background on energy in europe information prepared for the european council, 4 february 2011
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BACKGROUND ON ENERGY IN EUROPE
Information prepared for the European Council,4 February 2011
Background Information for the European Council, 4 February 2011
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Contents
1. Key facts about energy and the EU
2. EU energy goals and priorities
3. An integrated energy market
4. Energy efficiency
5. Renewable energy
6. Technological challenge
7. External dimension
Background Information for the European Council, 4 February 2011
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Key facts about energy and the EU
Background Information for the European Council, 4 February 2011
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World energy demand is on the rise
EU energy consumption is expected to level out in future but world energy consumption will continue to grow due to global population growth and economic catching up. Overall, world energy demand may grow by 45 % between 2006 and 2030. In China and India, demand will nearly double.
Source: IEA, World Energy Outlook 2010
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035
Mto
e
Rest of world
China
Rest of OECD
European Union
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The EU energy mix is slowly changing
Fossil fuels represent up to 80% of our energy mix today. In a “business as usual” scenario, the share may still be 70% by 2030, but renewable sources are expected to account for an increasing proportion.
Source: Eurostat 2010, PRIMES 2009
EU Gross inland consumption2008
EU Gross inland consumption2030
in % (1799 Mtoe; 2008) in % (1807 Mtoe; 2030 « business as usual »)
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Energy powers our society and economy
Source: Eurostat 2010
EU-27 Total Final Energy Consumption (2008) Total = 1168.63 Mtoe
Transport and industry consume more than half of the total energy in the EU, while a quarter of energy is consumed by households.
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A key sector for the economy
In 2008, the European electricity market was worth around 620 billion Euros. This figure represents 5% of EU GDP.
In 2007, the total number of employees in the energy sector was 1.6 million, representing 1.3% of the EU economy.
This represents highly qualified jobs (average personnel costs per employee in the energy sector were 40% above the average).
Energy costs represent 1% to 10 % of industrial production costs (excluding personnel costs).
Source: Eurostat 2011
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Energy79%
Agriculture10%
Industry Processes
8%
Other0%
Waste3%
A major source of emissions
Source: EEA 2010
Share of greenhouse gas emissions in 2008
The use of energy is responsible for the majority of greenhouse gas emissions, with the energy sector representing 31%, transport 19%, industry 13%, households 9% and others 7%.
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Massive modernisation investment is needed
Total investment needs in the electricity and gas sector between 2010-20: over € 1 trillion
Power generation: ~ € 500 bn Transmission and distribution: ~ € 600 bn
Distribution: ~ € 400 bn
Transmission: ~ € 200 bn
Source: Commission calculations
Renewables: ~ € 310-370 bn
Investments of over € 1 trillion will be needed by 2020 to replace obsolete power plants, to modernise and adapt infrastructure to the latest technologies and to cater for demand for low carbon energy.
Background Information for the European Council, 4 February 2011
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Dependence on imports is likely to grow
Today, Europe imports more than half of the energy it uses. If nothing changes, our dependence on fossil fuel imports will rise by 2030.
Source: European Commission
« Business as usual » scenario based on 2009 figures
GASOIL2005 2008 2020 2030 2005 2008 2020 2030in %
82 %84 %
93 %94 %
58 %
62 %
76 %
83 %
100
80
60
40
20
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The EU depends on a few suppliers
Source: Eurostat 2010
EU imports of natural gas
Russia
40%
Norway30%
Algeria15%
Nigeria 4%Others11%
EU imports of crude oil
OPEC Countries36%
Russia32%
Norway15%
Kazahkhstan 5%
Azerbaijan 3%
Mexico 2%
Others 7%
Today, the EU is very reliant on a few partners for its oil and gas supplies. Diversification of routes and sources is a strategic priority for the EU.
in % (2008, total = 561,46 Mt) in % (2008, total = 12,958,133 TJ)
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Evolution of the EU gas and oil import bill
Source: European Commission, Gas Strategies (2010)
The increase between 2007 and 2008 of the import bill due to high crude oil prices had a cost equivalent to 0.5% of the 2008 EU GDP.
€ bn 0
€ bn 50
€ bn 100
€ bn 150
€ bn 200
€ bn 250
€ bn 300
2005 2006 2007 2008 2009
Crude Oil
Natural Gas
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Oil and gas price evolution 2007-2010
Source: Platts 2011
Energy prices have a huge impact on the EU economy. However, they are very unstable.
