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ENERGY REPORT
July 2014
Issue 5 | July 2014
INSIDE THIS ISSUE
France
Energy transition and COP 21 : French
ambitions stand the test of reality
PAGE
6
Brussels
3rd EU attempt to boost a common
strategy for energy security
PAGE
12
Italy
National resources
and missed opportunities
PAGE
8
Sweden
Increased Swedish electricity
requirements in the future
PAGE
15
Germany
Politicians must get their hands dirty
for a successful Energiewende
PAGE
4
United Kingdom
Does the UK need to be better energy
interconnected with mainland Europe?
PAGE
10
ENERGY
REPORT
Europes Changing
Energy Future
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ENERGY REPORT
July 2014
Contents
Politicians must get their hands
dirty for a successful Energiewende 4
Energy transition and COP 21 :
French ambitions stand the test of reality 6
National resources and missed opportunities 8
Does the UK need to be better energy interconnected
with mainland Europe? 10
3
rd
EU attempt to boost a common strategy for energy security 12
Increased Swedish electricity requirements in the future 15
The Dutch quest for European LNG leadership 17
Crimean gas shadow 19
MSLGROUP can make the difference 21
Where we are 22
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ENERGY REPORT
July 2014
Rising to the challenge
The European energy landscape is evolving at a rapid pace and many
of the accepted norms have been challenged and abandoned. A few
years ago, who would have imagined a world where shale is rewriting
geopolitics, where solar and wind are supplanting coal in Germany, or
where there are serious concerns over the lights starting to go out in the
UK. One thing is clear the European Energy landscape is changing at a
pace that has never been seen before.
Similarly, the events in Ukraine and the Crimea have pulled Europes re-
liance on Russian gas into greater focus. While that may be unpalatable
for some, the reality is that with nuclear off the agenda in much of Eu-
rope, coal on the decline, and renewables too intermittent for baseload
power, Russian gas is likely to remain a key feature in Europes energy
mix for years to come.
This throws up a diverse series of communications challenges; from ex-
plaining to people that they should learn to love wind turbines and solar
panels, that nuclear could be part of the solution and, perhaps most im-
portantly, that energy saving can make a bigger difference than any fuel
switch to reducing carbon emissions, enhancing energy security and re-
ducing demand.
One thing that never changes is that energy projects are big, expensive
and long term. Change requires huge investment of capital, as well as
regulatory and legislative time and resource. Communications and en-
gagement will have a critical role to play across multiple stakeholder
audiences to help Europe navigate this transition a challenge that we
relish!
Nick Bastin
Managing Director, Capital MSL and Head of MSLGROUP EMEA Energy Practice
Introduction
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ENERGY REPORT
July 2014
Germany Corrects Its Failing Policy on Re-
newables
With Germanys new grand coalition government in
place, the Energiewende seems to be back on track: A
far-reaching, and long-overdue, reform of the countrys
Renewable Energies Act or Erneuerbare-Energien-Ge-
setz (EEG) has just been passed by the German parlia-
ment. It will right some of the most signifcant wrongs
which have been dogging Germanys energy regime in
recent years.
One of the key problems has been this: Germany has
seen an almost uncontrolled increase in renewable
energy generation, from around nine per cent of total
energy production fve years ago, to just under 24 per
Politicians must get their hands dirty for a
successful Energiewende
Vital reform passed, but mixed signals by politicians continue to pose a threat to the
Energiewende.
Florian Wastl
MSL Germany
forian.wastl@mslgroup.com
cent last year. Due to the system of fxed feed-in tariffs
for energy from renewable sources, this has led to an
ever-widening gap between wholesale energy prices,
which have been falling, and the guaranteed tariffs
for renewables. As a result, the countrys green ener-
gy levy (EEG-Umlage), paid by consumers in order to
bridge this gap, has risen from just over one euro cent
per kilowatt hour in 2009 to a staggering 6.24 euro
cents this year.
Much of this will now change: Under the reformed
EEG, the uncontrolled growth of renewables will be
reigned in, guaranteed feed-in tariffs will be reduced
and renewables will face more market-like conditions
whereby they will need to become more competitive. It
could have been a lot worse. In many ways, Germanys
Energiewende has been pulled back from the brink.
Communication Challenge Remains
But things are far from well. This is because German
politicians have been sending very mixed signals about
the Energiewende. There is a widening gap between
what they have been saying about the Energiewende
16%
24%
40-45%
2009
2013
2025
Germany has seen an almost uncontrolled increase in renewable energy generation, from around sixteen per cent of total energy
production fve years ago, to just under 24 per cent last year.
60%
50%
40%
30%
20%
10%
0%
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ENERGY REPORT
July 2014
as a whole, and what they have been saying about the
implementation of its parts. On the one hand, there is
widespread agreement about the need for a speedy
transformation of Germanys energy system. Ambi-
tious targets, albeit slightly reduced, remain in place:
By 2025, 40-45 per cent of Germanys power is sup-
posed to come from renewable sources.
On the other hand, in the wake of local opposition, pol-
iticians often backpedal when it comes to executing
vital Energiewende-related projects on the ground.
