It is a great honour to be invited to attend a meeting of this committee. I appreciate the invitation very much. I arranged to attend a meeting as soon as possible after the adoption of the Green Paper on European energy policy. Ireland is the first country I have visited after the adoption of the Green Paper on foot of the debate at the Transport, Telecommunications and Energy Council. I have visited Ireland in advance of the debate on energy policy at the European Council that will take place at the end of this week.
It is important that the committee is reviewing energy policy in Ireland. The EU's consideration of European energy policy is taking place as part of the same vision. Each member state is making its own decisions to reach the right solutions to the challenges we face.
I wish to highlight four principal challenges that we face at a global level. There has been a tremendous increase in global demand for oil, gas and energy resources in general. This is not a short-term increase but a fundamental increase in demand for energy. It could be argued, from one point of view, that we should be happy that there is growth in Europe, America, China, India and many other countries. From another point of view, however, we know that there are constraints on resources and that, even with major investment, we will continue to be obliged to face certain issues. The International Energy Agency perceives that if demand continues to grow as it is at present — that growth does not even have to increase — we will need 60% more energy resources by 2030. This means that constraints will continue to exist, thereby influencing the price of energy. It will also impact on the volatility of the market. The price of energy will be affected by, for example, events in Nigeria or the development of a nuclear programme in Iran.
The second issue relates to the importation of hydrocarbons. Each of the citizens of the European Union noticed the effects of this issue in the first days of this year, when the gas dispute between Russia and Ukraine constrained the supply of gas to the Union. It was a wake-up call for our citizens, who were reminded of our dependency on imported hydrocarbons. We import 50% of our resources. If current trends continue, we will be importing 70% of our resources. There is nothing wrong with importing resources, as long as there is a stable, transparent and open market. As members are aware, the situation is not always easy. There is instability in many countries that possess substantial resources. That is a particular challenge for the European Union. Most of the growth in demand is found in countries that are importing resources.
The third issue relates to investment needs. There has been a substantial level of under-investment in energy. The Union as a whole needs to spend €1 trillion in the next 20 years to ensure that there is security of supply for its citizens. This is an immense challenge because investment is needed not only in generation facilities but also in transport facilities, interconnectors and new pipelines. The investment needs are immense. We definitely have private capital that could address such immense needs. This means that we should provide a stable and predictable environment for such investments to be made. Last, but not least, energy policy in the near future and also in the long term will be strongly influenced by developments in the environment and in particular climate change. This issue is somehow overshadowed by what is happening in Ukraine and Russia in respect of high oil prices. However, it is known that this is the most important challenge we face in the area of energy. We should seek not only security of supply but also a sustainable supply that does not influence climate change. This poses a particular challenge for energy policy.
As a result of what I said regarding the four main challenges, we search for a global answer. In response to the challenges, we cannot just close the border and try to protect ourselves without looking at the outside world. The answer to the challenge of achieving security of supply and sustainability must be global. This means that the European Union must have a policy in this area. The energy policy has three objectives, namely, security of supply, sustainability and competitiveness. Energy policy should not only ensure security of supply and sustainability but should also provide Europe with the possibility to compete and to provide jobs in the European Union. It is not contradictory — it is the opposite — to address the security of supply issue in a sustainable manner. It provides for competitive advantages that will bring prosperity and jobs to the European Union. At the same time, I emphasise that we should look upon the three objectives in this way.
The Commission carried out an analysis of the challenges and made proposals to the Council and Parliament regarding how to create a common European energy policy or strategy that will not impact on subsidiarity but that will provide added value. It did so while recognising that a decision on energy policy in one member state will have an influence on the policies of other member states and in light of the clear potential, in scope and scale, for an EU of 25 or 27 members to achieve much more than even the biggest member state alone.
We must also be clear that there is not a silver bullet that could be used to address the challenges. Sometimes it is simplified and people seek a magical energy source that will supply an answer to all the issues. There is not such a source. This means that we should pursue activities in many areas and each single measure should be seen in light of subjective subvention. At the same time, it must be understood that only a synchronous approach in all areas can bring success. The Green Paper outlines six areas for action, all of which are equally important. It is not the case that an action listed on page 14 is more important than one on page 25 — all actions are important.
Let us start with fully competitive energy markets in Europe. In this area, we have moved ahead quite substantially. Although there are many complaints about energy prices in Europe, the latest publication of EUROSTAT shows that, in real terms, energy prices in Europe are still lower than they were in 1995. At the same time, however, it is clear that there are deficiencies in the market. Some of these are easy to identify. First, not all member states have implemented legislation and the Commission is commencing infringement proceedings against these countries. Second, competition issues have always been addressed in a particularly vigorous manner. The Commission is now doing that and is also encouraging national anti-trust authorities to do so.
We should take a step forward in some areas. I will indicate four areas in which action is clearly needed in addition to the implementation of the second package, not only in letter but also in spirit. First, in respect of physical interconnection, we are lagging behind. There will be a genuinely competitive market when consumers in Portugal have the opportunity to choose providers in Finland and obtain their energy through the power exchange in that way. That can be achieved if there is adequate physical interconnection. The Commission will examine the level of interconnection that will be necessary and consider how it can address the lack of interconnection and lines. The lack of interconnection is sometimes caused by a failure to put in place power plants or pipelines to provide for a real European energy market and to bring about the best possible energy prices in cities.
The second issue is transparency in the market. There are 25 markets with at least 25 different transmission system operators and these are aware of everything that happens in their national markets. That information needs to be available to all market participants if, as the Commission would like, a European market is to be established. We should take action in respect of the transparency issue by considering how to encourage the exchange of information at an appropriate level. It is clear that all transmission system operators should be allowed to give all necessary information to market participants.
