1725-3217
Energy
Economic
Developments
in Europe
EuropEan Economy 1|2014
Economic and
Financial Afairs
The European Economy series contains important reports and communications from the
Commission to the Council and the Parliament on the economic situation and developments, such
as the European Economic Forecasts.
Unless otherwise indicated the texts are published under the responsibility of the
European Commission
Directorate-General for Economic and Financial Affairs
Unit Communication
B-1049 Brussels
Belgium
E-mail: Ecfin-Info@ec.europa.eu
LEGAL NOTICE
Neither the European Commission nor any person acting on its behalf may be held responsible for
the use which may be made of the information contained in this publication, or for any errors which,
despite careful preparation and checking, may appear.
This report is also published as a Staff Working Document (2014) 19 attached to the 2030
Framework for Climate and Energy, adopted on 22 January 2014.
This paper exists in English only and can be downloaded from
http://ec.europa.eu/economy_finance/publications/.
More information on the European Union is available on http://europa.eu.
KC-AR-14-001-EN-N
ISBN 978-92-79-35345-1
doi: 10.2765/72195
© European Union, 2014
Reproduction is authorised provided the source is acknowledged.
Euro p e a n Co mmissio n
Dire c to ra te -Ge ne ra l fo r Ec o no mic a nd Fina nc ia l Affa irs
En e rgy Eco n o m ic D e ve lo p m e n ts
in Eu ro p e
EURO PEAN ECONOMY
1/ 2014
ABBREVIATIONS AND SYMBOLS USED
COUNTRIES
AT
BE
BG
CY
CZ
CIS
CN
DE
DK
EE
EL
ES
FI
FR
HU
IE
IT
JP
LT
LU
LV
MT
NL
NO
PL
PT
RO
RU
SE
SI
SK
TR
UA
UK
US
Austria
Belgium
Bulgaria
Cyprus
Czech Republic
Commonwealth of Independent States
China
Germany
Denmark
Estonia
Greece
Spain
Finland
France
Hungary
Ireland
Italy
Japan
Lithuania
Luxembourg
Latvia
Malta
Netherlands
Norway
Poland
Portugal
Romania
Russia
Sweden
Slovenia
Slovakia
Turkey
Ukraine
United Kingdom
United States
UNITS
Btu
GJ
GWh
Ktoe
kva
kWh
MJ
Mtoe
MWh
PPS
TCF
TCO2
ii
British Thermal Unit
Giga joule
Gigawatt hour
Kilo ton of oil equivalent
Kilovolt-ampere
Kilowatt hour
Megajoules
Million tonnes of oil equivalent
Megawatt-hour
purchasing Power Standard
Trillion Cubic feet
Tons of carbon dioxide emissions
TJ
TWh
Terajoule
Terawatt-hour
OTHERS
ARA
ARDL
BEA
BBL
CER
DSO
EC
ECM
EEX
EIA
ENTSO
ERGEG
ERU
ETS
EU
EUA
EUR
FiT
GDI
GDP
GO
GVA
GHG
HHI
HICP
HS
IEA
ISO
ITO
LM
LRMC
MS
NAP
NBP
NGO
NUEC
OECD
OU
PV
RCA
RES
RTB
RUEC
TSO
TTF
TYNDP
USD
Antwerp/Rotterdam/Amsterdam
Autoregressive distributed lag
Bureau of Economic Analysis
Oil barrel
Certified emissions reductions
Distribution system operator
Energy Cost
Error correction model
European Energy Exchange
Energy Information Administration
European network of transmission system operator
European Regulators' Group for Gas and Electricity
Emissions reductions units
Emissions trading scheme
European Union
European Union allowances
Euro
Feed-in tariff
Gross Domestic Income
Gross Domestic product
Gross Output
Gross Value Added
Greenhouse gas
Herfindahl-Hirschman index
Harmonized index of consumer prices
Harmonized System
International Energy Agency
Independent system operator
Independent transmission operator
Langrage multiplier
Long run marginal cost
Member State
National allocation plan
National balancing point
Non-Governmental organisation
Nominal Unit Energy Cost
Organization for Economic Cooperation and Development
Ownership unbundling
Photovoltaic
Revealed comparative advantage
Renewable energy sources
Relative trade balance
Real Unit Energy Cost
Transmission system operator
Title transfer facility
Ten year network development plans
US Dollar
iii
VAT
WIOD
WFD
iv
Value added tax
World Input-Output Database
Water Framework Directive
ACKNOWLEDGEMENTS
This report was prepared in the Directorate-General for Economic and Financial Affairs under the
direction of Marco Buti, Director-General, Servaas Deroose, Deputy Director-General, and Anne Bucher,
Director of the Directorate for Structural Reforms and Competitiveness.
The production of the report was coordinated by Emmanuelle Maincent (Head of Unit - Economic
Analysis of Energy, Transport, Climate Change and Cohesion Policy).
The main contributors were Ricardo Amaro, Paul Arnoldus, Fotios Kalantzis, Emmanuelle Maincent,
Jerzy Pienkowski, Andras Rezessy, Mirco Tomasi, and Arthika Sripathy.
Ricardo Amaro, Vittorio Gargaro, Andras Rezessy, Arthika Sripathy and Mirco Tomasi provided
statistical support. Editorial assistance was provided by Vittorio Gargaro.
The report has benefited from useful comments and suggestions received from colleagues in the
Directorate-General for Economic and Financial Affairs, Directorate-General for Agriculture and Rural
Development, Directorate-General for Climate Action, Directorate-General for Energy, DirectorateGeneral for Enterprise and Industry, Directorate-General for Environment, Joint Research Center,
Directorate-General for Employment, Social Affairs and inclusion, the members of the Economic and
Policy Committee Working Group on Climate Change and Energy, the members of the Economic and
Policy Committee and as well as the Agency for the Cooperation of Energy Regulator.
The Council of European Energy Regulator and the Agency for the Cooperation of Energy Regulator are
thanked for granting us access to their database.
Comments on the report would be gratefully received and should be sent to:
Directorate-General for Economic and Financial Affairs
Unit B4: Economic Analysis of Energy, Transport, Climate Change and Cohesion Policies
European Commission
BE-1049 Brussels
or by e-mail to ECFIN-SECRETARIAT-B4@ec.europa.eu.
v
CONTENTS
Exe c utive Summa ry
1
Pa rt I:
Ene rg y Co sts a nd Co mp e titive ne ss
5
Ove rvie w
1. Unit Ene rg y c o sts in Euro p e a nd the wo rld
7
8
2.
Pa rt II:
1.1.
Intro duc tio n
8
1.2.
Asse ssing Unit Ene rg y c o sts
8
1.3.
Unit Ene rg y Co sts: a n Inte rna tio na l Co mpa riso n
12
1.4.
Unit Ene rg y c o sts: A se c to ra l c o mp a riso n
17
1.5.
EU Me mb e r Sta te s a sse ssme nt
22
1.6.
Co nc lusio ns
27
The re c e nt d e ve lo p me nt o f US sha le g a s a nd its imp a c t o n EU
c o mp e titive ne ss
29
29
2.1.
Intro duc tio n
2.2.
The imp a c ts o f the surg e in US sha le g a s o n the US e ne rg y se c to r a nd EU a nd
US e ne rg y mix
29
2.3.
Ele c tric ity a nd Ga s p ric e s: a US-EU c o mpa riso n
33
2.4.
Ene rg y Inte nsity : a US-EU c o mpa riso n
36
2.5.
Tra de
38
2.6.
Co nc lusio ns
40
Re fe re nc e s
A.1. Da ta a nd Me tho d o lo g y
A.2. Re a l unit e ne rg y c o st in the wo rld
A.3. Re a l Unit Ene rg y Co sts & Shift-sha re e xc lud ing re fining se c to r
A.4. Ad d itio na l e ne rg y d a ta o n EU a nd US
42
44
46
47
49
Ene rg y a nd c a rb o n p ric e s: a sse ssing the imp a c t o f e ne rg y
a nd c lima te p o lic ie s
51
Ove rvie w
1. The imp a c t o f e ne rg y p o lic ie s o n e le c tric ity a nd na tura l g a s p ric e s:
a n e mp iric a l a sse ssme nt
2.
53
54
1.1.
Intro duc tio n
54
1.2.
Ene rg y p ric e d e ve lo p me nts in the EU
54
1.3.
The p o lic y de te rmina nts o f e ne rg y p ric e s a t EU le ve l
60
1.4.
Asse ssing the impa c t o f e ne rg y a nd c lima te p o lic ie s o n e le c tric ity a nd
na tura l g a s p ric e s
66
1.5.
Co nc lusio ns
70
Asse ssing the d rive rs o f c a rb o n p ric e s: a n e mp iric a l e stima te
72
72
2.1.
Intro duc tio n
2.2.
Stylise d fa c ts: e vo lutio n o f c a rb o n p ric e
72
2.3.
Clima te a nd Ene rg y p o lic y d e ve lo pme nts
74
2.4.
Asse ssing the d rive rs o f c a rb o n p ric e s
77
2.5.
Co nc lusio ns
81
vii
Pa rt III:
Re fe re nc e s
A.1. Ele c tric ity a nd Na tura l G a s Pric e Mo d e l a nd Va ria b le s De sc rip tio n
A.2. Ca rb o n Pric e mo d e l a nd va ria b le s d e sc rip tio n
82
85
87
Re ne wa b le s: Ene rg y a nd Eq uipme nt Tra d e De ve lo pme nts
in the EU
89
Ove rvie w
1. Re ne wa b le s d e ve lo p me nt in the EU a nd the wo rld
91
92
2.
3.
1.1.
Intro duc tio n
1.2.
Evo lutio n o f re ne wa b le Ele c tric ity in EU-27 a nd its ma in e c o no mic p a rtne rs
92
1.3.
Sup po rt Sc he me s a nd re ne wa b le s d e ve lo p me nt
95
1.4.
Co nc lusio ns
Re ne wa b le s c o mp e titive ne ss d e ve lo p me nt: the c a se o f wind a nd
so la r e q uip me nts
92
100
102
2.1.
Intro duc tio n
102
2.2.
Re ne wa b le c o mp o ne nts a nd e q uipme nt tra d e flo ws
102
2.3.
Inte rna tio na l c o mp e titive ne ss o f EU so la r a nd wind e ne rg y ind ustrie s
109
2.4.
Co nc lusio ns
111
Ene rg y tra d e b a la nc e a nd Avo id e d fue l c o sts
112
3.1.
Intro duc tio n
3.2.
To ta l e ne rg y tra d e b a la nc e
112
3.3.
Avo ide d c o sts o f imp o rte d fue l
113
3.4.
Co nc lusio ns
117
Re fe re nc e s
A.1. Da ta d e sc rip tio n fo r the mo d e l me a suring the d rive rs o f tra d e in
so la r p o we r a nd wind e q uip me nt
A.2. Da ta d e sc rip tio n fo r a sse ssing a vo id e d imp o rte d fue l c o sts
Sta tistic a l a nne x
112
119
121
122
123
LIST OF TABLES
I.1.1.
I.1.2.
I.1.3.
I.1.4.
II.1.1.
II.1.2.
II.2.1.
II.2.2.
III.1.1.
viii
Ave ra g e % a nnua l c ha ng e 1995-2009 - Ma nufa c turing
Se c to ra l b re a kd o wn: d e c o mp o sitio n o f RUEC a nd a nnua l g ro wth ra te s 19952009
Se c to ra l b re a kd o wn: d e c o mp o sitio n o f RUEC a nd a nnua l g ro wth ra te s 19952009
Ave ra g e % a nnua l c ha ng e 2000-2009 - Ma nufa c turing
Re sults o f Ele c tric ity p ric e mo de l
Re sults o f Na tura l g a s p ric e mo d e l
De sc rip tive sta tistic s o f EUA, fue ls a nd e le c tric ity p ric e c ha ng e s (%), 2008-2012
Re sults o f the c a rb o n mo d e l
Re ne wa b le e le c tric ity supp o rt instrume nts in me mb e r Sta te s
16
19
20
27
68
70
74
80
96
LIST OF GRAPHS
I.1.1.
I.1.2.
I.1.3.
I.1.4.
I.1.5.
I.1.6.
I.1.7.
I.1.8.
I.2.1.
I.2.2.
I.2.3.
I.2.4.
I.2.5.
I.2.6.
I.2.7.
I.2.8.
I.2.9.
I.2.10.
I.2.11.
I.2.12.
I.2.13.
I.2.14.
I.A3.1.
I.A3.2.
I.A4.1.
I.A4.2.
I.A4.3.
I.A4.4.
I.A4.5.
I.A4.6.
I.A4.7.
I.A4.8.
II.1.1.
II.1.2.
II.1.3.
II.1.4.
II.1.5.
II.1.6.
II.1.7.
II.1.8.
Re a l Unit Ene rg y Co sts a s % o f va lue a d de d , ma nufa c turing se c to r
Re a l Unit Ene rg y Co sts a s % o f g ro ss o utp ut, ma nufa c turing se c to r
Re a l Ene rg y Pric e le ve ls - Ma nufa c turing
Ene rg y Inte nsity le ve ls - Ma nufa c turing
Ave ra g e a nnua l c ha ng e 1995-2009 - Ma nufa c turing
Shift sha re a na lysis o f ma nufa c turing se c to r RUEC g ro wth
De c o mpo sitio n o f Re a l Unit Ene rg y Co sts - Ma nufa c turing
Annua l Gro wth Ra te s 2000-2009 - Ma nufa c turing
Na tura l g a s p ro d uc tio n in the US a nd sha re o f sha le g a s o n to ta l g a s p ro duc tio n
Ene rg y mix US
Ene rg y mix, EU
Ene rg y Imp o rt De pe nde nc y
Who le sa le na tura l g a s p ric e s in Ge rma ny, Ja p a n, UK a nd US c o mp a re d with
c rud e o il p ric e
Indic e s o f re a l g a s p ric e s fo r e nd -use rs
End -use r g a s p ric e s fo r industry
End -use r e le c tric ity p ric e s fo r ind ustry
Indic e s o f re a l e le c tric ity p ric e s fo r e nd -use rs (2005=100)
Ene rg y inte nsity o f ind ustry
Sha re o f so me Ene rg y Inte nsive Se c to rs (EIS) a nd sha re o f Ma nufa c turing in GDP
- 2001-2012
Ene rg y inte nsity o f ind ustry, se le c te d se c to rs
Ene rg y tra de b a la nc e s a s % o f GDP, to ta l a nd pe r e ne rg y so urc e - 2001-2011,
EU-27 a nd US
Curre nt a c c o unt b a la nc e , e xte rna l b a la nc e fo r g o o ds a nd b ila te ra l b a la nc e fo r
g o o d s, 2001-201 - US a nd EU-27
Re a l Unit Co sts ma nufa c turing se c to r inc luding vs. e xc luding c o ke , re fine d
p e tro l & nuc le a r fue ls
Shift-sha re a na lysis fo r the ma nufa c turing se c to r inc luding vs. e xc luding c o ke ,
re fine d p e tro l & nuc le a r fue ls
US Ene rg y d o me stic p ro duc tio n b y so urc e , 2000-2011
EU-27 Ene rg y d o me stic p ro d uc tio n b y so urc e , 2000-2011
Ele c tric ity mix US, 2002-2011
Ele c tric ity mix EU-27, 2001-2010
Ho use ho ld e xpe nditure s fo r e ne rg y p ro d uc ts, 2003-2010 - EU-27 a nd US
Ele c tric ity p ric e s fo r ind ustria l c o nsume rs a nd ho use ho ld s fo r the Euro p e a n
c o untrie s in the OECD a nd fo r the US
Ene rg y c o nsump tio n o f ind ustry b re a kd o wn b y so urc e s - US
Ene rg y c o nsump tio n o f ind ustry b re a kd o wn b y so urc e s, EU
EU-27 Ave ra g e d o me stic a nd ind ustria l re ta il e le c tric ity p ric e , who le sa le p ric e
a nd c rude o il p ric e e vo lutio n 2004-2011
EU a ve ra g e c ha ng e pe r e le c tric ity ta riff c o mp o ne nt b e twe e n 2008 a nd 2011
Re ta il a nd who le sa le e le c tric ity a ve ra g e p ric e c ha ng e s b y Me mb e r Sta te 20042011
Re ta il e le c tric ity p ric e s - Ho use ho ld s a nd Industry
Ave ra g e ra tio o f Industria l to Ho use ho ld e le c tric ity p ric e s, re la tive to the EU-27
a ve ra g e , 2004-2011
EU-27 a ve ra g e do me stic a nd ind ustria l re ta il na tura l g a s p ric e a nd c rude o il
p ric e e vo lutio n 2004-2011
Re ta il na tura l g a s p ric e e vo lutio n b y Me mb e r Sta te 2004-2011
Re ta il na tura l g a s p ric e s - Ho use ho ld s a nd Industry
12
13
13
13
14
15
24
25
30
30
30
33
34
35
35
35
35
36
37
38
39
40
47
48
49
49
49
49
49
50
50
50
55
55
56
57
58
58
58
59
ix
II.1.9.
II.2.1.
II.2.2.
II.2.3.
III.1.1.
III.1.2.
III.1.3.
III.1.4.
III.1.5.
III.1.6.
III.1.7.
III.2.1.
III.2.2.
III.2.3.
III.2.4.
III.2.5.
III.2.6.
III.2.7.
III.2.8.
III.2.9.
III.2.10.
III.2.11.
III.3.1.
III.3.2.
III.3.3.
III.3.4.
III.3.5.
III.3.6.
III.3.7.
x
Ave ra g e ra tio o f Industria l to Ho use ho ld na tura l g a s p ric e s, re la tive to the EU-27
a ve ra g e , 2004-2011
Evo lutio n o f EUA Future s p ric e s
Evo lutio n o f c a rb o n p ric e , fue ls a nd e le c tric ity p ric e s o ve r 2008-2012
De c o mpo sitio n o f Ca rb o n Pric e Cha ng e s o ve r 2008-2012
Sha re o f So la r PV, Wind , Hyd ro po we r a nd o the r re ne wa b le so urc e s in EU-27
g ro ss e le c tric ity g e ne ra tio n
Sha re o f re ne wa b le so urc e s in g ro ss e le c tric ity g e ne ra tio n b y Me mb e r Sta te in
2003, 2007 a nd 2011
Sha re o f so la r PV, wind , hyd ro po we r a nd o the r re ne wa b le so urc e s in g ro ss
re ne wa b le e le c tric ity g e ne ra tio n in 2011
Sha re o f EU-27, US, China , Ja pa n a nd Bra zil in wo rld ne t re ne wa b le e le c tric ity
g e ne ra tio n
Sha re o f Eu-27, US, China , Ja pa n a nd Bra zil in wo rld ne t e le c tric ity g e ne ra tio n so la r PV (a ) - Wind (b )
EU Me mb e r Sta te s with the hig he st sup po rt to re ne wa b le e ne rg y so urc e s, 2010
Sha re o f re we wa b le so urc e s (e xc luding hyd ro p o we r) in g ro ss e le c tric ity
g e ne ra tio n a nd RES e le c tric ity supp o rt in EU Me mb e r Sta te s -2010
EU-27 e xpo rts a nd imp o rts o f so la r c o mp o ne nts fro m Extra -EU
EU-27 e xpo rts a nd imp o rts o f wind c o mpo ne nts fro m Extra -EU
EU Me mb e r Sta te s intra a nd e xtra -EU imp o rts (M) a nd e xpo rts (X) o f so la r
c o mpo ne nts a nd e q uipme nt in 2012
EU Me mb e r Sta te s intra a nd e xtra -EU imp o rts (M) a nd e xpo rts (X) o f wind
c o mpo ne nts a nd e q uipme nt in 2012
Ave ra g e sha re o f EU-27, US, China a nd Ja p a n in wo rld 's to ta l, re ne wa b le , so la r
a nd wind p a te nts fro m 2000 to 2011
Ave ra g e sha re o f EU Me mb e r Sta te s in EU-27 to ta l, re ne wa b le , so la r a nd wind
p a te nts fro m 2000 to 2011
Ave ra g e Re ve a le d Co mp a ra tive Ad va nta g e Inde xe s o f so la r a nd wind
industrie s in the EU-27 Me mb e r Sta te s fro m 2007 to 2011
Ave ra g e Re ve a le d Co mp a ra tive Ad va nta g e Inde xe s o f so la r a nd wind
industrie s in the EU-27, USA, China a nd Ja p a n fro m 2007 to 2011
Ave ra g e re la tive tra de b a la nc e Ind e x o f the so la r industry in the EU-27, USA,
China a nd Ja p a n
Ave ra g e re la tive tra de b a la nc e Ind e x o f the wind ind ustry in the EU-27, USA,
China a nd Ja p a n
Re la tive Tra de Ba la nc e Inde xe s o f so la r a nd wind ind ustrie s in the EU-27 Me mb e r
Sta te s fro m 2007 to 2011
EU-27 tra de d e fic it in e ne rg y p ro d uc ts a nd c rude o il p ric e s, 2000-2012
Me mb e r Sta te s tra de b a la nc e in e ne rg y p ro d uc ts a s % o f GDP, 2012
Avo ide d impo rte d fue l c o sts tha nks to re ne wa b le e le c tric ity - 2010
Avo ide d impo rte d fue l c o sts tha nks to re ne wa b le e le c tric ity b y Me mb e r Sta te s 2010
Re ne wa b le e le c tric ity g e ne ra tio n a nd a vo id e d imp o rte d fue l c o sts - 2010
Avo ide d to ta l fue l c o sts a nd imp o rte d c o sts tha nks to re ne wa b le e ne rg y, 2010
Avo ide d fue l c o sts tha nks to re ne wa b le use in he a ting a nd tra nsp o rt b y
Me mb e r Sta te s, 2010
60
73
73
80
92
93
93
94
95
96
100
102
103
108
108
109
109
110
110
110
111
111
112
113
115
116
116
117
117
LIST OF BOXES
I.1.1.
I.2.1.
II.1.1.
II.1.2.
II.1.3.
II.2.1.
II.2.2.
III.1.1.
III.1.2.
III.1.3.
III.2.1.
III.2.2.
III.3.1.
Re a l Unit Ene rg y Co st (RUEC), No mina l Unit Ene rg y c o st (NUEC), Ene rg y Pric e s
a nd Ene rg y Inte nsity
Po te ntia ls a nd Unc e rta intie s fo r Sha le Ga s Explo ra tio n in the EU a nd in the US
Third Ene rg y Pa c ka g e
Lite ra ture Re vie w
Me tho d o lo g y a nd Da ta
Lite ra ture o n the inte ra c tio n b e twe e n e ne rg y a nd c lima te p o lo c ie s
Me tho d o lo g y a nd Da ta
Re ne wa b le Ene rg y Po lic ie s in the ma in EU e c o no mic pa rtne rs
Ele c tric ity ta riff d e fic it in so me Me mb e r Sta te s
Re ne wa b le a nd Emplo yme nt
Co mp o ne nts in wind a nd so la r ind ustry
Me a suring the d rive rs o f tra de in so la r po we r a nd wind e q uipme nt
Asse ssing a vo ide d imp o rte d fue l c o sts
10
31
62
66
67
76
78
94
97
99
103
104
114
xi
EXECUTIVE SUMMARY
Sinc e 2008, the EU ha s
ma d e a hug e le a p
fo rwa rd in p ro mo ting
the tra nsitio n to a lo w
c a rb o n e c o no my
In recent years, the EU has set an ambitious agenda to foster the transition to
low carbon economies. The Climate and Energy Package adopted in late
2008 sets an EU-wide 20% greenhouse gas emission reduction target for the
27 Member States by 2020, 20 % share of energy from renewable sources in
EU gross energy consumption by 2020 and a 20% decrease in primary energy
use by 2020. At the core of this strategy is an objective of achieving
greenhouse gas emissions reduction while improving security of supply and
promoting the emergence of new green sectors. The recent crisis has not put a
brake on this level of ambition as these 20/20/20 targets are part of a broad
coordinated exercise of economic and fiscal policies in the context of the
European Semester.
Ene rg y c o sts ma tte r…
Recently, the cost of energy has emerged as an important dimension of
international competitiveness of European industries, in particular in light of
the "shale gas revolution" taking place in the US. Energy matters for the
competitiveness of our economies as it affects the production costs of
industries and services and the purchasing power of households. Energy costs
are not only driven by the type of fuel mix used and consumed, but they have
been influenced by our energy policy choices as well as by technological
evolutions that can contribute to reducing our energy needs. This report
provides analysis and evidence for the economic impact of energy
developments in the EU and Member States over the past years. It could
contribute to discussions about economic aspects of energy and climate
policies and how they can best contribute to fostering the transition to low
carbon economies.
…b ut the EU
ma nufa c turing ha s
b e e n suc c e ssful in
re d uc ing its e ne rg y
inte nsity
The comparison of energy costs in Europe and Member States and in the rest
of the world helps assess our economies in terms of energy cost
competitiveness. Chapter I.1 develops unit energy cost indicators that bring
together the energy price and the energy intensity dimensions. One salient
feature is that the dynamics of energy costs has been positive in the EU, but
also in the rest of the world. Another salient characteristic is that, in a global
context, the EU manufacturing sector exhibits a low level of energy costs
relative to both output and value added. This positive outcome is mostly
explained by the low energy intensity of the sector. The EU manufacturing
sector has so far responded to energy price increases through sustained
energy intensity improvements, thus maintaining its relatively favourable
position. Although not visible over the longer period (1995-2009), the latest
period analysed (2005-2009) shows that these improvements have been
driven partly by restructuring towards sectors with lower energy costs as
energy intensive industries have been more affected by energy cost increase
pressure. In addition, Member States with high share of energy intensive
industries are most exposed to unfavourable unit energy costs developments.
Hig h e ne rg y p ric e s
sho uld re ma in a
c o nc e rn, ta king
a c c o unt o f the
inc re a sing EU-US
e ne rg y p ric e g a p .
Against this background, one cannot ignore the recent spectacular
development of the production of shale gas and oil in the US which has
started in 2009-2010 and is often seen as a major competitiveness threat in
the near future. Chapter I.2 provides a focus on more recent developments in
the US and EU. While the surge in US shale gas has led to marked changes in
the US energy sector and a reduction in the US energy trade balance in GDP
terms, the impact on the EU is limited at the moment as no major shift in the
EU-US goods trade balance nor significant divergent trends in the overall
production structure of manufacturing industry are observed and can be
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ascribed to the shale gas revolution. However, this should not imply
complacency on the widening EU-US energy price gap as the full impacts
may become visible only after some delay. Moreover, energy efficiency
improvements may slow down in the EU and speed up in US due to
diminishing low cost options, and increased policy effort. Consequently, high
energy prices for EU industries should remain a policy concern, even more so
in case the EU-US energy price gap will continue to increase.
It is therefore strategic for the EU to see whether and how energy prices have
been affected by policy developments. This report analyses three important
components of energy cost – electricity and natural gas retail prices, and
carbon prices. EU electricity and gas markets have been fundamentally
reshaped by the significant energy and climate policy initiatives over recent
years, in the areas of market opening, renewables penetration, climate change
mitigation, and security of supply. The report explores the impact of these
policy reforms on end-user electricity and gas prices as after all, these are
what industries and households are ultimately paying. The report also looks
at carbon prices as it is expected to provide the price signal to change our
consumption behaviour and reduce our carbon footprint.
2
Ma rke t o p e ning in
e le c tric ity a nd na tura l
g a s ha s b ro ug ht
sig nific a nt d o wnwa rd
p ric e e ffe c ts.
Re ne wa b le sup p o rt
ha s c o ntrib ute d to
inc re a sing e le c tric ity
p ric e s…
Analysis shows that while fossil fuels still remain key drivers of electricity
and natural gas price formation, market opening and competition appear to
have significant downward price effects for both household and industrial
consumers. In both markets, empirical estimates confirm that EU energy
policies, such as unbundling of networks and market opening lower retail
prices. In addition to these positive developments, natural gas and electricity
prices are also affected by specific factors. In the natural gas market, security
of supply plays an important role. High import dependency and low
diversification of imports can significantly contribute to increasing end-user
prices for industries and households. Hence Member States which rely on one
foreign source are likely to be exposed to higher prices. In the electricity
market, support to less mature renewables technologies has translated in
higher electricity prices for both industry and households segments.
Furthermore, in some Member States, the burden has not been evenly shared
across consumer segments, i.e. industries and households.
… while re ne wa b le
p ro d uc tio n, a mo ng
o the r fa c to rs ha ve
ne g a tive ly a ffe c te d
c a rb o n p ric e s.
By contrast, the carbon price is not found to have any statistical significant
impact on electricity retail prices. The latest data on carbon price evolution
show that its level is far lower than what was expected when the Energy and
Climate Package was adopted in 2008. As it is, although the carbon price is
seen as one of the key pieces for the transition to low carbon economies, it
fails to provide a strong price signal for consumption behaviour and for
investments in clean production technologies. The empirical estimate carried
out in chapter II.2 analyses the main drivers of carbon prices and shows that
economic factors have played a major role in driving carbon prices in phase
2. Without any doubt, the recent economic crisis has contributed to lowering
the demand of allowances, contributing to a large part to the ETS market
imbalance, hence the decrease in the carbon price. However, the European
carbon market is not isolated from other shaping factors such as the fuel
switching behaviour of the conventional power producers and the renewable
penetration among other drivers. There is evidence that the deployment of
renewable production has also contributed to a lesser extent to this ETS
market imbalance, therefore lowering the carbon price. Such results show the
Exe c utive Summa ry
importance of economic factors in driving carbon prices, but highlight the
interplay between energy and climate policies and ultimately the trade-offs
policy makers are confronted to when designing climate change and energy
policies combining market instruments and support mechanisms.
Co mp a re d to the re st
o f the wo rld , the EU
ha s b e e n suc c e ssful in
d e ve lo p ing wind a nd
so la r e ne rg y
Finally, the Energy and Climate agenda provides a comprehensive regulatory
and policy framework that favours the emergence of new green sectors. This
means that energy markets in the context of well-designed policies, can offer
many opportunities for growth and jobs (1). The report scrutinises the
development of new technologies and energy sources - solar and wind - and
their impact on trade flows as a way to assess one dimension of
competitiveness. Chapter III.1 provides an overview of what happened in the
EU and other parts of the world. In Europe, the support to renewable sectors
stepped up from 2007 and has represented a strong opportunity to accelerate
the expansion of less mature technologies such as wind and solar. Compared
to the rest of the world, the EU has been one of the frontrunner in developing
wind and solar energy although other countries have been catching up since.
The EU ha s d e ve lo p e d
stro ng p o sitio ns in the
wind e q uip me nt
se c to r…
The expansion of renewables provided opportunities in terms of industrial
equipment and trade flows. Chapter III.2 gives a closer look at trade
developments in the EU and Member States in the wind and solar sector.
Evidence shows that the EU displays strong comparative advantages in the
wind industry, but has not managed to develop such position in the solar
industry. When analysing the drivers of trade of wind and solar equipment,
one interesting result is the role of knowledge in driving trade flows, with the
EU export performance being strong in technologies where the EU has a
strong portfolio of patents. This suggests that innovation and R&D policies
should be seen as key policies in promoting the emergence of new green
sectors.
… b ut the fue l c o sts
a vo id e d b y
re ne wa b le
d e ve lo p me nts a re still
to o lo w.
Another expected benefit of developing renewable is the impact on the
energy trade bill and its contribution to reducing our energy dependence. The
EU dependence on fossil fuels is higher than in the US, and the EU27 trade
deficit in energy products amounted to 3.2% of GDP in 2012. Chapter III.3
shows that renewables help reduce import fuel costs and contribute to
improving the energy trade balance, but only to a limited extent. Nonetheless,
the avoided fuel costs are expected to rise in the coming years, due to
increasing production of renewable energy in the EU and projected increase
in EU fossil import prices.
(1) COM(2012)663.
3
Part I
Ene rg y Co sts a nd Co mp e titive ne ss
OVERVIEW
This part analyses energy cost competitiveness. The cost of energy has emerged as an important
dimension of international competitiveness of European industries, in particular in light of the "shale gas
revolution" taking place in the US. Energy matters for the competitiveness of our economies as it affects
the production costs of industries and services and the purchasing power of households.
Chapter 1 introduces the concept of Unit Energy Costs (UEC). Similarly to Unit Labour Costs, the UEC
indicator measures the energy cost per one unit of value added, in a given sector or in an aggregation
thereof. This indicator enables to compare the relative importance of energy inputs – or in other words the
sensitivity to energy price shocks - of a given sector over time. The UEC indicator brings together two
key components of energy competitiveness: the value of energy inputs and energy intensity.
Chapter 2 analyses the impacts of the development of shale gas, always through the same integrated
approach, i.e. observing the parallel evolution of energy intensity and energy prices in the EU and in the
US. It discusses how the introduction of shale gas has affected the US and EU energy sectors, the
development in the EU-US energy price-gap and in the trade balances for the EU and US in terms of
energy trade, of current accounts and trade of goods.
7
1.
1.1.
UNIT ENERGY COSTS IN EUROPE AND THE WORLD
studies on the production function. Decomposition
based on the input-output method has a close
relation to both methods.
INTRODUCTION
Energy is a key input in many production
processes. For this reason, its costs represent a
competitiveness factor for manufacturing industry,
with the intensity of use next to the energy price as
the major drivers. However, another equally
important factor is the intensity of its use. In order
to provide a more comprehensive assessment of
the role that energy plays in determining industrial
competitiveness, these factors shall be looked at in
combination, the same as it is done for other inputs
such as capital and labour.
The objective of this chapter is to assess energy
cost competitiveness using unit energy cost
indicators. Section 1.2 describes the concept and
methodology used to build these indicators.
Section 1.3 provides an international comparison
of unit energy costs in Europe and other parts of
the world. Section 1.4 focuses on sectoral
developments while section 1.5 assesses Member
States unit energy costs development. Conclusions
are presented in section 1.6.
1.2.
ASSESSING UNITENERGY COSTS
1.2.1. Intro d uc to ry re ma rks o n the ro le
e ne rg y in the p ro d uc tio n p ro c e ss
of
Energy is a key aspect of competiveness. This
follows from the energy's essential role in the
production process of goods and services. Hence,
an economic analysis of energy cost
competiveness cannot limit itself to energy prices
but needs to consider indicators which inform on
how energy prices and energy use affect
production decisions. Energy costs, energy
productivity and energy intensity are such
indicators which can be analysed.
The role of energy in production can be
empirically analysed by using analytical
frameworks firmly based on economic theory.
Often, the production function is employed in such
analysis, as it expresses in a mathematical form
how the output of the production process is related
to the production inputs. Two basic assessment
methods rely on the production function concept,
namely growth accounting and econometric
8
As regards the first method, growth accounting
is an empirical method which allows the
identification of the sources of growth of output.
Under the conventional assumptions of constant
returns to scale and production input prices equal
to their marginal productivity, it is possible to
derive from a further unspecified production
function that output growth is a weighted average
of the growth of the production inputs with the
cost shares of the various inputs as weights plus a
remainder term called "multi-factor productivity"
generally associated with technical progress.
However, growth accounting as a method cannot
be used to analyse the causes of changes in energy
costs, intensity and productivity.
Growth accounting is more complicated at industry
level than at macroeconomic level since
intermediate deliveries between industries and also
within a given industry serve both as input and
output, rendering it more difficult to link the
industry "multi-factor productivity" terms to
economy-wide measures of productivity (Hulten
2009). For a growth accounting analysis at macro
level, production output can be expressed in value
added (2) since the costs of intermediate inputs
cancel out against the gross income of delivering
these inputs in the derivation of GDP (which thus
equals GDI). At industry level, however, the
intermediate deliveries do not cancel out, so one
can argue in favour of gross production rather than
value added as the appropriate output variable. For
instance, O'Mahony and Timmer (2009) present as
basis for industry-level growth accounting the socalled KLEMS production function which has
gross production as output variable and capital (K),
labour (L), energy (E), materials (M) and services
(S) as production inputs. The contribution to
overall growth by each production and
intermediate factor is given by the product of its
share in total cost and its growth rate. As observed
by Hulten (2009), the weights for the primary
(2) This chapter uses gross value added at basic prices. The
National Accounts define it as the output at basic prices
(i.e. the sales revenues of the products without the taxes
and subsidies) minus the costs of the products used up in
the production process, valued at purchaser prices (i.e.
without VAT)
Pa rt I
Ene rg y Co sts a nd Co mp e titive ne ss
production factors, capital and labour, are smaller
than is the case for a "value added" production
function, since industry gross output is bigger than
industry value added. Hulten (2009) also notes that
the gross output approach is sensitive to the degree
of vertical integration of an industry, as a vertical
merger of an industry with some of its suppliers
could lead to the statistical elimination of
intermediate flows. The same reasoning applies
when an industry decides to outsource some
energy-intensive parts of the production process
either within the same industry or to other
industries in the same country or to low-energy
cost countries. While Hulten (2009) observes that
the gross production approach is tainted by
statistical problems regarding intermediate
deliveries, he recalls that the choice between value
added or gross output should take account of the
specification of technical change. Hence, he
cautions against the use of value added as
industrial output variable since "it implies
(improbably)
that
efficiency-enhancing
improvements in technology exclude material and
energy" (ibidem, p28).
The second method using the production
function concerns direct econometric estimation
of the production function (or, relatedly, the
cost function) at industry level. This allows for
estimating the output, substitution and price
elasticity for the different input factors such as
energy. The economics literature provides a wide
array of studies varying considerably in
aggregation level, in the coverage of sectors,
countries and time period; and estimation method.
Also the standard assumptions of constant returns
to scale and competitive pricing (i.e. the absence of
mark-ups) can be relaxed (Ecorys & CE, 2011,
ch.4) Often the production function used has the
shape of a translog function and mostly gross
production is the output variable of choice, but
value added is occasionally used as well, mostly
for data availability and data quality reasons. For
example, Krishnapillai and Thompson (2012)
estimate for the US a production function for
industrial value added, distinguishing capital,
labour and electricity as production inputs; the
estimated price elasticity suggest that electricity,
capital and labour are substitutes.
over time or over countries / branches of
industry. The point of departure is total gross
production at industry level. One can directly
relate the change in output to the corresponding
changes in the cost shares of the various primary
and intermediate inputs (up to the desired level of
aggregation), such as for energy as a whole.
However, this leaves out the indirect effects
underlying the changes of the intermediate inputs.
More formal decomposition methods allow for
assessing the relative role of changes in input
prices and input quantities in the overall change of
sectoral costs. Fujikawa et al. (1995) compare the
cost structure for industry sectors in Japan and US;
they derive from the price version of the inputoutput model a decomposition of cost differences
into a primary input price component, a primary
input technology component and an intermediate
input technology component, all three of which
can be further divided into a direct and indirect
component (i.e. following from deliveries from
other sectors). The role of energy in relative
productivity developments between countries has
been studied with such decomposition methods,
among others by Jorgenson and Kuroda (1992).
In addition to these elaborated analytical methods,
one can also directly compare (unit) energy cost
levels and developments over time and /or between
countries outside of the input-output framework,
hence without any restrictive assumption on the
relation between output and the defined inputs.
This allows much more freedom in choosing the
output indicator, gross production, value added or
even
other
indicators.
These
statistical
decomposition exercises tend not to be reported in
the economics literature, unless it involves an
innovation in method. Among others, the US
Department of Energy (2003) decomposes the
index of energy use into the multiplicative relation
of an activity index, an index on structure (changes
in the composition of the economy or sector at
hand) and an index of energy intensity or
productivity. This index approach only accounts
for changes relative to a base year and not for
difference in levels (in the base year). One of the
advantages is that one can choose for each of the
(sub)-sectors / activities in the sector under study
the best output variable possible.
The analytical framework underlying the inputoutput-table allows for a rigorous analysis of
differences in industrial cost structures either
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(Co ntinue d o n the ne xt p a g e )
10
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Ene rg y Co sts a nd Co mp e titive ne ss
Bo x (c o ntinue d)
In this chapter, the approach proposed uses the
input-output table as a starting point but it is not
based on input-output-analysis. Compared to the
range of methods presented above, the
decomposition of energy costs proposed here is
relatively straightforward. The comparison is
between many countries whereas the literature, as
reviewed above, tends to focus on a single or only
a few countries. Because of the lack of clear
guidance from the literature whether to use value
added or gross production and for reasons of data
availability and quality, the unit energy cost
concept used here has followed the convention of
using value added as benchmark (Box I.1.1). This
seems
fairly
unproblematic
since
this
decomposition is statistical and not embedded in a
theoretical framework. Moreover, such a
convention underlines the direct analogy with the
study of unit labour costs and its split labour costs
per worker and labour productivity. However, the
analogy should be handled with care as energy is
an intermediate input and not a primary production
factor.
1.2.2. Unit Ene rg y
Me tho d o lo g y
Co sts:
C o nc e p t
a nd
This section introduces the concept of Unit
Energy Costs (UEC). Similarly to Unit Labour
Costs, the UEC indicator measures the energy cost
per 1 unit of value added, in a given sector or in an
aggregation thereof. This indicator enables to
compare the relative importance of energy inputs –
or in other words the sensitivity to energy price
shocks - of a given sector over time (3). The
analysis focuses on the manufacturing sector and
14 subsectors of manufacturing as these sectors are
(3) See the description of the data used in Appendix 1.
characterised by a relatively higher use of energy
than others. Services are not analysed due to their
low energy intensity(4).
As Unit Labour Costs combine wages and labour
productivity, the UEC indicator brings together
two key components of competitiveness: the value
of energy inputs and energy intensity, which is the
reciprocal of energy productivity. In addition, in
order to differentiate between pure energy-related
effects and macroeconomic developments such as
fluctuations in the exchange rate and inflation
differentials, a distinction is made between Real
Unit Energy Cost (RUEC) measuring the energyrelated effect and Nominal Unit Energy Cost
(NUEC) which incorporates both components (See
Box I.1.1 for more details). The RUEC can then be
decomposed into the real price of energy inputs –
deflated with the value added deflator, hence
helping to measure energy inflation above the
inflation of the given sector – and energy intensity.
To summarize the different factors of NUEC:
NUEC = RUEC * nominal effect = real energy
price * energy intensity * nominal effect
While the nominal effect is important from an
international competitiveness perspective as
businesses make their decisions on the basis of
nominal values, the nominal effect of this
decomposition is determined by factors that are not
related to energy markets such as monetary policy,
inflation expectations, financial market and labour
market developments and exchange rate evolution.
This analysis focuses on the energy-related effects,
(4) Transport services are characterised by high energy
intensity, but they are not included in the analysis.
11
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therefore it concentrates on the RUEC while the
NUEC is presented only to illustrate how nominal
developments complemented the pure energy
effect.
The RUEC and NUEC indicators should be
interpreted in comparison among different
countries. While the level of RUEC indicates the
importance of energy inputs and sensitivity to
energy price shocks, an increase that is greater
than in other countries can signal an increased
vulnerability of this sector to energy costs, but it
could also reflect a restructuring of production
towards more energy intensive production
processes. Therefore, it is necessary to analyse the
level and evolution of the price of energy inputs
and energy intensity as well. Moreover, to address
the issue of potential restructuring on changes in
the RUEC, a shift share analysis is carried out,
which is a common method to disentangle the
effects of restructuring from the growth of an
aggregate indicator (see below).
1.3.
UNIT ENERGY COSTS: AN INTERNATIONAL
COMPARISON
This section analyses the developments of energy
costs and their drivers for the manufacturing sector
in a global comparison.
The evolution and levels of energy costs over
value added, and energy costs over gross output
in manufacturing are broadly similar across
developed countries such as the EU, US and
Japan. This prominent feature is to a large extent
explained by the industrial specialisation pattern
towards high valued added sectors. By contrast,
this is not the case for developing countries. A part
of this difference can be explained by the fact that
countries such as Russia, China or India and Brazil
have more energy intensive production structures,
specialized in sectors where energy inputs play a
comparatively bigger role. Moreover, these
production processes are often characterized by
lower value added. This is confirmed when
looking at the difference between the energy costs
as a percentage of value added (RUEC) and as a
share of gross output (Graph I.1.2). For the EU,
Japan and the US, the RUEC are around three
times higher than the share of energy costs in gross
output. For countries such as China, India and
Brazil the RUEC are four to five times higher,
implying that the difference between gross output
and value added for these countries is greater. The
exception is Russia where the difference of RUEC
and the share of energy costs in gross output is
similar to that of the EU.