For example, Horst Seehofer, prime minister of Bavar-
ia, Germanys largest federal state, and leader of the
CSU, Angela Merkels CDUs sister party, recently con-
founded the pundits by publicly questioning plans for
expanding the national grid. His remarks came after an
18-month consultation process and a cabinet decision
in favour of the plans. However, faced by a poor show-
ing in local elections in March and at the European
elections in May, Seehofer was trying to woo NIMBY
voters in his federal state. For short-term electoral
gain, he deliberately jeopardised a central pillar of the
Energiewende and created confusion and insecuri-
ty for local residents, investors and political partners
alike. This is just one example of a politician playing
the populist card when it comes to the Energiewende.
There are many more. For instance, instead of allay-
ing residents fears about onshore wind farms in their
neighbourhoods, politicians have been quarrelling
over whether setting the minimum distance between
residential homes and windmills should be the prerog-
ative of the federal government or the 16 German fed-
eral states. If the states had their way, it would create
a plethora of different regulations, varying from one
federal state to another a nightmare for investors.
But the point is a different one: What we are seeing are
politicians outdoing each other in playing to peoples
fears, instead of leading the way on tough decisions.
The debates about shale gas exploration and the
much-needed pumped storage hydro power stations
follow along very similar lines. In fact, some vital de-
bates are not even taking place at all, such as the one
about carbon capture and storage technology (CCS).
Admittedly, CCS will not turn conventional power sta-
tions into beacons of green energy overnight. Never-
theless, it could help industry to capture its own emis-
sions and thereby make an important contribution to
Germanys climate goals. Similar to nuclear power,
however, CCS has become the pariah of German pol-
itics. No one wants to get their hands dirty and touch it.
Politicians will need to stop paying lip service to the
Energiewende as a whole, and start leading the argu-
ment on its implementation where it will be most felt.
Instead of playing to peoples fears, they will need to
make the case for action, even if this means taking
unpopular decisions or advocating controversial tech-
nologies. If they do not do this, EEG reform may have
made the Energiewendes regulatory framework a lot
more sound, but the political rhetoric will continue to
sow fear, insecurity and false expectations.
The ramifcations for the Energiewende could be dis-
astrous: If grids are not extended fast enough, storage
facilities are held up indefnitely, and ever-changing
regulations designed to please local protest groups
make it impossible for investment to go into vital pro-
jects, progress in the Energiewende as such could
stall. By continuing to question its parts, politicians are
increasingly putting the project at risk as a whole.
What we are seeing are politicians out-
doing each other in playing to peoples
fears, instead of leading the way on tough
decisions.

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ENERGY REPORT
July 2014
Two intertwined milestones
This Aprils cabinet reshuffe has had a major effect on
decisions that will be taken in the upcoming months
regarding Frances energy plan :
Since her appointment in April 2014, Sgolne
Royal has undertaken the role of French En-
ergy and Environment Minister. Despite her loss as
presidential candidate in 2007, Royal has a charismatic
personality, a high media profle, undeniable political
clout, and is well-known for her commitment to envi-
ronmental issues during her time as President of the
Poitou-Charentes region in France. Her pragmatic po-
sition in terms of sustainable development was refect-
ed in her frst speech as a minister, during which she
reminded the audience of her opposition to punitive
ecology.
At the same time, the French Green Party an-
nounced their decision of nonparticipation in
the new Manuel Valls government, denouncing Valls
excessively free-market policies. While continuing
their support of the presidential majority, the environ-
mentalists now place all of their hopes in the future
energy transition law. Should this law disappoint them,
they may fnally rupture with the socialist government.
From now on, it is under the guidance of Sgolne
Royal that the long-awaited energy transition law will
be discussed. Initially scheduled for the end of 2013,
the law should fnally be presented by the Government
before the summer and discussed by the French par-
liament during autumn 2014.
Together with the French Minister of Foreign Affairs,
Laurent Fabius, Sgolne Royal is in charge of organ-
izing the other crucial event of Hollandes fve-year
term: the 2015 Paris Climate conference (COP 21)
which is scheduled for December 2015. Challenges
surrounding this conference are twofold : for France,
to advance as an environmental model on the interna-
tional stage; and for Europe, to avoid the double pen-
alty by diminishing even further its competitiveness
compared to emerging countries.
Though often understood as disconnected, these two
projects are in reality intertwined. Laurent Fabius, the
French minister of Foreign Affairs, has claimed that
the ability of France to bring participants to a consen-
sus during COP 21 will rely heavily on the success of
the French energy transition law. Should the law be
voted in without opposition, France will gain credibility
and will be able to frame the French energy model as
an international example.
An impossible consensus?
Both the energy transition law and COP 21 will be the
subject of tough negotiations: even though there is
consensus on the stated objectives, namely the re-
duction of CO
2
emissions and the movement towards
a carbon-free energy, the methods that are chosen to
reach these objectives are contested. How do we get
there?
