bear are fighting over the east of our continent? Well, Europe chooses to look elsewhere. In its headlong rush towards green energies, including intermittent renewables, considered in Brussels as the only acceptable climate solution, it takes the risk of being locked into a dependency on China, which masters a number of green technologies, solar and electric vehicles in the lead, and exports more and more of their components and equipment to Europe. If the Commission made the diversification of supplies the heart of its strategy as early as 2000, it very quickly forgot its own recommendations….

Is that really an ambitious industrial policy, energy security and European strategic autonomy? And is the race to set an example for a form of green fundamentalism that some are pushing in Brussels compatible with the imperative of a strategy of industrial power? The debate is open ahead of the European elections… to prevent the Green Deal dear to the President of the Commission from being made in China or in the USA !