Euromines welcomes a well-functioning, integrated electricity market

Euromines supports a stable and predictable energy and climate change policy that ensures sustainable growth and global competiveness for the EU industry as a whole as well as for the energy-intensive industries in particular. We share the belief that the main objective of energy policies should be securing energy at affordable prices as well as ensuring industrial competiveness while achieving appropriate climate reduction targets.

Euromines welcomes the European Union commitment to ensure a well-functioning, integrated electricity market allowing non-discriminatory market access for resource providers and electricity customers, empowering consumers, enabling demand response and energy efficiency, facilitating aggregation of distributed demand and supply, and contributing to the decarbonisation of the economy.  Nevertheless, the overall design of the electricity market should not undermine the essential economic, social and environment –related input needed by the society’s sustainable development. 

Euromines welcomes the Commission’s proposal aiming to promote energy efficiency within the European Union. However, the rules aiming at removing barriers and overcoming market failures should not lead to an overall increase in pressure and economic, social and environmental costs that might subsequently undermine the fundamental principle of sustainable development by making it impossible to serve the essential needs of mankind at present while protecting and ensuring the needs of future generations.

 

A. Energy Prices and Costs in Europe (European Commission)

Published every two years, this most recent report underlines the EU's exposure to volatile and growing fossil fuel prices and notes that wholesale prices have started to rise again. Future electricity production costs are expected to increase for fossil fuel-generated electricity (due to import prices and the carbon price) and fall for renewables (linked to the decreasing costs of investment as technologies evolve), with the report suggesting that that electricity market prices could reduce the need for subsidising renewable energy technologies by 2030. 

The EU remains heavily dependent on imports of oil and gas, and the increase in fossil fuel prices (especially crude oil) made the cost of EU energy imports in 2017 rise by 26% to EUR 266 billion. The increase in oil prices could have had a negative impact on EU growth (-0.4% GDP in 2017) and on inflation (+0.6%), the report estimates.

Energy costs for businesses fell from 2008 to 2015 in most of the sectors studied, with the most significant declines appearing in some energy intensive sectors.

The report also considers fossil fuel subsidies (which did not decrease in recent years) in a context of rising energy subsidies to finance the energy transition (€170 billion in 2016). Finally, it contains chapters on the impact of price regulation and the potential benefits of dynamic pricing.

 

B. Study: Composition and Drivers of Energy Prices and Costs: Case Studies in Selected Energy Intensive Industries – 2018 (Ecofys).

Based on data collected from 189 plants over a 10-year period (2008-2017), the study shows energy prices and costs borne by EU producers operating in 11 energy intensive subsectors: bricks and roof tiles, wall and floor tiles, glass tableware, packaging glass, aluminium primary, aluminium secondary, aluminium downstream, steel (electric arc furnace - EAF), steel (basic oxygen furnace - BOF), nitrogen fertilisers and refineries. Prices for both electricity and natural gas reached a peak between 2011 and 2013 and then decreased. By 2017, recorded prices had returned to pre-crisis levels. Across all sectors, larger consumers are experiencing lower prices and costs. Regulatory components (e.g. network costs, non-recoverable taxes and levies, etc.) have a larger impact on electricity prices than on natural gas prices. Energy costs represent a driver for cost competitiveness, as they account for between 2% and 43% of total production costs in different subsectors. Whereas it is not possible to draw conclusions on the impact of energy costs on margins, a statistically significant negative association between natural gas prices and plant profitability was detected. Finally, the energy costs borne by EU producers appear to be higher than those faced by their international competitors based in Algeria, Egypt, Russia, United Arab Emirates and the US and comparable to those faced by producers in China and Turkey.

As the recognized representative of the European metals and minerals mining industry covering more than 42 different metals and minerals and employing 350.000 directly and about four times as many indirectly, Euromines welcomes the Commission's Sustainable Finance Action Plan for a low carbon, greener economy and agrees that such a socio - economically efficient, sustainable and flexible financial system will contribute to long-term value creation. 

In order to successfully contribute to the common objectives, it is essential that these initiatives on sustainable finance are followed by subsequent proportionate, accurate and fit for purpose documents which include measures and recommendations appropriate to all affected stakeholders.

In light of the above, Euromines would like to make a series of comments regarding the Technical Report on EU Taxonomy published by the Technical Expert Group on Sustainable Finance on 18th of June 2019. The report is accompanied by a call for feedback as part of the ongoing work carried out by the Commission’s Directorate-general for financial stability, financial services and capital markets union, Directorate-general for environment, public consultation to which Euromines intends to participate and submit its input.