ESPON Project 2.1.4

1. ESPON Project 2.1.4 TERRITORIAL TRENDS OF ENERGY SERVICES AND NETWORKS AND TERRITORIAL IMPACT OF EU ENERGY POLICY CEEETA Research Centre for Energy, Transport and Environment Economics Álvaro Martins/Luís Centeno

2. The energy sector in Europe • High level of oil dependency of the European energy systems • The pressure on GHG emissions owing to the high share of fossil fuels on primary energy supply • Renewable energy sources development as the opportunity for reducing the dependency of fossil fuels • Energy prices impact and renewable energy resources are important links with territorial development

3. The need for an integrated approach to energy policy At the present state of the technology and global markets, low prices are an important boost for increased demand for fossil and nuclear energy sources. Setting the right balance among competitiveness, environment and local development requires an integrated approach where these three objectives are considered together and the costs of present decisions on the medium run are accounted. TEN-E and liberalized markets are only sensible policy options if a strong regulation policy environment is set in order to reduce room for undesirable outcomes.

4. Typology of self-sufficiency of European countries in energy resources • Countries with less endogenous resources for mainstream energy sources (oil, coal, large hydro) should reinforce their means of getting access to new forms of producing energy

5. Promoting full costing of energy use Competitiveness of renewable sources compared with fossil sources will be easily achieved if the externalities of energy used are fully transferred to final prices. The low price elasticity of energy and the low level of energy costs in economic activity will cushion the impacts of such pricing policy. In a number of European regions these policy changes must be done with care in order to avoid major social and economic impacts. Transfer of resources from most advanced and less sensible regions to those more at risk to energy shocks could be used.

6. Sensibility to energy price changes and country pressure on GHG emissions • Problem regions are mostly located in New Members. • For these regions special care must be placed when dealing with emissions control, since these could be damaged by eventual price impacts.

7. Flexibility in price policy There are heavy differences of electricity prices for industry and for households at country level. In several countries the gap between prices for industry and for households is widening. However energy prices seem not relevant to explain either energy consumption or development differences between countries. These results are very important for pricing policy. Pricing policy can and must be used to generate financial resources to be diverted to areas such as: promotion of renewables, energy efficiency, and consumer’s information policy.

8. Sensibility to variations on energy prices and energy self-sufficiency • The impacts vary significantly among countries. • Achieving a higher degree of self sufficiency has a price tag on it. Energy could become more expensive if less obvious energy sources are used.

9. Renewable energy development Renewable energy by its decentralized nature can have a very positive impact on local job creation and revenue generation. The target for electricity production from renewable sources must be achieved in 2010. Fighting Green House Gases emissions and the high dependency on oil in almost all the countries considered both call for an active strategy on renewables development at local level. Local impacts of energy policy are only clearly visible in the promotion of renewable sources, providing local income, entrepreneurship and employment opportunities. Thus the strategy for the promotion of renewable can be of high importance in the creation of conditions for a polycentric Europe.

10. Potential share of renewables in electricity consumption • Clusters of countries according to their capability to replace fossil sources by renewables in the production of electricity

11. Further issues Promote R&D on energy efficiency and use of renewables • Europe has considerable energy resources in renewable sources such as biomass, wind, hydro and solar. However there are presently technical limits to the extent in which renewables potential can be used. For instance the share of electricity produced from wind farms has an upper limit set by technical grid constraints. Overcoming theses limits is a key issue on the promotion of renewables and European energy self-reliance. • This is a particularly sensitive item for the energy production structure of islands and more remote regions to whom links with transeuropean grids are impossible or not cost effective.

12. Further issues Availability of statistical data Difficulties of adequate statistical data are reported along the study. To carry out research in order to understand the main problems concerned, complete data bases with adequate desegregation have to be available. The existing public data bases have to be improved.