Monthly Average Spot price in €/bbl or €/MWh (January 2007=100)
41€/bbl
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50%
100%
150%
200%
250%
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Dated Brent
UK NBP DA
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EU energy goals and priorities
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EU energy goals
Security of Supply
Competitiveness
Sustainability
Energy policy has been a cornerstone of European integration since its very beginning through the European Coal and Steel Community. In its daily activities, the EU contributes to delivering competitive, secure and sustainable energy for Europe. For detailed information, see: http://ec.europa.eu/energy/strategies/2010/2020_en.htm
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Meeting our “20-20-20 by 2020” goals
Reduce greenhousegas levels by 20%
Increase share of renewables to 20%
100%
Reduce energyconsumption by
20%
-10%Current
trend to 2020
-20%
20%
Current trend
to 2020
Current trend
to 2020
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An integrated energy market
Background Information for the European Council, 4 February 2011
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After 1 Year After 5 Years After 10 Years
-0,8%
-0,6%
-0,4%
-0,2%
0,0%
0,2%
0,4%
0,6%
0,8%
1,0%
Completion of the internal energy market will bring benefits
Source: European Commission
Achieving a fully functioning and competitive European electricity and gas market can add an extra 0.6% - 0.8% to EU GDP by 2020, create employment and curtail inflation.
Estimated effects of opening gas & electricity markets (ranges)
Effect on GDP
Effect on Employment
Effect on Inflation
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Recent gas crises are illustrative
The January 2009 gas crisis showed the lack of physical interconnections and the poor functioning of the EU internal market, with several Member States facing severe energy shortages for several days.
Source: European Commission
> 75 %
50 - 75 %
25 – 50 %
< 25%
0%
% of missing gas supply from 6 to 20 January 2009(- 300 million m3/day for 14 days)
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The Commission has identified priority infrastructures of European interest to be delivered by 2020. See: http://ec.europa.eu/energy/infrastructure/strategy/2020_en.htm
Baltic Energy Market Interconnectio
n Plan
Electricity & Gas
North-South Gas Corridorin Western Europe North-South Gas
Interconnections& Oil Supply
South Western Electricity Interconnections
Central / South Eastern Electricity Connections
SouthernGas Corridor
North SeasOffshore Grid
Gas
Electricity
Electricity and Gas
Oil and Gas
Smart Grids for Electricityin the EU
Infrastructure priorities by 2020
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Energy efficiency
Background Information for the European Council, 4 February 2011
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The EU is not on track to meet its target
In spite of progress, significant additional efforts are needed to achieve the - 20% energy consumption target. Most recent projections show that with current policies we will only achieve a 10% cut.
Source: European Commission
* Gross inland consumption minus non-energy uses
- 20% by 2020 objective- 368 Mtoe
Most recent projection- 166 Mtoe
Business as usual 2007 projection
Pri
ma
ry e
ne
rgy
co
ns
um
pti
on
*, M
toe
1400
1450
1500
1550
1600
1650
1700
1750
1800
1850
1900
2005 2010 2015 2020
1676 Mtoe
1842 Mtoe
1474 Mtoe
Projections from 2007Projections from 200920% energy saving objective
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Target value: 368,0
National intentions will not suffice
Source: European Commission
As part of the Europe 2020 strategy for smart, sustainable and inclusive growth, Member States are committed to setting national targets for energy efficiency. First indications show that the degree of precision and levels of ambition are insufficient.
Estimated absolute contribution to EU target by targets defined by 20 Member States so far
Mto
e
0,0
50,0
100,0
150,0
200,0
250,0
300,0
350,0
400,0
Slovak Republic
Sweden
Romania
Poland
Malta
Latvia
Lithuania
Italy
Ireland
Hungary
France
Finland
Spain
Greece
Estonia
Denmark
Germany
Cyprus
Bulgaria
Austria
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Energy efficiency has multiple benefits
Source: European Commission
COMPETITIVENESS• cut Europe’s energy bill by about € 200 billion / year in 2020• lower households’ bills by about €1000 per household / year
• create up to 2 million jobs by 2020• boost R&D and create markets where EU can become a global leader
SECURITY OF SUPPLY• decrease our energy dependence • help balance our trade • alleviate the need for gas pipelines and
grid investments
SUSTAINABILITY • help fight climate change: - 740 Mt CO2 / year in 2020
• limit environmental degradation
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Energy savings potential can be tapped
Source: European Commission
Transport and households, in particular buildings, are two sectors with great potential for energy efficiency gains. Measures to save energy in transport and accelerate the renovation rate of buildings are crucial.
Final energy in 2020 (in Mtoe)
17%
24%
21%
13%
0
50
100
150
200
250
300
350
400
Industry Transport Households Tertiary
Savings potential
Energy consumption
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This can be done in a cost-effective manner
While technologies are available for substantial energy savings, some may be too costly. Existing energy saving commitments can be achieved with cost-effective policies. The “business as usual” (BAU) scenario will not deliver.