The third area relates to the organisation of the market. We currently have national and regional market organisations but we do not have European market organisations. We should ensure that there is a European power exchange, whereby a person in Portugal can buy electricity from Finland. The three activities I have identified in the EU regulatory area would facilitate cross-border trade. Market liberalisation will have limited results in the absence of cross-border trade. It is clear that we need to provide for certainty, transparency and the necessary investment in the global EU market, which will bring about the best prices for our consumers.
The second priority is security of supply. It is sometimes suggested that this is a less important issue for countries in eastern Europe but that is not the case. Countries in every part of Europe could face disruption of supply. Some important things should be done. We could introduce more transparency in the market. We need to make preparations to ensure our citizens can be certain that if there is disruption of supply, adequate mechanisms will be in place and physical supplies will be available to give them appropriate energy resources. This means that our oil stocks should be directed to prove we have that flexibility in respect of oil products. We should develop the same vision in respect of gas. We should consider how to strengthen the security of supply directive in a way that will give each citizen confidence that the existing system will cope in the event of a disruption of supply at global level or within a single member state. It is important that all member states, including eastern European countries such as Poland, should be aware that the EU system can support each member state.
The third area is the energy mix. In a way, we are making progress on the energy mix by trying to meet the targets for renewable energies. That is the route we are taking, but the challenge is much deeper. When each member state makes an energy policy decision, it should be aware of the policies being adopted in other countries. Ireland is naturally closer to the UK market but the Belgian or Dutch markets also have an indirect influence on the price level in Ireland because the gas comes from Germany, via Belgium, to the UK and on to Ireland or it could be different.
It is intended to disseminate information on this issue. The Commission intends to propose the carrying out each year of a strategic EU energy review that will reflect developments in the EU market. In this way we can provide the best possible information to national policy makers. We can also provide for an overall energy strategy that could allow us to formulate an objective for the Union in the context of a mix of the minimum levels of the overall EU energy mix from secure, indigenous and low carbon energy sources. We must examine where Europe is going. We are at different starting positions and it will never be the case that the energy mix of country X will be the same as that of country Y. However, we should see the Union as a common market and, at the same time, we should consider where we are heading, whether it be towards 70% independence, 90% independence or 60% independence, coupled with the use of indigenous resources. We know the different possibilities that exist but the Union should have a vision with regard to where it is heading. It is difficult to formulate the position at this stage but we are looking for Ireland's support for strong targets. The Union has set 2030 for this target.
The first priority is to address the climate change goal but this is also appropriate in terms of energy mix. This issue relates to that of energy efficiency, the area in which the Union should concentrate most of its efforts. As long as there is growth in energy consumption, the position is not sustainable. We can increase energy generation capacities but we will be obliged to seek new power sources. There is the possibility of living at today's level of comfort using the energy level of 1990. The 20% potential that was calculated by estimating the price of oil at $30 per barrel indicates that the 1990 level of EU fuel consumption would be sufficient to keep us at today's level of comfort, perhaps at its biggest potential. This is a critical area because global success depends on that of the Union and our experience should be mirrored in other parts of the world.
There are some attempts to move forward in the United States and China, where energy efficiency has been made the first priority. We should lead the world. We should achieve it by showing example, determination and experience. We have already adopted legislation and an energy efficiency action plan for Europe is in the pipeline. Each member state will have an opportunity to examine it. This is a critical area and I urge members to give it the attention it deserves. Many small measures are required. I accept that I sound like a preacher but I really believe that we have fallen behind. We have failed to date and I do not know what are the reasons for this. It appears that we do not believe there is potential but we should begin to use it.
The other issue involves renewable energies. It has been claimed that there is too much support for renewables. This is wrong. All the support for renewable energy is according to the state-aided schemes approved in the Union. There is nothing anti-competitive in what is being done. Renewables would follow if the prices become extremely high but it will be a long and very painful transition. Including renewables in our energy mix means that the transition from an oil-based economy to one based on clean energy will be less painful. This area, which provides for sustainability and security of supply, is very important, bearing in mind that resources such as wind are immense. We would never say that a time will come when demand will peak. Competitiveness and advantage concerning other parts of the world should be considered.
The fifth area to be considered is technology. It is an obvious truth that technology makes us strong or weak. On the question of education and technological development, using the potential of the entire European Union is critical. It is not only the framework programmes, including the seventh, that are important, it is also important that research carried out in each European company or university be interlinked, thereby providing the best possible outcome. We have had good responses thus far on energy efficiency and renewables and have made quite remarkable progress regarding carbon.
Last but not least is external energy policy. The answer is global and we should, therefore, be sharing our vision globally. This is our first priority. Even in light of all the developments concerning renewables and energy efficiency, we should note that hydrocarbons will remain the most important part of our energy supply for some time. To achieve security of supply, the global market needs to function well. We should try to support the countries with the resources to develop in a democratic and market economy-friendly way by seeking necessary investment and using private or public capital to provide for responses from the market that will guarantee sustainable prices. The latter will result in enough income for those nations, while permitting sufficient growth in other countries. In this regard, we intend to strengthen dialogue between the Union and Russia, OPEC, Norway and the Caspian Sea countries. We will seek new participants to supply the European market. We will consider the Caspian Sea countries, the Middle East — in respect of gas — and north Africa. We must provide for the entry of additional resources to the European Union, while understanding clearly that a well-supplied China or America is also in our interest. Global supply in the market should be strengthened.
We would also like to bring our vision, as established in respect of the Balkan countries in south-east Europe, to other near neighbours. The EU approach, although not always perfect, is still the best in the world. The global market connects different nations of different cultures. It is a question of having security of supply for all citizens.
I thank members for their attention and I am ready to answer all their questions on energy policy or broader Union policy.
