EU’s energy regulations are preventing investment

Volatility in energy regulations could deter investors from giving around €1 trillion required in the power industry by 2020. According to a new report by the EU energy associations, almost […]

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By Priyanka Shrestha

Volatility in energy regulations could deter investors from giving around €1 trillion required in the power industry by 2020.

According to a new report by the EU energy associations, almost all the energy leaders surveyed said the investment the International Energy Agency (IEA) regard as necessary for the power sector will not happen.

EURELECTRIC claims investment decisions in the European electricity industry are more difficult than they should be. It suggests the lack of investment could be a result of higher borrowing costs due to the debt crisis and “continued distortions” in the wholesale and retail energy markets. The union said “greater policy consistency” and “long-term strategic thinking” would be vital to overcome the issue.

Hans ten Berge, EURELECTRIC’s Secretary General said: “The results of the study paint a deeply troubling picture of the current state of power sector investments in Europe. While it is true that this trend is not the same across all of Europe, business leaders overwhelmingly feel that a poor investment climate is leaving them trapped in a vicious circle in which changing regulation decreases the attractiveness of utilities. This deters investment and leads to yet more volatile regulation, as policymakers desperately try to ensure that the necessary investment takes place.”

Energy UK, trade body for the electricity sector said some of the proposals in the report are “sensible” and that an “honest” debate is necessary.

Chief Executive Angela Knight CBE said: “Politicians and regulators need to listen when so many leaders in the energy sector across Europe say that key investment decisions in the power sector are at risk…This report makes some sensible proposals for what could be done to promote investment, in particular abandoning purely target-driven policy and moving towards a more market-driven framework where investment decisions are based around economic sense. We must avoid a ‘race for new regulation’.

“More generally, the report is right to highlight the “inherent tension” between guaranteeing security of supply, promoting competitive prices and reducing carbon emissions across Europe. We need now an honest debate as to how the energy market can be made affordable for customers in the long term.”