Unlike other countries, energy policy in France
is not a consensual topic. While in Germany,
Angela Merkels decision to cease using nuclear ener-
gy met strong support of the Germans, Franois Hol-
landes commitment to shut down the Fessenheim
nuclear power plant by 2017 and to diminish the share
of nuclear energy in the French energy mix from 75%
to 50% is divisive :
French public opinion is divided : two different
surveys carried out in 2013 showed, for one, that a
narrow majority for French people (36% in favour,
14% against, the rest inconclusive) support nuclear
energy and, for the other, that 53% of French peo-
ple were in favour of a gradual withdrawal of nucle-
ar energy. These results offer little understanding
when considered together other than showing the
current division of the French public opinion.
Energy transition and COP 21 :
French ambitions stand the test of reality
Mathieu Slama
France
mathieu.slama@consultants.publicis.fr
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ENERGY REPORT
July 2014
French politicians are also divided. Unsurprisingly,
the right wing party, Union pour la majorit prsi-
dentielle, is opposed to a reduction of nuclear ener-
gys share in the French energy mix. At the same
time, the French Green Party often criticizes a lack
of conviction of the socialists for environmental
issues because of multiple delays in the discus-
sions of the energy transition law, and the lack of
a clear position on the future of nuclear energy in
France. French socialists themselves, especially at
the Parliament, do not have a clear position on the
future of nuclear energy in France.
Negotiations before and during the COP 21
promise to be complex as well, and the task
to lead those negotiations a hard one. On one hand,
the COP 21 talks is supposed to lead to a new agree-
ment on climate change in order to keep global warm-
ing under 2C. On the other hand, the talks push for a
legally binding agreement applicable to all countries,
which is an ambitious task. The main challenge lies in
fnding a level playing feld that will satisfy all States,
and also agreeing on provisions which will not destroy
further European competitiveness, which is already
under pressure from emerging countries.
A burden or an opportunity?
Energy and climate: on both topics, French offcials
have tried to highlight economic opportunities they
represent. Sgolne Royal insists on positive ecol-
ogy and the 100,000 jobs which could be created
by the energy transition. The French ministry of For-
eign Affairs stresses the need to understand the fght
against climate change not as a necessity to share the
burden of emissions, but as an opportunity to create
jobs and growth and to invent new means of produc-
tion and consumption.
All on the condition, of course, that an agreement is
reached.
2
Since her appointment in April 2014, Sgolne Royal has un-
dertaken the role of French Energy and Environment Minister.
Photo: Matthieu Riegler
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ENERGY REPORT
July 2014
National resources and missed opportunities
How to unchain Italian energy strategy through
consensus generation
Energy supply is notoriously one of the thorniest issues
in Italy. Debates have been dragging on year after year,
legislature after legislature, amidst energy crises and
international tensions, to these very days, yet energy
supply is still a polarizing issue far from been settled.
The divide cuts across all sections of society, citizens
and policy makers, all looking for the right solution.
If we were at long last to reach an agreement,
we could use energy as a powerful lever to stoke the
long-awaited recovery of our economy. Not to men-
tion related geopolitical issues. The current situation
in Ukraine calls for a review of our relations with Rus-
sia, Italys number one supplier of natural gas. After
the invasion of Crimea there have been ongoing fghts,
chaos and unrest in the region. There has been un-
rest also in other countries that supply energy to Italy.
Amongst our southern Mediterranean energy suppli-
ers, Libya, to name but one, has become a powder keg
after the fall of Colonel Gaddaf. This kind of situations
does not help economic relations nor trade and Italy
needs to look elsewhere for its energy supplies.
For the frst time though, instead of looking far afeld,
to the Middle East or to its US ally, Italy may turn its eye
to homeland and discover it can produce energy do-
mestically instead of importing it. Our country has con-
siderable energy resources: natural gas, oil and met-
als. Take black gold, for example. We are looking for oil
supplies around the world, yet we have oil felds in our
seas. The same holds true for other resources that we
continue to buy from foreign countries while we have
Alessandro Chiarmasso
Alessandro Paoletti
Italy
Alessandro.chiarmasso@mslgroup.com
Alessandro.paoletti@mslgroup.com
Communication as the way forward. After all the years experts, environmental activists and or-
dinary people have spent debating the energy supply issue without finding an agreement, this
may seem mere wishful thinking. Yet, digging a little deeper, it becomes apparent that commu-
nication can put an end to decades of disagreement and help solve the issue.
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ENERGY REPORT
July 2014
them within our borders. Unlike other countries where
obstacles and limitations are much fewer, in Italy re-
sources that could be used remain unexploited.
While some concerns are understandable and some
claims right and need to be taken in due consider-
ation - other concerns and arguments in the ongoing
energy debate are biased and unfounded, standing in
the way of a rightful exploitation of our domestic nat-
ural resources.
Communication can valuably dispel false beliefs by
providing accurate information to the public. This is
not a nave approach, quite the opposite. Clear, accu-
rate information allows the public to form an opinion
in a more mature and conscious way instead of being
played on by politicians that often use environmental
and health issues to win votes. Lack of communication
or misinformation has been often played on by jour-
nalists, too, fueling peoples emotional reactions after
tragic events or incidents just to sell more newspaper
copies or win larger TV audiences. All this brings about
even more confusion and provides people with further
arguments to oppose change, including change for the
better, and maintain the status quo.