Source: European Commission
0
5
10
15
20
25
30
Households Transport Industry Tertiary All sectors
BAU With cost-effective policies Technical potentials
Potential of consumption reduction by sector by 2020 (%)
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What improving energy efficiency means for a single family house built in the 70s (150 m²)
Annual CO2
emissionsin tonnes
Consumption of heating oil per year
Renovation to low energy house
standard
÷ 2,5 ÷ 2
No renovation
Renovation to new build standard
4500 litre 1800 litre 900 litre
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Renewable energy
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What the EU renewable target means
Share of renewable energy in total energy mix (in %)
0%
10%
20%
30%
40%
50%
Bel
giu
m
Bul
ga
ria
Cze
ch R
ep
ub
lic
Den
mar
k
Ger
man
y
Est
on
ia
Ire
lan
d
Gre
ece
Spa
in
Fra
nce
Ita
ly
Cyp
rus
La
tvia
Lith
ua
nia
Lu
xem
bou
rg
Hun
ga
ry
Ma
lta
Net
he
rla
nds
Aus
tria
Pol
an
d
Por
tug
al
Rom
ani
a
Slo
ven
ia
Slo
vaki
a
Fin
lan
d
Sw
ed
en
Uni
ted
Kin
gd
om
EU
27
60%
EU 2020
EU 2005
2005 levelsAdditional step to meet the 2020 target
Each Member State has a binding target - set as a combination of renewable potential and GDP - to increase its share of renewable energy by 2020.
Background Information for the European Council, 4 February 2011
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Renewable energy is taking off in the EU
The EU has made progress and seems to be on track to meet its target of 20% renewable energy in its energy mix by 2020. The contribution of renewable sources will vary significantly from one sector to the other.
Source: European Commission
Sectoral and overall growth of renewable energy in the EU
Electricity share
Transport share
Heating share
Overall RES share
(2009, 2010 linear estimates)
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Solar, wind and biomass are the technologies progressing most rapidly. Solar and wind develop for electricity generation while biomass remains dominant for the heating sector.
Growth and share of various types of renewable technologies
Source: European Commission
0
50000
100000
150000
200000
250000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Heat pumps
Biomass
Wind
Tide, wave, ocean
Solar
Geothermal
Hydro
ktoe
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Significant global investments in renewables
In 2009, investment in renewable energy fell in the EU by 10% in the context of the economic crisis, while it increased by more than 50% in China.
Source: International Energy Agency
Investments in renewable energy at global level
Europe
China
United States
Brazil
Other America
Other Asiaand Oceania
India
Middle Eastand Africa
Bill
ion
Dolla
rs
Background Information for the European Council, 4 February 2011
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Global renewable energy demand 2008-2035
Source: IEA, World Energy Outlook 2010
0 100 200 300 400
European Union
United States
China
Brazil
India
Africa
OECD Pacific
Mtoe
2008
2035
Demand for renewable energy is expected to triple, creating new market opportunities. The EU, the US and China will be the largest global markets.
New markets are expanding at home and abroad
Background Information for the European Council, 4 February 2011
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The renewable energy industry offers good job prospects
Source: European Commission
mln. jobs 0.0
mln. jobs 0.5
mln. jobs 1.0
mln. jobs 1.5
mln. jobs 2.0
mln. jobs 2.5
mln. jobs 3.0
mln. jobs 3.5
mln. jobs 4.0
2006 2010 2020 2030
Accelerated deploymentpolicies
Business as usual
Achieving the 2020 renewable energy target will deliver 2.8 million jobs in total.
Background Information for the European Council, 4 February 2011
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Technological challenge
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Industry 55%
Member States 35%
EU10%
Investment in energy R&D in the EU
Source: European Commission
Investment in energy R&D is mostly driven by the private sector, with public authorities at national and EU level also contributing significantly.
3,3bn €
Share of energy investments in 2007
Private sector
Public sector
Background Information for the European Council, 4 February 2011
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83%
75% 55% 70% 32%
Source: European Commission
Europe risks losing its technological edge
R&D expenditure in energy in 2007 (€ per inhabitant)
€ 0
€ 20
€ 40
€ 60
€ 80
€ 100
€ 120
€ 140
€ 160
€ 180
Japan S-Korea EU US Russia
private
public
83%
75% 55% 70% 32%
Europe spends on average € 20 on energy R&D per inhabitant, with the private sector contributing for a half (55%).
Background Information for the European Council, 4 February 2011
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External dimension
Background Information for the European Council, 4 February 2011
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EU
Energy Community Parties
Energy Community Observers
Other Neighbourhood Policy Countries
The EU is projecting its energy market model as well as political and economic stability in neighbouring countries including through the Energy Community Treaty. See: http://www.energy-community.org
Source: European Commission
Extension of the EU energy market to the neighbourhood
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OPEC
LNG*
* LNG: Liquefied natural gas (Qatar, Algeria, Nigeria, etc.)
RUSSIANORWAY
AL.
CA
SP
IAN
IRAQEAST MED.
Traditional strategic suppliers
Emerging strategic suppliers
Presentation of J.M. Barroso to the European Council, 4 February 2011
Traditional and emerging hydrocarbon suppliers
E U R O P E 2 0 2 0