G ra p h I.1.1:
Real Unit Energy Costs as % of value added,
manufacturing sector
1.3.1. Re a l Unit Ene rg y Co sts
As mentioned above the level of Real Unit Energy
Cost measures the amount of money spent on
energy sources needed to obtain 1 unit of value
added. Their evolution thus combines the energy
component of the sector's inflation and the energy
intensity of the sector.
Compared to its main economic partners, the
EU manufacturing industry had in 2011 the
third lowest RUEC in terms of value added
after Japan while the US, after the hike of 2008,
falls back to the just below the level of the EU in
2011 (Graph I.1.1). China, Russia and other major
economies such as Brazil and Indonesia show
substantially higher values than the EU (5).
(5) Brazil and Indonesia (and the other world countries) are
reported in Appendix 2.
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G ra p h I.1.2:
Real Unit Energy Costs as % of gross output,
manufacturing sector
1.3.2. The d rive rs o f the
Co sts (7)
Re a l Unit Ene rg y
The RUEC is decomposed into real energy prices
and energy intensity.
Sourc e : Co mmissio n Se rvic e s b a se d o n WIOD d a ta b a se .
It is interesting to note that, since 2006-2007, real
energy costs as a share of gross output in the US
increased much more than in the EU and this
evolution has been confirmed in 2010-2011. As the
levels of RUEC expressed in terms of value added
are similar, this may imply that the US are able to
extract higher value added from their production
than the EU.
The EU's RUECs have steadily but slowly
increased over time, a trend however that is
also observed in the other major world
economies. This signals the increasing importance
of energy cost pressure on the manufacturing
sector's value added on a global scale: for all the
countries considered the energy costs have, as a
matter of fact, increased proportionally more than
the value added. If the refinery sector is excluded
from the calculation of the RUEC (Appendix 3)
the levels decrease substantially (more than
halved) and the ranking of the countries changes
with the US displaying the lowest level of RUEC,
followed by the EU and Japan (6). This result
indicates the importance of the refining sector in
the US and it also highlights the fact that in the
other industrial sectors, less dependent on oil, the
RUEC level is higher in the EU than in the US.
However even excluding the refinery sector, the
EU RUEC remains among the lowest in the world.
Japan and the EU are the two regions where the
real energy prices are the highest in levels.
However the evolution of real energy price has
been similar for the four countries considered and
it appears highly linked to the global oil price's
fluctuation. With the oil price hike of 2008
however Japan and the US have registered a more
severe increase in real energy prices than the EU
and China signalling their greater sensitivity to oil
prices.
G ra p h I.1.3:
Real Energy Price levels - Manufacturing
No te : Ene rg y p ric e s d e fla te d with va lue a d d e d d e fla to r o f
the ma nufa c turing se c to r (in 2005 USD)
Sourc e : Co mmissio n Se rvic e s b a se d o n WIOD, ESTAT a nd
Wo rld De ve lo p me nt Ind ic a to rs d a ta b a se s.
G ra p h I.1.4:
Energy Intensity levels - Manufacturing
No te : inc lud ing fe e d sto c k
Sourc e : Co mmissio n Se rvic e s b a se d o n WIOD, ESTAT, OEC D
a nd Wo rld De ve lo p me nt Ind ic a to rs d a ta b a se s.
At the same time the EU and Japan have the
lowest levels of energy intensity while the US
(6) It is worth to note that excluding refineries from the
manufacturing sector reduces the RUECs to levels of
around 3-4% in gross output in the EU implying that
energy costs play a smaller role in this segment of the
economy.
(7) Due to data limitation the assessment of Energy intensity
and Real energy prices stops at 2009. Therefore to allow
comparability the growth rates of RUEC have also been
computed only up to 2009 (Graph I.1.5).
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and China (8) show considerably higher levels.
China and to a limited extent the US have been
converging towards the European and Japanese
levels. It is to note that graph I.1.4 shows energy
intensity including feedstock. The level and trends
of energy intensity would change if feedstock were
excluded as shown in chapter 2 (graph I.2.10).
Considering only final energy consumption, the
catching up process of the US seems to have halted
after 2009 while the EU performance keeps
improving.
The difference reveals another
potential vulnerability for the EU industry, that is
the cost pressure on EU industries stemming from
the supply of energy sources to be used as raw
material.
Graph I.1.5 summarizes the annualised growth
rates of RUEC and of their two drivers.
G ra p h I.1.5:
Average annual change 1995-2009 Manufacturing
real energy prices; substantial energy intensity
improvements have counterbalanced the upward
pressure of the real energy prices. China started
from very high levels of energy intensity and had
therefore greater margins to improve.
The EU and US have evolved in a very similar
fashion and the increase in RUEC has been
almost the same in the two regions. On average
the real energy price increase has been slightly
faster in the US than in the EU and was
compensated by an equally slightly faster
improvement in energy intensity performances
(bearing in mind that the absolute levels of the two
indicators are very different). The EU and the US
have followed therefore very similar patterns
where the differentials in real energy price levels
have been matched by equally distant levels of
energy intensity which translated in almost equal
levels of RUEC.
1.3.3. Dise nta ng ling the e ffe c t o f ind ustria l
re struc turing o n the g ro wth o f RUEC
No te : Ene rg y Inte nsity inc lud e s fe e d sto c k
Due to d a ta limita tio n the a sse ssme nt o f Ene rg y inte nsity
a nd Re a l e ne rg y p ric e s sto p s a t 2009. The re fo re to a llo w
c o mp a ra b ility the g ro wth ra te s o f RUEC ha ve a lso b e e n
c o mp ute d o nly up to 2009.
Sourc e : Co mmissio n Se rvic e s b a se d o n WIOD, ESTAT, OEC D
a nd Wo rld De ve lo p me nt Ind ic a to rs d a ta b a se s.
Japan is the country that faced the fastest increase
in RUEC during the 15 years considered. A result
that was brought about by a large increase in real
energy prices compensated only partially by very
little improvements in the terms of energy
intensity. This indicates that the country suffered
from strong energy cost pressure that was not
compensated via a reduction of energy intensity.
China on the other hand shows the slowest
increase in RUEC despite the fastest increase in
(8) The high level of energy intensity in China can be partly
explained by the PPP effect which however is not captured
by the dataset used.
14
It is also interesting to analyse to what extent the
developments in energy costs of the manufacturing
sector were driven by (1) energy cost pressures
apparent in all subsectors and/or (2) a restructuring
taking place among subsectors. For instance when
facing strong energy cost pressures, the industry
may respond by reallocating resources from
sectors with high energy costs to others with low
energy costs. This would then result in a decline in
the market share of high energy cost industries,
while those with low energy costs would see a rise
in their share.
In order to investigate the effects of these two
factors, a shift share analysis is carried out. The
RUEC in the total manufacturing industry can be
interpreted as the weighted average of the RUECs
of the subsectors making up the manufacturing
sector with the weights being the shares of
subsectors in total manufacturing value added.
This way, changes in the RUEC of aggregate
manufacturing can be broken down into two
distinct effects: a change in the RUECs of
subsectors (energy cost effect) and a change in the
shares of subsectors in total manufacturing
(restructuring effect) along with a dynamic
Pa rt I
Ene rg y Co sts a nd Co mp e titive ne ss
G ra p h I.1.6:
Shift share analysis of manufacturing sector RUEC growth
Sourc e : Co mmissio n Se rvic e s b a se d o n WIOD.
interaction component of the two effects (9). In
particular, the shift-share analysis decomposes the
growth of RUEC into the following three
components (10).
Within subsector effect: This shows what would
be the growth of RUEC of the total manufacturing
sector if the shares of the subsectors had stayed
unchanged throughout the period of analysis.
Therefore this effect shows the pure energy cost
pressure filtering out the effect of restructuring.
Restructuring effect: This measures the
contribution of changes in value added shares of
the different subsectors to overall manufacturing
(9) The decomposition of manufacturing is done with 14
subsectors on the basis of the NACE Rev.1 nomenclature.
It is possible that there is some restructuring taking place at
a lower aggregation level which may not be captured by
this analysis.
(10) See the technical details of the shift-share analysis in
Appendix 1.
RUEC growth keeping the RUECs of subsectors
unchanged. This component therefore shows the
static restructuring effect. For instance a negative
restructuring effect could show that the share of
industries with high energy costs has fallen,
thereby reducing RUEC growth.
Interaction effect: This term captures the dynamic
component of restructuring by measuring the comovement between RUECs and value added
shares. If it is positive, it signals that energy costs
are rising in subsectors that are expanding, and/or
they are falling in shrinking sectors, i.e. the two
effects complement each other. If it is negative,
then RUEC growth is positive in shrinking sectors,
and/or negative in expanding sectors, i.e. the two
effects are offsetting each other. A negative
interaction effect could signal that businesses in a
country are reallocating resources from high to low
energy cost sectors in response to rising energy
costs.
15
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
Ta b le I.1.1:
Average % annual change 1995-2009 - Manufacturing
No te : Ene rg y Inte nsity inc lud e s fe e d sto c k.
Due to d a ta limita tio n the a sse ssme nt o f Ene rg y inte nsity a nd Re a l e ne rg y p ric e s sto p s a t 2009. The re fo re to a llo w
c o mp a ra b ility the g ro wth ra te s o f RUEC ha ve a lso b e e n c o mp ute d o nly up to 2009.
Sourc e : Co mmissio n Se rvic e s b a se d o n WIOD, ESTAT, OEC D a nd Wo rld De ve lo p me nt Ind ic a to rs d a ta b a se s.
Looking at the shift share analysis of
manufacturing sector RUEC growth in the
period 1995-2011, the main result is that the
bulk of RUEC growth in EU27, Japan and
China were driven by the within effect; i.e.
energy cost increases within sectors (Graph
I.1.6). There is no evidence of a significant
restructuring effect in the EU during this long
period. In contrast, RUEC growth in the US was
dominated by the static restructuring effect, i.e. by
an increase in the share of high energy cost
industries, particularly of the coke and refined
petrol industry. Overall these developments may
signal an increased specialisation of US
manufacturing in high energy cost production with
respect to other countries (11).
The picture is changed if the shift share analysis
is decomposed into three shorter periods. The
period 1995-2000 was characterised by a marked
increase in RUEC dominated by the within
subsector effect in the EU, US and Japan. The
period 2000-2005, however, brought significant
differences with the US being the only country
with a negative within subsector effect. At the
same time the US showed a very large positive
restructuring effect which was mitigated to some
extent by a negative interaction term. Overall this
indicates that the US started specialising in high
energy cost production already in this period (12).
Finally, the last period – 2005-2011 – includes the
(11) In order to check the sensitivity of these results to the start
and end date of the analysis, we carried out the calculations
for the period 1998-2006 as well, which gave similar
conclusions.
(12) This evolution could be explained by a domestic
restructuring or investment of foreign companies in the US.
The analysis here does not differentiate between these
factors.
16
beginning of the development of shale gas in the
US as well as the peak in oil prices of 2008 and the
subsequent fall in 2009 and has brought a
significant adjustment and restructuring on a
global scale. While the RUEC of the EU rose only
moderately, this was due to a limited restructuring
– both static and dynamic – away from high
energy cost sectors offsetting a pure energy cost
effect which was substantially higher than in the
other countries. In the US, RUEC increased visibly
less than in the EU over this period. Once again a
positive restructuring effect can be observed, and
is brought about by the continuous growth of some
energy intensive sectors, in particular coke and
refined petrol. Japan saw a positive within
subsector effect with a positive restructuring effect
and its RUEC grew more than in the US and in the
EU. Finally, China experienced positive but
modest within subsector effect and a similarly
modest negative restructuring effect.
The shift share analysis of the manufacturing
sector excluding the coke, refined petrol and
nuclear fuel sector helps to single out the relevance
of this sector in the evolution of the RUEC and of
the industrial composition of the countries
(Appendix 3). The restructuring effect observed
with the full data set essentially disappears once
the refinery sector is excluded. This is most
evident in the US where in the period 1995-2011
the shift share analysis reported above in Graph
I.1.6 displays a very big positive restructuring
effect while excluding the refinery sector this
effect is no longer present. This points to the
increased relevance of this sector in the US
economy over the past years which is also
confirmed when looking at the growing
contribution of the sector to the total industrial
Pa rt I
Ene rg y Co sts a nd Co mp e titive ne ss
GVA of the US. Another important observation
can be made looking at the period 2005-2011
which includes the shale gas production surge. By
excluding the refinery sector highly dependent on
oil products, the RUEC growth in the US is
actually negative. This is probably due to the
substantial reduction in electricity and gas prices
which shale gas has made possible. In the EU the
difference between the shift share analysis with or
without the refinery sector is also significant. For a
start the growth of RUEC is greatly diminished,
over both the longer period 1995-2011 and the
shorter period 2005-2011. This implies that oil
price dynamics play a major role in determining
the energy costs of the manufacturing sector. The
less dependent a sector is from oil products the less
it appears to be exposed to real unit energy costs
increase. The second observation is that once the
refinery sector is excluded from the analysis the
small negative restructuring effect observed over
the period 2005-2011 disappears, implying that it
was mostly related to this sector (13).
1.3.4. No mina l Unit Ene rg y Co sts
Table I.1.1 presents the decomposition of the
different elements of NUEC and can be read from
left to right in an (approximately) additive manner.
The nominal effect represents the difference
between RUEC and NUEC and it measures the
combination of sectoral inflation and exchange rate
fluctuations.
The table shows that nominal developments
have added some pressure to the energy costs of
the EU over the period 1995-2009 as compared
to the US and Japan as shown by the higher
average growth rate of nominal effect for the EU
than for the US and Japan. With US dollar being
the common currency of comparison, the nominal
effect of the US is close to 0 (14). On the other
hand Japan has gone through a period of internal
deflation which resulted in a negative nominal
(13) It is important to keep in mind that there may be
restructuring taking place at a lower level of aggregation
than the available data which cannot be captured by this
analysis.
(14) For the US the nominal effect measures only the sectoral
value added inflation, since all figures are expressed in
USD. Between 1995 and 2009 the US had a sectoral
deflator evolution somewhat U-shaped which after a period
of inflation came back down to its initial levels. This
explains the annual growth figure being close to 0 in the
table.
effect partially offsetting the evolution of the
RUEC. China experienced the lowest annual
change in RUEC complemented by a sizeable
increase of the nominal effect and therefore has
experienced the fastest increase in NUEC. This
means that other sectoral price and exchange rate
dynamics have added upward pressure to the pure
energy-related effects captured by the RUEC in
China.
1.4.
UNIT ENERGY
COMPARISON
COSTS:
A
SECTORAL
A more disaggregated analysis involving 14
manufacturing subsectors shows that most of these
subsectors in the EU have a generally low unit
energy costs per value added in an international
comparison (15).
Certain sectors in the EU show however a
significant vulnerability because of their high
RUEC levels and/or RUEC growth rates in a
global
comparison,
indicating
elevated
sensitivity to energy-cost pressures (Table I.1.3
and Table I.1.2). Overall the sectoral analysis
confirms that the low unit energy costs level for
the total manufacturing industry of the EU hides a
substantial heterogeneity among subsectors. This
highlights the need for more disaggregated sectoral
analysis as it is possible that some subsectors of
manufacturing show high vulnerability to energy
inputs despite the fact that energy costs are very
low for total manufacturing. A more detailed split
could reveal even more vulnerabilities within
sectors. In this sense the top-down approach
applied here – from a high to a medium level
aggregation – should be interpreted as
complementary information to more disaggregated
sector-specific analyses.
In the food, beverages and tobacco sector the
RUEC of the EU were the second highest in 2009.
They showed a similar pattern to that of the US,
but both of them were performing significantly
worse than China and Japan. Energy intensity
improvements in the EU have been rather limited
but Japan and the US deteriorated their
performances. The real energy price increased
(15) As for the total RUEC, data limitation does not enable a
full decomposition after 2009. For this reason data for 2011
are presented separately.
17
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
faster in the EU than in either Japan or US
although in absolute levels the EU is still below
Japan. Compared to 2011 the RUEC of the EU
have increased while in the US they have
decreased, this was however matched in both
countries by a small decline in the share of the
sector in total manufacturing value added.
The textile industry of the EU has performed
substantially worse than that of the US and Japan
in terms of RUEC and their level is also higher
than in China, both in 2009 and in 2011. The
energy costs of the Chinese textile industry
showed a marked upward trend and reached
similar levels to that of the EU at the end of the
sample. The increasing trend of China and the
stable trend of the US could be a sign of
outsourcing although data availability does not
allow the assessment of the evolution of energy
intensity and real energy prices in the two
countries. The good performances in terms of
energy intensity in both the EU and Japan have
been met by opposite trends in terms of real energy
prices which translated into similar annual
increases of RUEC.
The developments in the leather and footwear
sector are in many ways similar to those of the
textile industry. The EU, Japan and China have
reached similar levels in the second half of the
sample period in terms of RUEC. The US reached
a considerably lower level by 2009, and again the
opposite trends between the US and China raises
the possibility of potential outsourcing. As with
most other sectors, Russia exhibited by far the
highest levels of RUEC throughout the entire
period. Both the textile and leather sectors have
experienced a sharp decline in the share of
manufacturing value added in Japan, Russia and
US, while the decline in the EU and China was
much less evident during this period. Data from
2011 confirms the trend of the previous period.
In the wood and wood product industry the EU
has shown the second lowest RUEC following
Japan. The pattern of marked improvement in 2009
for the US is not visible in this sector, in fact,
RUEC was trending upwards in US over the entire
period of analysis, much so than in any other of the
five countries. China was slightly above the EU
while Russia was fluctuating at a considerably
higher level. Unlike for other sectors, the energy
intensity performances of the EU and Japan have
18
deteriorated but have been matched by a moderate
decrease in real energy prices similarly to Japan. In
the US the increase in real energy prices has been
much faster than the decrease in energy intensity.
In 2011 however the RUEC in the EU, Japan and
China continues to increase while the opposite
happens in the US.
Pa rt I
Ene rg y Co sts a nd Co mp e titive ne ss
Ta b le I.1.2:
Sectoral breakdown: decomposition of RUEC and annual growth rates 1995-2009
No te : Ene rg y Inte nsity inc lud e s fe e d sto c k.
Due to d a ta limita tio n the a sse ssme nt o f Ene rg y inte nsity a nd Re a l e ne rg y p ric e s sto p s a t 2009. The re fo re to a llo w
c o mp a ra b ility the g ro wth ra te s o f RUEC ha ve a lso b e e n c o mp ute d o nly up to 2009.
Sourc e : Co mmissio n Se rvic e s b a se d o n WIOD, ESTAT, OEC D a nd Wo rld De ve lo p me nt Ind ic a to rs d a ta b a se s.
In the pulp, paper and printing sector the EU has
been performing in line with the US with Japan
also reaching similar RUEC levels at the end of
our sample. China and particularly Russia showed
higher levels of RUEC. The almost stable
performances in terms of energy intensity in the
EU means that the increase in real energy prices
has been therefore almost symmetrically translated
into higher energy costs for EU industries although
the trends in the US and Japan are broadly
comparable. As for the other sectors, data for 2011
show an increase in RUEC for EU, Japan and
China while the opposite is true in the US and to a
lesser extent Russia.
The production of coke, refined petrol and
nuclear fuel is the sector that shows the worst
performance in the EU with RUEC several times
above the levels of US, Japan, China and Russia.
RUEC in this sector showed a steep upward trend
19
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
Ta b le I.1.3:
Sectoral breakdown: decomposition of RUEC and annual growth rates 1995-2009
No te : Ene rg y Inte nsity inc lud e s fe e d sto c k.
Due to d a ta limita tio n the a sse ssme nt o f Ene rg y inte nsity a nd Re a l e ne rg y p ric e s sto p s a t 2009. The re fo re to a llo w
c o mp a ra b ility the g ro wth ra te s o f RUEC ha ve a lso b e e n c o mp ute d o nly up to 2009.
Sourc e : Co mmissio n Se rvic e s b a se d o n WIOD, ESTAT, OEC D a nd Wo rld De ve lo p me nt Ind ic a to rs.
in the period 1995-2009 in the EU unlike in any
other country analysed here which indicates an
increasing vulnerability. Looking at energy costs
as a share of output – not reported here – would
show a somewhat better relative performance of
the EU suggesting that this sector is suffering not
only from high energy costs but also from low and
drastically worsening value added in a global
comparison. The oil-price shock of 2008 had a
significant upward effect on the RUEC of all the
five countries, the EU however further increased
its RUEC in 2009 while in the other four countries
20
a reduction took place, bringing the levels back to
pre-2008. However, the share of the sector in
manufacturing valued added for the EU was and
remained very small. At the same time the sharp
increase of the share in Russia and the US need to
be recorded as it signals the growing importance of
coke and refinery activities in these two countries.
Data for 2011 show that while in the EU the
RUEC have further increased, an inverse trend is
observed in the US where the sector reached
almost 10% of total manufacturing value added.
Pa rt I
Ene rg y Co sts a nd Co mp e titive ne ss
In the chemicals and chemical products sector
the EU has shown the lowest RUEC together with
the US in the period of analysis (16). The low
levels of energy costs of the EU and US
significantly outperformed the other countries and
also present the lowest growth rates. In 2011
RUEC increased in both regions. Russia and China
showed the highest levels of RUEC throughout
most of the period of analysis. A marked
improvement is visible in Russian RUEC in the
years of the Russian financial crisis (1998-99).
This pattern is visible for many other sectors as
well, but the improvement was only temporary and
RUEC returned to pre-crisis levels in the following
years. For the EU the fast increase in real energy
prices which outpaced that of the US and to a
lesser extent that of Japan, was counterbalanced by
significant improvements in energy intensity
which both in levels and progress way outperform
the two competitors.
In the rubber and plastics sector, during the
period 1995-2009, the EU has performed relatively
well together with the US and Japan, while China
and especially Russia exhibited much higher levels
of RUEC. However the EU registers in 2009
higher RUEC than Japan and US and has the
highest growth rate since 1995 mostly driven by
the deterioration of its energy intensity. Looking at
the components of RUEC it is to note that the EU
had in 2009 the highest levels of energy intensity
(compared to Japan and US) and unlike the other
two countries did not record any improvement.
The EU compensated partially with a lower real
energy price than both Japan and US and with
lower growth rates. In 2011 the RUEC in the EU
and Japan continued to increase while in the US
they significantly reduced, at the same time the
contribution of the sector to the manufacturing
value added remained broadly unchanged.
In the non-metallic mineral sector and the
metals sector the EU showed a much lower level
of RUEC than Japan, China and Russia. The EU,
however, was performing worse than the US and
the gap in favour of the US has increased also in
2011. RUEC growth rates in the EU have been
anyway the lowest among the five countries,
mostly driven by energy intensity good
performances. Energy intensity in the EU was in
(16) This sector includes basic chemicals as well as cosmetics
and pharmaceuticals.
2009 the lowest and it has experienced the most
significant improvements while for Japan it
actually deteriorated. At the same time, while the
level of real energy prices is comparable in 2009
the EU experienced faster growth rates than both
Japan and the US.
In the sector of machinery the RUEC of EU,
Japan and US have had comparable very low
levels in the entire period. The US is the country
with the lowest level of RUEC and the only one
for which the growth rate is negative. This positive
evolution has been mostly driven by a decrease in
real energy prices while energy intensity slightly
deteriorated. US RUEC further decreased in 2011
while in the EU they remained stable. This
happened in a context of increase in share of the
sector in total manufacturing value added, in both
regions. China has shown a moderately increasing
trend and reached a level that is substantially
higher than that of the other three economies.
Russia in turn exhibited the highest RUEC in this
sector but lower growth rates than China and also
Japan. Energy intensity in the EU decreased
rapidly but on the other side real energy prices
increased at almost the same pace. In the US
conversely energy intensity did not improve but
real energy prices decreased by an average of only
1% per year.
In the electrical and optical equipment sector the
EU, US, Japan and China started from similar
levels of RUEC but have shown a remarkable
divergence in the period of analysis. This concerns
primarily the US and China, where the opposing
trend again suggest the possibility of outsourcing
of energy-intensive processes from the US to
China. The EU exhibited a relatively constant
RUEC which put it at the second lowest level after
the US in 2009. Japan showed a mild increase over
the period, while Russia fluctuated again at a
substantially higher level. The dramatic collapse in
energy intensity matched by an almost equally fast
increase in real energy price in the US tends to
confirm the assumption that the country may have
experienced a substantial relocation of energy
intensive activities. However the simultaneous
increase in the share of the sector in the
manufacturing value added signals that the US
industry focused on innovation and higher valued
added activities. Japan also presents similar
features. This trend is confirmed also by looking at
2011, where the share of the sector in the
21
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
manufacturing value added further increased while
RUEC decreased. The EU also recorded
remarkable improvements in energy intensity
although compensated by a significant increase in
real energy prices.
In the sectors of recycling and transport
equipment the EU has shown a significantly
higher RUEC than the US and also of Japan, a gap
that has further widened in 2011. In transport
equipment the performance of the EU was more or
less in line with that of Japan. China was
fluctuating at a higher level and Russia at an even
higher level in the transport equipment sector.
However the collapse of energy intensity
registered in Japan in the transport equipment
sector could be the consequence of a drastic
industrial restructuring and outsourcing of the most
energy intensive activities in favour of lower
energy intensive production with comparatively
greater value added. EU RUEC in 2011 decreased
slightly while an increase was registered in the
other countries. On the other hand in recycling the
EU has worsened its energy intensity performances
while recording only a moderate increase in real
energy price. The US shows the opposite picture,
rapidly falling energy intensity matched by an
increase in real energy prices which resulted in
small decrease of RUEC over the 15 years
considered.
In sum, the sectors that are most exposed to
energy price shocks in terms of high RUEC
levels in the EU are coke and refined petrol,
chemicals, non-metallic mineral, metals, rubber
and plastics. Coke and refined petrol stands out
with much higher RUEC levels than in other
countries and a growth rate that is also among the
highest
ones.
This
indicates
significant
vulnerability of this sector, though its share in total
manufacturing value added of the EU has been low
and stable. In contrast, US, Japan and Russia have
seen a significant increase in this share. In the
other four sectors with high energy cost
vulnerability (chemicals, non-metallic mineral,
metals, rubber and plastics) the EU shows RUEC
levels that are generally comparable with those of
Japan. The EU levels are, however, noticeably
higher than the US in chemicals, non-metallic
mineral, and metals. Nonetheless in all four sectors
the figures of the EU remain substantially lower
than those of China and Russia. In terms of the
growth rates of RUECs, the four sectors in the EU
22
perform generally in line with other countries with
some variability observable.
Data for 2011 show that for all sectors the RUEC
have generally increased in all countries, except in
the US where the picture is more mixed and most
sectors actually recorded a decrease. Although EU
RUEC are above the US for all sectors in 2011,
they are similar for total manufacturing due to the
different composition of the manufacturing value
added
in
the
two
regions.
It is nonetheless interesting to note that two of the
four sectors in the EU where the contribution to
the manufacturing value added has increased are
among the most energy intensive sectors such as:
coke and refined petroleum products; basic metals
and fabricated metals.
1.5.
EU MEMBER STATES ASSESSMENT
The evolution of RUEC for EU Member
States (17) between 2000 (18) and 2009 is in
general characterised by an upward trend. With
the exception of a handful of countries most
Member States saw their RUEC increase on
average by 47%. The biggest increases in
percentage terms were recorded in Ireland (89%)
followed by Malta (70%), Sweden, France and
Belgium (around 60%). The upward trend is
broadly confirmed with the data for 2011(19) with
the exception of Ireland and Germany where
RUEC have been reduced. Looking at the
evolution between 2000 and 2011 the Member
States with the greatest percentage increase were
France (144%) Belgium (124%) and Finland
(111%). On the other hand Cyprus, Slovakia,
Romania and the Czech Republic recorded a
decrease in RUEC.
The heterogeneity in levels is rather wide. For
some Member States the RUECs are sensibly
lower than the EU average while others on the
(17) There are two preliminary observations, first these data are
aggregated to include all the manufacturing sectors hence
the indicator can be affected by outliers; second, the
occurrence in 2008 of a significant price increase for crude
oil may have had more severe impacts on those countries
with production activities more dependent on oil such as
the refinery industry.
(18) Due to data limitation, the analysis at Member States level
starts with 2000 and not 1995.
(19) As for the other sections, data limitations for real energy
prices and energy intensity are not available after 2009.
Pa rt I
Ene rg y Co sts a nd Co mp e titive ne ss
contrary display levels that are significantly
higher, not only than the average but also than
the levels of their main international
competitors (Graph I.1.7). In absolute terms
Ireland and Malta, together with Luxembourg,
Slovenia and Austria, display the lowest levels of
RUEC in 2000, 2009 and 2011. The highest levels
were reached by Bulgaria which however recorded
a percentage increase well below the EU average
(7.9%, between 2000 and 2011) and Lithuania,
followed by the Netherland, Greece, Belgium and
France.
The evolution of energy costs at Member States
level is analysed in combination with the trends of
energy intensity and real energy prices presented
in
Graph
I.1.7.
23
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
G ra p h I.1.7:
Decomposition of Real Unit Energy Costs - Manufacturing
No te : Ene rg y Inte nsity inc lud e s fe e d sto c k.
Due to d a ta limita tio n the a sse ssme nt o f Ene rg y inte nsity a nd Re a l e ne rg y p ric e s sto p s a t 2009. The re fo re to a llo w
c o mp a ra b ility the g ro wth ra te s o f RUEC ha ve a lso b e e n c o mp ute d o nly up to 2009.
Sourc e : Co mmissio n Se rvic e s b a se d o n WIOD, ESTAT a nd OECD.
The Member States with the highest levels of
energy intensity in 2009 were Lithuania, the
Netherlands and Slovakia. However, it is to note
24
Pa rt I
Ene rg y Co sts a nd Co mp e titive ne ss
G ra p h I.1.8:
Annual Growth Rates 2000-2009 - Manufacturing
No te : Ene rg y Inte nsity inc lud e s fe e d sto c k.
Due to d a ta limita tio n the a sse ssme nt o f Ene rg y inte nsity a nd Re a l e ne rg y p ric e s sto p s a t 2009. The re fo re to a llo w
c o mp a ra b ility the g ro wth ra te s o f RUEC ha ve a lso b e e n c o mp ute d o nly up to 2009.
Sourc e : Co mmissio n Se rvic e s b a se d o n WIOD, ESTAT a nd OECD.
that Bulgaria had until 2006 the highest level of
energy intensity, but lack of data for 2009 does not
enable a full comparison (20). The lowest levels of
energy intensity are found in Slovenia,
Luxembourg and to a lesser degree Latvia, Austria,
Germany and Italy. At the same time real energy
prices were the highest in France, Slovenia and
Italy, while Estonia, the Czech Republic and
Slovakia enjoy the lowest real energy prices,
sometimes even below the US levels.
performances in terms of energy intensity, a
moderate increase (a decrease in the case of
Luxembourg) in real energy prices resulted in
RUEC growth rates below the EU average and also
the US. By contrast, some Member States such as
France, Sweden and Finland report fast growing
real energy prices, well above the EU average,
which were not offset by sufficient improvements
in energy intensity, hence a growth rate in RUEC
well above the average of the EU and the US.
By looking at the growth rates, some new
Member States (Czech Republic, Poland,
Slovakia and Slovenia) stand out in terms of
energy intensity improvements and, for the
Czech Republic also for the low rates of real
energy prices growth. These factors contributed
to determine a negative growth of RUEC for these
countries; except for Slovenia where the upward
pressure of real energy prices determined a minor
increase in RUEC. In some Member States (Italy,
Spain and Luxembourg), despite worsening
As said, an increase in Real Unit Energy Costs
means that the amount of money spent on energy
sources to obtain one unit of value added has
increased and this negatively weights on the
margins of the sector. The growth rates of NUEC
presented in Table I.1.4 show to what extent other
macroeconomic dynamics, such as sectoral price
inflation and exchange rate fluctuations, have
either exacerbated or alleviated the growth of
RUEC.
20
( ) Note that energy intensity in this framework includes
feedstock, which is a particularly important factor for the
coke and refinery sector and to a lesser extent the
chemicals sector. Moreover, energy intensity levels may be
influenced by the PPP effect which is not captured by the
present dataset.
Spain had the fastest growing NUEC in the EU
followed closely by a group of other Member
States which present all similar features, i.e. an
high increase of the nominal effect well above
the EU average (with the notable exception of
France where the NUEC growth is more linked to
25
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
the energy costs components). Conversely the
lowest increases in NUEC have been in Poland,
the Czech Republic and Slovakia. However only in
the case of Poland this result can be ascribed
mostly to the very low growth of the nominal
effect. In Czech Republic and Slovakia the
improvement in their performances must therefore
be found in the energy components, notably in
remarkable reductions of energy intensity.
26
Pa rt I
Ene rg y Co sts a nd Co mp e titive ne ss
Ta b le I.1.4:
Average % annual change 2000-2009 - Manufacturing
No te : Ene rg y Inte nsity inc lud e s fe e d sto c k.
Due to d a ta limita tio n the a sse ssme nt o f Ene rg y inte nsity a nd Re a l e ne rg y p ric e s sto p s a t 2009. The re fo re to a llo w
c o mp a ra b ility the g ro wth ra te s o f RUEC ha ve a lso b e e n c o mp ute d o nly up to 2009.
Sourc e : Co mmissio n Se rvic e s b a se d o n WIOD a nd ESTAT d a ta b a se s.
1.6.
CONCLUSIONS
The results shown above indicate that the EU
manufacturing sector has enjoyed some of the
lowest Real Unit Energy Costs together with
Japan and similarly to the US. This means that
to obtain 1 USD of valued added they have spent a
lower amount of money on energy sources than
Russia or China. In addition, the evolution of
RUEC plotted in Graph I.1.1 shows that the EU
have suffered relatively less than other countries
the oil price shock of 2008 which has on the other
hand affected severely both Japan and the US. This
impact is also clearly shown in Graph I.1.3 where
real energy prices are presented. This may be the
outcome of the energy mix composition of the US
industry compared to that of the EU, since the US
industry is more reliant on oil products than EU
manufacturers (21).
(21) See in Appendix 3, Graph I.A3.7 and Graph I.A3.8.
The trend of the EU RUEC could also be
determined by an industrial structure based on
higher value added production. The relatively
higher real energy prices may have induced EU
manufacturers – together with Japan and US – to
specialize in higher value added product categories
with lower energy intensity while conversely the
industry in countries such as China, Russia, India,
Brazil lead by competitive energy prices may have
opted for more energy intensive production
activities with a comparatively lower value added.
The RUEC levels for the entire manufacturing
sector in 2011 signal a continuation of the upward
trend for all the countries. It is to note however
that the EU overtakes the US, by a very thin
margin, and China further converges towards the
US, Japan and the EU.
The improvements of the EU industry in terms
of energy intensity have helped to offset the
increase in real energy prices. Despite the
already low starting point the EU manufacturers
have steadily improved their energy intensity
27
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
performances converging towards the Japanese
levels. The US and China have been catching up
but the difference in absolute levels remain
substantial.
The sectors that are most exposed to energy
price shocks in terms of high RUEC levels in
the EU are coke and refined petrol, chemicals,
non-metallic mineral, metals, rubber and
plastics. Coke and refined petrol stands out with
much higher RUEC levels than in other countries
and a growth rate that is also among the highest
ones. This indicates significant vulnerability of this
sector, though its share in total manufacturing
value added of the EU has been low and stable. In
contrast, US, Japan and Russia have seen a
significant increase in this share. In the other four
sectors with high energy cost vulnerability
(chemicals, non-metallic mineral, metals, rubber
and plastics) the EU shows RUEC levels that are
generally comparable with those of Japan. The EU
levels are, however, noticeably higher than the US
in chemicals, non-metallic mineral, and metals.
Nonetheless in all four sectors the figures of the
EU remain substantially lower than those of China
and Russia. The growth rates of RUECs of the EU
in the four sectors are generally in line with other
countries with some variability observable.
In 2011 data confirm that for all sectors, EU
RUEC are higher than in the US. While this points
to additional cost pressure on EU firms it is
however to be noted that some typically energyintensive sectors (coke and refined petroleum and
basic metal products) have incremented their
shares in the manufacturing value added of the EU.
The situation of Member States, is
heterogeneous. On the one hand countries such as
Bulgaria, Lithuania and the Netherlands have the
highest levels of RUEC therefore their production
structure is more sensitive to energy cost pressure
and any increase in energy prices not matched by
improvements of energy intensity may severely
affect the margins of their manufacturing sectors.
On the other hand countries like Italy and
Luxembourg have experienced a worsening of
their energy intensity performance which was
however met by moderately increasing real energy
prices. The growth of their RUEC has been
therefore modest and their absolute levels remain
low. More vulnerable in this sense appears France
where the very fast growth in real energy prices
28
was not sufficiently counterweighted by significant
improvements in energy intensity. The growth rate
of RUEC in France is well above the average
although its level is still relatively low. Finally for
some countries, especially Spain, the nominal
effect led to a fast increase in NUEC. These
dynamics are outside the scope of the present study
but have nonetheless added cost-pressure on the
Spanish manufacturing sector exacerbating the
energy cost component.
2.
THE RECENT DEVELOPMENT OF US SHALE GAS AND ITS
IMPACT ON EU COMPETITIVENESS
2.1.
INTRODUCTION
The previous chapter on Unit Energy Costs
presented an empirical analysis based on the
WIOD Database which provides data only until the
year 2009 for some of the indicators (namely
energy intensity and real energy prices) and for
2011 for the Real Unit Energy Costs.
The period after 2009 has however been marked
by important events, some energy-related and
some not. The development of US shale gas
belongs to first category. It has changed
substantially the energy system of the US and by
consequence it has widely impacted on the global
energy markets. The extent of these changes and
their implication for the EU are the subject of this
chapter. The economic and financial crisis that
spread after 2008 is instead part of the second
category of events, not energy-related. The
economic recession that has affected the EU
economic economy has however made more
urgent the need to look at energy prices for
consumers and industry, in a context of lacklustre
domestic demand and loss of competitiveness.
The surge of the US shale gas (22) and the
corresponding fall in energy prices for US
manufacturers has reignited the debate on the EU's
industrial competitiveness and has led to calls for
policy changes aimed at reducing the energy costs
for EU firms, either through reducing the
stringency of energy and carbon policies or
through stepping up EU gas production including
shale gas (23).
This chapter will endeavour to assess impacts of
the development of shale gas through a step-bystep comparison between the EU and US, using
data from Eurostat, OECD and the US Energy
Information Administration. Section 2.2 discusses
(22) Shale gas refers to natural gas that is trapped within shale
formations. Shales are fine-grained sedimentary rocks that
can be rich sources of petroleum and natural gas. Over the
past decade, the combination of horizontal drilling and
hydraulic fracturing has allowed access to large volumes of
shale gas that were previously uneconomical to produce.
(23) PISM (2011) and Artus P (2013).
how the introduction of shale gas has affected the
US energy sector. The impacts are assessed
through an EU-US comparison on the energy mix
and on the energy import dependence. Section 2.3
addresses the development in the EU-US energy
price-gap. The disparity in energy intensity and
some reflections on the impacts on the production
structure in the EU and US are presented in
Section 2.4. Finally the developments in the trade
balances for the EU and US will be discussed in
section 2.5. The chapter is concluded by some
preliminary remarks and open questions for future
discussions.
2.2.
THE IMPACTS OF THE SURGE IN US SHALE
GAS ON THE US ENERGY SECTOR AND EU
AND US ENERGY MIX
Many observers have noted the strong surge in
US gas production and consumption because of
what has been coined the "shale gas
revolution." As depicted in Graph I.2.1, shale gas
was already produced in the US in modest amounts
at the turn of the century, but it became significant
after the middle of the last decade.
The exponential growth in production volume
started to profoundly affect the make-up of the
US natural gas supply from 2007/2008 onwards.
By 2011, the US has become the biggest gas
producer in the world, ahead of Russia, while shale
gas constitutes now over one third of the natural
production in the US (while only about 5% in
2005).
The current impact of shale gas on the overall
make-up of the US energy sector has been
significant but it should not be overstated, both
as regards the net impact on the domestic gas
sector and as regard the changes in the energy mix.
Shale gas has revived the domestic natural gas
sector whose production had stagnated earlier in
the decade, and since a few years shale gas is also
replacing domestic supply of conventional natural
gas.
29
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
G ra p h I.2.1:
Natural gas production in the US and share of
shale gas on total gas production
G ra p h I.2.3:
Energy mix, EU
%
100
25
TCF/Y
%
40
90
80
20
70
30
60
50
15
20
40
30
10
20
10
10
5
0
2000
0
0
2000
2005
Coalbed methane (lhs)
Conventional gas (lhs)
Conventional gas only (lhs)
Sourc e : Co mmissio n Se rvic e s b a se d o n Ene rg y Info rma tio n
Ad ministra tio n, US.
Over the period 2000 – 2011 natural gas
production has increased by almost 20% and since
the historic low in production in 2005 it has
increased by almost 27%.
However, the share of natural gas in the US energy
mix has only increased by 2 percentage points
between 2000 and 2011, while it increased from
18% to 25% in the electricity mix (Appendix 4,
Graph I.A4.3).
90
80
70
60
50
40
30
20
10
2001
2004
Gas
2005
Oil
2006
Nuclear
2007
2008
2009
2010
Renewables
The resurgence of gas as primary energy source
in the US should be seen against the
background of changes in the US consumption
and production of the other primary energy
sources. Graph I.2.2 on the US energy mix in the
period 2000 – 2011 shows a similar increase in
importance of renewable energy sources: its
consumption share has risen from 6% in 2008 up
to a share of 9% in 2011. On the other hand, a
relative decline of oil and coal as primary energy
sources is observed with their shares falling over
the decade from 39% to 36% for oil and from 23%
to 20% for coal.
Energy mix US
%
0
2000
2003
Coal
No te : Exp re sse d a s sha re o f so urc e in G ro ss Inla nd
Co nsump tio n
Sourc e : Euro sta t.
Share of Shale gas in tot gas (rhs)
100
2002
2011
Shale gas (lhs)
G ra p h I.2.2:
2001
2002
2003
2004
Coal
Gas
2005
Oil
2006
2007
Nuclear
2008
2009
2010
RES
No te : Exp re sse d a s sha re p e r so urc e in Prima ry Ene rg y
Co nsump tio n
Sourc e : Ene rg y Info rma tio n Ad ministra tio n.
2011
These changes in shares reflect changes in
domestic production levels: renewable energy
generation has increased by 49% in the past ten
years and natural gas, as already mentioned above,
by 20%. Coal production has fluctuated but in
2011 it had decreased by 2% compared to 2000. In
2011 natural gas has for the first time overtaken
coal as first source of energy produced in the US.
Oil production after a period of slow and steady
decline, culminated in 2008 has picked up again
but in 2011 it was still 3% less than in 2000
(Appendix 4, Graph I.A4.1).
Together with renewables, US shale gas has
undoubtedly contributed to significantly
reducing the energy dependence of the United
States and hence to decreasing their exposure to
global commodity prices fluctuation and
geopolitical risks.
As depicted in Graph I.2.4, the US energy import
dependency has reached 18% in 2011, the lowest
point since 2000.
30
Pa rt I
Ene rg y Co sts a nd Co mp e titive ne ss
Bo x I.2.1: Potentials and Uncertainties for Shale Gas Exploration in the EU and in the US
Various sources (1) (2) reported that the proved natural gas reserves of the world were in 2011around
190/200 trillion of cubic meters (tcm). However the estimation of potential natural gas reserves is an
uncertain exercise.
The US had about 9 tcm of proved gas reserves in 2011 2.7 tcm of which concerns shale gas. According to
the US-based, independent "Potential Gas Committee" (PGC) assessment in 2012, the total reservoir of
potentially recoverable natural gas in the United States amounted to around 67 tcm, (3) 48% of which should
be shale gas (30,5 tcm). One year earlier, the US Energy Information Administration (EIA) estimated total
recoverable gas reserves in the US and the shale gas potential as about 72 tcm and 24.4 tcm respectively (4).