Much too often projects for the exploitation of domes-
tic resources have been bogged down by the opposi-
tion of local communities unwilling to accept energy
installations in their backyard, de facto vetoing any
initiative with their various protests and demonstra-
tions. This is of no advantage to anybody. If not entirely
eliminated, these situations could at least be reduced
in number if the public were to receive accurate infor-
mation through appropriate communication channels
and media.
Non-sensationalist, non-partisan communication
made for the sole purpose of informing the public, fa-
cilitating the circulation of correct information and the
formation of a public opinion based on facts, not myths
or misconceptions as, alas, much too often happens
today. Communication that delivers information as
much objectively as possible, using data and fgures,
as numbers provide frm evidence. Data and fgures
showing the extent of unexploited natural resources in
Italy, a country that has the fourth largest gas reserves
in Europe yet ranks only sixth among europes top pro-
ducers.
Numbers that help people understand that many of
their fears are unfounded, and that yes, there are haz-
ards, but doing nothing is not the answer. The answer
is moving forward managing hazards, and let exploita-
tion of natural resources be the solution, especially for
our economy, and no longer a problem. Let numbers
speak for themselves. Italys 2013 data show oil ex-
ploitation amounted to 5.5 million tons of oil equiv-
alent (MTOE) and gas exploitation to 6.4 MTOE, the
industry employed 140,000 people, generated 6.4
billion revenues and nearly 5.5 billion in energy bill
savings. These fgures would be much stronger if Italy
were to double its energy production.
To attain this goal it is essential to communicate accu-
rate information with the assistance of experts in the
feld for comprehensive coverage of the matter and
delivery of exhaustive answers to the public. Whats at
stake is not only the choice that will be made but also
on what basis people are going to make their decision.
Proper communication is key to have people make in-
formed, conscious decisions, whatever their choice will
be.
OiL gaS
140,000 people 6.4 billion
Italian Energy Industry in Numbers
2013
RevenueS EmploYed
6.4 MTOE
5.5 MTOE
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ENERGY REPORT
July 2014
All too often we hear the argument that UK energy prices are out of control, and that the lights
may go out in the not too distant future. UK energy consumers have faced a constant increase
in the cost of electricity, up 36% in three years. With the UK energy supply market constrained
by a diminishing domestic power generation infrastructure, and its ability to meet future de-
mand in doubt, the future for UK energy consumers looks bleak.
However, since the 1970s the UK has had a form of
power grid interconnection with our European neigh-
bours Ireland, France, and the Netherlands. An ar-
rangement whereby lower cost electricity can be trans-
mitted cross border from European neighbour grids.
The levels of such interconnection is currently limited.
Only 3.5 MW, or 4% of installed power in the UK, is
sourced via electrical interconnection.
Energy availability and pricing varies across Europe,
based on supply sources, surplus and the operating
environment. This means that cheaper and more read-
ily available power is available, if only the UK consumer
could access it.
So has the case for further power supply integration been
properly communicated to the UK consumer? Why does
the UK remain in relative power market isolation?
The case for increased levels of electrical interconnec-
tion with Europe has, in recent times, been voiced, but
perhaps too quietly, in isolation or ineffectively.
There is a strong case for Interconnection, which would
allow available energy to be moved between countries,
in turn assisting in driving down the cost of electricity
in the UK.
Interconnection could beneft both business and con-
sumers in the UK. According to UK Energy Minister
Ed Davey, interconnection could knock more than 10%
off the typical UK electricity bills. In an ever more glo-
balised energy market, it would appear that the UK
consumer is being punished by the UKs lack of con-
nectivity.
Additionally, as the UK and Europes energy supply is
increasingly made up of renewable sources, a system
is needed that is capable of absorbing and utilising
the available energy when it is available. By its nature,
renewable energys availability is intermittent. So for
example, solar electricity is produced when it is light,
wind power when it is windy, and so on. In a better inter-
connected market, electricity that is generated could
be more effciently directed to areas of consumer need
and the system could be better balanced during times
of low demand or low renewable generation.
Does the UK need to be better energy interconnected
with mainland Europe?
Michael Kinirons
UK
michael.kinirons@capitalmsl.com
There is a strong case for Interconnection, which would allow
available energy to be moved between countries, in turn assist-
ing in driving down the cost of electricity in the UK.
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ENERGY REPORT
July 2014
Ensuring that the UK grid is provided with a balance
of power sources, including a better connection into
the available power of our neighbours and moving the
available resources from low demand places to ones
of higher demand, would assist the UK in ensuring that
the lights remain on in future years.
But it would appear that the message, simply, is not
making its way to the consumers. They seem to re-
main unaware of the potential fnancial savings that
increased electrical interconnection with Europe could
offer to them.
It must be remembered that greater interconnection
with Europe would require large scale investment in
infrastructure and come with both associated levels of
pricing risk and geopolitical risk. Interconnection pro-
jects have high capital requirements and the pricing in
a more open market could be susceptible to increased
fuctuation.
However, with the UK government in support of in-
creased interconnection and a number of third parties
queuing up to fnance and coordinate the projects, why
is greater progress not being made?
