This entertaining graphic is the EU’s official triad of energy policies. The environmental strand is wittily nicknamed ‘Kyoto’; the competition component ‘Lisbon’ (the energy liberalisation edict, not the Treaty); and the security-of-supply axis ‘Moscow’ (I think we can guess why …).
Notwithstanding the EC’s assertion that these are ‘balanced, integrated and mutually reinforced’, the triad was always under severe tension, and the twin events of Russian action in Georgia and the credit crunch are now stressing it to probable breaking-point.
In particular, security of supply has zoomed into pole position, with gas supplies in particular looking even less comfortable than after the Ukranian spat of 2006. Competition is only really being promoted now by the UK (and the pro-competition hardcore within the Commission itself), which sees itself being stranded at the end of a very long pipeline system.
So – what of the environmental strand ? Didn’t they insist at the Brown-Barroso love-in just this morning that it won’t get forgotten in the excitement ?
As we’ve often noted before, implementing the full “20:20:20” vision would cost a mint. Until recently, energy projects were still able to leverage heavily: but finance is now drying up, in energy as elsewhere.
At the same time, costs of steel, turbines etc have been going through the roof. We can predict that lending may over time become easier; that some costs will fall as the down-cycle kicks in; and that demand for energy will fall for the same reason, making some of the targets easier to hit by default.
However, at best there will now be an investment hiatus of months, perhaps years. And then the lights will start flickering: we are on a ‘just-in-time’ schedule for new electricity generation development, and there is no leeway. And there are only two emergency solutions. In the short term, there will be rationing and removal of environmental constraints. In the medium term there could be hasty commissioning of the only type of large-scale plant that Europe can be sure of building in a hurry and fuelling securely: coal-fired plant, perhaps as part of a Keynsian public spending splurge.
Or, there is the possibility of a major industrial downturn, on the scale suffered by Eastern Europe post 1989. It would help solve ‘Kyoto’ and ‘Moscow’. But probably not the solution the EC has in mind …