A little less than half of this recoverable amount (11 tcm) should be found in what appears to be the largest
US shale gas field, the Marcellus basin.
However, a recent study by the US Geological Survey has radically lowered these potential reservoir
estimates: on the basis of more recent drilling and production data, they estimate the Marcellus basin
potential to be only 2.3 tcm (5), which is about 80% less than previously reported by EIA. The EIA's Annual
Energy Outlook 2012 reflects these newer insights as they have cut their reported estimate (6) of the "total
unproved technically recoverable reserves" of US shale gas from 2011 to 2012 by almost half (around 13,6
tcm).
Finally, in the most recent update of its assessment in June 2013, the EIA has further revised the potential
unproved shale gas reserves in the world: in the US, slightly upward to 16.1 tcm; in the EU slightly
downward to 13.3 tcm from 15.8 in 2011 (7) (Graph 1).
Some noted energy experts have expressed more pessimistic views as they not only expect recoverable
reserves to be significantly smaller than predicted but also shale gas wells to be depleted at a much faster
rate (33% a year) than conventional gas wells (20% a year), (8) indicating yet another source of uncertainty
underlying the reservoir estimates (9).
In this context of uncertainty, the estimates for shale gas potentials in the EU appear equally diverging
although also fewer in number. According to some sources, recoverable shale gas in the EU could range
between 2.3 tcm and 17 tcm (10) against the background of which the EIA estimates for the EU, presented in
Graph 1, appear rather optimistic. The EIA estimate for shale gas of 13.3 tcm for the whole EU should be
seen against the background of total proved natural gas reserves in 2011 of about 4 tcm in the EU.
Graph 1's confrontation of the EU and US shale gas reservoir estimates leads to the following general
observations. First, despite the wide range of estimates, Europe's shale gas reserves appear to be
significantly smaller than the US ones. In addition, they are also more dispersed: while between one third
and half of the potential US reserves are located in one huge basin (namely Marcellus) and some other US
basin appear quite large as well (Haynesville, 10% of total, around 2 tcm), the EU estimated reserves are
scattered across several countries, with France and Poland having the largest reserves. The dispersion over
many smaller fields suggests lower economies of scale in their exploitation, compared to the US.
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
Energy Information Administration, Proved Reserves of Natural Gas, http://www.eia.gov/dnav/ng/ng_enr_sum_a_EPG0_R11_BCF_a.htm
BP Statistical Review of World Energy June 2012
http://potentialgas.org/press-release (MAGNITUDE OF U.S. NATURAL GAS RESOURCE BASE, Press Release, 2012)
EIA (2011).
http://www.usgs.gov/newsroom/article.asp?ID=3419
EIA (2012), Table 14 on p57.
EIA (2013)
A prominent example is Arthur Bernam, http://petroleumtruthreport.blogspot.be/, blog entry of the 16th February 2013.
European Commission (2012c), p 24.
European Commission (2012c), p 29.
(Co ntinue d o n the ne xt p a g e )
31
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
Bo x (c o ntinue d)
G ra p h 1:
Unproved technically recoverable shale gas resource
Europe
Algeria; 20.0
3.9
France
Germany
Others World; 48.0
Canada; 16.2
Australia; 12.4
EU; 13,4
Russia; 8.1
0.5
0.7
0.7
0.9
0.3
Netherlands
UK
Denmark
Sweden
United
States; 16.1
Argentina; 22.7
4.2
Poland
Romania
Mexico; 15.4
China; 31.6
1.4
0.5
0.2
Bulgaria
Spain
Sourc e : Ene rg y Info rma tio n Ad ministra tio n
The second and more controversial observation relates to the actual extraction costs of shale gas. As
mentioned in section 2.3, the prices for gas in the US have substantially fallen since the onset of the surge.
Some expert assessments consider the current gas price level and production levels as incompatible,
expecting prices to rise and production to fall in the medium term. This is because the current wholesale
price appears too low for many shale gas fields (on-going and envisaged) to be profitably extracted (11)
(12). However, these predictions have so far not materialised: shale gas supply and gas consumption have
soared while prices have remained at low levels, notwithstanding a mild upward correction since early 2012
(13).
The learning curve of shale gas extraction may be one major cause of the sustained low prices: technological
progress may help to keep on enlarging the part of the reserves that can be commercially exploited and
reducing the production costs (14). The US EIA also provides another explanation: currently US shale gas is
often jointly recovered with oil and liquid gas (NGL) reserves, the prices of which are closely related to the
crude oil price (15). Since the oil price per MBtu is markedly higher than the various gas prices (Graph
I.2.5), producers have been able to compensate for the lower margins made on shale gas sales. It is
questionable whether the EU shale gas producers would be able to enjoy such a joint-production bonus,
because oil drilling is rather marginal in Europe and therefore shale gas extraction is not likely to be
associated with it.
Whether the low price levels will persist or not is subject of debate in the US and it is the reason of the
request from some industrial sectors not to allow the export of shale gas in order to prevent domestic gas
price increases. Due to the recent start-up of shale gas exploration, the information on EU shale gas
reservoirs is rather scant and quite uncertain but seems to suggest that prospective shale gas producers in the
EU cannot attain similar production volumes and production costs as their US counterparts. In addition,
potentially significant imports of US shale gas into Europe at relatively low prices may discourage
commercial exploitation of the more marginal EU shale gas fields.
G ra p h I.2.4:
32
Energy Import Dependency
Pa rt I
Ene rg y Co sts a nd Co mp e titive ne ss
60
%
50
40
30
20
10
0
2000
2001
2002
2003
2004
2005
2006
EU Import Dependency
2007
2008
2009
2010
2011
US Import Dependency
Sourc e : Co mmissio n Se rvic e s b a se d o n Ene rg y Info rma tio n
Ad ministra tio n a nd Euro sta t.
However, the fall in energy import dependency
started around 2005 and hence somewhat before
shale gas production levels became significant.
This can be explained by the expansion of
renewables and by the start of the increase in
overall gas production.
In sharp contrast to the US, the EU's import
dependency has increased from 46% to 52%
between 2000 and 2010 (24). This reflects the
combination of a decline in domestic energy
production and an increase in energy consumption,
even when taking account for the abrupt
contraction of economic activities in 2008.
The production decline over the decade
concerns all primary energy sources except
renewables. EU gas and oil production have fallen
by a quarter and 40% respectively. However coal,
because of its sheer volume (still larger than for all
other energy sources combined), has been the
major driver of the overall decline with a
production fall over 10%. In contrast, renewables
increased their output in caloric terms by 72%.
Since the EU energy mix has similar make-up and
trends as the one of the US (with a higher share of
nuclear power as the major difference), the rise in
consumption has been met by increasing imports.
Natural gas provides an apt illustration: the
increase of consumption share by 2 percentage
points over the decade has prompted an import
increase of more than 45%, whereas the US has
satisfied the increased demand mainly from
domestic sources (gas imports in monetary terms
decreased by 56%, compared to their peak in
2005).
(24) European Commission (2013b)
There is another recent phenomenon triggered
by the development of shale gas and observed
mainly between 2011 and 2012: the US have
decreased their consumption of coal, exporting
their excessive production and reducing their
imports. This has driven coal prices down. As gas
has became relatively more expensive and coal
relatively cheaper in Europe a substitution is
taking place: gas consumption declined by 7%
while coal consumption increased by about 20%
between the first half of 2011 and the first half of
2012. Notably imports of coal from the US
increased substantially especially in some Member
States: looking at the first half of 2012, Germany,
Italy and the Netherlands respectively imported
37%, 83% and 86% more hard coal from the US
than in the first half of 2011 (25). This shift raises
evident climate change concerns as currently
carbon prices are too low to offset the comparative
advantage of coal over natural gas.
2.3.
ELECTRICITY AND GAS PRICES: A US-EU
COMPARISON
In the developed world, gas is increasingly seen as
an attractive substitute for oil as it is a relatively
clean source of energy and also because it has
become relatively cheap (Graph I.2.5). For the
purposes of this analysis, however, it is not enough
to look at the gas spot market price, for a number
of reasons.
First, unlike oil, there exists no global wholesale
market and no global reference price for natural
gas. In the European Union the majority of natural
gas is supplied through bilateral long-term
contracts which are negotiated between two
parties, importer and exporter, and traditionally
indexed to the price of oil. Currently, half of
natural gas supply in the EU is still indexed to oil
while across the EU a wide variation in import
prices of piped gas and LNG has been
observed (26). This is remarkable as at the same
time a growing share of gas is traded on spotmarkets (27) where short-term contracts are
concluded on the basis of the market price
determined by actual demand and supply. Spot
(25) European Commission (2012b) (ii).
(26) European Commission ( 2012b) (iii).
(27) European Commission (2012c) and (2012d which reports
on p182 that one quarter of continental European gas is
spot traded).
33
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
market prices in the EU have been constantly
lower than long-term contracts' prices, at least
since 2005 (28).
In addition, gas can be used directly for heating or
other purposes but can also be used as a primary
energy source for electricity generation: in both
regions, the share of gas in the electricity mix is
currently around 25% and it has increased with a
similar pace over the past ten years. Consequently,
the wider impact of shale gas on energy prices can
be illustrated by looking at the electricity prices.
In both the US and in the EU, spot-market gas
prices have progressed in a similar fashion over
the past decade and have followed the
movements in the oil price, as depicted in Graph
I.2.5. In 2005, however, these gas prices have
started to clearly fall below the level of the oil
price. Between 2008 and 2009 they fell
significantly in both regions, likely as a
consequence of declining demand due to the
economic downturn.
G ra p h I.2.5:
Wholesale natural gas prices in Germany,
Japan, UK and US compared with crude oil
price
Sourc e : Euro p e a n Co mmissio n (2012).
The fall in energy consumption has led to an
excess supply of gas on the gas markets around the
world and both US and the UK spot markets
temporarily converged, trading at around 4/5
USD/MBtu in mid-2009, while the German hub
prices fell less evidently, trading still above 8
USD/MBtu in 2009. From 2007 onwards, the US
(28) European Commission (2012b) (i).
34
gas spot price has fallen under the price level of
the other gas spot markets, which most likely
reflects the effect of the surge in domestic shale
gas supply. This becomes quite clear after 2009,
when energy consumption picked up again
following the recovery of the economy.
Statistics from more recent years show that while
the US spot prices remained low (around 4
USD/Btu in 2011), the EU spot prices (both in the
UK and German hub) kept increasing(29).
Wholesale gas prices have continued to rise in the
EU while economic activity contracted and
consequently natural gas consumption in the EU
has been declining: the first half of 2012
represented the EU's lowest first half year
consumption of the last ten years. It was 7% and
14% less than the first half of 2011 and 2010
respectively (30).
The continued rise in EU wholesale gas prices
despite the slump in gas demand and the lower
gas spot prices vividly depicts the kind of
vulnerability the EU is exposed to due to its
high import dependency: as the Asian markets
offer higher returns (31) and more robust demand,
gas producing countries have increased their trade
with Asia lowering supply to Europe. As a
consequence wholesale gas prices in Europe have
increased while in the US, which now can rely
more heavily on domestic production, prices have
remained low. US prices were shielded from
potential upwards pressure from export demand
because of export restrictions (generally expected
to be gradually lifted). Furthermore, the impacts on
(29) On average in Q2 2013 wholesale consumers on the UK’s
NBP – traditionally the lowest priced hub in the EU, which
however in March 2013 experienced a price spike - paid
more than double the price paid by consumers on Henry
Hub in the US. The gap between Henry Hub in the US and
German border prices was even larger, with German border
prices almost three times higher than Henry Hub prices
over the first four months of 2013. European Commission
(2013a).
(30) European Commission (2012) (ii).
(31) European Commission (2012b) (ii). Average LNG price in
Europe in 2012 was between $9 or $10/MMBtu, in Japan it
was $17/MMBtun, in Korea $16.6/MMBtu. The price
differences suggest that, in vivid contrast to oil, the world
is divided in various regional gas markets. Some
commentators have hinted at the possibility that the price
differences may be reduced in the next decade due to an
increase in gas consumption; the abandonment of the
practice to base long-term gas contracts on the international
oil price; and the world-wide surge in gas exploration and
exploitation, including but not exclusively shale gas.
Pa rt I
Ene rg y Co sts a nd Co mp e titive ne ss
the EU have been further aggravated in this
context due to the oil-price indexation of many
long-term gas import contracts.
observed between the oil price and the natural gas
prices on the wholesale markets in the various
regions in the world.
The evolution of end-user's prices (32) for gas
(Graph I.2.6 and I.2.7) follows a pattern similar to
that of the wholesale market.
While the EU gas end user prices seem to stick
closer to the oil prices and increased from 0.022
EUR/KWh in 2005 to 0.035 EUR/KWh, the US
gas prices declined from about the same starting
point of the EU in 2005 to 0.010 EUR/KWh in
2011.
G ra p h I.2.6:
150
Indices of real gas prices for end-users
2005=100
On the other hand, the impacts of the fall in the gas
price on electricity end user prices is much less
evident yet it can still be observed. As shown in
Graph I.2.8, electricity prices in the US have
historically been much lower than in the EU.
125
100
75
50
25
G ra p h I.2.8:
0
1978
1980
1990
2000
2005
2006
2007
EU Natural Gas - Industry
US Natural Gas - Industry
2008
2009
2010
EU Natural Gas - Households
US Natural Gas - Households
0.16
No te : "Re a l" p ric e ind ic e s a re the c urre nt p ric e ind ic e s
d ivid e d b y the c o untry sp e c ific p ro d uc e r p ric e ind e x fo r
ind ustria l p ric e s, a nd b y the c o nsume r p ric e ind e x fo r the
ho use ho ld se c to r.
Sourc e : OECD - Ele c tric ity Info rma tio n (2012).
G ra p h I.2.7:
End-user electricity prices for industry
2011
0.80
EUR/KWh
0.12
0.60
0.08
0.40
0.04
0.20
End-user gas prices for industry
0.00
0.00
0.04
1.2
EUR/KWh
2001
2002
2003
US prices
0.03
0.9
0.02
0.6
0.01
0.3
0.00
2004
2005
2006
EU prices
2007
2008
2009
2010
2011
Price ratio US/EU (rhs)
No te : Fo r the EU p ric e s re fe r to a ve ra g e o f c o nsump tio n
b a nd s Ie If Ig until 2007, a fte r 2007 c o nsump tio n b a nd ID.
Pric e s a re no mina l a nd the e xc ha ng e ra te use d is fro m the
OEC D. Fo r the US no c o nsump tio n b a nd wa s a va ila b le .
2011 p ro visio na l d a ta . Ta xe s a re inc lud e d .
Sourc e : Euro sta t a nd Ene rg y Info rma tio n Ad ministra tio n.
0.0
2005
2006
2007
EU gas prices - Industry
Ratio prices US/EU (rhs)
2008
2009
2010
2011
US gas prices - Industry
No te : Fo r the US p ric e s it wa s no t p o ssib le to id e ntify a
sp e c ific c o nsump tio n b a nd . The EU p ric e s a re fo r the
c o nsump tio n b a nd I3 (I3.1 a nd I3.2 until 2006) tha t is
b e twe e n 10,000 a nd 100,000 G J.
Pric e s a re no mina l a nd the e xc ha ng e ra te use d is fro m
OEC D. Ta xe s a re inc lud e d .
Sourc e : Ene rg y Info rma tio n a d ministra tio n a nd Euro sta t
d a ta .
A significant gap between the EU and the US
starts appearing in 2006, prior to the development
of shale gas but coinciding with the divergence
(32) Comparing end-user prices is complicated as there are
differences in statistical conventions between the two
regions as well as different taxation regimes. Nonetheless
both the OECD data and the Eurostat data provide a similar
picture (Appendix 4, Graph I.A4.6).
35
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
G ra p h I.2.9:
150
Indices of real electricity prices for end-users
(2005=100)
ENERGY
INTENSITY (33):
COMPARISON
2.4.
A
US-EU
Over the past years, the European industrial
sector has been able to successfully decouple its
performance in terms of value added from its
energy consumption. The remarkable wide
energy price gap between EU and US should be
considered next to the equally remarkable energy
intensity gap between the two regions.
2005=100
125
100
75
50
25
0
1978
1980
1990
2000
2005
2006
2007
2008
2009
2010
2011
EU Electricity - Industry
EU Electricity - Households
US Electricity - Industry
US Electricity - Households
No te : "Re a l" p ric e ind ic e s a re the c urre nt p ric e ind ic e s
d ivid e b y the c o untry sp e c ific p ro d uc e r p ric e ind e x fo r
ind ustria l p ric e s, a nd b y the c o nsume r p ric e ind e x fo r the
ho use ho ld se c to r.
Sourc e : OECD - Ele c tric ity Info rma tio n (2012).
The EU industry's energy intensity has been
substantially lower than its US counterpart. In
addition it has improved by almost 19% between
2001 and 2011 while in the US the improvement
over the same period was only 9%.
G ra p h I.2.10: Energy intensity of industry
The gap has been persistent at least since 2001
(Graph I.2.8). Also in this case, the price
difference predates the development of shale gas.
500
Ktoe/bn EUR
400
The price differential has however been widening
in the past few years as the European prices
increased over the period (although not in a linear
manner) while the US prices remained more or less
constant.
300
% change 2001-2011:
EU27: -19%
US: -9%
200
100
0
2001
The development of US shale gas is likely to be
at the root of this widening gap mainly because
its increased energy independence and export
restrictions in the US has to some extent sheltered
them from fluctuations on the global energy
markets; in addition it has reduced the supply costs
of gas for electricity generation. At the same time
the EU energy dependence has increased and this
has led to a higher exposure of the EU to energy
prices volatility.
Finally it is to note that shale gas prices in the US
do not fully reflect external costs as the current
regulatory regime exempts shale gas projects from
a number of pieces of federal environmental
legislation, including the provisions of the US Safe
Drinking Water Act.
36
2002
2003
2004
2005
Energy Intensity Industry - US
2006
2007
2008
2009
2010
2011
Energy Intensity Industry - EU27
No te : Fina l e ne rg y c o nsump tio n ind ustry d ivid e d b y g ro ss
va lue a d d e d in 2005 re fe re nc e ye a r, kto e in b illio n o f e uro s.
Sourc e : Euro sta t, Ene rg y Info rma tio n Ad ministra tio n, Bure a u
o f Ec o no mic Ana lysis USA.
It appears that the increase in the European energy
prices is likely to have provided manufacturing
industry with the incentive to improve their energy
intensity in order to limit the cost of their
production inputs. Conversely, the relatively
cheaper energy supply in the US did not provide
similar incentives.
The development of shale gas has exacerbated this
difference as it has further lowered electricity and
(33) It is to note that for the calculation of energy intensity in
this section data taken from Eurostat and Energy
information administration of the US have been used.
Unlike in section 1, energy consumption does not take into
consideration feedstock (ie. energy sources used as raw
material). In addition the definition of Industry is broader
than the 14 Manufacturing sectors included in the analysis
of section 1 and it includes also agriculture, construction
and electricity and gas supply. Differences in levels and
evolution with respect to what observed in section 1 can
therefore be explained by these statistical differences.
Pa rt I
Ene rg y Co sts a nd Co mp e titive ne ss
gas prices. This seems to have halted the gradual
improvement in the energy intensity of the US
industry: after 2006 energy intensity performances
remained constant and actually started to slowly
deteriorate in the last two years considered.
There appear no significant divergences in the
production structure between the two regions
which can explain the marked difference in
energy intensity performance between EU and
US industry. First, the general picture of the EUUS energy intensity divergence also emerges when
looking at various branches within manufacturing
industry (Graph I.2.12).
Second, in terms of contribution to GDP, the
European manufacturing sector is still larger than
its US counterpart, although the difference seems
to have become smaller during the decade.
A similar convergence can be observed in the
energy intensive industry sector, whose GDP share
has become smaller in the EU than in the US but
the difference in size seems to slightly widen only
in 2011.
process of restructuring away from energy
intensive sectors is observed in the EU from 2005
(see the shift-shares analysis carried out in chapter
1). Graph I.2.11 corroborates this insight as it
shows that it is around 2005 that the share of
energy intensive sectors in the US exceeds that of
the EU. However as shown in chapter 1 and
Appendix 3 this is largely driven by the increased
importance of the refinery sector in the US
economy.
This suggests that while European business as a
whole has been able to compensate for the higher
energy prices through improvements in energy
intensity and possibly also through other nonenergy-related efficiency gains - facilitating the
substitution of energy with other production
factors (34) - the energy intensive sectors have been
relatively more strongly affected. Yet the
restructuring
started
already
before
the
development of shale gas and might therefore
accelerate as the energy price gap widens. .
G ra p h I.2.11: Share of some Energy Intensive Sectors (EIS)
and share of Manufacturing in GDP - 20012012
20
%
16
12
8
4
0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
EIS - EU-27
Chemicals - EU-27
Manufacturing - EU-27
EIS - US
Manufacturing - US
Chemicals - US
No te : Fo r the EU-27 e ne rg y inte nsive se c to rs inc lud e
Fa b ric a te d me ta l p ro d uc ts, Ba sic me ta l, O the r no n-me ta llic
mine ra l p ro d uc ts, C he mic a ls a nd c he mic a l p ro d uc ts, Co ke
a nd re fine d p e tro le um p ro d uc ts, Pa p e r a nd p a p e r
p ro d uc ts, Mining a nd q ua rrying .
Fo r the USA, e ne rg y inte nsive se c to rs inc lud e Mining , No nme ta llic mine ra l p ro d uc ts, Pa p e r p ro d uc ts, Pe tro le um a nd
c o a l p ro d uc ts, C he mic a l p ro d uc ts, Prima ry me ta ls,
Fa b ric a te d me ta l p ro d uc ts.
Sourc e : O wn c a lc ula tio ns o n Euro sta t a nd US Bure a u o f
Ec o no mic Ana lysis.
The better performance of the EU's manufacturing
industry in terms of energy intensity has therefore
happened in the context of comparable overall
production structures. Nonetheless, a certain
(34) The extent and nature of this adaptation would require
more in-depth empirical research.
37
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
G ra p h I.2.12: Energy intensity of industry, selected sectors
1200
Paper Industry
Ktoe/bn EUR
800
Chemical Industry
Ktoe/bn EUR
1000
600
800
600
400
400
200
200
0
0
2002
2006
Energy Intensity US
1000
Ktoe/bn EUR
2002
2010
Energy Intensity EU
2006
Energy Intensity US
Non-metallic Minerals Industry
1400
Ktoe /bn EUR
2010
Energy Intensity EU
Basic Metals
1200
800
1000
600
800
600
400
400
200
200
0
0
2002
2006
Energy Intensity US
2010
Energy Intensity EU
2002
2006
Energy Intensity US
2010
Energy Intensity EU
No te : Fina l e ne rg y c o nsump tio n in Kto e p e r b illio n EUR, re fe re nc e ye a r 2005.
Pa p e r Ind ustry fo r the EU inc lud e s Pa p e r a nd p a p e r p ro d uc ts a nd Printing a nd re p ro d uc tio n o f re c o rd e d me d ia . Fo r the US:
Pa p e r; Printing a nd Re la te d sup p o rt
Che mic a l Ind ustry fo r the EU inc lud e s Che mic a ls a nd c he mic a l p ro d uc ts a nd Ba sic p ha rma c e utic a l p ro d uc ts a nd
p ha rma c e utic a l p re p a ra tio ns. Fo r the US: C he mic a ls, Pha rma c e utic a ls a nd Me d ic ine s.
No n-me ta llic mine ra ls fo r the EU inc lud e s O the r no n-me ta llic mine ra l p ro d uc ts. Fo r the US: No n-me ta llic Mine ra l Pro d uc ts.
Ba sic Me ta ls fo r the EU inc lud e s Ba sic me ta ls. Fo r the US: Prima ry Me ta ls.
Sourc e : Euro sta t, Ene rg y Info rma tio n Ad ministra tio n a nd US Bure a u o f Ec o no mic Ana lysis.
2.5.
TRADE
2.5.1. Ene rg y tra d e
The most evident effect on trade of the US shale
gas development has been the sizeable reduction
of the US energy trade deficit over the past few
years. While for the first eight years of the decade
the energy trade deficits of EU and US deteriorated
in very similar fashion, after 2008 they developed
quite differently.
The US energy trade deficit improved much more
in 2009 than the EU counterpart, while in later
years it has deteriorated much less pronouncedly,
also in part because of its higher share of oil in its
energy imports that experienced larger volatility
than the other energy carriers. This has resulted in
a wider gap in GDP terms between the US and EU
energy trade deficit.
38
Pa rt I
Ene rg y Co sts a nd Co mp e titive ne ss
G ra p h I.2.13: Energy trade balances as % of GDP, total and
per energy source - 2001-2011, EU-27 and US
0.5
% of GDP
0.0
-0.5
-1.0
-1.5
-2.0
-2.5
-3.0
-3.5
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
0.5
price of coal vis-à-vis that of other primary energy
sources has fallen, triggering a process of partial
substitution in the European energy mix.
Tot Energy trade balance - EU27
Oil trade balance - EU27
Gas trade balance - EU27
Coal trade balance - EU27
% of GDP
0.0
-0.5
-1.0
-1.5
-2.0
Finally, with the current near balance in both coal
and gas trade, the US energy trade balance appears
now basically driven by the developments in the
oil trade balance. The US oil trade deficit has also
been significantly reduced compared to its 2008
levels, indicating, next to a fall in oil prices from a
peak level, a shift in US energy use away from oil
towards gas (and renewables). In contrast, the EU
energy trade balance is driven by the trends in all
three main tradable primary energy sources (oil,
gas and coal) and for each of them the deficit has
worsened over the past ten years considered,
although more for oil and gas than for coal. The
increase in import dependency may expose the EU
as a whole more to supply disruptions and
geopolitical risks, and to the related danger of
increased price volatility.
-2.5
2.5.2. Tra d e o f g o o d s
-3.0
-3.5
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Tot Energy trade balance - US
Gas trade balance
Oil trade balance
Coal trade balance
Sourc e : Co mmissio n Se rvic e s o n Euro sta t a nd US Bure a u o f
Ec o no mic Ana lysis.
The drive to self-sufficiency in domestic gas
consumption and the related increase in coal
exports which took place after 2008 help to explain
this trend. In contrast, the EU became more
dependent on gas and coal. Graph I.2.13 illustrates
these divergent developments.
The developments in the energy trade deficit
should be seen in the context of the trends in the
overall current account balance.
As it is well-known, the US has had a persistent
large current account deficit, for a part fuelled by
the global finance trends before the onset of the
current financial and economic recession.
However, it is of note that already in the years just
before the outbreak of the financial crisis, the
current account deficit had already started to fall.
While the US gas trade has tended to move
closer to balance, the EU's gas trade deficit has
actually increased. This trend has its origins well
before 2008 but the gap in GDP terms has widened
considerably after 2008. The difference is likely to
become bigger when the US starts to export shale
gas; this tendency could be countered if the EU
could rely more on domestically produced gas (35).
The significantly larger trade surplus for coal in
GDP terms from 2008 onwards reflects the US
excess coal supply. As a consequence, the relative
(35) This is possible when, for instance, Cyprus’ large offshore
gas reservoirs turn out to be commercially viable for
exploitation. Moreover, a number of EU countries report
large potential reservoirs of shale gas.
39
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
G ra p h I.2.14: Current account balance, external balance
for goods and bilateral balance for goods,
2001-201 - US and EU-27
2.0
% of GDP
0.0
-2.0
-4.0
-6.0
-8.0
2000
2001
2002
CA/GDP - US
1.2
2003
2004
2005
2006
Balance goods/GDP - US
2007
2008
2009
CA/GDP - EU27
2010
2011
2012
Balance goods/GDP - EU27
% of GDP
0.8
any clear sign of deterioration. Since the direct
trade in goods constitutes one of the key indicators
for assessing (changes in) competitiveness, one
can tentatively conclude that the widening EU-US
energy price gap has so far not visibly affected the
EU industry's market performance vis-a-vis their
US counterpart, at least on the EU and US
markets. This can for some part be explained by a
better overall energy intensity performance in the
EU; the relatively large share of services in US
exports which are less energy-intensive than
goods; the success of EU industry to realise cost
improvements through a heavier reliance on global
supply chains (37); the "income effect" of cheaper
energy on US consumers' demand and for parts of
the EU industry the cost benefit of cheaper US
intermediary goods.
0.4
2.6.
0.0
-0.4
-0.8
-1.2
2000
2001
2002
2003
2004
EU balance of goods with US
2005
2006
2007
2008
2009
2010
2011
2012
US balance of goods with EU
Sourc e : Co mmissio n Se rvic e s b a se d o n Euro sta t a nd US
Bure a u o f Ec o no mic Ana lysis.
The sharp reduction in this deficit between 2008
and 2009 appears to have a close connection with a
sharp reduction in domestic demand due to the
onset of the economic crisis, as the goods trade
balance moves in tandem (36). However after 2008,
the goods trade deficit widens again, while the
current account deficit more or less stabilises on a
level close to 3%.
At the same time the US energy trade deficit
has been reduced by about 1%-point of GDP,
this suggests that the increasing self-reliance in
energy has helped the US to get the current
account more in balance. From this perspective,
the US energy sector has helped to address one of
the more prominent global imbalances.
Interestingly, the EU-US goods balance has
shown a persistent surplus for the EU without
(36) The analysis focuses on overall trade balance changes and
it does not explicitly adress the impacts which run through
changes in the exchange rate. It is of note however that
over the period of study the Euro has almost steadily
appreciated vis-à-vis the US dollar.
40
CONCLUSIONS
The findings of this chapter point to the
importance to carefully check the on-going trends
and to put them into perspective. The surge in US
shale gas since 2007/2008 has led to marked
changes in US energy sector and energy trade
balance, as gas has replaced coal as dominant
energy source in domestic production and the US
energy trade deficit in GDP terms has been
reduced since the dip of 2008. This improved
performance of domestic US energy production
and subsequent price differential has occurred in
absence of any opening up of export of US shale
gas to the rest of the world. Any such opening
might limit future price differentials with the EU.
However, the investigated energy and trade data do
not reveal any major shift in the EU-US goods
(37) These first three points are corroborated by the elaborate
empirical analysis of WIOD data 1995-2009 in section 3.2
of the Commission's 2012 European Competitiveness
Report which shows that, next to improving its energy
efficiency, the EU export sector has maintained its
competitiveness by exploiting the opportunities from
globalisation to source their intermediate inputs more
cheaply. Table 3.2 of that publication shows that the total
energy inputs embodied in one unit of goods exports has
more or less stayed constant for the EU15 (and has fallen
dramatically for the EU 12) where it has on balance
increased for the US. Moreover, the share of embodied
foreign energy inputs per unit of goods export has
increased much more significantly in the EU than in the
US. For services exports, a similar picture emerges, but
with a smaller share of energy embodied per unit services
exports than is the case for goods exports and with a level
for the US exceeding that for the EU15.
Pa rt I
Ene rg y Co sts a nd Co mp e titive ne ss
trade balance nor significant divergent trends in
the overall production structure of manufacturing
industry which can be directly ascribed to the shale
gas revolution.
In contrast to the US, the EU economy and
industry have ever more heavily relied on energy
imports, including gas imports, but the data
strongly suggest that the EU industry has so far
also responded to the persistently higher energy
prices through the realisation of significant
improvements in the use of energy as reflected in a
secular decline in its energy intensity. By contrast,
the US industry's energy intensity seems to have
risen with the surge in consumption of the cheap
shale gas. This divergence in EU-US energy
intensity trends has partially helped EU industry
to offset the energy price differential with the US
and hence might have acted as a buffer to the US
shale gas surge. The EU has been somewhat
restructuring away from energy intensive sectors
while maintaining an overall share of
manufacturing in value added above that of the
US. Moreover, although not demonstrated by the
data presented in this chapter, one may surmise
that cheaper US intermediate goods and the
(future) availability of cheap (US) shale gas on the
EU gas markets (38) can act as further buffers to
the shale gas shock (39). The price gap with the EU
may also be reduced should the shale gas
producers be mandated to fully internalize external
costs, on the environment and human health, as it
is not currently the case.
part of the EU industry’s supply chain remains
unclear.
Consequently, high energy prices for EU industries
should remain a policy concern, even more so in
case the EU-US energy price gap will continue to
increase. For this reason, EU energy and carbon
policies have to be
cost efficient while
maintaining their ambition. Hence, on-going
efforts to improve the efficiency of energy markets
in the EU should be vigorously pursued, namely to
diversify the energy mix, including a shift to
multiple gas suppliers, increase the effective
competition on the global and EU energy markets,
and by integrating the various national energy
markets in the EU into regional or EU energy
markets.
Finally,
since
steady
energy
intensity
improvements have proven to be one of the best
asset of the EU industry to maintain their
competitiveness, the EU should maintain and
perhaps intensify its policy to bolster the EU
industry's energy efficiency efforts.
However, this should not imply complacency on
the widening EU-US energy price gap. Firstly
because the impacts may become visible only after
some delay and they may have in fact been
obscured by the divergence in timing of the
economic crisis between EU and US. Finally and
importantly, energy efficiency improvements may
slow down in the EU and speed up in US due to
diminishing low cost options; but that would seem
to require increased policy effort. Similarly the
magnitude of opportunities to increase the foreign
(38) This implies as well that so far the effects of the US shale
gas on the EU have run through US goods production and
the export of other energy sources such as coal, since US
shale gas has not (yet) been exported to other parts of the
world in signficant amounts.
(39) Another counter-argument further explored in box 1.2.1 is
that US gas prices may be unsustainably low and will
inevitably increase to match production costs or decline in
supply.
41
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43
APPENDIX 1
Da ta a nd Me tho d o lo g y
Unit Energy Costs: description of the data
The sectoral data on quantities of energy used, energy costs and value added in constant prices are
collected from the World Input Output Database (WIOD) (40). The advantage of using this source is that it
provides a large, consistent dataset of globally comparable sector-level data for a relatively long period of
time 1995-2011, while its drawbacks are that it does not include the developments of the most recent
years and data for some countries and sectors for 2009-2011 are estimated. In addition data limitations do
not enable to compute energy intensity and real energy prices for the years 2010 and 2011. Data from
WIOD allows the calculation of Real Unit Energy Costs for 27 EU Member States plus 13 other
countries. These indicators are computed for the manufacturing sector and its 14 subsectors on the basis
of the Nace Rev.1. nomenclature. The 14 subsectors of manufacturing are the following: food, beverages
and tobacco; textile and textile products; leather and footwear; wood and products of wood and cork;
pulp, paper, printing and publishing; coke, refined petroleum and nuclear fuel; chemicals and chemical
products; rubber and plastics; other non-metallic mineral; basic metals and fabricated metal; machinery;
electrical and optical equipment; transport equipment; manufacturing NEC, recycling. This is the most
detailed sectoral breakdown available in the database. It is worth noting that in certain cases these sectoral
aggregates could hide substantial variability in terms of lower subsectors.
Data is taken from national Use Tables of WIOD in purchasers' prices, because these prices reflect the
total cost of inputs payable by the sector, as opposed to basic prices, which exclude taxes and margins
(both of which can be substantial for energy products). Data from WIOD was complemented with
constant price value added are taken from Eurostat for EU countries, from the OECD for the US and
Japan and from the World Development Indicators for China. This enables the calculation of Nominal
Unit Energy Costs, energy intensities and real (deflated) energy prices for these countries and sectors.
The analysis focuses only on direct energy costs. These are defined as the costs incurred by companies to
directly purchase energy inputs including feedstock. The energy inputs considered here are the sum of 4
products categories: i) coal and lignite; ii) peat crude petroleum and natural gas, services incidental to oil
and gas extraction excluding surveying; iii) coke, refined petroleum products and nuclear fuels; iv)
electrical energy, gas, steam and hot water. The indirect energy costs are not analysed in the present note.
These are defined as the share of energy embedded into the other production inputs used by the various
sectors (for instance the energy inputs contained in the chemicals used by textile industry). Although
admittedly the indirect energy costs could be significant for certain sectors, data availability and
methodological issues represent important trade-offs that limit the usefulness of incorporating indirect
costs into the analysis.
The methodology of shift share analysis
The shift share analysis presented in the paper is based on the following decomposition of the growth of
RUEC between period 0 and period T:
∆RUECT
=
RUEC0
∑ ∆RUEC
i ,T
* mi , 0
i
RUEC0
within subsector
effect
+
∑ ∆m
i ,T
* RUECi , 0
i
RUEC0
restructuring effect
+
∑ ∆m
i ,T
* ∆RUECi ,T
i
RUEC0
interaction effect
(40) The WIOD project was funded by the European Commission as part of the 7th Framework Programme for Research.
44
Pa rt I
Ene rg y Co sts a nd Co mp e titive ne ss
∆RUEC = RUEC − RUEC
T
T
0 , i denotes a given subsector of total manufacturing, mi,T
Where
denotes the share of sector i in the value added of total manufacturing in period T, and
∆mi ,T = mi ,T − mi , 0
.
45
APPENDIX 2
Re a l unit e ne rg y c o st in the wo rld
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
EU27
RUEC as % of Value Added
RUEC as % of Gross Output
15.7 16.6 16.4 14.4 14.8 20.1 19.1 18.3 19.1 21.2 25.8 28.4 27.4 32.6 29.1 31.8 34.8
5.1
5.4
5.3
4.7
4.7
6.1
5.8
5.6
5.8
6.4
7.6
8.1
7.7
8.9
8.0
8.5
9.3
Australia
RUEC as % of Value Added 18.6 19.2 17.4 16.5 20.7 23.9 22.2 21.2 19.1 24.2 25.1 25.3 26.1 24.9 27.2 27.7 27.9
RUEC as % of Gross Output 6.0 6.2 5.9 5.4 6.6 7.3 6.6 6.5 6.1 7.2 7.4 7.4 7.7 7.3 8.0 8.1 8.2
Brazil
RUEC as % of Value Added 30.7 33.7 34.2 35.7 39.9 44.2 46.5 48.0 49.2 49.4 54.4 57.5 53.7 56.9 42.7 43.3 44.7
RUEC as % of Gross Output 9.4 9.8 10.1 10.4 11.4 12.1 12.6 12.9 12.8 13.0 13.8 14.6 13.5 13.6 11.7 11.9 12.3
Canada
RUEC as % of Value Added 10.4 10.9 10.4 9.4
RUEC as % of Gross Output 3.4 3.5 3.3 3.1
8.7 10.9 11.8 11.2 13.0 12.6 15.3 15.4 15.1 15.0 14.7 13.2 13.1
2.9
3.4
3.7
3.5
4.0
3.9
4.6
4.5
4.4
4.4
4.3
3.9
3.8
India
RUEC as % of Value Added 55.0 52.1 56.3 54.6 60.8 72.6 75.6 80.3 79.8 77.4 75.3 76.4 76.4 76.6 75.0 75.5 76.1
RUEC as % of Gross Output 12.2 11.9 12.2 11.9 13.5 15.9 16.3 17.0 16.7 16.2 16.1 16.1 16.1 16.0 15.5 15.6 15.7
Indonesia
RUEC as % of Value Added
RUEC as % of Gross Output
7.6 10.1 8.3 18.8 20.2 25.7 23.1 22.5 22.8 23.4 26.6 27.0 27.1 25.0 23.4 22.6 22.3
2.7
3.6
3.0
6.7
7.2
9.2
8.3
8.2
8.4
8.7 10.1 10.2 10.2 9.4
8.7
8.4
8.2
Korea (South)
RUEC as % of Value Added 23.7 27.9 34.0 38.5 35.7 40.1 40.6 34.6 35.7 38.3 43.9 49.3 49.5 69.5 58.3 60.6 63.4
RUEC as % of Gross Output 6.1 7.0 8.5 9.4 8.7 9.8 9.8 8.5 8.6 9.1 10.0 10.9 10.8 13.6 11.6 12.2 12.8
Mexico
RUEC as % of Value Added 30.1 24.5 25.1 24.3 23.7 23.6 25.1 25.1 24.6 27.2 29.3 31.2 31.5 38.5 33.1 31.3 32.9
RUEC as % of Gross Output 9.1 7.7 8.1 7.9 7.8 7.6 8.3 8.3 8.0 8.8 9.1 9.8 9.9 11.8 10.2 9.7 10.3
Turkey
RUEC as % of Value Added 20.7 19.3 18.4 17.1 28.6 36.3 36.4 26.5 26.2 26.1 26.9 28.4 28.0 23.5 24.2 23.8 23.6
RUEC as % of Gross Output 8.2 8.0 7.2 6.5 9.3 10.6 9.9 6.9 6.8 6.8 7.0 7.4 7.3 6.1 6.3 6.2 6.1
Taiwan
RUEC as % of Value Added 22.5 21.4 21.6 20.6 21.5 26.2 28.3 29.4 34.6 42.2 50.9 59.7 61.3 85.0 61.8 62.0 65.0
RUEC as % of Gross Output 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9
Source: Commission Services based on WIOD database
46
APPENDIX 3
Re a l Unit Ene rg y Co sts & Shift-sha re e xc lud ing re fining se c to r
G ra p h I.A3.1: Real Unit Costs manufacturing sector including vs. excluding coke, refined petrol & nuclear fuels
%
% RUEC as % of gross output, manufacturing sector excluding
RUEC as % of gross output, manufacturing sector
coke, refined petrol & nuclear fuels
25
14
12
20
10
15
8
6
10
4
5
2
0
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
EU27
%
US
JP
CN
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
RU
EU27
RUEC as % of value added, manufacturing sector
US
JP
CN
RU
% RUEC as % of value added, manufacturing sector excluding
coke, refined petrol & nuclear fuels
100
45
40
80
35
30
60
25
20
40
15
10
20
5
0
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
EU27
US
JP
CN
RU
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
EU27
US
JP
CN
RU
Sourc e : Co mmissio n Se rvic e s b a se d o n WIOD, ESTAT, OEC D & Wo rld De ve lo p me nt Ind ic a to rs.
47
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
G ra p h I.A3.2: Shift-share analysis for the manufacturing sector including vs. excluding coke, refined petrol & nuclear fuels
Including refining
1995-2011
%
Excluding refining
1995-2011
%
EU27
EU27
US
US
Japan
Japan
China
China
-30
20
70
Within subsector effect
120
Restructuring effect
-30
170
20
Within subsector effect
Interaction effect
Including refining
2005-2011
%
Restructuring effect
170
Interaction effect
EU27
US
US
Japan
Japan
China
China
0
10
Within subsector effect
20
30
Restructuring effect
40
Interaction effect
50
-20
-10
0
10
Within subsector effect
20
30
Restructuring effect
Sourc e : Co mmissio n Se rvic e s b a se d o n WIOD, ESTAT, OEC D & Wo rld De ve lo p me nt Ind ic a to rs.
48
120
Excluding refining
2005-2011
%
EU27
-10
70
40
50
Interaction effect
60
APPENDIX 4
Ad d itio na l e ne rg y d a ta o n EU a nd US
G ra p h I.A4.4: Electricity mix EU-27, 2001-2010
G ra p h I.A4.1: US Energy domestic production by source,
2000-2011
%
100
90
80
800
70
Mtoe
60
50
600
40
30
20
400
10
0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
200
Coal
0
2000
2001
2002
Coal
2003
2004
Gas
2005
Oil
2006
2007
NGPL
2008
2009
Nuclear
2010
2011P
Renewables
Sourc e : US Ene rg y Info rma tio n Ad ministra tio n, c o nve rsio n
fro m BnBtu to Mto e (1 BnBtu= 2,51996E-05 Mto e )
G ra p h I.A4.2: EU-27 Energy domestic production by source,
2000-2011
1000
800
Gas
Nuclear
Renenwables
Due to sta tistic s c o lle c tio n d iffe re nc e s, the US me a sure s its
e le c tric ity mix in te rms o f ne t e le c tric ity g e ne ra tio n while the
EU use s the g ro ss e le c tric ity g e ne ra tio n.
Sourc e : Co mmissio n Se rvic e s b a se d o n Euro sta t d a ta a nd
Ene rg y Info rma tio n Ad ministra tio n o f the US.