It is widely accepted that electrical interconnection
with countries such as Iceland and Norway offer a com-
pelling case for implementation. They offer effcient
sources of generation, which would allow the UK to
meet demand at reduced energy costs. Such arrange-
ments would provide greater security of supply, provid-
ing a pool of energy, which could cushion the UK from
supply shortages.
However, the case for increased interconnection has
largely failed to make the news agenda in a meaning-
ful way. It would seem that the argument for intercon-
nection is simply being overshadowed by the constant
noise around energy price increases, renewables,
fracking etc. It is a busy market place, with lots of news
items vying for the general publics attention.
There are a number of additional, and very specifc
communications challenges, which the industry will
have to overcome if it is to succeed. Those addition-
al communication elements will not be addressed by
one broad brush approach. But if the industry can use
that broad brush approach to garner the wider publics
opinion and support, then these specifcs will also be-
come a lot more achievable.
Interconnection clearly will not be the solution to all of
the UKs future power requirements. However, it does
have a valid and potentially signifcant place within the
UKs future energy mix. If a more electrically intercon-
nected UK is to be achieved, the industry must work
together to ensure that it better communicates the
benefts of that interconnection to the UK consumer.
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ENERGY REPORT
July 2014
Next October, EU energy Ministers and Heads of State
or Government are due to discuss short and longer
term policy orientation for energy following the pro-
posals put forward by the Commission, and in particu-
lar the newly proposed plan for a European Energy Se-
curity Strategy.
After the attempts and some progress made on the
front of energy security to tackle the temporary disrup-
tions of gas supplies in 2006 and 2009, recent geo-
political events in Ukraine have accelerated the need
for bolder and coordinated action at the EU level, well
beyond the initiatives launched few years ago.
The EUs energy dependence from abroad has been on
the rise since the mid-1990s topping now a ffth of the
overall EU import bill and half of EUs energy needs. In
2013, EU countries spent 400 billion euros to import en-
ergy, mainly crude oil (88% of EU consumption) natural
gas (66%) and solid fuels (44%). With Russia being by
far the main supplier for oil and gas.
The vulnerability of a certain area depends on sever-
al factors, in particular on the reliability of its external
suppliers; the diversity of its energy sources; the size
of its domestic production; and on the level of integra-
tion into the European pipeline network. To address
the short, medium and long-term energy security chal-
lenges, the Commission set out eight priority areas
where decisions need to be taken and concrete actions
implemented at the EU and national levels. These are:
Increasing the EUs capacity to overcome a major
disruption during the 2014/2015 winter;
Strengthening emergency/solidarity mecha-
nisms, including the coordination of risk assess-
ments and contingency plans; and protecting
strategic infrastructure;
3rd EU attempt to boost a common strategy for
energy security
Moderating energy demand;
Building a well-functioning and fully integrated
internal market;
Increasing energy production in the European
Union;
Further developing energy technologies;
Diversifying external supplies and related infra-
structure;
Improving coordination among EU member in ex-
ternal energy policy.
A snapshot of the main actions proposed is provided
below.
Immediate actions on energy security
To ensure uninterrupted supplies this winter, the Com-
mission proposes comprehensive risk assessments
(stress tests). These would be conducted on the re-
gional or EU level by simulating a disruption of the gas
supply. The aim is to check how the energy system can
cope with security of supply risks and based on that
develop emergency plans and create back-up mech-
anisms. Such mechanisms could include increasing
gas stocks, decreasing gas demand via fuel-switching
(in particular for heating), developing emergency in-
frastructure like, for example, completing reverse fow
possibilities and pooling parts of the existing energy
security stocks.
The Commission plans to review the existing provisions
and the implementation of the Security of Gas Supply
Regulation before the end of 2014. In this respect, the
Commission will analyse the potential for a more pre-
cise EU wide defnition of protected customers and
increase the number of days during which companies
have to ensure deliveries to these protected custom-
ers under severe conditions.
Leonardo Sforza
Brussels
leonardo.sforza@mslgroup.com
Energy policy is now recognised, more explicitly than ever, as one of the top two priorities for
EU action over the next five years. The commitment taken by Jean-Claude Juncker, the newly
elected Commissions President, couldnt be more explicit: I want to reform and reorganise
Europes energy policy ina new European Energy Union.We need to pool our resources, com-
bine our infrastructures and unite our negotiating power vis--vis third countries. We need to
diversify our energy sources, and reduce the energy dependency of several of our Member
States.
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ENERGY REPORT
July 2014
Interconnectivity
According to the Commissions strategy paper, com-
pleting the internal energy market and building miss-
ing infrastructure links is essential to quickly respond
to possible supply disruptions by directing energy
fows across the EU as and where needed. The Com-
mission has identifed 33 infrastructure projects which
are critical for the EUs energy security. Moreover, the
Commission proposes to extend the target for inter-
connection of installed electricity capacity from the
current commitment of 10% to 15% by 2030.
Diversifcation
In 2013, 39% of EU gas imports by volume came from
Russia, 33% from Norway and 22% from North Africa
(Algeria, Libya). While the EU will maintain its rela-
tionship with reliable partners, it will seek ties to new
partner countries and supply pathways. For example,
by further expanding the Southern Gas Corridor in the
Caspian Basin region; by developing the Mediterrane-
an Gas Hub; and by increasing LNG supplies.
