At the invitation of the Irish Presidency of the Council of the EU, Bruegel Deputy Director Simone Tagliapietra spoke at the informal meeting of energy ministers in Dublin on Europe’s electrification and industrial competitiveness.
On 29 September, he joined Céline Gauer, Director-General of DG ENER, and Greg Jackson, founder and CEO of Octopus Energy, for a panel on innovation and market design. The discussion examined the role of technology, market entrants and regulation in advancing Europe’s electrification.
In his remarks, he argued that expanding domestically produced clean electricity can reduce Europe’s reliance on imported fossil fuels and create new industrial opportunities. He called for deeper integration of Europe’s electricity system, including better coordinated grid and capacity planning and stronger regional markets, to lower costs and strengthen competitiveness and energy security.
Remarks by Simone Tagliapietra (Deputy Director, Bruegel) on Europe’s electrification and industrial competitiveness
Europe’s energy future is electric – and electrification will reshape Europe’s industrial
geography.
Clean electricity generated in Europe will allow Europe to reduce its dangerous dependency
on geopolitically volatile and expensive imported fossil fuels. It will also unlock new industrial
opportunities, especially related to the manufacturing of those clean technologies for which
Europe has comparative advantages.
But the clean electricity revolution will also involve far-reaching and potentially contentious
changes. Smart national and EU-level policies will need to embrace, rather than fight, these.
Three points need to be highlighted.
First, to succeed, the electric revolution will require European solutions. Only through greater
coordination will Europe be able to ensure a competitive, affordable and secure supply of
energy. Regrettably, the Energy Union is far from complete. Disagreement between
governments continues to prevent its necessary advancement.
That is, we are seeing a dangerous trend towards re-nationalisation of electricity policy. The
proliferation of different energy-subsidy schemes and capacity mechanisms across Europe
clearly illustrates this trend.
A system is needed in which responsibilities are assigned in a way that all parties have
incentives to maximise the security of the joint European electricity system, and to make it as
cost competitive as possible.
Governments and the European Commission should work together to make robust assessments
of capacity and grid needs to guide investors. Clarity on needs and reduction of regulatory risks
will lower capital costs. This can drastically cut the cost of the capital-intensive system that we
want to build to electrify our economies.
All this requires developing a shared vision on the future European electricity market – and
gradually building the trust among countries that will enable that market’s individual elements
to be developed jointly.
Electricity is the only domestic clean fuel available to power Europe’s economies. We cannot
afford the high costs of a fragmented and inefficient system.
If the goal of a Union-wide electricity market can be achieved, it will have the size to drive
innovation and competition in electricity technologies so that a virtuous cycle of cost savings,
deployment and innovation will once again make the EU energy-competitive globally.Second, energy affordability requires structural solutions, not short-cuts or dead ends. Short-
run solutions to decrease electricity prices all involve games of redistribution, namely between
families and companies.
Most recently, short-termism has fuelled attacks on the carbon price under the EU emissions
trading system, though it is the main driver of long-term decarbonisation in the power sector.
Structurally lowering electricity prices takes time and requires structural answers, such as
deeper integration of the European electricity system. If this can be done, both fuel use and
price volatility will be reduced, while the return on investment for new renewable assets will
be maximised.
Third, Europe’s industrial map will evolve alongside the emerging, new clean-electricity map.
Prime industrial locations are no longer on top of coal mines or at the end of gas pipelines.
They are rather where the sun shines, the wind blows (as on Ireland’s west coast) – or where
nuclear energy is available.
Allowing energy-hungry industrial processes to relocate to these areas in the future will lower
costs, improve competitiveness and reduce the strain on grids. This does not mean
deindustrialisation. Rather, it suggests smart rethinking of supply chains. It should be noted
that most industrial jobs and activity do not involve operating energy-intensive machinery.
Just as profitable companies today import oil, iron ore and natural gas, in the future they will
trade electricity-intensive primary products. Producing these products where clean energy is
abundant – both within and outside Europe – will mean lower costs for households and
companies where the clean-energy endowment is scarce and will help European industry to
remain competitive globally.
To conclude, Europe’s energy future will be electric — and that will reshape its industrial
geography. The question is whether Europe manages this transformation together, efficiently
and competitively, or in a fragmented way and at much higher cost.
European families and businesses need their governments to pursue structural solutions for the
long term, rather than costly short-term defensive measures that may be temporarily popular
but deliver.
External link