G ra p h I.A4.5: Household expenditures for energy products,
2003-2010 - EU-27 and US
400000
Mtoe
Oil
m PPS
300000
600
200000
400
100000
200
0
2003
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2004
2005
2006
EU27 - Household expenditures
Coal
Oil
Gas
Nuclear
2008
2009
2010
US - Household expenditures
Renewables
No te : Co nve ntio n fa c to r - OEC D Da ta se t: 4. PPPs a nd
e xc ha ng e ra te s.
Sourc e : Co mmissio n Se rvic e s b a se d o n Euro sta t a nd US
Ene rg y Info rma tio n Ad ministra tio n.
Sourc e : DG ENERG Y fa c tshe e t
G ra p h I.A4.3: Electricity mix US, 2002-2011
100
2007
2010
%
90
80
70
60
50
40
30
20
10
0
2002
2003
2004
2005
Coal
Oil
2006
Gas
2007
Nuclear
2008
2009
2010
2011
Renewables
No te : Due to sta tistic s c o lle c tio n d iffe re nc e s, the US
me a sure s its e le c tric ity mix in te rms o f ne t e le c tric ity
g e ne ra tio n while the EU use s the g ro ss e le c tric ity
g e ne ra tio n.
2011 p ro visio na l d a ta
Sourc e : Co mmissio n Se rvic e s b a se d o n Euro sta t d a ta a nd
Ene rg y Info rma tio n Ad ministra tio n o f the US.
49
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
G ra p h I.A4.6: Electricity prices for industrial consumers and
households for the European countries in the
OECD and for the US
G ra p h I.A4.8: Energy consumption of industry breakdown by
sources, EU
120
160
%
1.0
USD/MWh
100
0.8
120
80
0.6
60
0.4
40
80
20
40
0.2
0
0
0.0
2000
2006
2007
2008
EU OECD - average
300
2009
US
2010
2011
200
0.60
100
0.30
0.00
0
2007
2008
EU OECD - average
2009
US
2010
2011
Price ratio US/EU
Sourc e : Co mmissio n Se rvic e s b a se d o n OEC D Ele c tric ity
Info rma tio n (2012).
G ra p h I.A4.7: Energy consumption of industry breakdown by
sources - US
120
%
100
80
60
40
20
0
2001
2002
2003
Gas
2004
Electricity
2005
RES
2006
2007
Petroleum
2008
2009
Solid fuels
Sourc e : Co mmissio n Se rvic e s b a se d o n US Ene rg y
Info rma tio n Ad ministra tio n
50
2003
2004
Electricity
2005
RES
2006
2007
Petroleum
2008
2009
2010
2011
Solid fuels
price ratio US/EU (rhs)
0.90
2006
2002
Gas
USD/MWh
2000
2001
2010
2011
No te : In o rd e r fo r the d a ta to b e c o mp a ra b le with the US,
Ind ustry inc lud e s a lso a g ric ulture a nd fishing .
Sourc e : Co mmissio n Se rvic e s b a se d o n Euro sta t d a ta b a se .
Part II
Ene rg y a nd c a rb o n p ric e s: a sse ssing the imp a c t
o f e ne rg y a nd c lima te p o lic ie s
OVERVIEW
Part I has shown that, despite the good performance of EU industries in terms of energy intensity, high
energy prices should remain a policy concern, even more so in case the EU-US energy price gap will
continue to increase. This is why it is important to investigate how energy prices have been affected by
policy developments. This part analyses three important components of energy costs – electricity and
natural gas retail prices, and carbon prices.
Electricity and natural gas are a substantial part of energy costs; hence they have a significant impact on
the welfare of European citizens and on the competitiveness of industries. Over recent years, EU
electricity and gas markets have been fundamentally reshaped by the significant energy and climate
policy initiatives in the areas of market opening, renewables penetration, climate change mitigation, and
security of supply. Chapter 1 explores the impact of these reforms on end-user electricity and gas prices
for households and industries, while controlling for other factors such as fossil fuels.
The carbon price represents a cost component of electricity prices and is expected to play a crucial role in
the transition to low carbon economies. However, it fails to provide a strong price signal for consumption
behaviour and for investments in clean production technologies. The empirical estimate carried out in
chapter 2 analyses the main drivers of carbon prices, assessing the role of economic and energy factors.
53
1.
THE IMPACTOF ENERGY POLICIES ON ELECTRICITY AND
NATURAL GAS PRICES: AN EMPIRICAL ASSESSMENT
1.1.
INTRODUCTION
The last two decades have seen a number of
significant changes in EU energy policy, designed
to tackle the fundamental challenge of sustaining
economic competitiveness amidst rising global
competition for scarce natural resources and the
risks associated with climate change (41). Several
major EU policy initiatives in the areas of market
opening and integration, renewables policy and
climate change mitigation have contributed to
reshaping energy markets.
The objective of this chapter is to assess the impact
of market opening reforms, and energy and climate
policies, on retail gas and electricity prices in the
EU 27 over the period 2004 – 2011. Section 2
presents price evolution over the two past decades.
Section 3 describes the key policy drivers of
energy prices in the EU. Then data and
methodology are discussed, and results from the
empirical analysis are presented. Lastly, the main
conclusions and policy implications based on these
results are outlined.
1.2.
Since 1996, the EU has engaged in a process of
market opening in network industries, including in
the energy markets. In 2009, the process made a
huge leap forward with the adoption of the Third
Energy Package, which aims to create a single
electricity and gas market. In parallel, the Climate
and Energy package adopted in 2009 has
introduced a policy framework to reach the three
"20" targets: achieving a 20% reduction in EUwide greenhouse gas emissions, a 20 % share of
energy from renewable sources in overall EU
energy consumption and a 20% decrease in
primary energy use by 2020 compared to a predefined baseline.
While these measures may be aimed primarily at
fulfilling the competitiveness, security of supply,
and sustainability objectives of EU energy policy,
what ultimately matters for consumers is the retail
price they will have to pay for their gas and
electricity. These consumers are not only limited to
households; they are also industries including
SMEs. Thus any increase in retail prices has an
impact both on welfare of households and on the
competitiveness of the European economy (42). In
particular, between 2004 and 2011, retail
electricity and gas prices have increased
considerably by 65% and 42% respectively
compared to 18% for inflation (43) over the same
period.
(41) Delgado et al. (2007); European Commission (2007).
(42) Although industries in certain Member States are exempted
from charges that increase the retail prices or have longterm fixed contracts.
(43) HICP, Eurostat.
54
ENERGY PRICE DEVELOPMENTS IN THE EU
1.2.1. Ele c tric ity Ma rke t
Retail prices in the electricity sector have risen
much more than wholesale prices over the
period 2004-2011 (Graph II.1.1). In the electricity
market, both industrial and household end-user
prices (44) have followed an increasing trend since
2004, rising by more than 50% on average across
Member States, compared to a 23% increase in
average wholesale prices over the same period.
The latter has shown greater fluctuation compared
to retail prices, which have been rising
continuously. Between 2008 and 2009, the average
wholesale price fell by over a third, reflecting the
negative demand shock following the economic
and financial crisis and the increasing penetration
of renewable technologies.
The largest percentage increase among the
components of end-user electricity prices was
observed in taxes and levies (Graph II.1.2). This
fact may partly explain the observation that retail
prices in both consumer segments have risen more
than wholesale prices. Over the period 2008-2011,
average electricity taxes and levies in the EU have
risen by 43% and 67% in households and industrial
customers respectively (45), whereas the equivalent
changes in average energy and supply costs were
(44) The electricity prices of the consumption bands DC for
Households (2500 kWh < Consumption < 5000 kWh) and
IC for Industry (500 MWh < Consumption < 2000 MWh)
were selected and are considered as a representative
household and industrial customer, respectively.
(45) These upward dynamics were, however, largely driven by a
few countries: Latvia and Estonia in the household segment
and Finland and Estonia in the industrial segment.
Pa rt II
Ene rg y a nd c a rb o n p ric e s: a sse ssing the imp a c t o f e ne rg y a nd c lima te p o lic ie s
3% and -2% and in network cost 17% and
21% (46).
Retail electricity prices have also roughly
followed the trend of international oil prices
over the first half of the sample period, but the
co-movement has diminished since 2008. This
pattern observed post-2008 may be due to the
presence of price regulation which may have
become more responsive to oil price movements
from 2008 onwards, in order to smooth electricity
price developments in the face of increased crude
oil price volatility (47). This is in contrast to
wholesale electricity prices where, as expected, the
co-movement with international oil prices is much
closer and more evident over the period.
G ra p h II.1.1: EU-27 Average domestic and industrial retail
electricity price, wholesale price and crude
oil price evolution 2004-2011
160
EUR/MWh
EUR/bbl
100
120
75
80
50
40
25
0
0
2004
2005
2006
2007
2008
2009
2010
ELECTPRICE_H
ELECTPRICE_I
WHOLESALE_P
OIL_PRICE
2011
(1) The C o nsump tio n b a nd s use d we re DC fo r Ho use ho ld s
(2500 kWh < Co nsump tio n < 5000 kWh) a nd IC fo r Ind ustry
(500 MWh < Co nsump tio n < 2000 MWh), who le sa le p ric e s
a re a ve ra g e sp o t p ric e s fro m d iffe re nt Euro p e a n p o we r
e xc ha ng e s a nd p o o ls.
Sourc e : Euro sta t.
(46) Eurostat data on end user price components are only
available for the years 2007-2011. Data from 2007 was not
considered due to a large number of missing data points. In
the Household category, data from 22 countries were used
to calculate the average changes in the price components.
In the Industrial category, due to a greater degree of
missing data, only 20 countries were included in the
calculated average changes. Arithmetic average is used; it
follows the same evolution as the weighted average
changes.
(47) There may also be other reasons, for example lower
demand than expected and overcapacity as a result of the
crisis.
G ra p h II.1.2: EU average change per electricity tariff
component between 2008 and 2011
80
%
60
40
20
0
-20
Taxes and levies
Energy and supply
Households
Network costs
Industry
(1) The C o nsump tio n b a nd s use d we re DC fo r Ho use ho ld s
(2500 kWh < Co nsump tio n < 5000 kWh) a nd IC fo r Ind ustry
(500 MWh < Co nsump tio n < 2000 MWh), who le sa le p ric e s
a re a ve ra g e sp o t p ric e s fro m d iffe re nt Euro p e a n e xc ha ng e s
a nd p o o ls.
Sourc e : Euro sta t.
These aggregate figures mask large differences in
the experiences of individual Member States. The
evolution of wholesale and end-user prices over
the sample period have been highly
heterogeneous across Member States. In Poland,
the country experiencing the largest wholesale
price increase in percentage terms in 2011
compared to 2005, the wholesale market
weathered a price hike of around 82%. In the
Netherlands, the United Kingdom and Spain
however, wholesale prices fell over the same
period, with Spain experiencing a decrease of
approximately 7%. On an annual basis, the average
rate of change in wholesale prices has ranged from
24% in Slovenia to -6% in Estonia (Graph II.1.3).
These differences in wholesale price dynamics
may be explained by the vast heterogeneity in the
maturity of wholesale markets across the EU, the
fuel production mix that affects the degree of
sensitivity of domestic electricity markets to
external energy shocks, as well as the degree of
interconnection with neighbouring countries.
Retail price evolution has been equally varied.
Malta, Cyprus and Latvia had the largest increases
in end-user prices in both household and the
industrial sector with prices more than doubling on
average, while the Netherlands was the only
Member State to experience a fall in prices in both
markets over the same period. These rankings were
mirrored to some extent in the relative
55
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
G ra p h II.1.3: Retail and wholesale electricity average price changes by Member State 2004-2011
30
%
25
20
15
10
5
0
AT
BE
BG
CY
CZ
DE
DK
EE
EL
ES
FI
FR
HU
IE
IT
LT
LU
LV
MT
NL
PL
PT
RO
SE
SI
SK
UK
-5
-10
Average annual change in Household electricity prices 2004-2011 (%)
Average annual change in Industrial electricity prices 2004-2011 (%)
Average annual change in wholesale electricity prices 2005-2011 (%)
No te :The Co nsump tio n b a nd s use d we re DC fo r Ho use ho ld s (2500 kWh < Co nsump tio n < 5000 kWh) a nd IC fo r Ind ustry (500
MWh < Co nsump tio n < 2000 MWh)
Sourc e : Euro sta t.
performance of these countries in the various
components of the end-user electricity price
between 2008 and 2011. Latvia had the largest
percentage hike in taxes and levies, and relatively
large increases in energy and supply and network
costs, in the households' segment (48). Similarly,
Malta had the third highest percentage hike in
energy and supply costs in the industrial segment.
At the other end, Netherlands had one of the
largest percentage decreases in taxes and levies
and energy and supply costs in the industrial
sector, and relatively low changes in the household
price components. The average annual rate of
change in industrial end user prices over 20042011 has ranged from 17% in Malta to -0.15% in
the Netherlands. The equivalent figures for
household consumers were 15% and -0.03%, again
in Malta and the Netherlands respectively (49).
Given these diverging paces and trajectories,
there has been significant heterogeneity in enduser price levels across Member States over the
sample period (50). Certain countries, such as Italy
(48) While data was unavailable to calculate the equivalent
change in taxes and levies in the industrial sector in Latvia,
this country also had the highest percentage increase in
energy and supply costs and the second highest increase in
network costs in this market.
(49) Note that prices are illustrated in nominal terms. While
only the Netherlands experienced an overall fall in
electricity prices in its industrial and household segments
in nominal terms, once we control for inflation, Bulgaria,
Hungary, Italy, Luxembourg, Romania and the Netherlands
reveal a net fall in real electricity prices over the sample
period (Hungary and Luxembourg in the Industrial market,
Italy in the Household market, and Bulgaria and the
Netherlands in both markets).
(50) This may be due to cross-country differences in taxation,
since end-user prices including all taxes except VAT have
56
and Germany, have had relatively high average
retail prices in both their household and industrial
segments over the years 2004 and 2011. Similarly,
others such as Estonia and Bulgaria have had the
lowest retail prices across the EU 27 in both
markets.
Moreover, household end-user prices have been
much more varied than industrial prices. For
example, in households the average end-user price
in the five countries with the highest retail prices
over the sample period was almost 150% above the
average end-user price in the bottom five
countries, whereas the equivalent figure was
around 100% in the industrial segment. An
important observation here is that taxes and levies
constitute a much larger share in household enduser prices than in industries', whereas energy and
supply costs are the dominant drivers of industrial
end-user prices. More precisely, the respective EU
average shares of energy and supply costs and
taxes and levies in end-user prices over the period
2007-2011 were 44% and 22% in the households,
whereas the equivalent figures in the industrial
sector were 66% and 6%. The Commission's
recent Communication on the internal energy
market lends support to the claim that a large
portion of variation in retail prices between
Member States are driven by taxes and levies, as
these elements, along with network costs, "fall
been used. It may also reflect differing degrees of price
regulation.
Pa rt II
Ene rg y a nd c a rb o n p ric e s: a sse ssing the imp a c t o f e ne rg y a nd c lima te p o lic ie s
G ra p h II.1.4: Retail electricity prices - Households and Industry
250
EUR/MWh
160
EUR/MWh
140
200
120
100
150
80
100
60
40
50
0
BG
EE
RO
LT
LV
EL
CZ
PL
SI
FI
FR
HU
MT
UK
ES
SK
SE
CY
AT
PT
BE
IE
LU
NL
DE
IT
DK
0
Average Household electricity prices 2004-2011
BG
EE
FR
LU
FI
LV
SE
LT
PT
PL
SI
EL
DK
ES
RO
NL
UK
CZ
AT
HU
BE
SK
DE
IE
MT
CY
IT
20
Average Industrial electricity prices 2004-2011
No te : The Co nsump tio n b a nd s use d we re DC fo r Ho use ho ld s (2500 kWh < Co nsump tio n < 5000 kWh) a nd IC fo r Ind ustry (500
MWh < Co nsump tio n < 2000 MWh)
Sourc e : Euro sta t.
within the remit of the national legislations in each
Member State" (51).
All countries had household retail prices that
were higher on average than industrial prices,
with the exceptions of Greece, Malta and
Romania. However, the absolute size of the
price difference was highly dispersed across
Member States. While in countries like Romania
the price for households was around 90% of the
industrial price, the respective ratio was 240% in
Denmark. Graph II.1.5 illustrates individual
Member States' average industrial-household retail
price ratios relative to the EU average. It gives a
good indication of those countries where the
relative industrial price was much higher than the
EU average, and those countries where it was
significantly lower. These outliers may be
explained by active state intervention to pursue
different objectives in industrial and social policy.
For example, some Member States may allocate
the cost of renewables support unevenly across
different consumer groups. Denmark and Sweden
stand out as countries where the industrial price
relative to households' was much lower on average
than for the EU-27 as a whole, at 54% and 70% of
the EU average respectively. This suggests that
industries in these countries might enjoy a
relatively more favourable environment and lower
costs than on average. Perhaps expectedly,
Denmark and Sweden also had some of the highest
shares of taxes and levies and the lowest shares of
energy and supply costs in household end-user
prices across Member States, while Sweden also
had one of the lowest shares of taxes and levies in
industrial end-user prices between the years 2007
and 2011. Romania, Malta and Greece, on the
other hand, had a higher relative industrial price
compared to the EU average, with the average at
around 137 % of the EU 27.
(51) European Commission (2012b)
57
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
industrial gas prices rose at an average annual rate
of 11 %, compared to a 9 % average annual change
in household prices.
G ra p h II.1.5: Average ratio of Industrial to Household
electricity prices, relative to the EU-27
average, 2004-2011
UK
SE
RO
PT
PL
NL
MT
LV
LU
LT
IT
IE
FR
FI
ES
DE
0.6
0.8
1.0
EUR/bbl
EUR/MWh
100
1.2
40
80
30
60
20
40
10
20
EL
CZ
CY
BG
BE
AT
0.4
50
HU
EE
DK
G ra p h II.1.6: EU-27 average domestic and industrial retail
natural gas price and crude oil price evolution
2004-2011
SK
SI
1.4
1.6
1.8
No te : The Co nsump tio n b a nd s use d we re DC fo r
Ho use ho ld s (2500 kWh < Co nsump tio n < 5000 kWh) a nd IC
fo r Ind ustry (500 MWh < Co nsump tio n < 2000 MWh).
The me a sure is c a lc ula te d a s the sa mp le p e rio d a ve ra g e
ra tio o f ind ustria l to ho use ho ld re ta il e le c tric ity p ric e s, fo r a
g ive n Me mb e r Sta te , d ivid e d b y the EU-27 a ve ra g e ra tio o f
ind ustria l to ho use ho ld p ric e s o ve r the sa me p e rio d . G ive n
tha t a "no rma l" le ve l o f re la tive ind ustria l p ric e s, in the
a b se nc e o f a ny c ro ss sub sid isa tio n, is d iffic ult to id e ntify, it
ma y b e a ssume d tha t the EU a ve ra g e is a n imp e rfe c t p ro xy
o f a "no rma l" p ric e ra tio a nd the b e st a va ila b le b e nc hma rk
to d e te rmine the like ly d ire c tio n a nd e xte nt o f c ro ss
sub sid isa tio n in ind ivid ua l Me mb e r Sta te s. Whe n the ra tio is
a b o ve o ne , re la tive ind ustria l p ric e s a re a b o ve the EU
a ve ra g e , whic h ma y b e ta ke n a s a n ind ic a to r o f c ro sssub sid isa tio n fro m ind ustrie s to ho use ho ld s.
Sourc e : Co mmissio n Se rvic e s b a se d o n Euro sta t d a ta b a se .
0
0
2004
2005
2006
GASPRICE_H
2007
2008
2009
GASPRICE_I
2010
2011
OIL_PRICE
No te : The Co nsump tio n b a nd s use d we re D2 fo r Ho use ho ld s
(20 G J < C o nsump tio n < 200 G J) a nd I3 fo r Ind ustry (10 000
G J < Co nsump tio n < 100 000 G J
Sourc e : Euro sta t.
G ra p h II.1.7: Retail natural gas price evolution by Member
State 2004-2011
30
%
25
Both industrial and household natural gas
prices have been rising over the sample period,
aside from a decreasing trend between 2008 and
2009 (Graph II.1.6). In percentage terms, natural
gas (52) prices have risen more than electricity
prices over the sample period, and have been more
volatile. Average household gas prices have
increased by 77% between 2004 and 2011 (against
50% for electricity), whereas average industrial
prices have more than doubled (against a 53%
increase in industrial electricity prices). The
diverging paces of retail price growth in the two
consumer segments is reflected in the average
industrial-household price ratio, which has risen by
14% over the period, highlighting the relatively
faster growth in industrial prices. More precisely,
(52) As in footnote 4, the natural gas prices of the consumption
bands D2 for Households (20 GJ < Consumption < 200 GJ)
and I3 for Industry (10 000 GJ < Consumption < 100 000
GJ) were selected as they are considered as a representative
household and industrial customer, respectively.
58
20
15
10
5
0
AT
BE
BG
CZ
DE
DK
EE
ES
FI
FR
HU
IE
IT
LT
LU
LV
NL
PL
PT
RO
SE
SI
SK
UK
1.2.2. Na tura l Ga s Ma rke t
-5
Average annual change in Household gas prices 2004-2011 (%)
Average annual change in Industrial gas prices 2004-2011 (%)
No te : The Co nsump tio n b a nd s use d we re D2 fo r Ho use ho ld s
(20 G J < C o nsump tio n < 200 G J) a nd I3 fo r Ind ustry (10 000
G J < Co nsump tio n < 100 000 G J)
Sourc e : Euro sta t.
Retail natural gas prices also loosely followed
the trend of the Brent crude oil price between
2004 and 2011 (Graph II.1.6). This co-movement
was much stronger than in the case of electricity
prices, explained by the still large share of EU
natural gas trade that is conducted via oil-indexed
bilateral contracts.
Pa rt II
Ene rg y a nd c a rb o n p ric e s: a sse ssing the imp a c t o f e ne rg y a nd c lima te p o lic ie s
G ra p h II.1.8: Retail natural gas prices - Households and Industry
60
50
EUR/MWh
50
EUR/MWh
40
40
30
30
20
20
0
0
Average Household gas prices 2004-2011
EE
BG
RO
LV
ES
LT
PL
UK
CZ
BE
PT
FI
FR
IT
SK
HU
NL
SI
AT
LU
IE
DE
DK
SE
10
RO
EE
LT
LV
BG
HU
PL
SK
CZ
UK
LU
NL
AT
IT
SI
BE
FR
IE
DE
ES
DK
PT
SE
10
Average Industrial gas prices 2004-2011
No te : The Co nsump tio n b a nd s use d we re D2 fo r Ho use ho ld s (20 G J < C o nsump tio n < 200 G J) a nd I3 fo r Ind ustry (10 000 G J <
Co nsump tio n < 100 000 G J)
Sourc e : Euro sta t.
As with electricity prices, however, cross
country variations in the evolution of end-user
natural gas prices are evident. In households
Hungary experienced the highest overall
percentage increase in natural gas prices over the
sample period, with a hike of around 90%, whereas
Romania was the only Member State to experience
a fall in prices over the same period (by 17%). In
the industrial sector, the changes were more
profound. Although all countries experienced a
rise in industrial prices over the sample period, the
range of these increases in percentage terms
stretched from 126% in Denmark to 32% in
Austria.
Moreover, not all countries displayed similar
price performances relative to other Member
States across the two consumer markets.
Hungary, Denmark and Romania were particularly
distinct in this respect. While Denmark ranked at
the top of the sample in terms of industrial gas
price increases, it had a relatively small price
increase in the household sector. The reverse was
true for Hungary, which had the highest period
price rise in the household sector, but ranked
below the average in the industrial sector.
Romania, which showed the only decrease in
household prices over the period, experienced a
simultaneous above average increase in industrial
gas prices (53). Graph II.1.8 illustrates the annual
(53) As with electricity, natural gas prices are taken in nominal
terms. Unlike the case with electricity, however, there is no
average change in household and industrial natural
gas prices by Member State. Denmark and
Hungary, as expected, also had the largest annual
price increases in the two sectors.
There has also been notable heterogeneity in the
levels of end-users prices across Member States
over the sample period, with a slightly higher
range of prices for the household sector
compared to industries (54). In the industrial
segment, the average end-user price in the five
countries with the highest prices for 2004 was
more than double the average among the five
countries with the lowest prices for the same year.
This gap shrunk marginally by 2011, where the
former figure was around 86% higher than the
latter. For households, the highest-priced five
countries had end user prices that were on average
130% higher than the lowest-priced group in 2004,
with the equivalent figure falling to around an 84%
premium in 2011.
The relative prices of households and industries
reveal significant outliers in certain Member
States, implying the presence of some level of
state intervention to satisfy different distributional
preferences in industrial and social policy. Graph
substantial change in natural gas price evolution in
Member States over the sample period when prices are
taken in real terms.
(54) European Commission (2012b)
59
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
II.1.9 illustrates individual Member States' sample
period-average industrial-household retail price
ratios, benchmarked against the EU average ratio.
This highlights those countries where the relative
industrial price was much higher than the EU
average, and those countries where it was
significantly lower. Portugal and Spain stand out
as countries where the industrial price relative to
households' was much lower on average than for
the EU-27 as a whole, at 69% and 72% of the EU
average respectively. Conversely, Romania and
Hungary, had a higher relative industrial price
compared to the EU average, exceeding the
average EU 27 level by almost 39 %.
G ra p h II.1.9: Average ratio of Industrial to Household
natural gas prices, relative to the EU-27
average, 2004-2011
UK
SE
PT
IE
RO
PL
NL
LV
LU
LT
IT
HU
FR
ES
EE
DK
DE
CZ
BE
0.4
0.6
0.8
THE POLICY DETERMINANTS OF ENERGY
PRICES ATEU LEVEL
The period 2004-2011 has revealed some
interesting trends in the evolution of end-user
energy prices in the EU, which took place in a
changing EU climate and energy policy landscape.
BG
AT
1.0
1.2
1.4
1.6
The Co nsump tio n b a nd s use d we re D2 fo r Ho use ho ld s (20
G J < Co nsump tio n < 200 G J) a nd I3 fo r Ind ustry (10 000 G J <
Co nsump tio n < 100 000 G J)
The me a sure is c a lc ula te d a s the sa mp le p e rio d a ve ra g e
ra tio o f ind ustria l to ho use ho ld re ta il na tura l g a s p ric e s, fo r a
g ive n Me mb e r Sta te , d ivid e d b y the EU 27 a ve ra g e ra tio o f
ind ustria l to ho use ho ld p ric e s o ve r the sa me p e rio d . G ive n
tha t a "no rma l" le ve l o f re la tive ind ustria l p ric e s, in the
a b se nc e o f a ny c ro ss sub sid isa tio n, is d iffic ult to id e ntify, it
ma y b e a ssume d tha t the EU a ve ra g e is a n imp e rfe c t p ro xy
o f a 'no rma l' p ric e ra tio a nd the b e st a va ila b le b e nc hma rk
to d e te rmine the like ly d ire c tio n a nd e xte nt o f c ro ss
sub sid isa tio n in ind ivid ua l Me mb e r Sta te s. Whe n the ra tio is
a b o ve o ne , re la tive ind ustria l p ric e s a re a b o ve the EU
a ve ra g e , whic h ma y b e ta ke n a s a n ind ic a to r o f c ro sssub sid isa tio n fro m ind ustrie s to ho use ho ld s.
Sourc e : Co mmissio n Se rvic e s b a se d o n Euro sta t d a ta b a se .
In summary, end-user electricity and natural gas
prices have risen substantially in the majority of
Member States over the period 2004-2011. While
electricity prices have evolved similarly for both
households and industries, natural gas prices have
increased much more for industries. Despite these
common trends, a number of notable
60
1.3.
Since the 1990s, significant energy market reforms
and policy initiatives have been introduced in the
EU. On the one hand, the EU has launched a
process of domestic and cross-border market
opening of electricity and gas markets. On the
other hand, the Energy and Climate change
package adopted in 2009 significantly reoriented
the energy production and consumption towards
low carbon energy sources. This section aims to
assess their potential impacts on recent end user
price developments in the EU on the basis of
economic rationale (55).
SK
SI
heterogeneities exist between individual Member
States, which may be explained by the national
energy mix, fragmented national policies including
taxation, and other forms of state intervention
which is illustrated by the variation in relative
levels and relative evolutions of household and
industrial prices across Member States.
1.3.1. Ma rke t Op e ning in Ele c tric ity a nd Ga s
The Commission's Third Energy Package of 2009
introduced a set of Directives and Regulations to
further consolidate and open up the Internal
Energy Market. While broadly adopted, these
reforms have been implemented to varying degrees
across Member States. The Commission's
Communication on the Internal Energy Market in
2011
expressed
concern
about
delayed
implementation and the tendency toward "inwardlooking or nationally inspired policies" in some
Member States (56). These factors are hindering the
achievement of full market-opening and effective
competition. In 2011, more than 80% of power
generation in eight Member States was still
controlled by the historic incumbent, while in the
natural gas market, the market share of the largest
retailer was more than 50% in thirteen Member
States and over 80% in eight of these cases. The
(55) See Box II.1.2 for a brief summary of the literature review.
(56) European Commission (2012b)
Pa rt II
Ene rg y a nd c a rb o n p ric e s: a sse ssing the imp a c t o f e ne rg y a nd c lima te p o lic ie s
Commission is currently undertaking a number of
actions to tackle the non-transposition of the
Package's reforms, including infringement
procedures against Member States for incomplete
or improper implementation (57), in view of its
target of completing the internal energy market by
2014.
supply and demand dynamics. Moreover, the
independent regulation of TSOs and DSOs that
form a key part of the competitive model broadly
adopted should help ensure that network costs
provide sufficient incentives for long term
infrastructure investment, whilst ensuring nondiscriminatory access to the networks.
Market functioning is one of the key determinants
of prices in the energy markets, and the main
objective of market opening is to ensure cost
reflective energy prices and, where possible, to
minimise the cost of energy supply. The natural
gas and electricity markets, as with network
industries in general, entail a unique combination
of competitive activity, namely in generation and
supply, and natural monopoly features in
transmission and distribution. This has resulted in
varying drivers of price formation along the supply
chain - the competitive market vs. regulation –
which are all combined in the final end-user price.
The main direct benefits to be expected from
reforms promoting competition include:
To identify the precise segment of price formation
where market opening and competition are
expected to have their largest impact, it is useful to
start by distinguishing between the different
components of end-user energy prices: energy and
supply costs, network costs, and taxes and levies.
The energy and supply component is determined
by production, importation or generation costs, as
well as market power and supply and demand
dynamics in the wholesale and retail markets.
Network costs entail the tariffs paid by suppliers to
network operators for the use of transmission and
distribution infrastructure. In a properly regulated
system, these costs can be expected to take account
of long term infrastructure maintenance and supply
costs to give operators an incentive to make
necessary long term investments. Finally, taxes
and levies entail any state intervention to pursue a
certain distribution of energy and supply costs, or
to incentivise certain kinds of market (investment)
behaviour.
- Lower wholesale prices from higher competition
among domestic generators, resulting from reforms
such as the unbundling of TSOs and third party
access to transmission networks: competition puts
downward pressure on the profit margins of these
players and provides an incentive to reduce costs.
- Lower end user prices from greater competition
among retailers, through retail market opening
legislation and the unbundling of DSOs from
supply activities: competition puts downward
pressure on retail price mark-ups above the
wholesale price, as retailers compete for
consumers that are eligible and enabled to choose
their own suppliers.
- Price convergence from increased electricity
trade: reform facilitating cross-border trade in
electricity and gas increase price competition from
external generators and suppliers, providing a
further incentive for inefficient incumbent
domestic players to cut costs and lower prices.
- More cost-effective achievement of the other two
objectives of EU energy policy, security of supply
and sustainability: security of supply will be
supported by more diversified energy sources, and
any generation cost savings from RES-E
deployment will only be passed onto consumers in
a competitive wholesale and retail environment.
This process of market opening in the wholesale
and retail markets should gradually lessen the
influence of market power in driving the energy
and supply component of energy prices. That
segment of end-user price formation has become
increasingly driven by competitive pricing,
generation cost fundamentals, market liquidity and
(57) European Commission (2012b)
61
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
Bo x II.1.1: Third Energy Package
The third package includes: (i) Directive 2009/72/EC, aimed at introducing common rules for the
generation, transmission, distribution and supply of electricity; (ii) Directive 2009/73/EC, aimed at
introducing common rules for the transmission, distribution, supply and storage of natural gas; (iii)
Regulation 714/2009 laying down rules for cross-border exchanges in electricity; and (iv) Regulation
715/2009, laying down rules for natural gas transmission networks, gas storage and LNG facilities. The
latter also concerns access to infrastructures, particularly by determining the establishment of tariffs (solely
for access to networks), services to be offered, allocation of capacity, transparency and balancing of the
network.
The basic elements of the third package include:
- A high standard of public service obligations and customer protection (e.g. provisions enabling customers
to switch suppliers within three weeks; obligations on suppliers to provide information to consumers;
obligation on suppliers to foresee efficient complaint handling procedures; and specific protection of
vulnerable customers (1).
- Structural separation between transmission activities and production/supply activities of vertically
integrated companies (“unbundling”). Non-discriminatory access to networks is an essential condition to
allow fair competition between suppliers and to stimulate investment in infrastructure, also when new
interconnectors may negatively impact on the market share of the vertically related supplier. The Directives
grant Member States a choice between 3 possible models: Ownership unbundling (OU), Independent System
Operator (ISO) and Independent Transmission System Operator (ITO).
- Stronger powers and independence of national energy regulators. National energy regulators must be
legally distinct and functionally independent from any private or public entity (i.e. not part of a ministry).
They must have a separate annual budget and adequate human and financial resources. National energy
regulators must have the power e.g. to fix or approve the transmission and distribution tariffs or their
methodology as well as to enforce the consumer protection provisions, to issue binding decisions on
electricity undertakings and to impose effective, proportionate and dissuasive penalties.
- To close the current regulatory gap for cross-border transaction in gas and electricity, a European agency
for the co-operation of Energy Regulators (ACER) has been created. It shall issue opinions on all questions
related to the field of energy regulators. The agency will have decision-making power to review decisions
made by national regulators and ensure there is enough co-operation between network operators.
- Co-operation between national TSOs for gas and electricity, which took place only on a voluntary basis,
has been formalised through the establishment of the European Network of Transmission System Operator
organisations (ENTSOs), which will have to develop harmonised standards for how companies access the
pipelines and grids, ensure co-ordination, especially in the case of electricity, to allow synchronous network
operation and avoid possible blackouts, and co-ordinate and plan network investments notably through the
adoption of ten-year network development plans (TYNDP).
In its Communication on the internal energy market adopted on 15 November 2012, the Commission urges
Member States to step up efforts to implement EU legislation.
(1) Vulnerable customers are an important consumer category for investigation, especially in view of the increasing
numbers of households facing difficulties to pay their energy bills. However, due to lack of data, this consumer
category was excluded from the analysis, which was focused on the average type of household.
Effective competition in production and supply,
along with strong cross-border interconnections
between neighbouring Member States and efficient
regulation of the monopoly network companies,
62
should mean that end-user prices can only vary
significantly to the extent that there are genuine
differences in the cost of transmission, distribution
and supply. Otherwise, arbitrage by consumers and
Pa rt II
Ene rg y a nd c a rb o n p ric e s: a sse ssing the imp a c t o f e ne rg y a nd c lima te p o lic ie s
wholesale traders would eventually force suppliers
to equalise their prices in order to remain
competitive. It is important to note, however, that
these effects of market opening on energy prices
can only be expected to hold in the absence of
market failures and distortive price regulation (58).
A traditional reason for government regulation of
energy prices has been to prevent monopoly
producers and suppliers from pricing substantially
above long run marginal cost (LRMC) (59).
Effective competition, however, removes the need
for such intervention. The continuation of price
regulation following market opening, to subsidise
certain segments of customers for political reasons,
can therefore be distortive (60). There is, however,
a case for subsidising electricity consumption for
vulnerable consumers on welfare and social
grounds.
A price subsidy is present when the price is held
below the marginal cost of supply, which indicates
the economically-efficient level of pricing. When
prices are held above marginal costs, there is overpricing, and the surplus may go toward monopoly
profits or to cross-subsidise other segments of the
market. In fully liberalised markets, with long run
marginal cost pricing, retail prices for industrial
customers would be lower than for households.
Supply costs to industry are much lower, as
electricity is supplied at higher voltages which
permit economies of scale. Moreover, capacity
costs are also lower, as industrial customers tend to
have flatter load profiles than households (61).
According to the Energy Charter Secretariat
(2003), electricity prices are very close to long run
marginal costs in most Western European
countries, where industrial prices are on average
50% of household prices. This is much lower than
the EU-wide average ratio of 75% observed in the
stylised facts, but it may give a rough indication of
the efficient ratio of industrial to household prices.
(58) The predicted price effect of market opening is also based
on the assumption that market opening has a direct and
positive impact on market concentration. However, it may
be that the absence of sufficient competition and sustained
dominant incumbent positions, despite legal market
opening, may hold back the expected downward price
effects.
(59) Energy Charter Secretariat (2003): LRMC includes the
investment and capital costs for any new generating,
transmission and distribution capacity necessary, as well as
short run operating costs and variable network costs.
(60) There is, however, a case for subsidising electricity
consumption for vulnerable consumers on welfare grounds.
(61) Energy Charter Secretariat (2003)
Retail prices are still regulated in some countries
and they are often held below production cost. In
particular, when markets are liberalised and price
regulation is lifted in parallel, a 'catching-up' effect
may be observed: prices may initially rise
following market liberalisation if they were
previously held below costs under price regulation.
Price adjustment towards the level of long run
marginal cost could have the added benefit of
providing the right investment signals to
producers, to invest in new capital and
infrastructure where capacity is constrained,
especially in the lower marginal cost generation
technologies. In the longer term however, once this
initial adjustment is achieved, the expected
negative price effect from market liberalisation are
likely to be observed.
1.3.2. Ac hie ving a lo w c a rb o n e c o no my
The Climate and Energy Package of 2009,
combined with the Energy Efficiency Directive,
has provided a common framework and a set of
targets both at the EU and Member State level to
accelerate the shift to a low carbon economy. The
three headline targets of the 2009 Package are:
- A 20% reduction in total EU greenhouse gas
emissions from 1990 levels by 2020. This entails
an EU-level 21% reduction from 2005 levels in
emissions from ETS sectors, and country-specific
reduction targets for non-ETS sectors under the
Effort Sharing Decision amounting to 10%
reductions compared to 2005.
- A 20% share of renewable energy sources in
gross final consumption of energy by 2020.
- A 20% improvement in the EU's energy
efficiency.
The EU ETS has been established as the main
market-based instrument to facilitate the
achievements of these targets in the energy supply
and industry sectors, but it has also been
supplemented by national policies facilitating the
achievement of the emission target in the other
sectors not covered by the ETS, supporting the
development and deployment of renewable energy
sources and measures to improve energy
efficiency. Recent assessments show that the EU is
on track to meet the climate and renewables targets
by 2020, while the indicative efficiency target
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might not be fully achieved even with the recently
adopted Energy Efficiency Directive. However,
the potential impact of these policies on energy
costs in the EU has become an issue of concern.
1.3.2.1. EU Climate
c ha ng e
po lic y:
Emissio n Tra ding Sc he me (ETS)
the
Since 2005, the EU ETS has been used as a
market-based instrument which aims to internalise
the external costs of GHG emissions through a cap
and trade system. The amount of emissions
originating in the energy-intensive and power
industries has seen a rapid decrease since 2008.
This coincided with a steep fall in the carbon price
over 2008-2009; since then, the carbon price has
decreased further.
The ETS gives flexibility to operators on how to
meet their compliance obligations, and will
therefore incentivise them to reach the cap at the
least cost across the EU. Independently of other
measures, an emissions trading scheme (ETS) such
as the EU ETS can be expected to raise GHG
emission costs for conventional fossil fuel
generators. As long as these plants set the
wholesale electricity price, this would raise the
wholesale and ultimately the retail electricity
prices. This increases the incentive to invest in
renewable energy and energy efficiency measures,
in particular those that are most cost-effective. As
it also increases wholesale electricity prices, the
ETS also incentivises sufficient investment in
conventional generation if the cost is passed on (in
particular those which are less carbon-intensive),
which will continue to be necessary for a secure
supply of energy.
1.3.2.2. Re ne wa b le s p o lic y
The binding targets set by the Renewables
Directive 2009/28/EC for 2020 have supported the
growth of renewable energy sources (RES-E) in
electricity generation. The combined share of
wind, solar and photovoltaic energy in electricity
generation has been rising continuously over the
sample period, with an increase in the average
growth rate since 2010. This is true both on
average and in a large majority of Member
States (62).
(62) See part III on renewables
64
The intermittent nature of availability along with
the high capital investment cost of renewable
energy technologies make them under the
prevailing market conditions in the EU less
competitive than the conventional power units. As
a result, the majority of RES-E generation beyond
pumped storage hydro units is supported by public
support schemes, most of which are financed via a
special levy imposed on consumers, which are
subsequently claimed to raise the retail electricity
price (63). Moreover, the intermittency of
renewables production, and the consequent fixed
and maintenance costs for back-up capacity, as
well as the need for higher investments in
networks infrastructure, entail an additional cost to
the end-consumer for ancillary services and
networks use.
However, there is one possible way in which RESE could have the opposite effect on the retail
electricity price, independently of support
schemes. As renewable energy is characterised by
negligible marginal costs relative to conventional
fossil fuel technologies, high levels of RES-E
penetration would drive the conventional thermal
plants with higher marginal costs out of the
market. Given sufficient competition at the
wholesale level, this should lower the wholesale
electricity price, which is a significant component
of retail tariffs (64). In addition, when the
development of renewables is combined with an
emission trading scheme (ETS), higher RES
substitution of conventional fossil fuel generation
technologies would lower the demand for ETS
allowances in the generation sector, which would
lower the price of these allowances. This would
reduce costs for conventional electricity generators
and, hence the wholesale electricity price (Saenz
de Miera et al. 2008) (65).
What is fundamental in these arguments is which
impact renewables will have on retail prices.
Generally, it seems that the wholesale price effects
on retail prices have been limited so far and the
RES-E production increase the overall cost of
electricity supply to end users. Hence, under the
(63) Moreno and Lopez (2011)
(64) Jensen and Skytte 2003; Saenz de Miera et al. 2008;
Senfuss et al. 2008
(65) Note that greater RES-E promotion may also raise costs for
conventional thermal plants with high capital costs, since
these fixed costs will have to spread over fewer load hours,
leading to calls for capacity payments.
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current pricing regimes for RES-E production and
the low levels of RES-E penetration, the wholesale
market dynamics may not compensate for the
investment cost associated with the RES-E
promotion that most categories of electricity
consumers tend to pay.
1.3.3. Se c urity o f sup p ly
Security of supply has been one of the main
objectives of EU energy policies. It has several
dimensions; import dependence and diversification
constitute two important elements (66). Threats to
energy security of supply, among others, "include
the reliance on imported and insufficiently
diversified energy sources, the political instability
of several energy-producing and transit countries,
(and) global competition over energy sources" (67).
A country’s import dependence is measured as the
share of its net imports in total final inland
consumption. In the case of natural gas, this
measure has been highly volatile across the EU 27
on average over the sample period, but this result
is clearly driven by volatility in a handful of
countries. The import dependence of the majority
of countries has remained relatively stable across
the sample period, as compared to the mean trend.
The higher the energy import dependence, the
greater the exposure to external supply disruptions,
and sudden price hikes. While this channel may be
important for price changes in the short term, the
often higher cost of imported energy sources, such
as natural gas, may be a driver of long term prices.
It is important to note, however, that the impact of
import dependency on end-user energy prices is
likely to be highly mediated by the degree of
import diversification. The more diversified a
country’s import sources, the more room it will
have to negotiate favourable contracts and secure
the cheapest sources. The price impact of import
dependency is also likely to be affected by the
degree of competition amongst the energy
importers and suppliers, as this will determine the
price mark-ups that local consumers face, as well
as the degree of diversification in the energy mix.