EU wide gas purchases platform
Poland has been pleading for the establishment of
a new EU mechanism to strengthen the bargaining
power of Member States and the EU vis--vis external
suppliers. The original proposal that was put forward
by Polish Prime Minister Tusk envisages several pos-
sible instruments to do so, ranging from an ex ante
screening of IGAs, over enhanced transparency of com-
mercial terms, to joint purchase agreements between
undertakings or an Agency acting as single buyer. The
proposal also underlines the importance of antitrust
enforcement against abusive practices by dominant
suppliers. The Commission seems to be quite prudent,
if not reticent, towards the establishment of a new EU
agency for this purpose. A working group (comprising
experts from Poland and the Commission) has been
set up to analyse joint purchasing initiatives or mecha-
nisms that could be benefcial to supply security in the
EU.
External policy coordination
Improving coordination of national energy policies and
speaking with one voice in external energy policy con-
tinue to be one of the most challenging objectives for
the EU. The Commission reaffrms its aims to be in-
volved at an early stage in expected intergovernmental
agreements with non-EU countries that could have a
possible impact on security of supply. The Commis-
sions stick here is given by its empowerment to scru-
tinise the compliance of all such agreements with the
relevant EU legislation.
A working group (comprising experts from Poland and the Commission) has been set up to analyse joint purchasing initiatives or
mechanisms that could be benefcial to supply security in the EU.
14
ENERGY REPORT
July 2014
Moderating energy demand
According to the Commission, the already agreed
EU energy effciency target of 20% by 2020 can be
achieved if the measures foreseen in the relevant leg-
islation are implemented rigorously and without de-
lays. In particular, this applies to the Energy Effcien-
cy Directive (EED) and the Energy Performance of
Buildings Directive (EPBD). The building sector is
the main industry target identifed by the EC. It is re-
sponsible for about 40% of energy consumption in the
EU and a third of natural gas use could be cut by up to
three quarters if the renovation of buildings is speed-
ed up. The EC plans to incentivise the mobilisation of
private fnancial resources leveraging the European re-
gional funds made available for this purpose.
Increasing indigenous energy production
This includes further deployment of renewables, the
safe use of nuclear energy, where this option is cho-
sen by the Member State, and sustainable production
of fossil fuels. According to the Commission, Member
States should increase coordination of their national
renewable energy support systems, while facilitating
access to fnance for renewable projects with the sup-
port of both the European Investment Bank and na-
tional investment banks.
More importantly, the Commission calls Member
States to assess the potential of unconventional hydro-
carbons, taking into account the highest environmental
standards. On its side, the European Commission will
launch a European science and technology Network
and facilitate the exchange of information between
Member States on unconventional hydrocarbon ex-
traction. In other words, this means that shale gas ex-
ploitation is not ruled out and is still seen as an oppor-
tunity to consider. The Commission will also review the
Carbon Capture and Storage Directive in the coming
months to further promote the market uptake of these
environmentally-friendly technologies.
Conclusions
In conclusion, the latest plan proposed by the Com-
mission on energy security has the merit to provide an
updated analysis of the scope and nature of problems
hindering the European market. The paths for action
proposed, some of which are bolder than what has
been proposed in the past, will rely on national political
will for better pan-European coordination and on the
Commissions ambition to implement and make better
known what is agreed. The forthcoming Commission,
to be appointed during the autumn, and the reshuffed
European Parliament now in offce, will undertake a
thorough scrutiny of the proposed plans and their fol-
low up. They will also infuence future focus and ori-
entations and may challenge Member States inactivity.
The forthcoming Commission, to be appointed during the autumn, and the reshuffed European Parliament now in offce, will under-
take a thorough scrutiny of the proposed plans and their follow up.
15
ENERGY REPORT
July 2014
Increased Swedish electricity requirements
in the future
The results show that Swedens electricity require-
ments in 2030 will be 5-10 TWh greater than current
levels. Electricity use within the industrial and hous-
ing sectors will remain at around current levels, with
new data centres and electric cars accounting for the
increase. The reports fndings come as a surprise to
those who thought that electricity requirements would
be reduced through energy effciency improvements.
The Confederation of Swedish Enterprises says it is not
surprised by the fnding that electricity requirements
will increase; this is a natural consequence of contin-
ued economic growth and increased business sector
production. Neither does the organisation believe that
there will be an electricity shortage in 2030, although
it does caution that Sweden may have problems with
output availability in the electricity system. If nuclear
reactors are phased out as a result of political decisions
or due to old age, investments will be needed in new,
weather-independent electricity production. But there
are many obstacles to these types of investments
one of which is the low price of electricity.
The issue of Swedens future baseload power supply
has recently become more controversial. SKGS, the
energy-intensive industry organisation, presented a
Per Ola Bosson
Sweden
perola.bosson@jklgroup.com
Contrary to what many believe, electricity requirements will increase in the future according to
a recent report presented by the Confederation of Swedish Enterprises. The report examined
developments within various areas of the economy through 2030 and added developments in
the household sector and new fields of application such as electric vehicles and the establish-
ment of data centres.