(66) Other sources of security of supply concerns can come
from the intermittency of renewables and the phase-out of
nuclear production in some Member States.
(67) European Commission (2013b)
Security of supply is an issue of particular in the
natural gas market, given the high level of gas
import dependency in the EU (68). The EU natural
gas market always has had, and will continue to
have, a large international dimension. It is
estimated that even with complete integration in
the internal natural gas market, the introduction of
meaningful competition among domestic players,
and the exploitation of potential domestic gas
reserves, the EU will continue to import a large
share of its natural gas consumption from third
countries (69). Hence the scope for lowering import
dependency is limited. The natural gas market,
given its significant external dimension, thus
differs from electricity in the sense that national
and EU policies on market liberalisation and the
completion of the internal market can only have a
limited impact on prices.
In electricity, the notion of security of supply is
very different. Given the non-storability of
electricity, transportation depends significantly on
the distance and takes place only in cases where
this is economic viable in relation to energy losses.
This factor significantly reduces the international
dimension to supply risks. What is more important
for secure electricity supplies is rather the proper
management of the grid and sufficient investment
in generation and network infrastructure. Security
of supply in electricity is nevertheless ameliorated
to some extent by the on-going deployment of
renewables. When governments decided to
promote renewables, this was not only with a focus
on sustainability but also in view of reducing
import dependence, diversifying their energy
sources, and, to a lesser extent, promoting security
of supply in electricity.
(68) Security of supply is also a huge concern in the oil market,
which is beyond the scope of this paper.
(69) Parmigiani (2013)
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Bo x II.1.2: Literature Review
A number of studies have tried to establish the relationship between market opening and energy prices
empirically, by looking at the impact of market opening reforms on electricity and gas end-user prices. In
general, most studies have confirmed the expected downward energy price effects of market opening.
Steiner (2000), conducted one of the first empirical studies of the effects of electricity sector reforms and
found that the vertical unbundling of generation activities, third party access and the introduction of
wholesale electricity markets were all linked to lower retail electricity prices for large industrial consumers,
whereas private ownership did not necessarily improve competition. Similar results were found by Martin
and Vansteenkiste (2001) and Dee (2010), while ECB (2010) contributed to the existing literature by
establishing that the indicators of entry barriers and vertical integration have a positive impact on electricity
prices, whilst entry barriers, public ownership and market concentration all have the expected positive effect
on gas prices.
Not all studies are in agreement, however. Hattori and Tsutsui (2004) and Nagayama (2007) concluded that
unbundling of generation and the introduction of spot wholesale markets do not necessarily lower prices and
may possibly increase prices. Hence, there is some debate in the literature on the impact on certain market
opening reforms on energy prices.
Erdogdu (2011) built on these studies by considering the collective impact of the different policy variables,
in order to estimate the effect of market opening on the price-input cost margins. Rather than trying to
capture the effect of any one reform measure, he uses an electricity market reform score variable aimed at
measuring the overall progress towards complete market opening. He finds that greater progress toward
market opening triggers convergence in these margins, and goes some way in highlighting the collective
impact and potential interactions between reforms at different stages of the supply chain on retail price
developments.
An interesting new avenue of research is the impact of electricity generation from renewable energy sources
(RES-E) on energy prices, and its potential interactions with market liberalisation. The majority of
renewable energy technologies are not profitable at current prices, and their development is mainly driven
by different public support schemes which tend to be financed by the retail electricity market. This implies
an additional cost for the consumer, and an increase in the retail electricity price. Nevertheless, the empirical
literature is divided on the direction of the net effect of RES_E deployment on the retail electricity price.
Moreno, Lopez and Garcia-Alvarez (2012) confirm that the cost of the support schemes pushes up the enduser price.
However, Saenz de Miera et al. (2008), Sensfuss et al. (2008) and Jensen and Skytte (2003) point to counterdynamics in the wholesale electricity market to justify their findings that RES_E deployment contributes to
an overall reduction in the retail electricity price, especially in the presence of an ETS (Saenz de Miera et al.
2008). These conflicting results suggest that further work needs to be done on quantifying the various
components of the overall price effect, on differentiating the net impact by type of consumer and by type of
renewable energy promoted, and on identifying any interactive effects with other factors such as the degree
of competition in the market.
1.4.
ASSESSING THE IMPACT OF ENERGY AND
CLIMATE POLICIES ON ELECTRICITY AND
NATURALGAS PRICES
In this section, an empirical estimation of the
impact of energy and climate policies on final
consumer prices - industry and households - is
presented. For this reason, the analysis focuses on
retail electricity and natural gas prices, which are
66
part of the last stage of the energy value chain and
include four main components:
- Network costs, which are the costs of
transporting electricity from the generators to
customers via the transmission and distribution
networks.
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Bo x II.1.3: Methodology and Data
In order to estimate the effect of recent energy regulatory reforms, such as market opening, and other energy
policy decisions on end-user prices, two sets of equations are used for households and industrial consumers.
Both are estimated using a log-linear regression, based on panel data analysis. The dependent variables for
the two sets of regressions are the end user electricity and natural gas prices, for industrial and household
use, respectively. In particular, the empirical analysis is based on the general specification of the following
log-linear equation:
(1)
where: i stands for countries (1-27) and t stands for years (2004-2011).
Y is the annual average electricity or natural gas end-user price, including all taxes and excluding VAT for
households or industrial customers, X is a set of variables on regulation, market concentration, energy policy
variables impacting on price, proxies for price cross-subsidisation, and other relevant control variables.
Finally, μ is the unobservable time-invariant country specific effect (1).
Based on the LM and Hausman tests, both the electricity and natural gas price models for industrial and
household consumers are estimated with the fixed effects estimator, which assumes that a country-specific,
time-invariant effect is present that is moreover correlated with some of the explanatory variables. The
natural gas price model also includes a time fixed effect to capture the aggregate effects of unmeasured
factors that are time-variant but constant across countries. In the electricity price model, however, such an
effect is excluded, and the crude oil and carbon prices are explicitly controlled for in the model specification
to identify their individual effects.
(1) See Appendix 1 and 2 for further information on the model specification and variables.
- Energy costs, which are mainly the costs of
purchasing energy from generators and suppliers
on the wholesale level in the electricity and natural
gas market respectively.
- Support scheme costs and taxes, which represent
the costs of complying with specific targets of the
EU energy legislation and national taxation.
- Retail costs and margin, which includes the costs
of running the retail business.
1.4.1. Drive rs o f e le c tric ity p ric e s
One of the main factors driving the cost of
electricity is the fuel used in generation activity.
The results (Table II.1.3) indicate that the price of
electricity depends significantly on the structure of
each market's fuel mix for both consumer
groups (70). In particular, a shift in the generation
(70) Wooldridge (2006): As the fixed effects estimator controls
for time-constant, country-specific heterogeneities that are
correlated with explanatory variables, the effect of certain
explanatory variables such as the generation fuel mix that
fuel mix from natural gas (71) to coal generation
units would at least reduce retail prices, as this
would entail a substitution of peaking or intermedium load generation units with lower marginal
cost base load units, though these units require
higher capital investment cost and produce higher
GHG emissions.
On the contrary, the coefficient of RES penetration
in the electricity sector implies that a shift in the
generation fuel mix from natural gas to wind,
solar-thermal and photovoltaic power will increase
the industrial and household end-user prices. This
variable might be considered as a proxy for the
size of supporting schemes for RES production or
are relatively stable over time may get swept away by the
fixed effects transformation. This will result in less
significant coefficients than in the absence of the fixed
effects control.
(71) Natural gas was used as a reference case for the generation
fuel variables as a result of the technical characteristics of
the regression analysis, in order to avoid perfect
multicollinearity. The results are robust regardless of the
reference case fuel choice.
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Ta b le II.1.1:
Results of Electricity price model
Households
Variable
Constant
Unbundling of DSO
RES
Nuclear
Pumped Storage Hydro
Coal
Concentration Ratio Retail
Concentration Ratio Generation
GDP
Relative Price Deviation
Relative Price Deviation < 1 * RES
Crude Oil Price
Carbon Price
R2
#Obs
Coefficient
(1)
2.274**
-0.028***
0.138***
-0.017
0.049
-0.123***
-0.057***
-0.030
0.279**
-0.136**
0.072*
-0.001
0.95
144
Industry
Coefficient
(2)
4.806***
-0.030***
0.108***
-0.015
0.007
-0.072*
-0.048***
-0.100
Coefficient
(3)
4.251***
-0.052***
0.133***
-0.007
0.047
-0.106**
-0.039**
0.039
Coefficient
(4)
4.223***
-0.048***
0.127***
-0.013
0.005
-0.148**
-0.027**
0.013
0.274***
0.044***
0.183***
0.95
164
0.097
0.005
80%
144
-0.013
0.171***
0.77
164
No te : *, **, *** Ind ic a te s sig nific a nc e a t 10%, 5% a nd 1% c o nfid e nc e le ve l.
In (1) a nd (3), the mo d e ls fo r ho use ho ld s a nd ind ustry a re e stima te d inc lud ing the e xp la na to ry va ria b le 'Re la tive Pric e
De via tio n' whic h me a sure s a c o untry's ind ustria l-ho use ho ld s e le c tric ity p ric e ra tio re la tive to the EU a ve ra g e ra tio in ye a r t-1.
This is ta ke n to ind ic a te the p re se nc e a nd e xte nt o f c ro ss-sub sid isa tio n in re ta il ta riffs, a nd the re fo re a c ts a s a p ro xy fo r e nd
use r p ric e re g ula tio n. In (2) a nd (4), this va ria b le is e xc lud e d , a nd inste a d the mo d e ls a re e stima te d inc lud ing a n inte ra c tio n
te rm b e twe e n a ) a d ummy va ria b le tha t ta ke s a va lue o f o ne in c a se s whe re the 'Re la tive Pric e Ra tio ' is b e lo w o ne , a nd ze ro
o the rwise , a nd b ) the sha re o f re ne wa b le s in e le c tric ity g e ne ra tio n ('RES'). In c a se s whe re the 'Re la tive Pric e De via tio n' is
b e lo w o ne , we c a n a ssume tha t the re is g re a te r c ro ss-sub sid isa tio n o f ind ustria l ta riffs b y ho use ho ld s, re la tive to the EU
a ve ra g e b e nc hma rk. In suc h c a se s, it ma y b e re a so na b le to e xp e c t tha t ho use ho ld s b e a r a g re a te r sha re o f the c o sts fro m
re ne wa b le s sup p o rt sc he me s, a nd the re fo re tha t the e xp e c te d o ve ra ll p o sitive e ffe c t o f RES o n e nd -use r p ric e s will b e hig he r
fo r ho use ho ld s a nd lo we r fo r ind ustrie s re la tive to the c o unte rfa c tua l with no c ro ss-sub sid y.
Sourc e : Co mmissio n Se rvic e s.
the RES levy used for the reimbursement of RES
production, which are usually paid by the
consumers. However, this effect might not be
applicable to specific consumer categories that
might be protected from the RES levies increase
(72).
As expected, the measure of cross-subsidization
between industrial and household tariffs is
statistically significant and has the expected sign
for both consumer groups. An increase in the
benchmarked industrial-household end user price
ratio in the previous year will raise industrial
prices and lower household prices in the current
period. Whether such an increase in the
benchmarked ratio constitutes a removal of crosssubsidies depends on the initial level of the ratio.
When this ratio is below one, an increase towards
one would imply a reduction in the crosssubsidisation of industrial tariffs by households,
whereas when it is above one, an increase would
entail a strengthening of the cross-subsidisation of
households by industrial consumers.
(72) Note that when using the electricity prices of heavy energy
intensive industries (band ID) as a dependent variable, this
coefficient was negative and insignificant, perhaps as a
result of the exemption of these industries from the RES
levy in some countries.
68
When testing the interaction of cross-subsidization
from households to industries with renewables
penetration, the results are significant for the
household segment and carry some interesting
implications. As predicted, where industrial tariffs
are likely to be cross-subsidised by household
consumers (i.e. where the benchmarked ratio is
below 1), the deployment of renewables has a
greater overall effect in raising household prices
relative to the case of no cross-subsidisation,
implying that households bear a larger share of the
cost of renewable support schemes in these cases.
The prices of electricity are also broadly aligned
with the price of crude oil, the coefficient of which
is positive and statistically significant for both
consumer groups – households and industry. This
linkage is stronger for industrial consumers than
for households. Given that crude oil is one of the
most important global commodities, the fluctuation
in its price has a direct impact on the global
economy. The crude oil price variation directly
influences sentiments and hence the volatility of
markets worldwide, especially those such as the
electricity markets that depend on energy
commodities.
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Conversely, as expected the carbon price does not
influence retail prices, due to relatively low levels
observed over the recent years.
Consistent with most of the existing literature (73),
the results support the hypothesis that the higher
the competition among suppliers, the lower the
expected end user prices. The retail market
competition variables are statistically significant
and have the expected sign in both regressions. A
plausible explanation is that greater competition
amongst suppliers in formerly highly concentrated
markets puts downward pressure on profit
margins, and provides an incentive to reduce costs
and achieve higher levels of efficiency.
Particularly, the retail competition effect is higher
for households relative to industrial consumers.
Along the same lines, results indicate that
unbundling of distribution networks leads to lower
electricity prices, perhaps due to the removal of
entry barriers and greater competition among
retailers in formerly vertically integrated activities.
This effect is slightly larger for industries and
highly significant for both consumer types.
1.4.2. Drive rs o f na tura l g a s p ric e s
Measures related to security of supply such as
import dependency and diversification of imports
are found to be highly significant drivers of
household natural gas prices. Given the relatively
low levels of domestic natural gas reserves in
Europe and the limited diversification in supply
sources in the present scenario, this suggests
considerable scope for policy action in this area. A
greater dependence on natural gas imports leads to
higher retail prices in both the industrial and
household markets, although the coefficient of the
industrial customers found not to be significant. In
addition to this, more concentrated import sources
of supply also lead to higher prices for household
consumers. It seems that industries are relatively
less exposed to price dynamics from the external
dimension of security of supply. This might be
either a result of cross-subsidization between the
two consumer categories or a result of the
industrial customer's access to natural gas hubs
where market to market competition takes place.
(73) Steiner (2001); Martin & Vansteenkiste (2001); ECB
(2010); Dee (2011)
In particular, the measure of the crosssubsidization between the two consumer groups, as
in the electricity price model, is represented as the
price ratio of industrial to residential tariffs relative
to the respective average price ratio of the EU-27.
It displays the expected sign and is significant for
both industrial and residential consumers. For
households this effect is significantly greater than
for industrial customers. In other words, an
increase in the relative price ratio during the
previous year will lead to an increase in industrial
natural gas prices and a decrease in household
natural gas prices. As discussed in the previous
section, whether this is an adjustment in the right
direction (i.e. a removal of cross-subsidies)
depends on the level of the benchmarked ratio. For
instance, this adjustment would entail a reduction
in the cross-subsidisation of industrial tariffs by
households only in cases where this ratio is
initially below one.
The unbundling of TSO networks from gas
production and importation activity appears to
have a highly significant but small effect in
lowering industrial prices, and although the
direction of the effect is the same and as expected
for households, the price effect in this consumer
segment is insignificant. The unbundling of DSO
network ownership from natural gas retail activity,
however, leads with high significance to lower
prices for both consumer groups. While the
unbundling of DSO networks is currently not a
requirement under EU legislation, these results
suggest that there may have been significant
competitive energy price benefits to such a policy
in the Member States that have pursued it.
The measure of retail market competition does not
appear to be a significant determinant of prices for
either consumer type, whereas legal market
opening, that is the capacity for all consumers to
choose their own natural gas supplier, has a
significant effect in lowering mainly industrial
end-user prices. The effect of retail market opening
is insignificant for household consumers. A
plausible interpretation of this result may be the
presence of informational constraints and
switching costs that might be larger for households
with low consumption, and which may pose a
greater obstacle to switching suppliers and
achieving any potential price reductions despite the
legal ability to do so.
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Ta b le II.1.2:
Results of Natural gas price model
Households
Industry
Variable
Coefficient
Coefficient
(1)
(2)
Constant
28.345***
25.266***
Import Dependency
0.629**
0.344
Concentration Ratio Importers
0.034**
0.012
Market Opening
-0.011
-0.037***
Unbundling of Generation
-0.008
-0.008***
Unbundling of Retail
-0.034***
-0.022***
Population Density
-5.873***
-4.951***
Concentration Ratio Retail
-0.013
0.002
Gas to Gas Competition
-0.066
-0.092**
Relative Price Deviation
-0.268**
0.071*
91%
89%
90
89
R2
#Obs
No te : *, **, *** Ind ic a te s sig nific a nc e a t 10%, 5% a nd 1% c o nfid e nc e le ve l
Sourc e : Co mmissio n Se rvic e s.
Although wholesale gas trading hubs are still
limited both in number and accessibility in the EU,
it seems that access to a spot trading hub does lead
to lower natural gas prices for industries and
households. This is intuitive, as spot prices tend to
be lower on average than oil-indexed prices set in
long-term contracts which have been the most
prevalent form of gas trade in the EU. Population
density also has a large and significant effect in
lowering end-user prices for both consumer types,
despite a slightly larger effect on households.
Again, this is to be expected, as more dense
populations are associated with lower unit network
costs.
1.5.
70
CONCLUSIONS
end-user prices, and thereby improving industrial
competitiveness and consumer's welfare, the
empirical estimates indicate that the early
penetration of not yet mature renewable
technologies may have the opposite effect. At
levels of deployment observed for these
technologies between 2004 and 2011, the cost for
retail consumers as a whole from RES support
schemes seems still to outweigh the merit order
effect whereby the wholesale price is lowered with
RES deployment. As indicated, some literature
highlights that this may be different with higher
deployment levels of more mature technologies,
e.g. wind. Moreover, in cases where households
were likely to be subsiding industrial tariffs, they
were also likely to bear a greater share of the cost
of these support schemes, meaning the overall
positive price effect of RES deployment for
households was higher in such cases.
Fossil fuels remain key drivers of electricity and
natural gas prices. Gas prices followed the
evolution of crude oil prices, as large part of EU
gas trade is still based on oil-indexed contracts,
while electricity prices were strongly affected by
the generation fuel mix. Moreover, market opening
and competition in the energy sectors can have
significant downward price effects for both
household and industrial consumers. In both
markets, empirical estimates confirm that EU
energy policies, such as unbundling of networks
and market opening decrease retail prices.
In the natural gas market, lowering import
dependency and improving security of supply can
have greater downward price effects, relative to
market competition in the retail segment. Given
the high degree of import dependency within the
EU, along with the high degree of concentration
ratio of importers, this result is not surprising and
shows the need to ensure diversification into
alternative energy source and improve energy
efficiency.
In the electricity market, whereas greater market
competition may have been successful in lowering
Finally, in cases where there is cross-subsidisation
of one consumer category by another, this plays a
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crucial role in the following year's price formation
through the asymmetric application of taxes and
levies. Although such state intervention may be
motivated by different distributional preferences, it
nevertheless increases distortions and negates the
effectiveness of market opening in delivering
competitive price signals. This result is of high
importance when considering the Commission's
insistence on phase-out timetables for regulated
prices as part of Member States' structural reforms.
71
2.
ASSESSING THE DRIVERS OF CARBON PRICES: AN
EMPIRICAL ESTIMATE
2.1.
INTRODUCTION
In 2007, the EU made a unilateral commitment to
reduce overall Greenhouse Gas Emissions (GHG)
from its 27 Member States by 20% compared to
1990 levels by 2020. This commitment is
enshrined in the Energy and Climate package
agreed in late 2008. In addition, it is also one of
the headline targets of the Europe 2020 strategy,
along with two other energy targets –achieve 20%
of share of renewables in final energy consumption
and increase energy efficiency by 20%.
In order to achieve the transition to a low carbon
economy, the EU has always promoted the use of
market based instruments. In that spirit, the ETS
(Emission Trading Scheme) is a market based
instrument that provides incentives to reduce GHG
emissions at least cost. A cap on the allowed
carbon emissions set by EU legislation, alongside
various other market fundamentals, delivers a
carbon price which is expected to provide the
signal to invest in clean technologies and to reduce
carbon emissions. Moreover, the carbon price is
expected to translate into higher electricity final
prices. However, as seen previously, the carbon
price did not have any impact on electricity retail
price, probably due to its low level observed since
the onset of the financial and economic crisis in
late 2008.
The low level of the carbon price has triggered
discussions among academia, think tanks, business
and NGOs about the design and the effectiveness
of this instrument and its combination with other
energy target. In late 2012, the Commission
published a first carbon market report (74)
assessing the supply-demand balance in the
European carbon market, with particular
consideration on issues arising due to some
regulatory decisions in the transition from phase II
to phase III of the ETS (on top of the economic
crisis). The report found a large growing surplus of
allowances that is likely to weigh heavily on the
carbon price and related incentives for many years
to come.
(74) The ETS Directive provides for the Commission to
produce an annual carbon market report as of the third
phase of the EU ETS, which started in 2013.
72
The objective of this chapter is to assess the carbon
price drivers and especially the interaction with
other energy policies that contribute to the
greenhouse gas emissions reduction, such as the
deployment of renewables. Section 2 describes the
carbon price developments over the three phases of
the Emissions Trading System (ETS) and analyse
the factors underlying the evolution of carbon
emissions. Section 3 describes the policy
framework in which the carbon price has
developed. Section 4 proposes an empirical model
to assess the carbon price drivers. Conclusions are
presented in section 5.
2.2.
STYLISED FACTS: EVOLUTION OF CARBON
PRICE
2.2.1. Ca rb o n p ric e e vo lutio n 2005-2013
The evolution of the European carbon price
(European Union Allowances-EUA) has been
influenced by the regulatory design of the
different phases (75). During the first phase of the
implementation of the ETS (2005-2007), the
carbon price was below 10€/tCO2 until mid-2005
before rising to a peak at just above 30€/tCO2 in
April 2006. Then it fell sharply, followed by a
small rebound during the second part of 2006. The
publication of the first verified emissions data at
the start of the second quarter of 2006 has revealed
the existence of a large surplus of allowances in
the first phase which was mostly due to the
regulatory feature chosen by most Member States,
i.e. not to allow for banking allowances(76). Such a
surplus has led to an abrupt decrease in the carbon
price at the end of the first phase. The
Commission's strict assessment of national
allocation plans defining inter alia the caps per
Member State for the second period has
contributed to strengthening the price at the
beginning of the second phase. However, during
this phase (2008-2012), the economic crisis has
contributed to lowering the number of CO2
emissions as well as output, leading to a decrease
in the carbon price. In early 2009 the carbon price
(75) The third phase started in 2013 and will end in 2020. The
first phase took place in 2005-2007 and the second phase
between 2008 and 2012.
(76) Carry-over of unused allowances into the second phase.
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G ra p h II.2.1: Evolution of EUA Futures prices
Sourc e : Blue ne xt, Blo o mb e rg .
plunged to a level below 10€/tCO2. After some
recovery in 2009-2010, the price returned to single
digits in 2011 mainly as a result of the slow
recovery and the correspondingly weak demand
for allowances (along with the effect of possible
other factors such as energy policies and
international offsets).
The start of the third phase in 2013 was
characterised by one of the lowest levels of carbon
prices since the beginning of 2007. This low price
level is to a large extent due to the regulatory
change in late 2012 with the initiation of largescale auctioning of free allowances. In 2013 on
average some 12 to 15 million allowances are
auctioned per week (77). In addition, this
decreasing trend of prices can also be attributed to
some extent to the slow progress in discussions on
back-loading. The Commission announced its
intention to propose back-loading in April 2012
and make formal proposals in July 2012. The
market has seemingly priced in a back-loading
premium and the slow progress in decision-making
has reduced or eliminated this premium. Finally,
other factors such as international offsets and the
transferred EUA from phase II to phase III are also
likely to have played a role in carbon price
evolution.
(77) Auctioning allowances implies that allowances have to
make it "through the market" and cannot be silently
absorbed on registry accounts (as free allocation is) but
translates on a one-to-one basis into market supply.
2.2.2. The e vo lutio n o f o the r fue l pric e s
The carbon price evolution follows the pattern
of other commodities prices except the short
term variations of electricity prices (EEX spot
price). Electricity prices tend to fluctuate in the
short-term due to day-to-day and seasonal
variations in supply and demand, but in general,
they revert toward a long-term equilibrium. Since
mid-2011, the carbon price has been decoupled
from the other fuel prices, in particular from
natural gas and coal prices, as the difference of
prices between those two fuels shrank
significantly. It is likely that the emergence of the
allowance surplus has made the carbon price more
sensitive to market expectations around regulatory
action proposed to restore scarcity and market
confidence.
G ra p h II.2.2: Evolution of carbon price, fuels and electricity
prices over 2008-2012
Sourc e : Ec o win.
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Ta b le II.2.1:
Descriptive statistics of EUA, fuels and electricity price changes (%), 2008-2012
Sourc e : EC O WIN, Blo o mb e rg .
Carbon prices have been less volatile than
electricity prices, but almost as volatile as most
other primary energy sources (Table II.2.1). This
can be explained by the differences in the
underlying characteristics of supply, and in the
behaviour of demand in those different energy
commodities.
2.3.
CLIMATE
AND
DEVELOPMENTS
ENERGY
POLICY
2.3.1. The ETS d e sig n
The ETS is a market-based instrument which aims
to internalise CO2 external cost through a cap and
trade system. The overall level of emissions
allowed is capped and within that limit,
participants in the system can buy and sell
allowances as they require. The cap on the total
number of allowances creates scarcity in the
market, allowing the market to set the equilibrium
price. The market price of allowances would
correspond to the equalisation of marginal
abatement costs of buyers and sellers.
The ETS is linked to other parts of the world
through project based mechanisms leading to a
reduction of emissions. Industrial installations can
meet part of their emission reductions with Kyoto
offsets – Certified Emissions Reductions (CER)
and Emission Reduction Units (ERU). This
mechanism gives some flexibility to operators
while allowing a transfer of low carbon
technologies to foreign countries. At the same time
the use of international credits allows companies to
collectively emit above the cap.
A lot of experience has been gained which
contributed to the improvement of the regulatory
practice and design over the different phases. In
particular, the first phase 2005-2007 was a learning
process. Member States were responsible for
drawing up National Allocation Plans (NAPs), by
74
specifying how many allowances they intend to
allocate, and how the total will be distributed
between the covered installations, while respecting
the criteria of Annex III of the Directive on ETS
(2003/87/EC). To this end, Member States
submitted National Allocation Plans to the
Commission, while the Commission was mandated
to assess these plans and could reject them if the
Annex III criteria were considered to be violated.
In the second phase (2008-2012), Member States
were obliged to show that their planned allocation,
together with other policies and measures, would
enable them to meet the Kyoto commitments.
Furthermore, during these two phases, the directive
obliged Member States to allocate most of the
allowances for free – they may auction at most 5%
for the 2005-2007 period, and at most 10% for
2008-2012.
The third phase started in 2013 and will end in
2020. Compared to the previous periods,
substantial design changes have been brought in.
The most important change concerns the cap. The
system of National Allocation Plans was
discontinued and the Directive determined the cap
for 2013 onwards. By means of a linear factor (a
percentage defining by how many allowances the
cap is reduced each year) an expectation was also
created how the cap would evolve beyond the end
of phase 3. The linear factor of 1.74 % implies that
by 2050 the annual amount of allowances put in
circulation would be more than 70 % lower than
the second phase cap. A significant amount of
carbon allowances are auctioned. The level of
auctioning for non-exposed industries will increase
in a linear manner with a view to reaching 100%
by 2027. Industries exposed to carbon leakage are
allocated allowances for free. Subject to state aid
approval, Member States may also be entitled to
compensate certain installations for CO2 costs
passed on in electricity prices. Certain Member
States are allowed an optional and temporary
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derogation to continue free allocation for power
plants up to 2019 (78).
According to Chevallier (2011), regulatory
decisions on the ETS, as much as evolving market
fundamentals, are likely to influence the carbon
price. For example, during the second year of the
first phase, in 2006, companies reported to
Member States and the Commission on the actual
emissions. In their report, it became obvious that
the market had been over-supplied, which led to a
fall of the carbon price by 50% in a few days
(Chevallier, 2011). Another example is the
decision taken by most Member States not to allow
for the transfer of any banked allowances from
phase I to phase II, leading to a discrepancy
between spot phase I and future prices for phase II
(Chevallier 2011).
2.3.2. Po lic y
d e ve lo p me nts
a nd
inte ra c tio ns with e ne rg y p o lic ie s
the
In addition to a reduction in greenhouse gas
emissions from 1990 levels, the "20-20-20" targets
set two more key objectives for 2020 in order to
fight against the climate change.
The first one is to raise the share of renewables in
gross final consumption of energy to 20%. The
development of renewables has been costly
compared to conventional energy sources (79) and
has required support from authorities to ensure
their take up. The most common support schemes
of renewables have been feed-in tariffs, feed-in
premiums and green certificates. The feed-in tariff
provides the renewable producer with a guaranteed
price for the power they infuse into the grid.
Compared to the feed-in tariff, the feed-in
premium offers a guarantee (premium) over the
electricity price, which means that the renewable
producer has to cope with the variation of the
electricity price. Green certificates are based on
quota obligations where consumers or suppliers
must have a certain percentage of the electricity
produced by renewable sources (80). The
development of renewables has been promoted
through the use of support systems mostly
(78) Bulgaria, Cyprus, Czech Republic, Estonia, Hungary,
Lithuania, Poland and Romania submitted applications,
which have all been approved by the Commission.
(79) Although the marginal cost of renewables is lower.
(80) See Canton and Johannesson Linden (2010).
financed via the electricity market (81), but more
recently, Member States have started to revise the
level of their support schemes, as some
technologies have become more mature.
The second objective refers to a 20% improvement
in the EU's energy efficiency. The new Energy
Efficiency Directive proposes different way to
achieve energy efficiency – e.g. by an energy
savings obligation on suppliers, etc.
Overall, the identification of these three targets had
a common objective: accelerating the reduction of
GHG emissions in a cost effective way. At the
same time the renewables and energy efficiency
targets are pursued by wider motivations like
enhanced supply security and industrial policy and
competitiveness considerations. The impact
assessment (82) accompanying the Energy and
Climate Package acknowledges the interactions
between renewable and climate policy, in
particular the extent to which they reinforce each
other in order to achieve both targets. More
specifically, modelling results show that each
policy alone is less effective in reducing carbon
emissions and the combination of both carbon and
renewable policies contribute to reaching both
targets by 2020. At the same time, the impact
assessment stresses that renewable policies
contribute to lowering the carbon price needed to
achieve the 20% GHG emissions reduction (from
49€/tCO2 to 39€/tCO2).
Since the discussions on the three 2020 targets,
there has been discussion in the literature on the
overlap between renewable and climate
instruments and their impact on carbon prices.
Most of the papers reviewed focused on the price
interactions and found that the combination of both
policies reduces the allowance price. Furthermore,
the interaction of policies leads to two fold effects
(second order effects): a decrease in the carbon
price and an increase in carbon emissions (see box
II.2.1).
(81) If not, leading to the emergence of tariff deficit in the
electricity system (Spain, Portugal for example).
(82) SEC(2008)85, vol.II.
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2.4.
ASSESSING THE DRIVERS OF CARBON
PRICES
In this section, an empirical estimation of drivers
of carbon prices is presented.
2.4.1. Ma in d rive rs o f g re e n-ho use
e missio ns a nd p ric e s
gas
Greenhouse gas emissions generated by industrial
and non-industrial activities depend mostly on
economic and energy factors (Kaya, 1990). As
regards the ETS sectors, the demand and supply of
allowances derived from greenhouse gas emissions
will drive the carbon price. Market equilibrium
depends mainly on the following:
a) The fixed supply of allowances, as defined by
the ETS cap.
b)Macro-economic factors that drive carbon
emission. The recent economic crisis has
contributed to a significant drop in carbon
emissions. Therefore, it expected that the carbon
price will be positively correlated with economic
growth.
c) Energy prices (oil, gas and coal) that influence
the fuel switching behaviour of power producers
which account for the majority of ETS emissions.
d) Weather conditions (including precipitation
patterns) that drive the short-term demand for
heating and cooling and hence the demand for
allowances, as well as the operation of
hydroelectric units.
e) Institutional factors that influence the
behaviour and expectations of market agents, such
as decisions about back loading, directives etc.
f) International environment and number of
CERs and ERUs surrendered in the ETS.
Surrendered CERs and ERUs add to the domestic
supply of allowances and can be expected to
modify allowance prices.
g) Energy policies that influence overall carbon
emissions, hence the carbon price.
h) Innovation and technological developments
with influence the marginal abatement costs and
demand for allowances.
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(Co ntinue d o n the ne xt p a g e )
78
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Bo x (c o ntinue d)
2.4.2. Ma in d rive rs imp a c t o n c a rb o n p ric e s
In this section, the impact of economic activity and
energy factors on carbon prices is tested (83). Table
II.2.2 reports the short and long-run coefficient
estimates obtained from the Error Correction
Model (ECM) version of the ARDL model. All the
estimated coefficients have emerged with the
theoretically expected signs and many are
statistically significant.
In the long run model, economic activity and
renewable policy as well as the coal price have
had an impact on the carbon price in the period
2008-12. The long-run model reveals that the
coefficient of the variable that represents the
economic activity is positive and statistically
significant, indicating that business cycles have a
strong influence on the carbon price by affecting
the demand for allowances. For the same reason,
the renewable penetration impacts negatively the
carbon price as it substitutes part of the
conventional units operation and thus lowers the
demand for allowances. Similarly, the negative
(83) Due to data availability, variables corresponding to
international offsets (CERs, ERUs), to weather and to
energy efficiency could not be included.
coefficient of coal prices suggests the possibility of
fuel switching by electricity producers, when coal
prices increase, towards a less carbon intensive
energy source, such as natural gas. Conversely, the
hydro production found to be statistically
insignificant, which implies that the weather
conditions (dry or wet year) would in this five year
period not have had any systematic impact on the
fuel electricity production mix, hence on the
carbon price formation. The coefficient of the
error-correction term (ut-1) reveals that any
deviation from the long-run carbon prices path,
due to changes in the explanatory variables, is
corrected by approximately 50% over the
following month. Moreover, the negative sign of
this term implies that the carbon prices series is
non-explosive, implying that price revert to its
long-run equilibrium after an unexpected insistent.
In terms of time, the speed of convergence of
carbon price to its long-run equilibrium after a
shock is at least two months, resulting in the high
volatility of the market (84).
(84) The formula for calculating the number of months needed
for prices to convert on its long-run equilibrium is
ln(0.5)/ln(1+β1).
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Ta b le II.2.2:
Results of the carbon model
No te : *, **, *** Ind ic a te s sig nific a nc e a t 10%, 5% a nd 1% c o nfid e nc e le ve l.
Sourc e : Co mmissio n Se rvic e s.
On the short-run the effect of most of the
explanatory variables on the carbon price is still
statistically significant, but lower than in the
long run relationship. Allowance price changes
have a long memory, as they depend strongly on
the previous period price changes. Once again the
renewable penetration and the evolution of coal
prices are one of the most important factors
influencing price formation in the short-run.
Consistent with the long-run results, both affect
prices negatively by lowering the demand for
allowances. By contrast, the results indicate that
economic activity, as well as the hydro production,
despite that their coefficients have the expected
sign, do not affect the carbon price in the short run.
Moreover, the coefficients of the dummies
included in the regression in order to test the
impact of institutional factors on prices, indicate
that institutional as well as policy factors play an
important role in the carbon price formation. The
proposal on energy efficiency made by the
Commission in June 2011, as well as the
80
discussions on the ETS market imbalance led to
the lowest levels since the recession-led sell off in
March 2009. Apparently, the news was integrated
immediately by market agents, who adjusted
accordingly their demand for allowances.
G ra p h II.2.3: Decomposition of Carbon Price Changes over
2008-2012
Sourc e : Co mmissio n Se rvic e s
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Finally, in order to identify the degree of influence
of the independent variables on the change of
carbon prices during the ETS phase 2, a
decomposition analysis based on the estimated
coefficients of the model (Table II.2.2) was carried
out. The contributions of these determinants were
analysed on a yearly basis. Results (Graph II.2.3)
indicate that there has been significant changes in
carbon prices over the sample period and that the
economic activity, as well as the power producers
fuel preferences (fuel switching), along with the
renewables
penetration
were
the
main
determinants of these changes until 2011. At the
beginning of phase 2 the economic crisis was the
most important factor contributing to a significant
decrease of carbon prices by cutting down GHG
emissions and consequently the demand for EUAs.
This variable exhibited a high volatility compared
to the other variables such as fuel switching
behaviour and renewables penetration. Renewables
displayed a constant downward effect on carbon
prices, while the influence of the power producers
operating preferences was positive in 2008 and
negative after, due to the evolution of coal prices
in relation to the natural gas prices. By contrast, in
2012, it seems that other factors than those
variables played a crucial role in the carbon price
formation. Such factors could be the international
carbon offsets, policy initiatives, or institutional
decisions etc.
2.5.
CONCLUSIONS
The ETS was introduced as the main instrument to
achieve greenhouse gas emissions reduction in the
most cost-effective way. However, the main
feature of this market-based instrument - the fixed
supply of allowances (ETS cap) and the elastic
demand - has made the carbon price more sensitive
and responsive to demand factors. Among these
demand factors, the economic activity which is a
key driver of GHG emissions resulted into the
lowest levels of carbon prices. Based on the
empirical results, the economic recession impact
becomes more apparent in the long-run, as market
agents appear to adjust their expectations and
demand for allowances in the long-run, rather than
in the short run.
preferences and the RES deployment. As already
indicated in the 2008 Commission impact
assessment for the Climate and Energy Package,
renewables do not emit CO2, and the renewables
penetration in electricity decreases the demand for
allowances and hence contributes to lowering the
carbon price-- as would do the spreading of any
other significant abatement activities falling within
the scope of the scheme. It was observed that
renewables affect carbon prices and not vice versa.
The latter could be explained by the low level of
carbon prices and the fact that the renewables
deployment in many Member States has not been
driven by the carbon prices, but by guaranteed
supporting schemes very often disconnected from
market evolution. Finally, the impact of the
accelerated use of international credits in the ETS
could not be tested in the present analysis due to
data limitations. However, the role of other drivers
in recent years points to the importance of this
factor as well as institutional factors.
Along the same lines, the on-going discussions on
the ETS made the market participants and the
market more sensitive to regulatory and
institutional factors such as the discussions about
the appropriate policy response to the growing
supply-demand imbalance in the carbon market. It
seems that market participants, such as power
producers which account for the majority of ETS
reductions, respond to any type of pricing relevant
information and especially on the evolution of the
relative fuel prices. This underlines that abstracting
from the over-supply problem in principle the
carbon market performs well as a tool to allow for
cost-effective emission abatement.
Other factors also contribute to carbon price
evolution, even though to a lesser extent, i.e. the
conventional
power
producers
operating
81
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International Energy Agency (2007), CO2 Allowance & Electricity Price Interaction. Impact on
industry's electricity purchasing strategies in Europe. February 2007.
Kaya Y.,(1990), Impact of Carbon Dioxide Emission Control on GNP Growth: Interpretation of Proposed
Scenarios. Paper presented to the IPCC Energy and Industry Subgroup, Response Strategies Working
Group, Paris
Mirzha de Manuel A. (2011), Market Efficiency in the EU emissions trading scheme. An outlook for the
third trading period. Bruges European Economic Research Papers, BEER n° 20.
Moselle B. (2011), Climate change policy – Time for Plan B. Edited by Simon Moore, Policy Exchange,
Clutha House, London.
Olivier J., G. Janssens-Maenjout, J. Peters (2012), Trends in global CO2 emissions, 2012 report. PBL
Netherlands Environment Assessment Agency, EC Joint Research Center.
Philibert C.(2011), Interactions of Policies for renewable Energy and Climate, Working Paper,
OECD/International Energy Agency.
Roques F., (2012), The ETS: a residual market for carbon abatement in need of a structural reform.
Tendances Carbone, n°67. March.
Sartor O., Berghmans N., (2011), Carbon Price Flaw? The Impact of the UK's CO2 price support on the
EU ETS. Climate Brief, n°6. June.
Sartor O., (2011), Closing the door to fraud in the EU ETS. Climate Brief, n°4. February.
Sartor O., (2012), The EU ETS Carbon Price: To intervene or not to intervene? Climate Brief, n°12.
February.
Tol R. (2010), The costs and benefits of EU climate policy for 2020, Copenhagen Consensus Centre.
Trotignon R. (2011), Combining cap-and-trade with offsets: lessons from the EU-ETS. Climate Policy,
12:3, 273-287.
Weigt H., E. Delarue, D; Ellerman (2012), CO2 abatement from RES injections in the German electricity
sector: does a CO2 price help? EUI Working Paper, RSCAS 2012/18.
Zachmann, G., M. Holtermann, J. Radeke, M. Tam, M. Huberty, D. Naumenko, A. Ndoye Faye (2012),
The Great Transformation decarbonising Europe's energy and transport systems. Bruegel Blueprint 16.
84
APPENDIX 1
Ele c tric ity a nd Na tura l Ga s Pric e Mo d e l a nd Va ria b le s
De sc rip tio n
Electricity Price
Variable
Retail Electricity Price – Households
Retail Electricity Price – Industry
Unbundling of DSO
Concentration Ratio Retail
Concentration Ratio Generation
Relative Price Deviation
Carbon Price
RES-E
Relative Price Deviation < 1 * RES
De scription
2008-2011: Average of bi-annual household retail prices (EURO), excl.
VAT ; Consumption band DC (Annual consumption: 2500kWh < C <
5000kWh).
2004-2007: Average of bi-annual household retail prices (EURO), excl.
VAT ; Consumption band Dc (Annual consumption: 3500 kWh)
2008-2011: Average of bi-annual end-user prices (EURO); Consumption
band IC (Annual consumption: 500MWh < C < 2000MWh)
2004-2007: Average of bi-annual industrial end-user prices (EURO);
Consumption bands Id (Annual consumption: 1250MWh), Ie (Annual
consumption: 2000MWh)
Proportion of the country's DSOs that are ownership-unbundled %
Number of companies with more than 5% share of the retail market by
volume
Cumulative capacity share of the 3 largest generation companies by net
generating capacity %
Each country's relative price ratio between industrial and household tariffs
with the respective ratio of the EU27.
EUA Spot prices
Share of gross electricity generated from Solar T hermal, Solar
Photovoltaic, and Wind in T otal Gross Electricity Production %
An interaction term between a binary variable taking value 1 when the
Relative Price Deviation is below 1 (0 otherwise), and the RES variable
GDP
Coal
Pumped Storage Hydro
Crude Oil Price
Nuclear
Source
Sample
Eurostat
EU 27
2004 - 2011
Eurostat
EU 27
2004 - 2011
CEER database
CEER database
CEER database
Eurostat
Bloomberg
2005 - 2011
Eurostat
EU 27
2004 - 2011
Own calculations based
on Eurostat data
Eurostat
Share of electricity generated from Coal in total gross electricity generation
%
Share of electricity generated from Pumped Storage Hydro in total gross
electricity generation %
Annualised Crude Oil Brent prices (EURO)
Share of electricity generated from Nuclear in total gross electricity
generation %
EU27 excl. EE
2004 - 2011
EU 27 excl. UK
2004 – 2011
EU 27
2004 - 2011
EU 27
2004 - 2011
Eurostat
Eurostat
ECOWIN
Eurostat
DG ENER Country
Factsheets
EU 27
2004 - 2011
EU 27
2004 - 2010
EU 27
2004 - 2010
EU 27
2004 – 2011
EU 27
2004 - 2011
85
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
Natural Gas Price
Variable
Natural gas retail price - Households
Natural gas retail price – Industry
Market Opening
Concentration Ratio Retail
De scription
Sample
Eurostat
EU 27 excl. CY,
EL, MT
2004 - 2011
2008-2011: Average of bi-annual end-user prices (EURO), excl. VAT ;
Consumption band I3 (Annual consumption: 10 000 GJ < C < 100 000 GJ)
2004-2007: Average of bi-annual end-user prices (EURO), excl. VAT ;
Consumption bands I3-1 and I3-2
Eurostat
EU 27 excl. CY,
EL, MT
2004 - 2011
Proportion of retail customers eligible to choose their supplier %
CEER database
Cumulative market share of the 3 largest companies in the retail market by
volume %
CEER database
Import Dependency
Share of net imports of natural gas in total final inland consumption of
natural gas %
Eurostat
Population Density
Inhabitants per km2
Eurostat
Unbundling of DSO
Proportion of the country's DSOs that are ownership-unbundled %
CEER database
Unbundling of T SO
Proportion of the country's T SOs that are ownership-unbundled %
CEER database
HHI index on natural gas import sources
CEER database
Concentration Ratio Importers
86
Source
2008-2011: Average of bi-annual domestic retail prices (EURO), excl.
VAT ; Consumption band D2 (Annual consumption: 20GJ < C < 200 GJ).
2004-2007: Average of bi-annual domestic retail prices (EURO), excl.
VAT ; Consumption bands D3, D3-b and D2-b
Gas to Gas Competition
Binary variable taking value 1 when a Member State had access to a
wholesale gas trading hub, and 0 otherwise
Relative Price Deviation
Each country's industrial-household retail price ratio from period t-1,
divided by the equivalent average ratio of the EU 27
EU 27 excl. MT
2004 - 2011
EU 27 excl. CY,
DK, MT UK
2004 - 2011
EU 27 excl. CY,
MT
2004 - 2011
EU 27
2004 - 2011
EU 27 excl. EE
2004 - 2011
EU 27 excl. EE
2004 - 2011
EU 27 excl. MT
2004 - 2011
Based on data from
DG ENER, OECD, and
NRA's annual reports
EU 27
2004 - 2011
Eurostat
EU 27
2004 - 2011
APPENDIX 2
Ca rb o n Pric e mo d e l a nd va ria b le s d e sc rip tio n
Variable
De scription
Unit
Source
Sample
Carbon Price
Futures Carbon Prices
€/tCO2
Ecowin
January 2008- December 2012
Eurostat
January 2008- December 2012
IEA
January 2008- December 2012
€/tonne
Ecowin
January 2008- December 2012
GWh
Eurostat
January 2008- December 2012
Industrial Production
RES-E
Price of Coal
Hydro
D2011
D2012
Monthly Industrial production index (2010)
for mining and quarrying; manufacturing;
Index (2010)
electricity, gas, steam and air conditioning
supply
gross electricity generated from Solar
GWh
T hermal, Solar Photovoltaic, and Wind in
IEA Countries (EU 20)
Coal (ARA) prices in €/tonne
gross electricity generated from hydro units
in IEA Countries (EU 20)
Binary variable that takes the value of 0
before June 2011 and 1 after that date
Binary variable that takes the value of 0
before March 2012 and 1 after that date
(0-1)
Own estimation January 2008- December 2012
(0-1)
Own-estimation January 2008- December 2012
87
Part III
Re ne wa b le s: Ene rg y a nd Eq uip me nt Tra d e
De ve lo p me nts in the EU
OVERVIEW
The Energy and Climate agenda provides a comprehensive regulatory and policy framework that favours
the emergence of new green sectors. This means that energy markets in the context of well-designed
policies, can offer many opportunities for growth and jobs. The report scrutinises the development of new
technologies and energy sources - solar and wind - and their impact on trade flows as a way to assess one
dimension of competitiveness.
Chapter 1 provides an overview of renewable developments in the EU and other parts of the world. In
Europe, the support to renewable sectors stepped up from 2007 and has represented a strong opportunity
to accelerate the expansion of less mature technologies such as wind and solar.
Chapter 2 gives a close look at trade developments in the EU and Member States in the wind and solar
equipment sector. It also analyses the drivers of trade of wind and solar equipment, including the role of
research and innovation.
Chapter 3 analyses the impact of renewable developments on the energy trade bill. More specifically, it
provides some estimates on the avoided fuel costs.
91
1.
RENEWABLES DEVELOPMENTIN THE EU AND THE WORLD
1.2.
1.1.
INTRODUCTION
The development of renewable energy in the EU
has been promoted with a view to reaching a 20%
share in gross final consumption of energy by 2020
as defined by the European Council in 2007 and
Directive 2009/28/EC on renewable energy (85).
Before these targets, an indicative target to have
21% of its electricity coming from renewable
energy sources by 2010 has been formulated in
Directive 2001/77/EC on the promotion of
renewable electricity. Over the last decade, the
EU-27 has increased the share of renewable
sources in gross electricity generation by 50%,
from 13.6% in 2000 to 20.4% in 2011. EU share in
world's total renewable electricity generation went
from 14.8% in 2000 to 16.5% in 2011. Only China
generates more electricity through renewable
sources than the EU.
Renewables expansion increases diversification
and security of energy supply while contributing to
the reduction of greenhouse gases emissions.
Despite strong research and innovation efforts,
some types of renewable energies were too costly
to expand through market forces. Therefore,
development of some renewable technologies has
been accompanied by support through feed-in
tariffs and feed-in premiums, green certificates,
priority in the grid, tax incentives and other
support measures. Annual subsidies to renewable
energy in the EU amounted to EUR 36 billion in
2011, more than half of worldwide subsidies to
renewables.
This chapter presents an overview of renewable
development, especially of renewable electricity,
in the EU and its main economic partners. It also
looks at the development of support schemes in
Member States as these are the main instruments
used to promote renewables. Section 2 reviews the
evolution of renewable electricity generation in the
EU and other parts of the world Section 3 analyses
whether this evolution was guided by the support
schemes in place. Conclusions are presented in
section 4.
(85) Before these targets, an indicative target to have 21% of its
electricity coming from renewable energy sources by 2010
has been formulated in Directive 2001/77/EC on the
promotion of renewable electricity
92
EVOLUTION OF RENEWABLE ELECTRICITY
IN EU-27 AND ITS MAIN ECONOMIC
PARTNERS
1.2.1. Evo lutio n o f re ne wa b le e le c tric ity in EU27
The share of renewable sources in gross
electricity generation grew by 50% over the
decade, from 13.6% in 2000 to 20.5% in 2011.
However, this evolution has not been monotonic
over time (Graph III.1.1). After a slight decrease
between 2001 and 2003, renewables share have
increased at a high rate, in particular from 2007
onwards when the EU agreed to have a target for
renewables, i.e. to reach a share of 20% of gross
final consumption of energy by 2020.
G ra p h III.1.1: Share of Solar PV, Wind, Hydropower and
other renewable sources in EU-27 gross
electricity generation
25
%
20
15
10
5
0
2000
2001
2002
2003
Solar PV
2004
2005
Onshore Wind
2006
Hydropower
2007
2008
2009
2010
2011
Other Renewable Source
Sourc e : Co mmissio n Se rvic e s b a se d o n Euro sta t d a ta b a se .
The evolution of renewables has not been
homogeneous across renewable sources (Graph
III.1.1). The target agreed at EU level did not
include any obligation on the renewable mix to be
achieved.
Until 2007, hydropower was the most important
renewable source and it remained the highest
(renewable) contributor to gross electricity
generation despite a slight decrease of its share
over the last decade. This relative evolution could
be explained by the efforts made to support the
other renewable sources, but also by the
implementation of the EU Water Framework
Directive (WFD) initially established in 2000, and
which limits the approval of new hydropower
projects and allocation of concessions and
Pa rt III
Re ne wa b le s: Ene rg y a nd Eq uip me nt Tra d e De ve lo p me nts in the EU
permissions (86). The share of hydropower in
electricity
generation
showed
substantial
variability from one year to another, depending on
annual rainfalls and water levels.
By contrast, solar photovoltaic (PV) displayed the
largest expansion during the same period, from
2007 onwards. Solar PV grew on average 87 % per
year between 2007 and 2011, starting from a 0.11
% share in 2007 to 1.37 % in 2011. The
combination of initial high level of support and a
learning curve effect leading to a fall of solar
modules prices contributed to making this
technology more and more attractive.
The share of wind increased during the same
period. In 2011, it contributed to 5.46% of EU-27
gross electricity generation comparing to a 0.74 %
share in 2000. This expansion has been monotonic
over time, with a higher growth rate in the last
years.
Finally, the share of other renewable sources has
increased from 0.5% in 2000 to reach 4.3% of
gross electricity generation in 2011. A vast
majority of electricity under this category is
produced from solid biomass, biogas and waste,
with minor contribution of geothermal, offshore
wind and thermal solar power.
The same evolution is observed across Member
States. Overall, the share of renewables in gross
electricity production has increased in all Member
States between 2003 and 2011 (except Latvia) but
at a different pace (Graph III.1.2). The highest
increases are observed in Estonia, Denmark,
Lithuania and Ireland. While renewables account
for more than 40% of gross electricity generation
in Latvia, Portugal, Sweden, Austria and Denmark,
their share is rather low in small countries such as
Malta and Cyprus. Arguably, the size of these
countries does not allow them to fully exploit the
economies of scale associated with renewables.
However, larger countries such as the United
Kingdom, France, Netherlands, Belgium, Poland,
Czech Republic and Bulgaria still do not use
renewables as extensively as the relatively good
(86) Strategic Energy Technologies Information System
(SETIS),
European
Commission.
http://setis.ec.europa.eu/technologies/Hydropower/info.
Ecologic Institute (2011) presents a discussion on the
Water Framework Directive and hydropower.
natural conditions for wind energy (87) would
predict.
G ra p h III.1.2: Share of renewable sources in gross electricity
generation by Member State in 2003, 2007
and 2011
80
%
60
40
20
0
2003
2007
2011
Sourc e : Euro sta t
The renewable mix differs across Member
States. Denmark and Ireland mostly use wind
onshore to produce renewable electricity (above
70% in 2011). By contrast, a large number of
Member States obtain most of their renewable
electricity from hydropower. As regards solar PV,
it is still marginal in most Member States except in
Czech Republic, Germany, Belgium and Italy
where it already accounts for one sixth to one
quarter of their renewable electricity.
G ra p h III.1.3: Share of solar PV, wind, hydropower and other
renewable sources in gross renewable
electricity generation in 2011
100
%
80
60
40
20
0
Solar PV
Wind
Hydropower
Other renewable sources
Sourc e : Co mmissio n Se rvic e s b a se d o n Euro sta t d a ta b a se .
(87) European Environment Agency (2009).
93
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
Bo x III.1.1: Renewable Energy Policies in the main EU economic partners
In 2012 the US senate approved the Clean Energy Standard Act. This legislation introduced in the US the
first nation-wide targets to clean energy. This adds to previous federal and state-level policies that provided
tax incentives, grants and loans to support the growth of renewables (Energy Independence and Security Act
2007, Energy Improvement and extension Act 2008 – Tax incentives and American Recovery and
Reinvestment Act 2009: Appropriations for Clean energy).
China's renewable policy started in 2005 with the introduction of the Renewable Energy Law (subsequently
amended in 2009) that introduced feed-in-tariffs, tax incentives and mandatory connection and purchase
policy to renewable sources. In 2009, at the UN Climate Change conference held in Copenhagen, China
committed to reduce its carbon intensity emitted by unit of GDP (by 40-45% by 2020 based on 2005 levels)
and to raise its share of renewable energy sources in terms of primary energy consumption to 15% by 2020.
Japan's renewable policy was reviewed and extended in 2009 and 2010. However the main changes occurred
in 2011 and 2012, following Fukushima nuclear power plant disaster. Japan committed to triple its power
generation from renewables by 2030 comparing with 2010 values. In 2012, Japan launched a new feed-intariff system for solar, wind and other renewables that is among the most generous worldwide (1).
Australia and Brazil also committed to targets on renewable energy generation by 2020. The Australian
Government comprise to add 45 TWh of electricity and heat generated through renewable sources
(comparing with 2010 values). Brazil aims to generate 80% of its electricity in 2020 through renewables
(based on the expansion of large hydropower projects and mandatory minimum blending levels for ethanol).
India set in 2010 an ambitious target on solar energy (20 GW by 2022).
(1) International Energy Agency (2012a)
1.2.2. Evo lutio n o f RES-E in EU-27 a nd ma in
e c o no mic p a rtne rs
Over the past years, the expansion of renewable
electricity has been observed in the rest of the
world. Similarly to the EU, other major countries
have adopted policies promoting the use of
renewable energy (Box III.1.1). World renewables
electricity net generation has increased by 45%
between 2000 and 2010 (88) with the highest
growth for China (+245%), the EU27 (+62 %)
followed by the US, Brazil and Japan.
renewable sources in 2010 followed by EU27
(Graph III.1.4).
G ra p h III.1.4: Share of EU-27, US, China, Japan and Brazil in
world net renewable electricity generation
100
%
90
80
70
60
50
40
30
China more than doubled the electricity
generated through renewables sources during
this period. The growth of renewables has been
particularly significant since 2007, when the
government launched the national plan for
renewable energy development setting medium
(Box III.1.1). Over the past decade, China has been
catching up on renewable and has become the
largest renewable producer with around 18.6% of
the world electricity net generation through
(88) US Energy Information Administration.
94
20
10
0
2000
2001
2002
2003
EU-27
2004
US
China
2005
Japan
2006
Brazil
2007
2008
2009
2010
Other Countries
No te : Da ta c o rre sp o nd to the ne t e le c tric ity g e ne ra tio n. Ne t
e le c tric ity is the g ro ss e le c tric ity minus e le c tric ity c o nsume d
within the p la nt fo r a uxilia ry se rvic e s.
Sourc e : Unite d Sta te s Ene rg y Info rma tio n Ad ministra tio n.
Compared to the rest of the world, EU-27 has
strong positions in solar PV and wind (Graph
III.1.5). It produced around 70% of world's
electricity net generation from solar PV sources.
Pa rt III
Re ne wa b le s: Ene rg y a nd Eq uip me nt Tra d e De ve lo p me nts in the EU
This share has been increasing considerably over
time, which suggests that EU-27 has been
investing much more in this source than its main
economic partners. Almost 44% of world's
electricity net generation through wind in 2010
was produced in EU-27, which makes it the world
leader also in this source. However, the EU-27
share has been decreasing over time, due to a quick
expansion of wind sources in the US and China.
G ra p h III.1.5: Share of Eu-27, US, China, Japan and Brazil in
world net electricity generation - solar PV (a) Wind (b)
100
(a)
%
90
80
70
60
50
1.3.1. Sup p o rt instrume nts
Due to higher costs of renewable energy,
Member States provide various forms of
support in order to increase their share in energy
production and consumption to the levels required
by the Renewable Directive (89). The objective is
to compensate for the relative higher costs of this
energy source compared to other fossil fuels. There
are also huge fixed costs that create economies of
scale as the average cost per unit produced
decreases as the quantity increases. With subsidies,
private firms can invest in renewables and have
similar rate of returns as conventional energy
sources. Finally, as renewables develop, one could
expect that there will be further technology
development, which will reduce the costs of these
technologies over time and render them
competitive in the longer run (90).
40
30
20
10
0
2000
2001
2002
2003
EU-27
2004
US
China
2005
Japan
2006
Brazil
2007
2008
2009
2010
other countries
%
(b)
100
90
80
70
60
50
40
30
20
10
0
2000
2001
2002
2003
EU-27
2004
US
China
2005
Japan
2006
Brazil
2007
2008
2009
2010
Other Countries
The most common renewable electricity
support schemes include feed-in tariffs, feed-in
premiums and green certificates (Table III.1.1).
Feed-in tariffs provide the eligible renewable
power producer with a guaranteed price for the
power they feed into the grid. Feed-in premiums
provide the producers with a guaranteed premium
in addition to the electricity market price. Both of
them may be capped with a ceiling related to
electricity wholesale prices. Green certificates are
normally based on a quota obligation to have a
certain percentage of the electricity sourced from
renewable sources. The authorities issue these
certificates to producers of renewable energy, who
sell them separately from the electricity.
Sourc e : Unite d Sta te s Ene rg y Info rma tio n Ad ministra tio n
1.3.
SUPPORT SCHEMES AND RENEWABLES
DEVELOPMENT
The generation cost of renewable electricity
remains generally higher than that of conventional
technologies, with some exceptions. Solar power
plants traditionally had very high generation costs,
but these costs have fallen substantially over the
last years. On-shore wind power and small hydro
costs are also more expensive than those of coalfired plants, although they have the potential to
compete with them if local conditions are in their
favour.
(89) Directive 2009/28/EC of the European Parliament and of
the Council of 23 April 2009 on the promotion of the use
of energy from renewable sources
(90) Canton and Johannesson Lindén (2010)
95
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
Ta b le III.1.1:
Renewable electricity support instruments in member States
AT BE BG CY CZ DE DK EE
FIT
x
x
x
x
Heating
Electricity
Premium
Quota
obligation
Investment
grants
Tax
reductions/
exemptions
Financial
incentives
Investment
grants
Tax
reductions/
exemptions
Financial
incentives
x
x
x
x
x
ES
x
x
x
x
FI
x
Transport
EL HU
x
x
IE
x
x
x
x
x
x
x
x
x
x
x
x
x
x
IT
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
LT LU LV MT NL PL
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
SI
x
SK UK
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
PT RO SE
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
Premiums
Quota
obligation
Tax
reductions/
exemptions
FR
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
Sourc e : SWD(2012) 164
1.3.2. De ve lo p me nt o f sup p o rt sc he me s
Total amount of subsidy to electricity
generation from RES amounted in 17 Member
States (91) to EUR 25.2 billion in 2010 (92). These
17 Member States accounted for 92% of RES
electricity generation in the EU; assuming similar
level of support in the other Member States, the
level of subsidy in the EU-27 would have
amounted to some EUR 27 billion (93). Three
countries accounted jointly for 70% of the support
to renewables: Germany, Spain and Italy followed
by France and UK. However, according to more
recent data, the costs of support to renewables
have substantially risen in 2011 and 2012. For
instance, in Germany, they increased from EUR
9.5 billion in 2010 to EUR 12.7 billion in 2012,
and in Spain from EUR 5.4 billion to EUR 8.4
billion in 2012.
According to International Energy Agency (2013),
subsidies to renewable energy in the EU-27
(including not only subsidies to electricity but also
to transport and heating) amounted to EUR 27
billion in 2010 and to EUR 46 billion in 2012. IEA
applied a different methodology than CEER.
In order to compare the burden of RES incentives
on electricity consumers, one can divide the
overall support level by final electricity
consumption. The average weighted support level
was 9.3 EUR/MWh in 2010, compared to average
end-user electricity price in EU in 2010 of 128
EUR/MWh for industrial consumers and 173
EUR/MWh for households. The average level of
support per unit of electricity produced was the
highest in Spain (18 EUR/MWh), followed by
Germany, Portugal and Italy (Graph III.1.6).
G ra p h III.1.6: EU Member States with the highest support to
renewable energy sources, 2010
9
EUR/MWh
bn EUR
30
6
20
3
10
91
( ) Data based on replies to CEER questionnaire, to which 17
Member States replied. 10 Member States have not replied
to the questionnaire: Bulgaria, Cyprus, Denmark, Greece,
Ireland, Lithuania, Latvia, Malta, Poland, Slovakia.
92
( ) CEER (2013).
(93) If the other countries had the same average support as the
17 Member States accounting for 92% of renewable
electricity generation, EU-27 would receive 27.3 bn.
Assuming a lower support than average of the remaining
countries would lead to a total around 27 bn.
96
0
0
Germany
Spain
Italy
Total support, bn EUR (rhs)
Sourc e : CEER (2012)
France
UK
Portugal
Belgium
Support in EUR per MWh of energy consumed (lhs)
Netherlands
Pa rt III
Re ne wa b le s: Ene rg y a nd Eq uip me nt Tra d e De ve lo p me nts in the EU
Bo x III.1.2: Electricity tariff deficit in some Member States
Some Member States have over the last years accumulated so-called electricity tariff deficits. These deficits
emerge because the regulated electricity prices do not cover the corresponding costs borne by electricity
utilities. In some countries like Spain, Portugal and Greece, the authorities and regulatory bodies explicitly
use the term "electricity tariff deficit" and monitor its size. However, the problem is broader and concerns
also the other Member States where electricity costs are higher than the relevant regulated tariffs1. For
instance in France, the regulated electricity tariffs do not cover the actual costs of the incumbent electricity
company, state-controlled EDF, which has by far the largest share in French electricity market. In Bulgaria,
the regulated energy prices are also too low to match the corresponding costs. In Malta, the rigidity in price
regulation measures has led to an accumulation of debts in the electricity company.
The scope of the tariff deficit differs from one country to another. The deficit can be caused by a mismatch
between the total end-user electricity price and the corresponding costs (this is the case in Portugal or
France), between the access costs - including transmission, distribution and support to renewables - and the
corresponding tariff (in Spain), or between the costs and revenues of the special account to support
renewables (in Greece). It is important to distinguish between long-term significant tariff deficits, which are
difficult to eliminate, and short-term mismatches between end-user prices and costs caused by incidental
factors, which can be easily adjusted in the following year.
The main factor which triggered the emergence of tariff deficits in the recent years was a substantial increase
in electricity prices (see Part II, chapter 1). Several factors contributed to this price increase, in particular
rising costs of fossil fuels worldwide and the deployment of renewable technologies. In some countries,
generous subsidies granted to solar and wind power producers triggered massive investment in these sectors,
which in turn inflated the amount of subsidies needed to remunerate the investors. This support is mainly
financed as a surcharge on electricity price. The other factors contributing to rising electricity prices include
limited competition and transparency in the energy sector in some Member States, subsidies to the
conventional energy producers, as well as the remaining long term purchase power agreements.
In the majority of Member States, rising electricity costs were fully reflected in end-user prices, sometimes
unevenly across consumers' segments, i.e. industries and households (see Part II, chapter 1). However, in
some countries, the authorities considered that increasing the regulated tariffs to the level fully
corresponding with so quickly rising electricity costs was not possible. This has led to the emergence of
tariff deficits. These deficits may be exacerbated in some countries by a high number of unpaid electricity
bills, in relation to difficult financial situation of many households and firms.
The financial burden resulting from the tariff deficit is initially borne by the electricity suppliers or
distributors. However, following the court decisions, the electricity companies that bear the tariff deficit
burden are usually entitled as creditors to recover the corresponding amounts, with interests. In Spain and
Portugal, the rights of the utilities to recover the accrued tariff deficit were turned into fixed-income
securities; in Spain these securities are explicitly guaranteed by the government. The accumulated tariff debt
– including the securitized part – amounts to 2-3% of GDP in both Spain and Portugal.
In spite of the securitisation of the "old" tariff deficit, new tariff deficit continues to emerge as the regulated
tariffs are still too low to match the corresponding costs. The expected deficits in 2013 range from 0.3% of
GDP in Greece and Spain and 0.6% of GDP in Portugal to up to 1% of GDP in Bulgaria.
In order to reduce these deficits, the easiest solution, in theory, would be to increase tariffs to the cost
recovery level. However, this is not always possible. If the deficits are high, their elimination would require
1
Regulated electricity end-user prices for households existed in 17 Member States in 2011 and in 12 Member States
for non-household consumers. However, the existing price regulations can take different forms: they can be integral
(i.e. cover the whole electricity price) or cover a part of electricity price, corresponding to some cost elements.
Moreover, all Member States apply regulations of electricity transport and distribution costs, charged by transmission
and distribution system operators which are natural monopolies.
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substantial electricity prices hikes. They could adversely affect industrial competitiveness and households'
purchasing power, and would not be acceptable for energy consumers.
Therefore Member States with tariff deficits usually combine limited tariff increases with other measures
splitting the burden of the corrective action between the energy consumers, the energy sector and sometimes
public finance. These measures include, first of all, reductions in the support to renewable producers
(including co-generation), to the other energy generators (such as capacity payments or coal subsidies) and
reduced remuneration of energy transport and distribution. For instance, Spain recently replaced its feed-in
tariff for renewable energy by a compensation mechanism guaranteeing RES generators a certain yearly rate
of return on investment, introduced similar rules for energy transport and distribution and reduced
substantially capacity payments for gas plants (2). In Bulgaria, the government introduced grid access tariffs
for renewable energy producers and prohibited access to the energy system of a part of the grid-connected
renewable capacity. While such changes may be indispensable to reduce the tariff deficit, they may be
legally challenged by the electricity companies, and may also negatively affect overall investment in green
energy.
Other measures to phase out tariff deficits include new taxes with revenues earmarked to reduce the tariff
deficit. Depending on the country, they may include taxes on electricity production and on specific
technologies (hydro generation, nuclear, lignite). Other sources of revenues, earmarked to reduce the tariff
deficit, include the revenues from the sale of CO2 allowances (in Spain and Greece) and even a part of the
revenues from the TV license fee (in Greece). Moreover, Greece, Portugal and Spain have decided to
eliminate regulated end-user tariffs for households and SMEs, with an exception of vulnerable consumers.
In spite of these measures, electricity tariff deficits persist in many countries. They distort electricity prices,
deteriorate the financial situation of energy utilities and increase uncertainty for investors in this sector and
for all electricity consumers. They also involve a contingent liability for public finance. For these reasons,
several Member States have committed to the elimination of tariff deficits. In Greece, Portugal and Spain,
phasing out of electricity tariff deficits has been included in the memoranda of understanding describing the
conditionality of their financial assistance programmes.
(2) These measures are part of the 2013 electricity sector reform package in Spain, aimed at a complete elimination of the
annual deficit of the electricity system from 2014 on.
The costs of support are usually borne by
electricity consumers as a surcharge on retail
electricity price. Usually the amount of this
surcharge is set by the energy regulator, on the
basis of actual costs, but in some countries the
government approves the tariffs. In some
countries, like Spain and Portugal, setting
electricity tariffs at a too low level, not sufficient
to cover the costs, led to a deficit of electricity
system (electricity tariff deficit – Box III.1.2),
which may be a contingent liability of the state
budget and therefore a burden on public finance.
98
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Bo x III.1.3: Renewable and Employment
In addition to energy and environmental benefits, the development of renewable is expected to bring benefits
in terms of growth and jobs. Current gross employment in the renewable sector amounts to some 1.2 million
jobs, and is forecast to rise to 3 million by 2020. However, the net employment effect of renewable policy
(taking into account job losses in the other sector) is much lower, in the range of 300-400,000 jobs.
When discussing the impact of renewable energy on employment, one should distinguish "gross" from "net"
employment impact. "Gross" means the total number of jobs created in the renewables sector, including
manufacturing and instalment of investment installations, operation and maintenance activities, as well as
production of fuels (mainly biofuels and other biomass). "Net" means taking into jobs losses in conventional
energy, indirect jobs losses due to reduced incomes if renewables lead to increased energy prices, and other
indirect effects.
A recent comprehensive report on the state of renewable energies in Europe (1) estimated current "gross"
employment in RES at 1.19 million in 2011. This included 312,000 jobs in photo-voltaic solar sector,
274,000 jobs in solid biomass, 270,000 jobs in wind energy, 109,000 jobs in biofuels and the rest in the
other branches. Germany accounted for almost one third of RES jobs (379,000), followed by France
(178,000), Italy, Spain and Sweden.
The number of jobs in renewables has been successively growing over the last year, and is expected to grow
further. A major EU-funded EmployRES project (2) estimated gross employment in RES at 2.8 million jobs
in 2020, of which some 1.2 million in RES installation and manufacturing, 0.4 million in operation &
maintenance and 1.2 million in fuel production (biomass, biofuels). Last year, Commission services (3)
estimated gross job potential in renewable energy sector at 3 million jobs by 2020, or some 1.2% of total EU
employment.
The EmployRES study and some other studies also look at net employment effect. They deduct from the
gross job numbers the employment losses in conventional energy sector, take into account the secondary
employment effects of changes in incomes (higher incomes in RES, lower in conventional energy), as well
as secondary employment losses due to reduced consumption because of increase in end-user energy prices
resulting from RES deployment. This study estimated net employment effect of RES deployment in the EU
(in comparison to the scenario without any support to RES) at some 310,000 – 370,000 additional jobs in
2010 and 390,000 – 420,000 jobs in 2020. These employment gains are rather modest as they represent less
than 0.2% of EU labour force.
One of the reasons of positive net employment effect of renewables is higher labour intensity of the
renewable energy in comparison to conventional technologies. The renewable energy sector generates more
jobs per megawatt of power installed, per unit of energy produced, and per EUR of investment, than the
fossil fuel-based energy sector. According to Wei et al (2009) (4) this job generation effect of RES is
particularly high for PV solar (0.87 job-years/GWh), but for biofuels (0.21) and wind (0.17) it was also
much higher than for coal and gas (0.11). It was also high for energy efficiency (0.38). For solar power, high
job generation effect is caused by employment in construction, installation and manufacturing (CIM) being
much higher per MW than for the other technologies, while labour use for maintenance is similar to the
other energy sources. On the other hand, higher labour intensity means lower labour productivity. This
adverse impact of renewables development and green growth policies on labour productivity certainly
should not be overlooked.
(1)
(2)
(3)
(4)
Observ'ER report, (2012)
Ragwitz, M. et al (2009)
SWD(2012)92
Wei, M., S. Patadia, M.Kammen (2009)
The Graph below shows that Spain, Germany
and Portugal, which have the highest average
level of support per unit of electricity produced,
have also the highest combined share of wind
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Some countries agreed in the past to provide
overgenerous long-term support to renewables,
especially to the solar power. More specifically,
when comparing the remuneration to renewable
generators with electricity (and heat) generation
costs, substantial differences in remuneration and
profitability between Member States are
observed (96). For instance, as regards onshore
wind, in 2011 support levels were too high in
comparison to generation costs in Italy, Romania,
Slovakia, the United Kingdom and some other
countries. Support to solar power was in this year
(94) Denmark and Ireland, which also have very high shares of
wind energy in electricity mix, are not mentioned here as
they have not provided data to the CEER Status Review, on
which this section is based.
95
( ) This is an indicative comparison. A more detailed analysis
is included, for instance, in the RE-SHAPING project
reports (see footnote below). A new study on costefficiency of subsidies to electricity generation has been
launched by the European Commission services.
(96) http://www.reshaping-res-policy.eu . EU-funded RESHAPING project, implemented by a consortium led by
Fraunhofer Institute. The remuneration level was calculated
as a sum of the net present value of the expected support
payments (plus energy price, in case of feed in premiums
and green certificates, or if support lasts less than 20
years). The remuneration level was normalised to a
common payback period of 20 years and is based on an
assumption of the same discount rate. The comparison was
carried out per technology category, while the tariffs within
one category might differ significantly. The remuneration
level was compared to electricity and heat generation costs,
distributed over the whole lifetime of the renewable power
plant.
100
overly generous in Greece, Italy, Spain and
Cyprus (97).
G ra p h III.1.7: Share of rewewable sources (excluding
hydropower) in gross electricity generation
and RES electricity support in EU Member
States -2010
25
Share of Renewables (excluding hydropower) in gross electricity
generation
and solar power in electricity generation (94).
This would suggest that providing high level of
support per kWh was effective in these countries to
stimulate the development of renewable electricity
in these countries (95). In the other Member States,
the correlation between the support level and share
of wind and solar power is however weaker. For
instance, Italy and Austria have a similar level of
wind and solar energy in the electricity mix, but
the support level per unit of electricity produced is
more than twice higher in Italy. This weaker
relationship could be largely explained by the fact
that the level of support guaranteed to the investors
in each renewable technology varied from one
country to another, and changed in time. Other
factors, such as differences in renewable energy
potential of each country, state policies concerning
award of licenses etc. should be also taken into
account.
PT
20
ES
15
Fl
DE
SE
10
AT
NL
EE
5
LU
FR
IT
HU
BE
UK
CZ
Sl
0
0
2
4
6
8
10
12
14
16
18
20
RES electricity support per unit of gross electricity produced (€/MWh)
Sourc e : Euro sta t a nd CEER (2012)
1.4.
CONCLUSIONS
Renewable
energy
production
expanded
substantially in the EU over the last decade. The
share of renewable electricity in the EU electricity
production increased from 13.6% to 20.4%
between 2000 and 2011. Most of this growth can
be attributed to wind, solar power, which increased
its share in electricity production from almost zero
a decade ago to 5.4% for wind and 1.4% for solar
in 2011. Some Member States, like Denmark,
Spain and Portugal, produce 15-20% of their
electricity from wind and solar. Electricity
produced
from
biomass
also
increased
substantially over the last decade.
As the generation cost of these renewable sources
remain generally higher than that of conventional
technologies, their increased deployment required
generous subsidies to renewable energy investors.
These subsidies were necessary to respond to some
market failures: positive externalities of
renewables such as avoided greenhouse gas
emissions and pollution, huge fixed investment
costs, contribution to technological progress and
decreased generation costs in the longer run.
The development of renewables should be seen in
the global context. World renewables electricity
(97) Re-Shaping project (2011)
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net generation has increased by 45% between 2000
and 2010, with the highest growth in China,
followed by the EU, US, Brazil and Japan. The
EU has strong position in solar PV and wind, as it
produced in 2010 around 70% of world's
electricity generated from solar PV and 44% of
global wind production. These developments
provide opportunities and risks for the EU
renewable sector and the whole economy. They are
related to trade flows in renewable energy
equipment, maintaining the leading position in
green technologies and possible expansion to nonEU markets, as well as possibilities to avoid some
imported fuel cost.
101
2.
RENEWABLES COMPETITIVENESS DEVELOPMENT: THE
CASE OF WIND AND SOLAR EQUIPMENTS
2.1.
2.2.1. EU27 re ne wa b le
c o mp o ne nt
e q uip me nt tra d e flo ws
INTRODUCTION
The development of renewable energy fulfils
several objectives, including the reduction of
greenhouse gas emissions, security of supply, job
creation
and
strengthening
industrial
competitiveness (98). This chapter analyses how
the recent expansion of renewables, most notably
solar PV and wind sources, has contributed to EU27 trade performance and competitiveness in this
sector.
The competitiveness of the EU-27 renewable
industry is looked at in two ways. Firstly, trade
performance in renewables equipment and
components is analysed, as trade developments
have followed the renewables expansion and the
EU has been able to build competitive strength in
some components (wind). Second the drivers to
trade, including the role of innovation, are
assessed. The EU-27's share in the world's clean
energy patents was around 40% in 2011.
This chapter is organized as follows. Section 2
presents an overall picture of EU27 trade in solar
and wind components and equipment and
discusses innovation in solar and wind in the EU27
and its Member States. Section 3 describes the
international competitiveness of EU27 in these
sectors. Conclusions are presented in section 4.
a nd
2.2.1.1. EU-27 c o mp o ne nts a nd e q uip me nt
tra de with Extra -EU
The EU-27 has a considerable trade deficit with
the rest of the world in solar components and
equipment. This trade deficit became more
pronounced from 2006 onwards when Chinese
exports to the EU started to increase (Graph
III.2.1). The worsening of the EU's trade position
has been driven by the evolution of imports.
EU imports of solar components are very
concentrated. In 2012, 75% of EU-27 imports of
solar components came from China (31% in 2006).
Despite the decrease in EU imports over the two
last years, China has managed to remain the first
exporter of solar components to the EU. By
contrast, extra-EU-27 exports of solar components
are more diversified. In 2012, 60% of extra-EU
exports went to 5 countries. In 2012, 25% of extraEU-27 exports of solar components went to Japan,
and 14% to the US.
G ra p h III.2.1: EU-27 exports and imports of solar
components from Extra-EU
25
bn EUR
20
15
2.2.
RENEWABLE
COMPONENTS
EQUIPMENTTRADE FLOWS (99)
AND
The expansion of renewable energy sources has
contributed to increasing trade flows in
renewable components and equipment (see Box
1 for a brief description of the industry). More
specifically, intra and extra EU27 trade in wind
and solar components have increased considerably
between 2000 and 2012 (100).
(98) Philibert (2011)
(99) This section focuses on trade in renewable equipment.
Chapter 3 deals with the energy part.
(100) Depicting trade flows of renewable components with the
Harmonised System (HS) nomenclature is rather difficult,
as many of these components are also used in other end-use
sectors. After a careful analysis of the HS nomenclature
102
10
5
0
2000
2001
2002
2003
2004
Exports to Extra-EU
2005
2006
2007
Imports from Extra-EU
2008
2009
2010
2011
2012
Imports from China
Sourc e : Co mmissio n Se rvic e s b a se d o n Euro sta t d a ta b a se .
and existing literature, four main wind and two solar HS
items have been included. This rather restrictive approach
probably under-estimates the total trade affected by these
two renewable sources. However, it leads to more accurate
figures on the evolution of the trade associated with these
sources
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Bo x III.2.1: Components in wind and solar industry
Solar components included in this study are: photosensitive semiconductor devices, including photovoltaic
cells (HS code: 85414090) and inverters with power handling capacity > 7.5 kva, excluding a kind used with
telecommunication apparatus, automatic data-processing machines and units thereof (HS code: 85044088).
No studies are available on the value chain and contribution of each activity of the solar power industry to
direct GDP and trade. However, photovoltaic cells are already the result of melting the silicon, to obtain the
wafers that then are machined and coated. Therefore, it includes almost all stages of photovoltaic modules
production. Moreover, the last production stage is to combine the solar modules with the inverters, a
component that is also included in this analysis. Thus, even if one cannot precisely estimate the share of the
trade related with the solar power industry covered by these two components, this value is expected to be
rather high.
Wind components are: wind-powered generating sets (HS code: 85023100) , towers and lattice masts of iron
or steel (HS code: 73082000), ac generators "alternators", of an output > 750 kva (HS code: 85016400), gear
boxes for machinery, excluding those for civil aircraft (HS code: 84834094), parts of electrical lightening or
signalling equipment, windscreen wipers, defrosters and demisters of a kind used for motor vehicles, n.e.s,
excluding burglar alarms for motor vehicles (HS code: 85129090) and parts of engines and motors, n.e.s
(HS code: 84129090).
EWEA (2012b) estimates that in the wind industry, wind turbine and component manufactures accounted
for 36.70% of this sector's contribution to direct GDP in 2010. Service providers and developers accounted
respectively for 20.5% and 42.8%. However, wind turbine and component manufactures represent 85% of
this sector's exports. The same study estimates that EU-27 exports of wind turbine and component
manufactures amounted to around 7.5 bn EUR in 2010. The exports of the six components included in this
study were 2.7 bn EUR in the same year. This suggests that these components cover around 36% of the total
exports in wind turbine and components.
In 2012, EU-27 had a trade surplus of around
2.45 billion EUR in wind components and
equipment with the rest of the world. This trade
performance has been constant since 2008 with the
exception of 2009, when the surplus was around
1.6 billion EUR (Graph III.2.2). These good
performances are driven by the presence of
positive trade balances with a large number of
countries.
EU exports of wind components are quite
diversified. In 2012, 55% went to 5 countries, and
one third to US and Canada. Similarly, 59% of
extra EU imports of wind components come from
5 countries, including 40% from China. Once
again, imports from China started to increase after
2006 (imports from China represented a low share
until 2006, around 4%).
G ra p h III.2.2: EU-27 exports and imports of wind
components from Extra-EU
4.0
bn EUR
3.0
2.0
1.0
0.0
2000
2001
2002
2003
2004
2005
2006
Imports from Extra-EU
2007
2008
2009
2010
2011
2012
Exports to Extra-EU
Sourc e : Co mmissio n Se rvic e s b a se d o n Euro sta t d a ta b a se .
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Bo x III.2.2: Measuring the drivers of trade in solar power and wind equipment
The renewable sector has expanded over the past decade. While some renewable sources were already
profitable, others as wind and solar benefited from the support policies put in place in many countries
(chapter 1). The renewable development has induced trade flows both between EU-27 Members States and
with Non-EU countries; the EU-27 has built a strong position with the rest of the world in the trade of wind
components, while trade in solar components has been characterized by a large trade deficit. In addition,
Intra-EU trade (1) is larger than EU-27 trade with the rest of the world both in solar and wind components
(1.3 times larger for the former and 2.1 for the latter). This justifies the inclusion of trade flows with the rest
of the world as well as trade flows within EU Member States when conducting this exercise.
Beyond the support policies towards these new sectors implemented by governments, it is important to
understand the other drivers of trade. As these technologies become more and more mature, subsidies will be
phased out and the development of these sectors should be driven by other factors. This box focuses on
analysing the drivers of EU Member States imports of and exports of solar and wind components.
In order to measure the drivers of trade, an ex-post econometric exercise is conducted. The methodology
employed follows an augmented gravity model, generally used in empirical trade literature which benefits
from strong theoretical foundations (2), and already applied in a similar exercise studying the drivers of
Chinese exports of solar components (see Cao, J. and Groba, F., 2013).
The baseline model studying the determinants of EU Member States imports of solar components from NonEU countries is given by the following regression (3):
where i are EU Member States, j EU Member States or non-EU countries, p are the different solar
components and t the years covered in this analysis (2000-2012);
is the log of EU Member
State i imports of the solar component p from other (4) EU or non-EU partner j at time t,
is a constant,
and
are the log of the number of inhabitants of the EU Member State i and EU or nonEU partner j at time t;
and
are the log of the nominal GDP PC at current prices
of the EU Member State i and EU or non-EU Member State j at time t (5);
and
measure the stock of knowledge of EU Member State i and EU or non-EU partner j in solar energy
technology at time t (6);
and
are the solar in total net electricity generation of EU Member
State i and EU or non-EU partner j at time t; finally, a large set of fixed effects were employed.
controls
for year specific fixed effects,
and
for fixed effects at the reporter (EU Member State importing
component p) and partner (EU or non-EU Member State exporting component p) levels and
for fixed
effects at the product level.
This large set of control variables assures that traditional variables used to control for geographical and
cultural reasons behind trade persistence are controlled through the fixed effects (i.e. distance between
(1)
(2)
(3)
(4)
(5)
Trade is measured as the sum of EU-27 Member States imports and exports.
See De Benedictis and Taglioni (2011) for a review on this methodology.
Appendix 1 describes the variables used.
Since a country does not trade with itself, i and j cannot refer to the same country at the same time.
De Benedictis and Taglioni (2011) for an explanation on why one should include the GDP measure in nominal terms
when performing a gravity model. In this case however, using a deflated measure would not bias the coefficient as
time fixed effects are included in the regression.
(6) Appendix 1 explains the methodology used to build this measure in detail. This measure takes in consideration that
the productivity of knowledge strongly depends on existing knowledge plus new innovation (see Porter and Stern,
2000).
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Bo x (c o ntinue d)
partners, common language, existence of historical relations, between others). This method is proven to
provide reliable results as long as the idiosyncratic error term
is not correlated with the explanatory
variables.
The time period under study is 2000-2012 and the data covers the trade relations between the EU Members
and between EU Members and a diverse cross-section of twenty non-EU trade partners accounting for 95%
of EU-27 imports of solar components from the rest of world in 2012 (ranging between 90% and 96% in the
sample years); and accounting for 84% of EU-27 exports of wind components to the rest of the world in
2012 (ranging between 82% and 97% in the sample years) (7).
Population and GDP per capita control for the effect of market size and income, respectively, in EU Member
States imports/exports of solar components. Positive coefficients are expected in both cases, i.e. large
countries are expected to have a larger trade volume, and higher income is expected to be associated with
higher trade flows of more capital intensive products. As regards innovation, positive coefficients are
expected for exporter (be it EU or non EU), in particular as the stock of knowledge takes into account the
new innovations and the existing knowledge base in the economy. As regards the importer, the expected
sign of the coefficient is less clear. One the one hand, high innovative potential in the renewable solar
component industry might reduce imports, but, if associated with some particular components, it might lead
to increased imports of all solar components. The share of solar electricity generation gives a proxy of the
country's effort/potential for this renewable source. Coefficient is expected to be positive, i.e. the higher the
development of renewable generation, the higher induced imports of equipment.
(7) Notice that other countries have not been included to avoid zero trade flows, as it would not allow this log-linear
formulation. This is a common problem in this model. Cipollina, M. et al (2013) discusses this topic.