16
ENERGY REPORT
July 2014
study on the options available when existing nuclear
power needs to be replaced. The study presents four
alternatives for new baseload power production:
Nuclear power
Hydropower
Natural gas
Coal
Of these alternatives, the study found that new hydro-
power and new coal are impossible to implement in
view of environmental legislation and the upcoming
tightening of climate provisions. Hydropower produc-
tion will probably be somewhat reduced rather than
increased. So Sweden has two alternatives: nuclear
power and natural gas both of which face major po-
litical challenges.
Nuclear power is controversial in all countries, but in
Sweden new natural gas power plants are nearly as
controversial as new nuclear plants. Sweden has al-
ways opted out of natural gas as a form of energy and
has declined connection to the Russian-German gas
pipeline that runs along Swedens economic border in
the Baltic Sea. Following recent events in Ukraine and
Russias rearmament in the Baltic area, natural gas has
become less palatable in Sweden.
The Swedish National Grid (the Transmission Grid Op-
erator, or TSO) recently estimated that an additional
32,200 MW of wind power would be needed in south-
ern Sweden (approximately south of Uppsala) to meet
peak load requirements during a normal winter, in the
event the three oldest reactors are phased out. There
is currently 4,500 MW of wind power in the entire coun-
try of Sweden. These fgures have added fuel to the
growing debate on future electricity supply.
So far, though, there has been no political response as
to what will replace the existing nuclear plants once
their time is up. A general election will be held in Swe-
den in mid-September, and it is expected that the red-
green parties will have an opportunity to form a gov-
ernment.
The Green Party wants to start an immediate phase-
out of nuclear power, so the issue of future electricity
production will be a hot topic this autumn.
An additional 32,200 MW of wind power would be needed in southern Sweden to meet peak load requirements during a normal
winter, in the event the three oldest reactors are phased out.
17
ENERGY REPORT
July 2014
The Dutch quest for European LNG leadership
The Dutch, through their position as a gas producing
country, are currently not as reliant on Russian fossil
fuels (about 25%) as other European countries (up to
100% in parts of Eastern Europe), but time is running
out: gas reserves are decreasing swiftly and the esti-
mate is that within the next 10 years, the Netherlands
will become a net gas importing country. So, how does
the Dutch government go about addressing this issue?
For now, shale gas is out of the question: the govern-
ment has declared a moratorium for the next few years,
while numerous local governments and NGOs have al-
ready spoken out against test drilling let alone real
production locations. This also makes the exact shale
gas reserve fgures uncertain: there is no sure way of
knowing without testing it.
Sustainable sources of energy (wind, solar) have also
been on the rise in the Netherlands, but not as much
as in Germany or Sweden. From a European perspec-
tive, the Dutch rank somewhere near the bottom of
the list. The Dutch Energy Accord that has been estab-
lished, consisting of numerous stakeholders, tries to
break this deadlock but has been quite ineffective so
far: ferce public debates were sparked by the focus on
wind energy, while several coal-fred energy plants that
were supposed to shut down, remained operating.
One of the less debated developments from a Dutch
perspective is the role of liquefed natural gas (LNG).
Rotterdam is one of the few ports in Europe which has
Erik Martens
Timen van Haaster
Netherlands
erik.martens@msl.nl
timen.van.haaster@msl.nl
Similar to several other European countries, the Netherlands have for some years been trying
to diversify their mix of fossil fuels in order to reduce (future) dependency and supply risks. The
Crimean and Ukrainian crises once more showed Europe the possible, far-reaching implica-
tions.
GATE terminal in the port of Rotterdam.
18
ENERGY REPORT
July 2014
a large LNG import terminal, set up by Gasunie and
Vopak. This suitably named GATE (Gas Access To Eu-
rope) terminal enables huge tankers from all over the
world (for example Nigeria, Norway, Qatar, Algeria) to
supply Rotterdam and North-West Europe with LNG.
But what are the advantages of this type of fuel? LNG
is a very cost effcient and relatively clean way of trans-
porting natural gas by ship, as it is cooled to minus
162 degrees Celsius and, as a consequence, is com-
pressed. Moreover, it is also a cleaner fuel for ships and
trucks than natural gas or fuel oil, which is the fuel of
choice for the majority now. The use of LNG could lead
to a 20% reduction of CO2 emissions and other harm-
ful emissions.
In addition, one of the obstacles for the successful in-
troduction of LNG as a valuable part of the total fuel
mix in the Netherlands has been removed. The GATE
terminal will be expanded with a break bulk facility, en-
abling it to supply small LNG ships and giving a boost
to the use of ships with LNG engines. Shell has already
signed a contract to set up multiple LNG supply facil-
ities along the coast of the North Sea and the rivers
Rhine, Main and Danube.
LNG thus looks like a potential success story in Rot-
terdam, and could make the Netherlands into a Euro-
pean leader in this area. Several serious issues remain
though. For example, the extension of the GATE ter-
minal was sorely needed as demand for gas and LNG
from Dutch gas-fred power plants plummeted. This is
because of structurally high gas prices in Europe. It is
even more the case for LNG, as Japan has turned into
the largest importer of LNG in a matter of years after
the Fukushima nuclear disaster. At the same time,
coal-fred power plants became more proftable due to
the low price of coal.