(Co ntinue d o n the ne xt p a g e )
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Bo x (c o ntinue d)
Table 1: Coefficient estimates for the gravity equations studying the determinants of EU Member
States imports and exports of solar components from/ to other EU or from/ to twenty major non-EU
trade partners
(1)
(2)
(3)
ln(imports)
ln(imports)
ln(imports)
ln(population i)
9.047***
9.367***
ln(population j)
0.548
-0.419
ln(GDPPC i)
0.004
0.614***
ln(GDPPC j)
0.597**
0.843***
ln(GDP i)
0.069
ln(GDP j)
0.749***
ln(Know i)
0.057
0.105*
ln(Know j)
0.378***
0.410***
pat i
0.010***
pat j
-0.001
share solar i
21.569***
32.844***
26.506***
share solar j
39.246***
60.08***
42.227***
Constant
-154.19***
-148.55***
-11.79*
5667
Observations
5667
9349
Year FE
yes
yes
yes
Poduct FE
yes
yes
yes
Importer FE
yes
yes
yes
Exporter FE
yes
yes
yes
ln(exports)
ln(exports)
ln(exports)
-3.873
-0.2870281
ln(population i)
ln(population j)
1.273
-3.024**
ln(GDPPC i)
1.073**
1.587***
ln(GDPPC j)
0.517**
0.350*
ln(GDP i)
0.959**
ln(GDP j)
0.466*
ln(Know i)
0.030
0.009
ln(Know j)
0.263***
0.255***
pat i
0.005***
pat j
0.000
share solar i
32.511***
36.485***
30.635***
share solar j
51.032***
79.805***
49.490***
37.087
47.766
-27.351***
Constant
Observations
5319
8538
5319
Year FE
yes
yes
yes
Poduct FE
yes
yes
yes
Importer FE
yes
yes
yes
Exporter FE
yes
yes
yes
Table 1 presents the estimates for this baseline model (regression 1). Regression 2 and 3 use patents as a
flow instead of a stock and Nominal GDP instead of Population and GDP per capita, respectively. Results
confirm the importance of the relative size of the solar market as means to increase trade flows, the same
happening with nominal GDP and GDP per capita at least in the importing country. Population has the
expected coefficient sign and significant levels (only for imports of EU countries). The share of solar
electricity generation is positive and significant, which tends to shows that the higher the development of
solar electricity, the higher trade flows. As regards knowledge, the coefficient is only significant for
exporting countries.
(Co ntinue d o n the ne xt p a g e )
106
Pa rt III
Re ne wa b le s: Ene rg y a nd Eq uip me nt Tra d e De ve lo p me nts in the EU
Bo x (c o ntinue d)
Table 2: Coefficient estimates for the gravity equations studying the determinants of EU Member
States imports and exports of wind components to twenty major non-EU trade partners
(1)
ln(exports)
(2)
ln(exports)
ln(population i)
-7.209***
-2.813
ln(population j)
1.273
0.623
ln(GDPPC i)
0.474***
0.492***
ln(GDPPC j)
0.281
0.288*
ln(GDP i)
(3)
ln(exports)
0.426**
ln(GDP j)
0.263
ln(Know i)
0.191***
ln(Know j)
-0.007
pat i
0.111**
-0.014
0.010***
pat j
-0.001
share wind i
10.99***
8.154
share wind j
2.264
2.572*
2.113
102.522**
39.718
-7.551**
Constant
Observations
9.551***
15510
17899
15510
Year FE
yes
yes
yes
Poduct FE
yes
yes
yes
Importer FE
yes
yes
yes
Exporter FE
yes
yes
yes
ln(imports)
ln(imports)
ln(imports)
ln(population i)
-4.538**
-4.900***
ln(population j)
-0.268
1.47
ln(GDPPC i)
0.096
0.105
ln(GDPPC j)
0.972***
1.003***
ln(GDP i)
0.109
ln(GDP j)
0.906***
ln(Know i)
-0.031
-0.070
ln(Know j)
0.212***
0.183***
pat i
0.000
pat j
0.006***
share wind i
-4.743**
-2.665**
-6.143***
share wind j
11.417***
10.78176***
10.884***
Constant
79.525*
54.463*
-16.936***
14891
16993
14891
Year FE
yes
yes
yes
Poduct FE
yes
yes
yes
Importer FE
yes
yes
yes
Exporter FE
yes
yes
yes
Observations
The same empirical test is carried out in the wind sector. The regression is the same as the model used for
solar components. In this case, the components p correspond to wind components; the share of wind
electricity in electricity generation is taken as a proxy for renewable support. The stock and flow of patents
also corresponds to wind patents.
Results presented in table 2 suggest that the stock of knowledge triggers exports in the wind industry for EU
and non EU countries. This confirms the role of innovation in improving a country's position in this
industry. In addition, the coefficient associated with the exporter's share of wind in total net electricity
generation is also positive, which might suggest that high effort on developing wind energy might
established a know-how that has triggered these countries exports.
107
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
2.2.1.2. Me mb e r State s tra de o f c o mp o ne nts
a nd e q uip me nt with e xtra and intra -EU
In general, most Member States display a trade
deficit in solar components, and a trade surplus
in wind components. Trade volumes differ
significantly across Member States. Germany and
Netherlands have the largest trade volumes, both
inside and outside the EU. Germany had the
largest trade deficit (intra and extra EU) in solar
components in 2012 (1.9 billion EUR). Most of the
deficit with the rest of the world comes from
China. Italy had the second largest trade deficit in
2012 (1.86 billion EUR). Only the Czech Republic
displayed a small trade surplus (Graph III.2.3).
G ra p h III.2.4: EU Member States intra and extra-EU imports
(M) and exports (X) of wind components and
equipment in 2012
3000
m EUR
2500
2000
1500
1000
500
0
M
X
DK
M
X
DE
M
X
ES
M
X
FR
M
X
IT
Extra-EU
M
X
AT
M
X
PL
M
X
RO
M
X
M
SE
X
UK
Intra-EU
Sourc e : Co mmissio n Se rvic e s b a se d o n Euro sta t d a ta b a se .
G ra p h III.2.3: EU Member States intra and extra-EU imports
(M) and exports (X) of solar components and
equipment in 2012
6000
This section analyses whether this trade evolution
is consistent with the innovation position of these
industries. Innovation is measured by patents,
which reflect the output of the innovative activity.
m EUR
5000
4000
3000
2000
1000
0
M
X
BE
M
X
BG
M
X
CZ
M
X
DE
Extra-EU
M
X
GR
M
X
ES
M
X
FR
M
X
IT
M
X
NL
M
X
UK
Intra-EU
Sourc e : Co mmissio n Se rvic e s b a se d o n Euro sta t d a ta b a se .
As regards wind components, Germany, Denmark
and Spain have the largest trade volumes in the
EU. In 2012, these three countries displayed a
trade surplus (1.9, 1.5 and 1.2 billion EUR
respectively). Italy and Austria also had trade
surpluses in wind components, while the other
Member States faced a trade deficit, with the
United Kingdom and Sweden having the largest
ones (873 and 302 million EUR respectively). In
both cases, the overall trade deficit was driven by a
large trade deficit with Intra-EU countries (Graph
III.2.4).
108
2.2.2. Inno va tio n a nd tra d e p e rfo rma nc e s
Over the last decade, the share of EU-27 in total
world patent applications was 32.5%. This
share is even higher in the renewable energy
sector (39.6%), probably reflecting the fact that
the EU was an early mover in most renewable
industries (Graph III.2.5). The performance in
wind and solar have differed during 2000-2011.
The EU-27 share in solar energy patents was only
28.5% during this period. Moreover, between 2007
and 2011, when the trade performance of the
sector deteriorated in Europe, the share was only
24.8%. By contrast, in the wind industry the EU27 share was 55% of world applications, well
above any other country and well above the EU
average in all industries. Compared to the EU, the
share of the US in renewable patents is lower.
Japan displays a relatively high share of patents in
solar panels. The share of China is still low in
renewables, including solar and wind; however, its
share more than doubled between 2007 and 2011.
Pa rt III
Re ne wa b le s: Ene rg y a nd Eq uip me nt Tra d e De ve lo p me nts in the EU
G ra p h III.2.5: Average share of EU-27, US, China and Japan
in world's total, renewable, solar and wind
patents from 2000 to 2011
60
2.3.
INTERNATIONAL COMPETITIVENESS OF EU
SOLAR AND WIND ENERGY INDUSTRIES
In this section, international competitiveness is
assessed using two indicators - revealed
comparative advantage (RCA) (101) and the relative
trade balance (RTB) (102).
%
50
40
30
2.3.1. Re ve a le d c o mp a ra tive a d va nta g e s
20
10
0
EU-27
US
Overall economy
Renewable Energy
China
Solar energy
Japan
Wind energy
No te : Da ta o n a p p lic a nt's c o untry o f re sid e nc e ha ve b e e n
use d . The y me a sure the c o untry's o wne rship o f inve ntio ns.
The sa me me a sure ha s b e e n use d in g ra p h 6. The c o unt o f
p a te nts re la te d to re ne wa b le , so la r a nd wind ind ustrie s a re
d ire c tly p ro vid e d b y the OEC D, a nd the re fo re fo llo w the ir
d e finitio n o f the se ind ustrie s.
Sourc e : OECD Pa te nts Sta tistic s
Germany is the main contributor to EU patents
in the renewable energy sectors, including the
solar sector (45%) (Graph III.2.6). Around 23.5%
of EU patents in the wind energy sector were
registered by Danish companies, which is in line
with the trade and competitiveness performances
of Denmark in this sector. The share of Spain in
wind is also quite high (9.1% compared to a 2.4%
share in the overall economy and 7.1% in the
renewable sector).
G ra p h III.2.6: Average share of EU Member States in EU-27
total, renewable, solar and wind patents from
2000 to 2011
100
%
EU-27 and the US do not display a revealed
comparative advantage in the solar industry. In
the wind industry, EU-27 presents the highest
RCA index. Japan has performed above the world
average both in the solar and wind industry. China
has revealed comparative advantage in the solar
industry (Graph III.2.8).
The situation is heterogeneous across Member
States (Graph III.2.7). Denmark, Germany,
Estonia, Austria, Slovakia and Finland perform
better than the world average in both solar and
wind. Denmark presents a particularly high RCA
in the wind industry, which reflects the support
policy to wind since the 1970s. In the solar
industry, only Cyprus presents a strong revealed
comparative advantage, followed by Czech
Republic and Finland.
(101) The RCA index compares the share of the solar and wind
sector exports in the EU's total goods exports with the
share of the same sector's exports in the total world's
exports. This measure is also computed for the EU main
trade partners, for comparability. Values higher (lower)
than 1 mean that the solar or wind industry in the EU (or
EU economic partner) performs better than the world
average, and is interpreted as a sign of comparative
(dis)advantage. The RCA index for product "i" is defined
80
as follows:
where
is the value of
60
exports, and w is the reference group, the world economy.
The final index is constructed as a simple average of the
annual indexes computed for the period 2007-2011 (the last
five years of available data).
(102) The relative trade balance index measures the trade balance
relative to the total trade in the sector. The RTB indicator
40
20
0
Overall economy
Germany
Renewable Energy
France
The UK
The Netherlands
Solar energy
Sweden
Spain
Wind energy
Denmark
for product "i" is defined as
where
i
Other EU MS
Sourc e : Co mmissio n Se rvic e s b a se d o n OEC D Pa te nts
Sta tistic s d a ta b a se .
is the value of product's "i" exports and imports. The
relative trade balance index ranges between -1 and 1 in a
symmetric manner, and it is usually used for comparisons
across countries and time. By comparison, the revealed
comparative advantage is asymmetric, as relative
disadvantage area ranges between 0 and 1, while the
relative advantage area between 1 and infinite. See Sanidas
and Shin (2010).
109
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
G ra p h III.2.7: Average Revealed Comparative Advantage Indexes of solar and wind industries in the EU-27 Member States
from 2007 to 2011
15
12
9
6
3
0
BE
BG
CZ
DK
DE
EE
IE
EL
ES
FR
IT
CY
LV
Solar Components
LT
LU
HU
NL
AT
PL
PT
RO
Sl
SK
FI
SE
UK
Wind Components
No te : RC A fo r Me mb e r Sta te s inc lud e b o th intra a nd e xtra EU tra d e .
Sourc e : Co mmissio n Se rvic e s b a se d o n UNCo mtra d e d a ta b a se .
G ra p h III.2.8: Average Revealed Comparative Advantage
Indexes of solar and wind industries in the EU27, USA, China and Japan from 2007 to 2011
4.00
3.20
3.00
2.16
2.00
1.77
1.00
0.80
1.70
0.77
0.66
0.59
0.00
EU-27
USA
Solar Components
China
Japan
Wind Components
No te : In this se c tio n, the UN Co mtra d e wa s use d inste a d o f
the Co me xt p ro vid e d b y the Euro sta t. This is e xp la ine d b y
the fa c t tha t Co me xt p ro vid e s limite d d a ta to No n-EU
c o untrie s, whic h wo uld no t a llo w the c o mp uta tio n o f the se
ind e xe s.
Sourc e : Co mmissio n Se rvic e s b a se d o n UNCo mtra d e
d a ta b a se .
Japan presents a slightly higher value, but this has
decreased over time. Both China and the USA
present negative index values, although China
improved significantly during the second period.
Once again, the situation is heterogeneous at the
Member State level (Graph III.2.11). Some
countries display a positive relative trade balance
in both solar and wind components (Denmark,
Estonia, Finland and Slovakia) while others
present a negative RTB in both solar and wind
components. Almost one third of the Member
States combine a negative relative trade balance in
solar components with a positive one in wind
components.
G ra p h III.2.9: Average relative trade balance Index of the
solar industry in the EU-27, USA, China and
Japan
0.60
2.3.2. Re la tive tra d e b a la nc e
0.40
The EU-27 displays a negative relative trade
balance (103) in the solar industry which has
worsened over time (Graph III.2.9). In
comparison, the situation of the US has remained
relatively stable. Japan presents a positive and
constant pattern, while China has improved its
position during the same period.
0.20
EU-27
US
0.00
China
-0.40
-0.60
RTB 2002-2006
By contrast, the EU-27 performs very well in the
wind industry (Graph III.2.10), once again having
a RTB index around 0.5 in both periods. Only
(103) In this case the index was calculated for two periods of five
years each (2002-2006 and 2007-2011), as the symmetry of
this index allows for comparability across time.
110
Japan
-0.20
RTB 2007-2011
Sourc e : Co mmissio n Se rvic e s b a se d o n UNCo mtra d e
d a ta b a se .
Pa rt III
Re ne wa b le s: Ene rg y a nd Eq uip me nt Tra d e De ve lo p me nts in the EU
G ra p h III.2.10: Average relative trade balance Index of the
wind industry in the EU-27, USA, China and
Japan
0.80
0.60
0.40
0.20
US
China
0.00
EU-27
Japan
-0.20
By contrast, the EU-27 has not yet managed to
build such a position in the trade of solar energy
components, mostly due to a negative trade
balance with China, which has emerged as a key
player over the past years. Overall, the EU-27
deficit in 2012 was 9 billion EUR, while in 2010
the figure was 21 billion EUR. Only a few
Member States (Czech Republic and Cyprus)
display a trade surplus in these components and it
is mostly driven by a surplus with other EU
countries.
-0.40
-0.60
RTB 2002-2006
RTB 2007-2011
Sourc e : Co mmissio n Se rvic e s b a se d o n UNCo mtra d e
d a ta b a se .
G ra p h III.2.11: Relative Trade Balance Indexes of solar and
wind industries in the EU-27 Member States
from 2007 to 2011
1
PT
0.6
0.4
SK
EE
0.8
DK
BE
FI
IT
DE
ES
AT
LT
0.2
Sl
CZ
FR
0
NL
PL
-0.2
-0.4
SE UK
LU
RO
-0.6
HU
-0.8
BG
IE GR
-1
CY
Solar Components
Wind Components
No te : RC A fo r Me mb e r Sta te s inc lud e b o th intra a nd e xtra
EU tra d e .
Sourc e : Co mmissio n Se rvic e s b a se d o n UNCo mtra d e
d a ta b a se .
2.4.
CONCLUSIONS
The wind and solar power sector has benefitted
from massive support across the world (chapter 1)
which has stepped up its development and the
related trade of equipment and components.
Compared to the rest of the world, the EU-27 has
built a strong position in wind energy components
that led to a trade surplus of around 2.45 billion
EUR in 2012. This coincides with a large share in
world wind patents since the 2000s. Within the
EU, Germany, Denmark and Spain display good
performances both in trade and innovation.
111
3.
3.1.
ENERGY TRADE BALANCE AND AVOIDED FUEL COSTS
INTRODUCTION
The development of renewable energy sources has
been promoted to increase diversification and
security of energy supply. It is also considered as a
way to reduce pollution and emissions of
greenhouse gases, caused by combustion of
conventional fuels. It is also expected to improve
security of supply and to be positive for the EU
external energy trade balance. The EU is
traditionally net importer of energy and its import
dependency has increased over the past years, from
47% in 2000 to 54% in 2011 (104). Renewables can
help EU avoiding some fuel imports and thus
reducing its trade deficit in energy sources.
This chapter analyses the impact of renewable on
the energy trade balance. More specifically, it
assesses the scale of avoided costs of imported
fuels, in the context of EU huge deficit in energy
products. Section 2 provides an overview of the
EU energy trade balance. Section 3 assesses the
avoided fuel costs. Conclusions are presented in
section 4.
While the previous parts of this paper focused on
renewable electricity, the current part adopts a
broader perspective and analyses not only avoided
costs of imported fuels thanks to the use of
renewables in electricity, but also in heat
production and transport. This approach is
necessary to have a full picture of avoided costs of
imported fuels, as they are higher in heating and
transport than in electricity.
3.2.
TOTALENERGY TRADEBALANCE
The EU has a strong trade deficit in trade in
energy products with non-EU countries, which
reached EUR 421 billion (3.3% of EU GDP) in
2012. The EU spent EUR 545 billion on imports of
energy products from outside the EU, while extraEU exports in this category amounted to EUR 124
billion
112
As Graph III.3.1 shows, the value of EU energy
trade balance seems to be linked to the price of
crude oil, as the increase of the oil price in 20052008 and 2010-2012 has contributed to
aggravating the trade. This can be explained by the
high share of oil in extra-EU energy imports (105)
(63% in 2012) and by the fact that import prices of
gas are frequently indexed to oil prices. Apart from
changing prices of oil and other fuels, EU trade
deficit was influenced by changes in demand for
imported fuels resulting from diminishing
domestic production of fuels, energy efficiency
efforts, the expansion of renewables, changes in
the economic activity and in households'
purchasing power. The overall EU dependence on
imported fuels increased gradually until 2006, and
since then remained stable around 53-54% (53.8%
in 2011).
G ra p h III.3.1: EU-27 trade deficit in energy products and
crude oil prices, 2000-2012
500
bn EUR
EUR/bbl
100
400
80
300
60
200
40
100
20
0
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Gas, natural and manufactured (lhs)
Petroleum, petroleum products and related materials (lhs)
Coal, Coke and Briquettes (lhs)
Others (lhs)
Sourc e : Euro sta t, Wo rld Ba nk
Among the energy products, crude oil and
refined petroleum products contributed the
most to the energy trade deficit. Oil deficit was
equal to EUR 275 bn, or 2.2% of GDP in 2011
Trade deficit in gas amounted to EUR 105 bn and
a smaller deficits was recorded for coal and
electricity.
The deficit has increased over the last years as it
was only EUR 150 bn in 2004 (in current prices).
Within the EU, new Member States (EU-12)
tend to have a larger energy trade deficit than
the EU-15 countries: seven EU-12 countries had
over 2007-2011 an average deficit larger than or
equal to 5% of GDP (Bulgaria, Cyprus, Lithuania,
Slovakia, Hungary, Slovenia and Latvia), whereas
(104) European Commission (2013a) provides an analysis of
energy dependence of the EU and Member States
(105) European Commission (2013c)
Pa rt III
Re ne wa b le s: Ene rg y a nd Eq uip me nt Tra d e De ve lo p me nts in the EU
G ra p h III.3.2: Member States trade balance in energy products as % of GDP, 2012
2
% of GDP
DK
0
-2
-4
EE
EU
DE
-6
SE
IE
NL
EL
ES
FR
IT
AT
PT
CZ
BE
LV
-8
PL
UK
FI
RO
LU
SK
HU
SI
BG
CY
LT
-10
-12
MT
-14
Sourc e : Euro sta t
none of the EU-15 countries exceeds this
threshold.
EU negative trade balance in energy products and
high energy imports have several negative
macroeconomic
implications.
They
imply
substantial transfer of wealth from EU energy
consumers to energy producers outside the EU,
especially to the Gulf States, which have
particularly low crude oil production costs (106).
Moreover, high energy imports make Member
States vulnerable to the inflationary pressures
originating from energy price shocks and their
impact on GDP. In particular, energy-intensive
economies run risk of competitiveness erosion,
depending on the energy intensity and energy
efficiency performance (107).
3.3.
This section provides an estimate of the amount of
the savings in imported fuels cost, achieved thanks
to the deployment of renewables. The main
assumption is that the renewable energy replaces
the same amount of energy received from nonrenewable sources, i.e. from fossil fuels and other
sources such as nuclear power.
The assessment is made separately for three main
energy sectors: electricity, heating and transport
(including cooling) (108) (Box III.3.1). These three
sectors represent together over 90% of EU final
energy consumption, heating accounting for almost
half of it. In 2010, heating represented 43% of EU
final energy consumption, compared with 21% for
electricity and 32% for transport.
AVOIDED COSTS OF IMPORTED FUEL
EU external trade deficit in energy products may
be partially reduced thanks to the development of
renewables, which are largely produced
domestically. Renewables replace a part of nonrenewable fuels in the EU energy mix, which saves
some costs of imported fuels.
(106) According to Kelley and Bishop (2010), the wealth transfer
to Gulf States (from all the importers, not only from the
EU) was estimated at USD 490 billion per year when crude
price was $75 per barrel. With current prices exceeding
$100/bbl, this transfer must be even higher. A part of this
transferred wealth returns to the EU and other oil
importers, for instance in form of goods and services
purchased in these countries.
(107) Ciscar et al (2004). According to one of the calculations,
every $10 rise in the price of oil per barrel leads on average
to a 0.94 per cent decline in GDP for those importing oil.
(108) The Renewable Directive set a specific mandatory target
on the transport sector: a 10% share of energy from
renewable sources in transport by 2020. Electricity and
heating are included in the overall target of 20% share of
renewable energy in the final energy consumption by 2020.
113
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
Bo x III.3.1: Assessing avoided imported fuel costs
As regards electricity, the assessment involves first the calculation of the cost of fuel input to electricity
generation from conventional energy sources, for each of the main types of fuel (hard coal, gas, oil) and by
Member State. For this purpose, IEA data on the volumes of fuel inputs and the relevant fuel unit costs have
been used (1). As the next step, the ratios of hydro, wind and solar power generation to the non-renewable
power generation have been calculated. By multiplying these respective ratios by the cost of fuel input, the
value of coal, gas and oil avoided thanks to the use of hydro, wind and solar energy has been assessed.
In this calculation (2), it is assumed that renewable electricity replaces not only electricity from fossil fuels
but also nuclear power. This is in line with the changes observed over the last decade (3). It is also assumed
that renewables replace a mix of conventional fuels equivalent to the one used to actually produce electricity
in the given year, which is a certain approximation. This may underestimate the fact that renewables replace
mainly the most expensive technologies, depending on their relative costs and available capacities.
However, the avoided fuel costs include the cost of both domestic and imported fuels. While from the point
of view of energy savings brought about by renewables both domestic and imported bring the same benefits,
they should be treated differently as regards the impact on energy trade balance: imported fuels aggravate
energy trade deficit, while domestic fuels do not (4). Therefore, in order to assess the costs of imported fuels,
the avoided costs of domestically produced fuels (i.e. of coal, gas and oil produced in the EU) .This has been
done by multiplying the avoided fuel costs of oil, gas and coal by the respective import dependency ratios
for coal, gas and oil respectively.
Avoided Import Fuel CostElectricity =
∑ ( Cost
fuel *
Inputfuel) * (RESPROD /NONRESPROD) *(Impfuel/GICfuel)
where Inputfuel is the fuel input for thermal generation for each type of fuel; Costfuel is the unit cost of fuel
for each type of fuel; RESPROD is the renewable electricity production, separately for wind, solar, hydro
and biomass; NONRESPROD is the non-renewable electricity production; Impfuel/GICfuel is the dependency
ratio on imported gas, oil and coal.
As regards heat, the assessment involves first the calculation of the average cost of replaced conventional
fuel used for heating per energy unit (toe). This calculation is based on IEA data on fuel costs. The average
cost of fuel is multiplied by the volume of renewable energy used for heating, which gives us the cost of
avoided fossil fuel thanks to the use of biomass. We assume that biomass used in heating replaces the same
amount of heat from non-renewable sources, in the same proportion as in the current energy mix. However,
like in case of electricity, the avoided fuel costs used in heating include the cost of both domestic and
imported fuels, while our purpose is to calculate the costs of imported fuels. Therefore the avoided fuel costs
have been divided between the costs of oil, gas and coal, and multiplied by their respective import
dependency ratios.
As regards transport, the amount (in toe) of biofuels used in a given year was multiplied by the unit cost of
replaced petrol and diesel fuel (using the IEA data about energy unit costs). This calculation gives us the
cost of avoided fossil fuel thanks to the use of biofuels. This value has been multiplied by the import
dependency ratio on oil, to eliminate the impact of domestic oil production and assess the avoided costs of
imported fuels.
(1) International Energy Agency (2012b)
(2) See Appendix 2 for data description.
(3) Between 2005 and 2010, the share of RES in EU electricity generation increased by 6 percentage points and of gas by
4 points, while the share of coal, nuclear and petroleum decreased by 5, 3 and 2 pp respectively (European
Commission 2012b). This shows that RES replaces not only fossil fuels, but also nuclear power in the electricity mix.
4
( ) Although EU is a net importer of fuels, a small part of domestically produced fuels is exported. If fuel is not sold
internally, it still has the same value as the imported fuel because it can be exported at that price.
(Co ntinue d o n the ne xt p a g e )
114
Pa rt III
Re ne wa b le s: Ene rg y a nd Eq uip me nt Tra d e De ve lo p me nts in the EU
Bo x (c o ntinue d)
Avoided Import Fuel CostTransport or Heating = Costfuel * RESPROD *(Impfuel/GICfuel)
where Costfuel is the cost of unit of fuel; RESPROD is the production of renewable heating/biofuels;
Impfuel/GICfuel is the dependency ratio on imported gas, oil and coal (oil only in transport).
3.3.1. Avo id e d fue l c o st in e le c tric ity
In 2010, the avoided imported fuel cost in
electricity generation amounted to EUR 10.2
billion for EU-27 in 2010, including EUR 5.8
billion for hydro power, EUR 2.2 billion for wind
power, EUR 1.8 billion for biomass and EUR 0.3
billion for solar power. While 2011 and 2012 data
are not available yet (109), the avoided fuel costs
increased in these years in comparison to 2010,
due to increased renewable production and rising
oil and gas import prices.
It is important to remember that wind, solar or
hydro power investments made in a given year
save fuel costs over the entire lifetime of these
installations, during at least 20-25 years. For
instance, thanks to wind and solar installations
which were put into operation in 2010, some EUR
460 million of imported fuel costs were saved in
2011, but some EUR 7.5 billion can be saved over
the lifetime of this equipment (110).
G ra p h III.3.3: Avoided imported fuel costs thanks to
renewable electricity - 2010
8000
m EUR
6000
4000
(Graph III.3.4). One could in principle expect that
countries with higher production of renewable
electricity would have higher avoided imported
fuel costs. Graph III.3.5 shows that this is not
always the case. For instance, Italy saves more
imported fuel costs than Germany and Spain,
which have higher RES production. Austria saves
twice more imported fuel costs than Sweden or
France, although produces less renewable
electricity than these countries. This could be
explained by differences in the fuel mix for nonrenewable electricity generation in these countries,
and by differences in the share of imports in fuel
consumption. Italy produces its non-renewable
electricity mainly from gas and uses relatively
much oil for electricity generation; these fuels are
usually more expensive and fully imported. Spain
and Germany use more coal for electricity
generation, which is cheaper and partially
domestically produced, than Italy. France and
Sweden have high shares of nuclear power. As we
assume that renewable energy replaces the same
amount of energy received from non-renewable
sources, i.e. from fossil fuels and nuclear, a high
share of nuclear means that each unit of renewable
electricity produced replaces less imported fossil
fuels than in the countries without or with low
nuclear power. This concerns also the other
countries with high share of nuclear power, such as
Belgium, Hungary or Slovakia.
2000
0
Wind
Solar
Hydro
Biomass
Sourc e : Co mmissio n Se rvic e s b a se d o n Euro sta t a nd
Inte rna tio na l Ene rg y Ag e nc y d a ta b a se s.
Among Member States, avoided costs of
imported fuels thanks to the use of renewable
energy were the highest in Italy and Spain,
followed by Austria, Germany and Portugal
(109) In particular, data on the costs of fuel input to electricity
generation are not available yet for 2011 or 2012.
(110) Assuming average lifetime of 25 years and using 4%
discount rate
115
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
G ra p h III.3.4: Avoided imported fuel costs thanks to
renewable electricity by Member States - 2010
4000
m EUR
3000
2000
1000
0
IT ES AT DE PT FR SE FI UK EL RO BE LT IE DK LV SK BG LU NL HU PL SI CZ EE CY MT
Sourc e : Co mmissio n Se rvic e s b a se d o n Euro sta t a nd
Inte rna tio na l Ene rg y Ag e nc y d a ta b a se s.
G ra p h III.3.5: Renewable electricity generation and
avoided imported fuel costs - 2010
DE
RES electricity production, TWh
ES
SE
FR
80
IT
60
AT
40
PT
UK
FI
RO
20
DK
EL
BG
0
0
500
1000
1500
2000
2500
3000
3500
4000
Avoided costs of imported fuels, MEUR
Sourc e : Co mmissio n Se rvic e s b a se d o n Euro sta t d a ta b a se .
3.3.2. Avo id e d fue l c o sts in he a ting
tra nsp o rt
a nd
The production of renewables contributes to
replacing fossil fuel costs used not only in
electricity, but also in heat production and
transport.
In heating, fossil fuels provide some 80% of
energy used for this purpose, with the highest
share of gas (43%) followed by solid fuels (29%).
Renewable energy – biomass – represented in
2010 some 15% of energy used for heat
production. Most of the biomass used for heating
in the EU is domestically produced, and the
imports of biomass are rather marginal. In 2010,
EU consumption of biomass used for heating
116
In transport, oil products represented almost 95%
of fuel consumption (112). The EU is highly
dependent on oil imports, which in 2010
represented 84% of EU oil consumption. EU
dependency on oil products was growing over the
recent year due to depletion of domestic oil
reserves and diminishing of crude oil production.
Biofuels represented in 2010 3.8% of final energy
demand in transport. However, not all EU biofuels
production was domestic: some 35% of bioethanol
used in the EU and 22% of biodiesel was imported.
Moreover, a part of feedstock for production of
biofuels by EU industry is also imported.
As regards the calculation of avoided fuel costs in
heating and electricity, the methodology has been
similar to the methodology applied to electricity
(Box III.3.1).
120
100
amounted to 72.5 Mtoe, while imports accounted
for some 3 Mtoe only (111).
According to our calculation, the avoided costs
of imported fuels, replaced by biomass used for
heating, amount at EUR 12.2 billion in 2010.
This includes EUR 6.9 billion of imported gas
costs, EUR 3.3 billion of imported oil and EUR 2
billion of imported coal. France and Sweden,
followed by Germany, Finland and Italy, had the
highest amounts of avoided costs of imported fuels
due to biomass use among Members States (Graph
III.3.7).
As regards transport, the avoided costs of
imported fuels, replaced by biofuels, amounted
at EUR 7.6 billion in 2010. This included EUR
5.8 billion saved thanks to the production of
biodiesel and EUR 1.8 billion thanks to
bioethanol. (113). Among Member States, avoided
costs of imported fuels thanks to the use of
renewable energy in transport were the highest in
Germany, France, Italy and Spain (Graph III.3.7).
(111) Data from the Impact Assessment on biomass sustainability
(under preparation). One of the limitations in the
calculation is the fact that imported wood, biomass and the
feedstock for biofuels can be used for energy purposes but
also for other non-energy purposes: wood for furniture or
paper, biofuel feedstock – as edible oil.
(112) Including maritime bunkers.
(113) For comparison, the support to biofuels in the form of tax
exemptions was estimated at some EUR 3 billion a year in
EU-27, not taking into account market transfers resulting
from mandatory blending requirements,
Pa rt III
Re ne wa b le s: Ene rg y a nd Eq uip me nt Tra d e De ve lo p me nts in the EU
G ra p h III.3.6: Avoided total fuel costs and imported costs
thanks to renewable energy, 2010
14000
G ra p h III.3.7: Avoided fuel costs thanks to renewable use in
heating and transport by Member States, 2010
3000
m EUR
m EUR
Transport
12000
10000
2000
8000
6000
1000
4000
2000
0
DE FR IT ES SE PL BE NL PT FI AT CZ SK HU EL LT IE LV UK RO SI BG CY MT DK EE LU
0
Electricity
Heating
Transport
4000
m EUR
Heating
Sourc e : Co mmissio n Se rvic e s b a se d o n Euro sta t a nd
Inte rna tio na l Ene rg y Ag e nc y d a ta b a se s.
3000
Altogether, the avoided costs of imported fuel
saved thanks to the use of renewable energy
amounted to some EUR 30 billion in the EU in
2010. This estimate given in this paper applies
rather cautious assumptions and should be
considered as a low estimate (114).
2000
1000
0
FR SE DE FI IT ES AT PT RO LT BE EL BG LV HU EE PL CZ SK UK DK SI NL IE CY MT LU
Sourc e : Co mmissio n Se rvic e s b a se d o n Euro sta t a nd
Inte rna tio na l Ene rg y Ag e nc y d a ta b a se s.
However, EU production of renewables is
expected to substantially increase over the coming
years in order to reach the objective of 20% share
of energy from renewable sources in gross final
consumption of energy in 2020. Total renewable
energy production amounted to 150 Mtoe in 2010
and is expected to increase to 238 Mtoe by
2020 (115), i.e. by 59%. With unchanged fuel
prices, this would imply an increase in the avoided
imported fuel costs to some EUR 50 billion in
2020 (in 2010 prices). The actual increase in
avoided fuel costs is likely to be much more
significant as most reference scenarios for 2020,
including IEA's, EIA's and the Commission's,
project for substantial price increases for EU fossil
import prices.
3.4.
(114) For instance, European Wind Energy Association (2012)
calculated the avoided fuel cost thanks to wind energy (i.e.
including avoided costs of domestic and imported fuels) at
EUR 5.7 billion in 2010
CONCLUSIONS
The development of renewables allows Member
States to save a part of costs of imported fossil
(115) European Commission (2013b)
117
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
fuels and thus to reduce its trade deficit in energy
products. According to our calculations, these
avoided imported fuel costs amount to some EUR
30 billion a year in 2010. This amount is in 2010
still rather limited in comparison to EU external
trade deficit in energy products (EUR 304 billion
in 2010, but increased to EUR 421 billion in
2012). It is also comparable to the amount of
subsidies received by the renewable sector in 2010
(some EUR 27 billion). Our calculation applies,
however, rather cautious assumptions and should
be considered as a low estimate.
118
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120
APPENDIX 1
Da ta d e sc rip tio n fo r the mo d e l me a suring the d rive rs o f tra d e
in so la r p o we r a nd wind e q uip me nt
Variable
Imports and Exports
De scription
Product HS codes are presented at
box 1.
Source
Sample
COMEXT (Eurostat)
EU-27 Member States and twenty non-EU trade
partners: Australia, Brazil, Canada, Chile, Republic of
China, Hong Kong, India, Indonesia, Israel, Japan,
Republic of Korea, Malaysia, Mexico, Philippines,
Russian Federation, Switzerland, T aiwan, T hailand,
T urkey and United States of America
2000-2012
Comtrade (UN)
US, China, Japan, EU27
2002-2011
World Development Indicators
(World Bank)
EU-27 Member States and twenty non-EU trade
partners: Australia, Brazil, Canada, Chile, Republic of
China, Hong Kong, India, Indonesia, Israel, Japan,
Republic of Korea, Malaysia, Mexico, Philippines,
Russian Federation, Switzerland, T aiwan, T hailand,
T urkey and United States of America
2000-2012
World Development Indicators
(World Bank)
EU-27 Member States and twenty non-EU trade
partners: Australia, Brazil, Canada, Chile, Republic of
China, Hong Kong, India, Indonesia, Israel, Japan,
Republic of Korea, Malaysia, Mexico, Philippines,
Russian Federation, Switzerland, T aiwan, T hailand,
T urkey and United States of America
2000-2012
World Development Indicators
(World Bank)
EU-27 Member States and twenty non-EU trade
partners: Australia, Brazil, Canada, Chile, Republic of
China, Hong Kong, India, Indonesia, Israel, Japan,
Republic of Korea, Malaysia, Mexico, Philippines,
Russian Federation, Switzerland, T aiwan, T hailand,
T urkey and United States of America
2000-2012
OECD Patents Statistics
EU-27 Member States and nineteen non-EU trade
partners: Australia, Brazil, Canada, Chile, Republic of
China, Hong Kong, India, Indonesia, Israel, Japan,
Republic of Korea, Malaysia, Mexico, Philippines,
Russian Federation, Switzerland, T hailand, T urkey
and United States of America
2000-2011
OECD Patents Statistics
EU-27 Member States and nineteen non-EU trade
partners: Australia, Brazil, Canada, Chile, Republic of
China, Hong Kong, India, Indonesia, Israel, Japan,
Republic of Korea, Malaysia, Mexico, Philippines,
Russian Federation, Switzerland, T hailand, T urkey
and United States of America
2000-2011
US Energy Information Agency
EU-27 Member States and twenty non-EU trade
partners: Australia, Brazil, Canada, Chile, Republic of
China, Hong Kong, India, Indonesia, Israel, Japan,
Republic of Korea, Malaysia, Mexico, Philippines,
Russian Federation, Switzerland, T aiwan, T hailand,
T urkey and United States of America
2000-2011
In euros
Imports and Exports
Population
Nominal GDP
GDP per capita
Patents
In dollars.
T otal number of people per country
In current US dollars
In current US dollars
Number of applications by the
applicant's country of residence
T he stock of knowledge comes from
authors own computations. It applies
the perpetual inventory method to
the patents data described above. At
year t technology i (wind or solar
photovoltaic) the stock value is:
Stock of knowledge
Stock it=(1-δ) Stock it-1 +InnoPatApp it
Where the base year was 1976 (the
first year of available data), and the
discount rate ( ) is assumed to be
0.15, following Cao and Groba
(2013).
Billion kilowatt-hours
Net electricity generation by wind
and solar
T he share of solar or wind power in
total net electricity generation comes
from authors own computations based
on the data on net electricity
described above plus data on total net
electricity generation provided by the
same source. It was simply divided the
former by the latter.
T his source does not present values
individually to solar power, as it
aggregates tide and wave with solar
power. However, the bias in the true
values is not considerable as both tide
and wave are still marginal.