This situation is unlikely to change much in the near fu-
ture, so these Dutch initiatives remain limited in scope
and impact. It is not yet contributing to a more bal-
anced fuel mix, but more of an attempt to prevent LNG
from being driven out of the mix altogether while
at the same time trying to explore possible structural
solutions (also on a European or international level) to
the issue of high gas and LNG prices and the increas-
ing gas dependency.
LNG thus looks like a potential success story in Rotterdam, and could make the Netherlands into a European leader in this area.
19
ENERGY REPORT
July 2014
Crimean gas shadow
This change is in response to the threat, perceived or
otherwise, of losing of a stable gas sources and is fue-
ling several game changing initiatives. From a resur-
gence of coal to the main energy debate, a more friend-
ly approach towards unconventional gas resources or a
far more optimistic view on nuclear, to even a chance
to turn Germany from the banishment of the atom, it
seems change is coming.
Due to the nature of the industry, business decisions in
energy are not made on the basis of current conficts
or crisis situations. At least, they should not be. For the
German atomic sector, what is currently happening in
Ukraine is not of the same magnitude as the Fukushi-
ma disaster it wont change the general policy direc-
tion. Nevertheless, this regional instability is a signal
of potential trouble with the reliability of the supplier,
i.e. Russia. It is for this reason that Essen and Dssel-
dorf-based companies have made efforts to underline
the stability of this EU-Russia supply partnership. Gas
driven economies would only need to omit the 2009
drop in deliveries in order to fully accept these asser-
tions, though.
Actions connected to Russia that would be deemed
acceptable or, at least, quite understandable among
old European countries do not appreciate the same
treatment among nations in CEE. Any business action
or declaration toward their Russian counterpart during
this political crisis immediately and irrevocably takes
on a heightened political context. Regardless that
ukasz Kowalski
Poland
lukasz.kowalski@mslgroup.com
The Crimean crisis and continued unrest in Eastern Ukraine have had a profound impact on the
politics among the border countries of the European Union. As is to be expected, such an event
has resulted in a change of climate toward both energy projects and supply strategies.
20
ENERGY REPORT
July 2014
these partnerships are unavoidable, journalists and
decision makers tend to view these actions as political
statements as much as they are business dealings.
When LetterOne Energy, the investment fund of Rus-
sias fourth-richest tycoon Mikhail Fridman, agreed to
buy RWEs oil and gas company, RWE DEA, gaining as-
sets in the North Sea, no one in RWEs headquarters
could have seen the communication crisis potential.
RWE DEAs Polish assets that is, inactive convention-
al gas concessions seemed, at that time, irrelevant.
This perspective proved mistaken and failed to take
into account the political landscape surrounding the
local, Polish market since discussions on natural gas
deposits as well as disappointment with the govern-
ments shale policy had been quite hot for some time.
In effect, every positive aspect of the companys corpo-
rate communications activity was overshadowed by the
negative context that developed even though it was far
from the facts surrounding the actual deal being nego-
tiated. Only a swift and decisive crisis operation mini-
mized the harm to the reputation of the company and
its relations with decision makers.
A few weeks following this crisis, the same company
witnessed the same situation again, albeit from the
other side. By signing a deal on reverse gas transfer
with Ukraine, RWE successfully regained its momen-
tum in the market and reaffrmed its support.
In turbulent times, it is critical to seek dynamic insight
into the local market in order to track potential crisis
scenarios in real time. It is important to note here that
the energy market is slowly adapting to this new polit-
ical environment which is still, at the moment, rather
unstable. Natural gas has been a headliner in the con-
text of unrest in the East. However, though the topic
of oil supplies has remained somewhat off the crisis
radar, it could easily become one in an instant. De-
pendency on Russian sources for oil in the region is far
higher than those for gas.
Volatility, it seems, is an aspect of the oil and gas indus-
try that plagues more than just the cost of hydrocar-
bons. In the communications feld, we would do well
to remember it.
21
ENERGY REPORT
July 2014
personer
MSLGROUP can make the diference
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your market or contact Nick Bastin at nick.bastin@capitalmsl.com
Anders Kempe
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GROUP EMEA
anders.kempe@mslgroup.com
Nick Bastin
Head of Energy
MSLGROUP EMEA
nick.bastin@capitalmsl.com
Per Ola Bosson
Sweden
per.ola.bosson@jklgroup.com
Alessandro Chiarmasso
Italy
alessandro.chiarmasso@
mslgroup.com
Liam Clark
UK
liam.clark@capitalmsl.com
Seth Goldschlager
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seth.goldschlager@
consultants.publicis.fr
Helmut Kranzmaier
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cnc-communications.com
Peter Steere
Belgium/ Sweden
peter.steere@jklgroup.com
ukasz Kowalski
Poland
lukasz.kowalski@mslgroup.
com
Erik Martens
Netherlands
erik.martens@msl.nl
Florian Wastl
Germany
forian.wastl@mslgroup.com
oUR TeAm
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Leonardo Sforza
Brussels
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mslgroup.com
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ENERGY REPORT
July 2014
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