Percentage Points
US Energy Information Agency
EU-27 Member States and twenty non-EU trade
partners: Australia, Brazil, Canada, Chile, Republic of
China, Hong Kong, India, Indonesia, Israel, Japan,
Republic of Korea, Malaysia, Mexico, Philippines,
Russian Federation, Switzerland, T aiwan, T hailand,
T urkey and United States of America
2000-2011
121
APPENDIX 2
Da ta d e sc rip tio n fo r a sse ssing a vo id e d imp o rte d fue l c o sts
122
Variable
De scription
Source
Sample
Fuel input for electricity generation
Million tonnes (coal, oil)
GWh (gas)
International Energy Agency
EU-27 Member States
2010
Unit cost of fuel in electricity,
heating and transport
USD/tonne (coal, oil)
USD/MWh (gas)
USD/toe (heating, transport)
International Energy Agency
Unit cost of fuel in heating and
transport
EUR/1000 L
European Commission: Oil Bulletin
EU-27 Member States
(average cost for MS for which data
are available was used)
2010
EU-27 Member States
(average cost for MS for which data
are available was used)
2010
Exchange rate EUR/USD
Ratio
Eurostat
2010
Renewable electricity generation
(total and by technology: wind, solar,
hydro, biomass) and non-renewable
electricity generation
T Wh
European Commission
DG Energy
EU-27, Member States 2010
Renewable energy in heating and
transport
Mtoe
European Commission
EU-27
2010
Import dependency ratio
Net imports / (gross energy
consumption + bunkers). Separately
for oil, gas, coal. In %
Eurostat
EU-27, Member States
2010
STATISTICAL ANNEX
Energy Unit Costs in Europe and the world
Austria
Food, Beverages and Tobacco
Energy Intensity*
(10MJ/$)
annual
level 2009 growth
rate
0.42
0.4%
Real Energy price
($/10MJ)
annual
level 2009 growth
rate
0.18
-0.2%
RUEC
(% )
annual
level 2009 growth
rate
7.7
0.2%
Share of sector in
Manufacturing VA
RUEC
level
level 2000 level 2009
Share of sector in
Manufacturing VA
2011
10.3%
11.1%
8.4
10.1%
Textiles and Textile Products
0.36
0.0%
0.20
4.0%
7.2
4.1%
3.5%
1.9%
8.5
1.6%
Leather, Leather and Footwear
Wood and Products of Wood and
Cork
Pulp, Paper, Paper , Printing and
Publishing
Coke, Refined Petroleum and
Nuclear Fuel
Chemicals and Chemical Products
0.18
-2.2%
0.31
5.0%
5.5
2.7%
0.6%
0.3%
6.4
0.3%
1.24
7.4%
0.09
-3.8%
10.5
3.3%
4.5%
4.4%
10.8
4.8%
1.71
-0.8%
0.08
8.3%
13.7
7.4%
9.6%
7.7%
15.3
7.0%
12.88
-14.0%
0.69
39.6%
883.0
20.0%
3.1%
0.8%
1076.2
0.9%
1.54
-5.4%
0.14
9.8%
21.7
3.9%
6.5%
8.1%
22.9
8.0%
Rubber and Plastics
0.31
4.5%
0.20
-4.0%
6.1
0.4%
4.2%
4.0%
7.3
3.5%
Other Non-Metallic Mineral
1.50
4.1%
0.13
0.6%
18.9
4.7%
6.0%
5.3%
20.9
4.6%
Basic Metals and Fabricated Metal
1.26
2.5%
0.21
4.5%
26.4
7.1%
14.8%
17.7%
34.0
19.2%
Machinery, Nec
0.14
4.0%
0.17
-4.3%
2.3
-0.5%
11.7%
14.0%
2.6
14.7%
Electrical and Optical Equipment
0.15
4.0%
0.21
0.9%
3.0
4.9%
13.0%
13.1%
3.4
12.8%
Transport Equipment
0.15
-1.5%
0.20
0.7%
3.2
-0.8%
6.4%
7.3%
3.5
8.7%
Manufacturing, Nec; Recycling
0.19
6.4%
0.30
-1.7%
5.6
4.6%
5.6%
4.3%
6.4
3.6%
Total Manufacturing
1.58
-0.7%
0.11
5.0%
18.1
4.3%
23.5
Belgium
Energy Intensity*
(10MJ/$)
Real Energy price
($/10MJ)
Share of sector in
Manufacturing VA
RUEC
(% )
RUEC
level
Share of sector in
Manufacturing VA
Food, Beverages and Tobacco
0.55
annual
growth
rate
1.1%
0.16
annual
growth
rate
-0.3%
8.9
annual
growth
rate
0.8%
12.5%
14.5%
10.7
12.5%
Textiles and Textile Products
0.37
-2.9%
0.21
-2.4%
7.8
-5.2%
5.1%
3.8%
9.5
3.3%
Leather, Leather and Footwear
Wood and Products of Wood and
Cork
Pulp, Paper, Paper , Printing and
Publishing
Coke, Refined Petroleum and
Nuclear Fuel
Chemicals and Chemical Products
0.34
2.9%
0.13
-6.5%
4.5
-3.8%
0.2%
0.2%
5.7
0.2%
1.01
-4.2%
0.08
1.6%
8.2
-2.7%
1.5%
1.6%
9.8
1.5%
0.81
2.5%
0.10
-3.7%
7.8
-1.4%
8.2%
7.7%
9.6
6.7%
46.45
-5.3%
0.19
7.8%
883.1
2.0%
2.9%
4.3%
922.9
6.1%
3.95
0.7%
0.10
4.2%
40.0
4.9%
19.0%
19.8%
43.4
21.2%
Rubber and Plastics
0.26
-13.7%
0.27
15.4%
6.8
-0.5%
3.6%
3.9%
7.9
4.1%
Other Non-Metallic Mineral
1.58
-2.9%
0.14
6.1%
21.9
3.0%
5.2%
6.0%
25.4
5.2%
Basic Metals and Fabricated Metal
1.57
-6.9%
0.15
12.0%
23.5
4.3%
14.4%
15.0%
28.6
16.7%
Machinery, Nec
0.08
-4.1%
0.39
2.9%
3.1
-1.2%
6.6%
6.8%
3.3
7.0%
Electrical and Optical Equipment
0.13
-5.7%
0.23
2.5%
2.9
-3.4%
8.8%
7.2%
2.8
6.9%
Transport Equipment
0.29
-0.5%
0.13
3.6%
3.7
3.0%
8.8%
6.4%
4.1
6.2%
Manufacturing, Nec; Recycling
0.30
-8.7%
0.27
12.3%
8.0
2.4%
3.1%
2.8%
9.5
2.5%
54.1
5.4%
level 2009
Total Manufacturing
level 2009
level 2009
level 2000 level 2009
2011
75.4
123
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
Bulgaria
Energy Intensity*
(10MJ/$)
RUEC
level
Share of sector in
Manufacturing VA
Food, Beverages and Tobacco
26.1
20.3%
15.9%
26.1
15.9%
Textiles and Textile Products
13.0
-5.0%
12.2%
14.9%
13.0
14.9%
Leather, Leather and Footwear
Wood and Products of Wood and
Cork
Pulp, Paper, Paper , Printing and
Publishing
Coke, Refined Petroleum and
Nuclear Fuel
Chemicals and Chemical Products
18.7
-6.6%
1.4%
1.3%
18.7
1.3%
50.9
1.6%
1.4%
2.0%
50.9
2.0%
13.6
-5.7%
4.1%
4.4%
13.6
4.4%
988.2
9.6%
11.9%
6.3%
988.2
6.3%
76.2
-3.7%
10.1%
6.4%
76.2
6.4%
Rubber and Plastics
32.3
-0.1%
2.2%
2.9%
32.3
2.9%
Other Non-Metallic Mineral
68.5
-4.8%
4.0%
7.8%
68.5
7.8%
Basic Metals and Fabricated Metal
76.4
-2.8%
12.2%
17.4%
76.4
17.4%
Machinery, Nec
21.3
8.0%
10.1%
8.2%
21.3
8.2%
Electrical and Optical Equipment
17.5
3.0%
5.2%
6.1%
17.5
6.1%
Transport Equipment
12.7
6.3%
2.4%
2.3%
12.7
2.3%
Manufacturing, Nec; Recycling
23.0
-1.7%
2.4%
4.1%
23.0
4.1%
Total Manufacturing
99.1
0.9%
level 2009
annual
growth
rate
Share of sector in
Manufacturing VA
RUEC
(% )
annual
growth
rate
0.2%
level 2009
annual
growth
rate
Real Energy price
($/10MJ)
level 2009
level 2000 level 2009
2011
99.1
Czech Republic
Energy Intensity*
(10MJ/$)
Share of sector in
Manufacturing VA
RUEC
(% )
RUEC
level
Share of sector in
Manufacturing VA
Food, Beverages and Tobacco
0.69
annual
growth
rate
-3.0%
0.10
annual
growth
rate
-2.3%
6.7
annual
growth
rate
-5.2%
13.0%
11.8%
6.9
9.7%
Textiles and Textile Products
0.86
-5.4%
0.14
3.3%
12.2
-2.3%
5.4%
3.2%
14.2
2.9%
Leather, Leather and Footwear
Wood and Products of Wood and
Cork
Pulp, Paper, Paper , Printing and
Publishing
Coke, Refined Petroleum and
Nuclear Fuel
Chemicals and Chemical Products
0.16
-16.8%
0.03
-16.9%
0.4
-30.8%
0.6%
0.3%
0.5
0.3%
0.88
0.4%
0.14
4.9%
12.8
5.4%
3.4%
3.7%
13.0
3.3%
1.49
-0.5%
0.05
-4.9%
7.1
-5.4%
5.7%
5.5%
6.9
5.2%
58.49
-7.1%
0.96
36.7%
5611.1
27.0%
1.6%
0.1%
4191.1
0.2%
10.18
-1.9%
0.10
6.6%
100.6
4.5%
6.6%
4.3%
101.1
4.8%
Rubber and Plastics
0.44
-19.2%
0.23
26.3%
10.2
2.1%
4.8%
8.8%
11.0
8.6%
Other Non-Metallic Mineral
2.31
-2.3%
0.08
0.6%
17.4
-1.8%
7.9%
6.3%
15.6
5.7%
Basic Metals and Fabricated Metal
3.21
-3.5%
0.07
-1.4%
22.3
-4.9%
14.8%
14.4%
22.3
15.7%
Machinery, Nec
0.44
-5.0%
0.19
5.0%
8.5
-0.2%
9.6%
11.0%
8.4
11.0%
Electrical and Optical Equipment
0.20
-12.0%
0.13
7.5%
2.6
-5.4%
12.0%
11.1%
2.8
11.2%
Transport Equipment
0.30
-8.6%
0.17
7.4%
5.1
-1.8%
10.2%
15.6%
4.9
17.8%
Manufacturing, Nec; Recycling
0.16
-22.4%
0.29
24.6%
4.6
-3.3%
4.4%
4.0%
5.7
3.8%
Total Manufacturing
2.50
-5.0%
0.08
1.7%
20.0
-3.4%
level 2009
124
Real Energy price
($/10MJ)
level 2009
level 2009
level 2000 level 2009
2011
22.4
Sta tistic a l a nne x
Denmark
Energy Intensity*
(10MJ/$)
Real Energy price
($/10MJ)
Share of sector in
Manufacturing VA
RUEC
(% )
RUEC
level
Share of sector in
Manufacturing VA
Food, Beverages and Tobacco
0.60
annual
growth
rate
0.1%
0.15
annual
growth
rate
1.3%
8.8
annual
growth
rate
1.4%
15.9%
18.1%
13.6
15.7%
Textiles and Textile Products
0.30
-1.8%
0.23
4.5%
6.8
2.6%
2.4%
1.2%
7.9
1.3%
Leather, Leather and Footwear
Wood and Products of Wood and
Cork
Pulp, Paper, Paper , Printing and
Publishing
Coke, Refined Petroleum and
Nuclear Fuel
Chemicals and Chemical Products
0.20
6.9%
0.50
10.1%
10.1
17.7%
0.3%
0.0%
12.4
0.0%
0.85
-0.8%
0.07
2.1%
5.8
1.3%
2.9%
2.2%
7.9
1.9%
0.21
-3.5%
0.20
5.0%
4.1
1.4%
10.7%
8.5%
5.1
8.2%
7.0
1.5%
11.2%
12.5%
Rubber and Plastics
0.31
-9.4%
0.19
10.5%
6.0
0.0%
5.1%
Other Non-Metallic Mineral
1.87
0.2%
0.10
2.2%
18.4
2.5%
4.7%
Basic Metals and Fabricated Metal
0.20
-3.2%
0.35
5.7%
6.9
2.3%
10.7%
Machinery, Nec
0.15
-0.3%
0.26
2.9%
3.9
2.6%
Electrical and Optical Equipment
0.09
-5.1%
0.19
3.5%
1.8
-1.7%
Transport Equipment
0.48
9.4%
0.08
-9.3%
3.6
Manufacturing, Nec; Recycling
0.18
-3.5%
0.24
4.3%
level 2009
level 2009
Total Manufacturing
level 2009
level 2000 level 2009
2011
996.2
1.7%
9.0
14.3%
4.4%
7.2
4.7%
3.8%
24.2
3.6%
9.3%
8.7
10.1%
14.4%
15.6%
6.5
15.2%
12.3%
15.8%
2.5
17.1%
-0.8%
3.0%
2.9%
28.6
0.7%
4.3
0.7%
6.0%
4.8%
5.1
5.6%
17.8
1.9%
24.6
Germany
Energy Intensity*
(10MJ/$)
RUEC
level
Share of sector in
Manufacturing VA
Food, Beverages and Tobacco
13.6
8.6%
7.2%
12.4
6.2%
Textiles and Textile Products
12.9
4.6%
2.1%
1.4%
11.9
1.3%
Leather, Leather and Footwear
Wood and Products of Wood and
Cork
Pulp, Paper, Paper , Printing and
Publishing
Coke, Refined Petroleum and
Nuclear Fuel
Chemicals and Chemical Products
6.2
-1.0%
0.2%
0.2%
5.8
0.2%
14.1
7.6%
1.9%
1.3%
13.2
1.2%
10.8
4.6%
8.0%
6.3%
10.2
5.4%
1511.4
12.8%
1.2%
0.6%
1375.5
0.7%
22.2
-0.7%
9.7%
10.5%
20.9
10.1%
Rubber and Plastics
14.1
9.6%
4.7%
4.6%
13.5
4.5%
Other Non-Metallic Mineral
20.7
2.9%
3.8%
2.9%
19.0
2.7%
Basic Metals and Fabricated Metal
16.2
2.3%
13.2%
14.4%
14.0
16.2%
Machinery, Nec
3.0
-0.1%
14.6%
17.1%
2.7
17.0%
Electrical and Optical Equipment
3.3
1.9%
15.5%
15.0%
3.1
15.4%
Transport Equipment
5.6
0.2%
13.4%
15.5%
5.2
16.6%
Manufacturing, Nec; Recycling
10.4
5.9%
3.0%
2.8%
10.2
2.5%
19.7
3.2%
Total Manufacturing
1.8
-0.1%
level 2009
0.1
annual
growth
rate
Share of sector in
Manufacturing VA
RUEC
(% )
annual
growth
rate
4.5%
level 2009
annual
growth
rate
Real Energy price
($/10MJ)
3.3%
level 2009
level 2000 level 2009
2011
18.4
125
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
Estonia
Energy Intensity*
(10MJ/$)
Real Energy price
($/10MJ)
Share of sector in
Manufacturing VA
RUEC
(% )
RUEC
level
Share of sector in
Manufacturing VA
Food, Beverages and Tobacco
1.25
annual
growth
rate
-4.6%
0.14
annual
growth
rate
5.2%
17.6
annual
growth
rate
0.3%
17.7%
15.5%
17.6
15.5%
Textiles and Textile Products
0.85
-6.2%
0.12
5.9%
10.4
-0.7%
12.5%
6.9%
10.4
6.9%
Leather, Leather and Footwear
Wood and Products of Wood and
Cork
Pulp, Paper, Paper , Printing and
Publishing
Coke, Refined Petroleum and
Nuclear Fuel
Chemicals and Chemical Products
1.37
9.4%
0.05
-7.2%
7.1
1.4%
1.6%
0.6%
7.1
0.6%
2.04
-0.5%
0.08
2.7%
15.7
2.2%
13.1%
12.4%
15.7
12.4%
1.61
-0.8%
0.10
5.7%
16.0
4.9%
7.9%
8.3%
16.0
8.3%
16.06
-11.2%
0.04
-5.3%
level 2009
level 2009
level 2009
level 2000 level 2009
2011
72.0
-15.9%
0.6%
3.5%
72.0
3.5%
47.9
-3.2%
4.3%
5.2%
47.9
5.2%
3.0%
Rubber and Plastics
0.51
-3.0%
0.24
1.7%
12.4
-1.3%
2.7%
3.0%
12.4
Other Non-Metallic Mineral
5.84
-0.2%
0.04
-3.2%
21.6
-3.4%
5.7%
5.6%
21.6
5.6%
Basic Metals and Fabricated Metal
0.39
0.6%
0.23
9.1%
9.0
9.7%
7.8%
10.6%
9.0
10.6%
Machinery, Nec
0.86
0.8%
0.09
6.5%
7.7
7.3%
3.3%
5.1%
7.7
5.1%
Electrical and Optical Equipment
0.30
-8.5%
0.10
5.6%
3.0
-3.4%
9.2%
13.4%
3.0
13.4%
Transport Equipment
0.58
-1.5%
0.10
9.1%
6.1
7.5%
4.9%
3.6%
6.1
3.6%
Manufacturing, Nec; Recycling
1.39
-5.3%
0.10
8.2%
13.4
2.4%
8.6%
6.5%
13.4
6.5%
Total Manufacturing
3.46
-2.5%
0.05
2.7%
16.2
0.1%
16.2
Ireland
Energy Intensity*
(10MJ/$)
Share of sector in
Manufacturing VA
4.7
12.6%
17.2%
5.1
17.2%
Textiles and Textile Products
5.9
2.0%
1.1%
0.6%
6.9
0.5%
Leather, Leather and Footwear
Wood and Products of Wood and
Cork
Pulp, Paper, Paper , Printing and
Publishing
Coke, Refined Petroleum and
Nuclear Fuel
Chemicals and Chemical Products
1.5
-12.4%
0.1%
0.1%
1.8
0.1%
12.3
3.7%
1.1%
0.8%
12.3
0.9%
0.8
-4.0%
13.5%
12.3%
0.9
14.6%
271.2
15.5%
0.9%
1.0%
290.5
0.8%
1.5
-2.3%
33.2%
40.3%
1.7
41.1%
Rubber and Plastics
14.8
9.7%
1.6%
1.6%
15.6
1.3%
Other Non-Metallic Mineral
22.5
7.0%
3.2%
1.9%
23.4
1.6%
Basic Metals and Fabricated Metal
46.4
6.6%
3.4%
2.7%
53.8
2.3%
Machinery, Nec
3.0
-3.2%
2.4%
2.0%
3.4
1.8%
Electrical and Optical Equipment
2.9
12.6%
24.8%
17.4%
3.1
16.1%
Transport Equipment
Manufacturing, Nec; Recycling
Total Manufacturing
126
RUEC
level
Food, Beverages and Tobacco
level 2009
annual
growth
rate
Share of sector in
Manufacturing VA
RUEC
(% )
annual
growth
rate
-3.3%
level 2009
annual
growth
rate
Real Energy price
($/10MJ)
level 2009
level 2000 level 2009
2011
4.4
4.8%
1.6%
1.4%
5.0
1.2%
298.9
14.9%
0.5%
0.6%
313.0
0.5%
8.7
7.3%
8.0
Sta tistic a l a nne x
Greece
Energy Intensity*
(10MJ/$)
RUEC
level
Share of sector in
Manufacturing VA
15.9
24.8%
34.1%
15.9
34.1%
Textiles and Textile Products
27.4
9.4%
12.6%
8.7%
27.4
8.7%
Leather, Leather and Footwear
Wood and Products of Wood and
Cork
Pulp, Paper, Paper , Printing and
Publishing
Coke, Refined Petroleum and
Nuclear Fuel
Chemicals and Chemical Products
10.4
0.7%
1.0%
0.7%
10.4
0.7%
Food, Beverages and Tobacco
0.60
level 2009
0.26
annual
growth
rate
2.4%
Share of sector in
Manufacturing VA
RUEC
(% )
annual
growth
rate
4.7%
level 2009
annual
growth
rate
2.2%
Real Energy price
($/10MJ)
level 2009
level 2000 level 2009
2011
0.66
0.4%
0.16
-4.1%
10.7
-3.7%
2.6%
1.4%
10.7
1.4%
0.32
-6.9%
0.36
10.0%
11.4
2.5%
7.0%
7.6%
11.4
7.6%
53.37
-8.6%
0.09
7.7%
458.8
-1.5%
6.7%
7.4%
458.8
7.4%
1.28
-5.5%
0.17
13.0%
21.6
6.7%
6.7%
5.8%
21.6
5.8%
Rubber and Plastics
0.65
4.1%
0.26
2.0%
16.7
6.1%
3.3%
3.3%
16.7
3.3%
Other Non-Metallic Mineral
3.02
-1.7%
0.09
2.7%
27.4
1.0%
8.4%
5.2%
27.4
5.2%
Basic Metals and Fabricated Metal
1.23
-9.3%
0.32
15.1%
39.6
4.4%
9.8%
11.5%
39.6
11.5%
13.1
-3.6%
3.5%
3.1%
13.1
3.1%
0.88
8.5%
0.24
-2.7%
21.1
5.6%
3.9%
3.0%
21.1
3.0%
33.7
9.4%
3.9%
3.6%
33.7
3.6%
5.6%
4.6%
9.7
4.6%
Machinery, Nec
Electrical and Optical Equipment
Transport Equipment
Manufacturing, Nec; Recycling
0.43
-1.7%
0.23
-1.0%
9.7
-2.7%
Total Manufacturing
4.74
-2.2%
0.11
3.3%
53.3
1.0%
53.3
Spain
Energy Intensity*
(10MJ/$)
Real Energy price
($/10MJ)
Share of sector in
Manufacturing VA
RUEC
(% )
RUEC
level
Share of sector in
Manufacturing VA
Food, Beverages and Tobacco
0.74
annual
growth
rate
-0.6%
0.15
annual
growth
rate
7.7%
10.9
annual
growth
rate
7.1%
13.3%
16.9%
11.4
17.2%
Textiles and Textile Products
0.59
-1.6%
0.15
6.7%
8.6
4.9%
5.5%
3.2%
9.0
2.9%
Leather, Leather and Footwear
Wood and Products of Wood and
Cork
Pulp, Paper, Paper , Printing and
Publishing
Coke, Refined Petroleum and
Nuclear Fuel
Chemicals and Chemical Products
0.50
-0.6%
0.18
8.0%
8.8
7.4%
1.6%
1.0%
9.2
1.0%
1.17
3.7%
0.13
0.7%
15.5
4.4%
2.4%
1.9%
16.4
1.8%
0.88
0.5%
0.15
6.2%
13.6
6.8%
8.8%
9.2%
14.4
9.3%
level 2009
level 2009
level 2009
level 2000 level 2009
2011
60.24
2.4%
0.19
5.0%
1137.1
7.5%
2.6%
1.8%
1660.6
2.0%
2.52
-3.1%
0.16
4.0%
39.6
0.8%
9.1%
11.1%
42.9
12.1%
Rubber and Plastics
1.22
8.9%
0.16
-1.5%
19.7
7.2%
4.4%
4.4%
20.8
4.5%
Other Non-Metallic Mineral
3.07
1.2%
0.09
4.4%
27.9
5.6%
7.5%
7.0%
28.6
6.3%
Basic Metals and Fabricated Metal
1.23
-0.9%
0.14
5.1%
17.2
4.1%
15.1%
16.2%
18.8
17.1%
Machinery, Nec
0.19
0.6%
0.34
3.6%
6.5
4.2%
6.9%
7.5%
6.7
7.5%
Electrical and Optical Equipment
0.26
3.0%
0.30
1.7%
8.0
4.8%
6.9%
5.7%
8.3
5.1%
Transport Equipment
0.30
-0.2%
0.29
5.2%
8.8
5.0%
10.8%
9.1%
9.3
9.2%
Manufacturing, Nec; Recycling
0.27
4.6%
0.15
-0.5%
3.9
4.0%
5.1%
4.9%
4.0
4.2%
Total Manufacturing
2.95
0.5%
0.12
3.3%
35.9
3.8%
49.8
127
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
France
Energy Intensity*
(10MJ/$)
Real Energy price
($/10MJ)
Share of sector in
Manufacturing VA
RUEC
(% )
RUEC
level
Share of sector in
Manufacturing VA
Food, Beverages and Tobacco
0.60
annual
growth
rate
-0.8%
0.24
annual
growth
rate
6.5%
14.6
annual
growth
rate
5.7%
12.8%
14.1%
18.4
12.4%
Textiles and Textile Products
0.21
-13.3%
0.34
16.7%
7.1
1.2%
3.9%
2.9%
8.2
2.6%
Leather, Leather and Footwear
Wood and Products of Wood and
Cork
Pulp, Paper, Paper , Printing and
Publishing
Coke, Refined Petroleum and
Nuclear Fuel
Chemicals and Chemical Products
0.15
-5.5%
0.22
5.4%
3.4
-0.4%
0.7%
0.8%
4.0
0.7%
2.35
5.4%
0.04
-1.4%
8.9
3.9%
1.7%
1.7%
11.9
1.6%
0.51
-4.7%
0.22
10.2%
11.2
5.0%
8.2%
8.0%
12.5
8.1%
level 2009
level 2009
level 2009
level 2000 level 2009
2011
47.86
-2.8%
0.37
16.6%
1777.3
13.3%
2.4%
1.4%
1349.8
2.9%
2.76
-3.7%
0.20
9.2%
54.5
5.2%
9.8%
11.0%
69.1
9.6%
Rubber and Plastics
0.18
-8.1%
0.65
15.2%
11.5
5.9%
5.0%
4.9%
13.6
4.7%
Other Non-Metallic Mineral
1.50
0.3%
0.12
2.0%
18.7
2.3%
3.9%
4.7%
22.6
4.2%
Basic Metals and Fabricated Metal
0.96
-2.1%
0.12
4.6%
11.5
2.4%
14.9%
15.1%
12.3
17.8%
Machinery, Nec
0.11
-4.4%
0.38
6.7%
4.0
2.0%
8.5%
10.0%
4.5
11.0%
Electrical and Optical Equipment
0.13
-4.9%
0.42
12.7%
5.6
7.2%
12.9%
8.8%
6.9
8.7%
Transport Equipment
0.22
-1.4%
0.28
4.6%
6.2
3.2%
11.6%
12.5%
6.5
11.6%
Manufacturing, Nec; Recycling
0.25
3.2%
0.26
-0.1%
6.7
3.1%
3.6%
4.1%
8.0
4.2%
Total Manufacturing
2.26
-1.8%
0.17
7.9%
39.3
6.0%
56.1
Italy
Energy Intensity*
(10MJ/$)
Share of sector in
Manufacturing VA
RUEC
(% )
RUEC
level
Share of sector in
Manufacturing VA
Food, Beverages and Tobacco
0.45
annual
growth
rate
-1.1%
0.38
annual
growth
rate
5.9%
17.4
annual
growth
rate
4.7%
10.0%
11.7%
18.3
11.0%
Textiles and Textile Products
0.28
-3.5%
0.50
6.6%
13.8
2.9%
9.9%
8.5%
14.7
7.6%
Leather, Leather and Footwear
Wood and Products of Wood and
Cork
Pulp, Paper, Paper , Printing and
Publishing
Coke, Refined Petroleum and
Nuclear Fuel
Chemicals and Chemical Products
0.12
-3.7%
0.37
2.4%
4.5
-1.4%
2.9%
3.0%
4.9
2.9%
0.33
1.6%
0.33
1.6%
10.9
3.3%
2.6%
2.1%
11.7
1.9%
0.67
0.9%
0.24
2.5%
16.0
3.4%
6.1%
6.1%
17.0
5.6%
level 2009
128
Real Energy price
($/10MJ)
level 2009
level 2009
level 2000 level 2009
2011
77.97
6.0%
0.28
8.6%
2148.3
15.1%
1.8%
0.7%
1439.2
1.5%
2.49
-1.3%
0.12
5.0%
30.7
3.6%
7.5%
7.6%
35.8
7.2%
Rubber and Plastics
0.62
3.9%
0.32
0.5%
20.0
4.4%
4.5%
3.7%
20.9
3.7%
Other Non-Metallic Mineral
2.16
0.5%
0.18
2.9%
39.2
3.4%
5.5%
4.8%
42.6
4.5%
Basic Metals and Fabricated Metal
1.40
5.6%
0.10
-3.2%
14.5
2.2%
15.4%
16.3%
16.8
18.3%
Machinery, Nec
0.24
-0.1%
0.32
2.2%
7.6
2.1%
13.0%
14.2%
7.8
15.4%
Electrical and Optical Equipment
0.24
0.2%
0.34
2.2%
8.2
2.4%
9.5%
9.8%
8.2
9.6%
Transport Equipment
0.16
-1.8%
0.60
3.5%
9.6
1.7%
6.0%
5.8%
10.4
5.2%
Manufacturing, Nec; Recycling
0.19
2.8%
0.30
-0.5%
5.7
2.2%
5.2%
5.7%
5.9
5.6%
Total Manufacturing
2.34
1.1%
0.13
2.4%
30.2
3.5%
37.7
Sta tistic a l a nne x
Cyprus
Energy Intensity*
(10MJ/$)
RUEC
level
Share of sector in
Manufacturing VA
Food, Beverages and Tobacco
15.1
37.0%
30.0%
15.1
30.0%
Textiles and Textile Products
9.6
0.2%
6.0%
2.5%
9.6
2.5%
Leather, Leather and Footwear
Wood and Products of Wood and
Cork
Pulp, Paper, Paper , Printing and
Publishing
Coke, Refined Petroleum and
Nuclear Fuel
Chemicals and Chemical Products
11.7
-2.5%
1.3%
0.4%
11.7
0.4%
7.2
3.2%
6.0%
7.5%
7.2
7.5%
7.5
2.3%
8.4%
9.8%
7.5
9.8%
0.9%
0.0%
8.2
2.6%
6.3%
6.3%
8.2
6.3%
Rubber and Plastics
16.3
4.9%
3.1%
3.8%
16.3
3.8%
Other Non-Metallic Mineral
38.2
6.4%
10.5%
15.1%
38.2
15.1%
Basic Metals and Fabricated Metal
22.3
1.2%
8.0%
12.4%
22.3
12.4%
Machinery, Nec
10.7
2.7%
2.6%
2.9%
10.7
2.9%
Electrical and Optical Equipment
13.5
13.2%
1.8%
2.3%
13.5
2.3%
Transport Equipment
13.3
0.8%
1.0%
1.3%
13.3
1.3%
Manufacturing, Nec; Recycling
7.1
3.3%
7.0%
5.8%
7.1
5.8%
Total Manufacturing
17.0
-9.1%
level 2009
annual
growth
rate
Share of sector in
Manufacturing VA
RUEC
(% )
annual
growth
rate
5.4%
level 2009
annual
growth
rate
Real Energy price
($/10MJ)
level 2009
level 2000 level 2009
2011
17.0
Latvia
Energy Intensity*
(10MJ/$)
RUEC
level
Share of sector in
Manufacturing VA
Food, Beverages and Tobacco
17.8
27.4%
23.8%
17.8
23.8%
Textiles and Textile Products
15.2
0.7%
11.2%
5.1%
15.2
5.1%
Leather, Leather and Footwear
Wood and Products of Wood and
Cork
Pulp, Paper, Paper , Printing and
Publishing
Coke, Refined Petroleum and
Nuclear Fuel
Chemicals and Chemical Products
7.2
-8.1%
0.2%
0.2%
7.2
0.2%
30.8
0.3%
19.1%
19.0%
30.8
19.0%
3.4
3.1%
8.6%
9.1%
3.4
9.1%
59.7
-2.2%
3.0%
6.4%
59.7
6.4%
Rubber and Plastics
11.0
1.4%
1.6%
2.9%
11.0
2.9%
Other Non-Metallic Mineral
70.8
0.8%
2.9%
4.8%
70.8
4.8%
Basic Metals and Fabricated Metal
44.1
5.9%
9.7%
9.9%
44.1
9.9%
Machinery, Nec
17.1
5.9%
3.8%
2.8%
17.1
2.8%
Electrical and Optical Equipment
6.4
0.9%
3.8%
6.5%
6.4
6.5%
Transport Equipment
32.2
6.5%
3.2%
3.8%
32.2
3.8%
Manufacturing, Nec; Recycling
12.0
1.4%
5.4%
5.9%
12.0
5.9%
25.8
2.0%
Total Manufacturing
2.06
-1.7%
level 2009
0.13
annual
growth
rate
Share of sector in
Manufacturing VA
RUEC
(% )
annual
growth
rate
5.9%
level 2009
annual
growth
rate
Real Energy price
($/10MJ)
3.7%
level 2009
level 2000 level 2009
2011
25.8
129
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
Lithuania
Energy Intensity*
(10MJ/$)
Real Energy price
($/10MJ)
Share of sector in
Manufacturing VA
RUEC
(% )
RUEC
level
Share of sector in
Manufacturing VA
Food, Beverages and Tobacco
0.74
annual
growth
rate
-4.5%
0.38
annual
growth
rate
6.1%
27.9
annual
growth
rate
1.3%
23.0%
24.3%
27.9
24.3%
Textiles and Textile Products
0.52
-1.1%
0.38
5.4%
19.8
4.3%
18.2%
7.2%
19.8
7.2%
Leather, Leather and Footwear
Wood and Products of Wood and
Cork
Pulp, Paper, Paper , Printing and
Publishing
Coke, Refined Petroleum and
Nuclear Fuel
Chemicals and Chemical Products
1.43
2.0%
0.23
-2.4%
33.2
-0.5%
1.5%
0.2%
33.2
0.2%
1.23
1.1%
0.26
-3.8%
31.4
-2.8%
6.7%
7.3%
31.4
7.3%
23.9
-1.0%
6.9%
6.4%
23.9
6.4%
level 2009
level 2009
level 2000 level 2009
2011
788.0
6.9%
9.4%
7.9%
788.0
7.9%
8.45
-5.9%
0.25
7.6%
213.3
1.3%
5.8%
10.5%
213.3
10.5%
91.1
0.4%
3.1%
4.9%
91.1
4.9%
4.27
-4.3%
0.08
1.4%
32.7
-3.0%
3.7%
3.3%
32.7
3.3%
13.7
-0.8%
3.4%
4.6%
13.7
4.6%
Rubber and Plastics
Other Non-Metallic Mineral
level 2009
Basic Metals and Fabricated Metal
Machinery, Nec
0.30
-14.6%
0.42
16.6%
12.8
-0.4%
3.0%
3.1%
12.8
3.1%
Electrical and Optical Equipment
0.20
-16.2%
0.83
19.8%
16.6
0.3%
7.5%
5.0%
16.6
5.0%
21.0
3.4%
2.7%
5.3%
21.0
5.3%
5.2%
10.0%
14.2
10.0%
Transport Equipment
Manufacturing, Nec; Recycling
0.35
-3.2%
0.40
1.1%
14.2
-2.1%
Total Manufacturing
9.43
-0.2%
0.11
4.6%
107.0
4.4%
107.0
Luxembourg
Energy Intensity*
(10MJ/$)
Food, Beverages and Tobacco
0.65
annual
growth
rate
3.8%
Textiles and Textile Products
0.61
-3.8%
level 2009
130
Leather, Leather and Footwear
Wood and Products of Wood and
Cork
Pulp, Paper, Paper , Printing and
Publishing
Coke, Refined Petroleum and
Nuclear Fuel
Chemicals and Chemical Products
Rubber and Plastics
Real Energy price
($/10MJ)
0.09
annual
growth
rate
-5.7%
0.21
11.2%
level 2009
Share of sector in
Manufacturing VA
RUEC
(% )
5.9
annual
growth
rate
-2.1%
12.6
7.0%
level 2009
RUEC
level
level 2000 level 2009
Share of sector in
Manufacturing VA
2011
8.5%
10.6%
5.9
10.6%
7.1%
4.7%
12.6
4.7%
0.0%
0.0%
2.03
24.2%
0.04
-15.9%
7.9
4.5%
1.7%
1.6%
7.9
1.6%
0.43
0.7%
0.21
7.2%
9.1
8.0%
7.4%
7.4%
9.1
7.4%
1.08
-2.7%
0.07
6.1%
7.9
3.3%
5.4%
4.0%
7.9
4.0%
0.53
6.4%
0.24
4.1%
12.8
10.8%
14.9%
11.2%
12.8
11.2%
Other Non-Metallic Mineral
2.93
-2.3%
0.07
6.3%
20.9
3.8%
10.4%
8.0%
20.9
8.0%
Basic Metals and Fabricated Metal
3.02
9.0%
0.05
-8.9%
15.9
-0.7%
31.7%
36.1%
15.9
36.1%
Machinery, Nec
0.37
2.3%
0.08
-4.8%
3.0
-2.6%
6.7%
7.9%
3.0
7.9%
Electrical and Optical Equipment
0.33
2.6%
0.14
3.5%
4.4
6.3%
4.1%
5.8%
4.4
5.8%
Transport Equipment
0.61
3.3%
0.14
5.2%
8.8
8.6%
0.5%
1.4%
8.8
1.4%
Manufacturing, Nec; Recycling
0.89
0.7%
0.18
11.3%
16.3
12.0%
1.7%
1.4%
16.3
1.4%
Total Manufacturing
1.41
2.4%
0.09
-0.3%
12.0
2.1%
12.0
Sta tistic a l a nne x
Hungary
Energy Intensity*
(10MJ/$)
Real Energy price
($/10MJ)
Share of sector in
Manufacturing VA
RUEC
(% )
RUEC
level
Share of sector in
Manufacturing VA
Food, Beverages and Tobacco
0.94
annual
growth
rate
3.9%
0.18
annual
growth
rate
-1.5%
17.3
annual
growth
rate
2.4%
14.0%
11.9%
16.6
9.2%
Textiles and Textile Products
0.38
-2.9%
0.22
-2.3%
8.5
-5.2%
5.6%
1.9%
10.1
1.4%
Leather, Leather and Footwear
Wood and Products of Wood and
Cork
Pulp, Paper, Paper , Printing and
Publishing
Coke, Refined Petroleum and
Nuclear Fuel
Chemicals and Chemical Products
0.31
0.3%
0.38
4.0%
12.0
4.4%
1.2%
0.6%
13.6
0.6%
0.69
-6.6%
0.32
10.5%
22.0
3.1%
1.9%
1.2%
23.2
0.8%
0.67
-3.5%
0.21
5.4%
14.2
1.7%
5.3%
5.0%
14.8
4.2%
level 2009
level 2009
level 2009
level 2000 level 2009
2011
19.76
-1.2%
0.10
-0.5%
207.3
-1.7%
5.8%
6.9%
224.8
8.1%
5.87
-0.8%
0.15
5.6%
85.6
4.8%
9.2%
8.8%
96.7
8.5%
Rubber and Plastics
0.35
-5.1%
0.38
3.9%
13.6
-1.4%
3.9%
5.1%
14.1
5.3%
Other Non-Metallic Mineral
2.47
-3.3%
0.17
6.3%
42.2
2.7%
4.7%
3.7%
47.7
2.5%
Basic Metals and Fabricated Metal
2.25
-3.5%
0.14
2.4%
30.7
-1.2%
9.2%
7.7%
33.8
7.4%
Machinery, Nec
0.28
-3.3%
0.20
-3.7%
5.6
-6.8%
6.4%
17.2%
5.7
27.2%
Electrical and Optical Equipment
0.13
-2.9%
0.43
7.5%
5.6
4.4%
18.5%
14.9%
5.8
11.3%
Transport Equipment
0.24
-0.6%
0.28
3.7%
6.5
3.1%
12.1%
12.9%
6.1
11.8%
Manufacturing, Nec; Recycling
0.28
-4.5%
0.36
3.6%
10.3
-1.0%
2.2%
2.2%
11.7
1.7%
Total Manufacturing
2.85
-2.8%
0.11
3.6%
32.6
0.7%
36.6
Malta
Energy Intensity*
(10MJ/$)
RUEC
level
Share of sector in
Manufacturing VA
Food, Beverages and Tobacco
9.7
13.9%
14.2%
9.7
14.2%
Textiles and Textile Products
10.9
14.1%
9.4%
3.9%
10.9
3.9%
Leather, Leather and Footwear
Wood and Products of Wood and
Cork
Pulp, Paper, Paper , Printing and
Publishing
Coke, Refined Petroleum and
Nuclear Fuel
Chemicals and Chemical Products
5.3
8.8%
1.3%
0.1%
5.3
0.1%
9.3
11.6%
0.3%
0.5%
9.3
0.5%
7.6
4.9%
6.4%
10.7%
7.6
10.7%
49.1
-4.9%
0.1%
0.0%
49.1
0.0%
6.4
-8.6%
2.2%
13.3%
6.4
13.3%
Rubber and Plastics
15.2
7.8%
6.6%
4.5%
15.2
4.5%
Other Non-Metallic Mineral
14.3
3.7%
2.4%
4.2%
14.3
4.2%
Basic Metals and Fabricated Metal
9.0
8.1%
2.6%
3.8%
9.0
3.8%
Machinery, Nec
7.5
2.9%
1.6%
1.3%
7.5
1.3%
Electrical and Optical Equipment
10.7
13.9%
37.8%
24.0%
10.7
24.0%
Transport Equipment
5.6
-2.9%
4.9%
7.9%
5.6
7.9%
Manufacturing, Nec; Recycling
4.1
0.4%
10.6%
11.6%
4.1
11.6%
Total Manufacturing
8.7
6.1%
level 2009
annual
growth
rate
Share of sector in
Manufacturing VA
RUEC
(% )
annual
growth
rate
2.4%
level 2009
annual
growth
rate
Real Energy price
($/10MJ)
level 2009
level 2000 level 2009
2011
8.7
131
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
Netherlands
Energy Intensity*
(10MJ/$)
Real Energy price
($/10MJ)
Share of sector in
Manufacturing VA
RUEC
(% )
RUEC
level
Share of sector in
Manufacturing VA
Food, Beverages and Tobacco
0.53
annual
growth
rate
-3.6%
0.16
annual
growth
rate
4.2%
8.7
annual
growth
rate
0.4%
17.0%
23.2%
9.0
21.9%
Textiles and Textile Products
0.39
-3.5%
0.19
5.1%
7.3
1.4%
2.1%
1.4%
7.2
1.4%
Leather, Leather and Footwear
Wood and Products of Wood and
Cork
Pulp, Paper, Paper , Printing and
Publishing
Coke, Refined Petroleum and
Nuclear Fuel
Chemicals and Chemical Products
0.21
-6.4%
0.35
13.2%
7.5
6.0%
0.2%
0.2%
7.6
0.2%
0.49
9.3%
0.12
-6.9%
5.7
1.7%
1.6%
1.7%
6.4
1.3%
0.59
1.2%
0.13
4.4%
7.6
5.7%
12.6%
11.0%
7.2
10.0%
level 2009
level 2009
level 2009
level 2000 level 2009
2011
47.94
-5.3%
0.34
11.1%
1649.3
5.2%
2.5%
2.3%
4141.2
1.3%
9.46
-3.3%
0.11
9.0%
100.7
5.5%
14.5%
14.0%
95.4
18.2%
Rubber and Plastics
0.31
-5.0%
0.31
8.6%
9.6
3.2%
3.2%
3.3%
11.5
2.9%
Other Non-Metallic Mineral
1.25
-1.9%
0.14
4.9%
18.1
3.0%
3.7%
3.7%
18.3
3.1%
Basic Metals and Fabricated Metal
1.75
-1.4%
0.10
6.4%
17.7
4.9%
11.6%
11.7%
19.4
11.1%
Machinery, Nec
0.45
0.0%
0.08
1.5%
3.4
1.4%
8.5%
9.5%
3.2
10.7%
Electrical and Optical Equipment
0.13
3.3%
0.76
5.8%
10.0
9.3%
9.7%
5.8%
10.4
5.8%
Transport Equipment
0.18
1.5%
0.24
1.6%
4.2
3.1%
5.5%
4.1%
4.3
5.1%
Manufacturing, Nec; Recycling
0.10
-3.4%
0.34
0.9%
3.3
-2.5%
7.3%
8.1%
3.5
7.0%
Total Manufacturing
5.27
-1.1%
0.11
5.5%
58.8
4.3%
79.0
Poland
Energy Intensity*
(10MJ/$)
Share of sector in
Manufacturing VA
15.4
17.8%
18.2%
18.3
17.6%
Textiles and Textile Products
8.9
1.6%
6.3%
4.4%
10.2
4.3%
Leather, Leather and Footwear
Wood and Products of Wood and
Cork
Pulp, Paper, Paper , Printing and
Publishing
Coke, Refined Petroleum and
Nuclear Fuel
Chemicals and Chemical Products
6.4
-0.8%
1.1%
0.6%
7.1
0.7%
14.5
3.2%
4.7%
3.8%
17.9
4.0%
8.6
2.1%
9.0%
7.6%
10.8
7.8%
304.4
-3.8%
3.0%
3.8%
275.6
6.5%
45.2
1.4%
7.4%
7.2%
56.7
7.3%
Rubber and Plastics
13.0
0.1%
5.1%
6.2%
16.5
6.7%
Other Non-Metallic Mineral
38.4
0.8%
7.5%
6.3%
49.6
6.7%
Basic Metals and Fabricated Metal
28.5
-2.9%
10.7%
12.1%
40.8
13.5%
Machinery, Nec
6.6
-3.6%
7.8%
7.9%
7.3
6.5%
Electrical and Optical Equipment
5.9
-5.1%
8.4%
7.5%
11.0
5.0%
Transport Equipment
8.1
-4.1%
6.1%
9.0%
11.3
8.2%
Manufacturing, Nec; Recycling
9.7
2.2%
4.9%
5.4%
11.5
5.4%
28.0
-0.8%
Total Manufacturing
132
RUEC
level
Food, Beverages and Tobacco
2.96
-7.0%
level 2009
0.09
annual
growth
rate
Share of sector in
Manufacturing VA
RUEC
(% )
annual
growth
rate
0.6%
level 2009
annual
growth
rate
Real Energy price
($/10MJ)
6.6%
level 2009
level 2000 level 2009
2011
39.7
Sta tistic a l a nne x
Portugal
Energy Intensity*
(10MJ/$)
RUEC
level
Share of sector in
Manufacturing VA
Food, Beverages and Tobacco
10.1
13.8%
13.1%
10.1
13.1%
Textiles and Textile Products
8.7
3.4%
15.9%
12.2%
8.7
12.2%
Leather, Leather and Footwear
Wood and Products of Wood and
Cork
Pulp, Paper, Paper , Printing and
Publishing
Coke, Refined Petroleum and
Nuclear Fuel
Chemicals and Chemical Products
4.6
3.9%
4.4%
3.5%
4.6
3.5%
7.2
1.2%
4.0%
5.0%
7.2
5.0%
10.7
10.0%
10.4%
8.8%
10.7
8.8%
865.1
-16.5%
0.4%
2.8%
865.1
2.8%
41.7
1.5%
5.2%
5.9%
41.7
5.9%
Rubber and Plastics
10.7
4.8%
3.1%
4.0%
10.7
4.0%
Other Non-Metallic Mineral
30.8
6.1%
9.9%
8.3%
30.8
8.3%
Basic Metals and Fabricated Metal
11.6
3.7%
9.7%
10.9%
11.6
10.9%
Machinery, Nec
5.0
3.0%
5.4%
6.2%
5.0
6.2%
Electrical and Optical Equipment
2.9
0.0%
7.0%
8.4%
2.9
8.4%
Transport Equipment
4.1
2.9%
6.3%
5.8%
4.1
5.8%
Manufacturing, Nec; Recycling
10.9
4.6%
4.4%
5.0%
10.9
5.0%
Total Manufacturing
36.4
4.7%
level 2009
annual
growth
rate
Share of sector in
Manufacturing VA
RUEC
(% )
annual
growth
rate
6.3%
level 2009
annual
growth
rate
Real Energy price
($/10MJ)
level 2009
level 2000 level 2009
2011
36.4
Romania
Energy Intensity*
(10MJ/$)
RUEC
level
Share of sector in
Manufacturing VA
Food, Beverages and Tobacco
7.3
30.5%
26.6%
7.3
26.6%
Textiles and Textile Products
9.1
1.2%
10.1%
6.7%
9.1
6.7%
Leather, Leather and Footwear
Wood and Products of Wood and
Cork
Pulp, Paper, Paper , Printing and
Publishing
Coke, Refined Petroleum and
Nuclear Fuel
Chemicals and Chemical Products
6.9
-3.9%
1.9%
1.7%
6.9
1.7%
5.4
-4.6%
4.3%
3.9%
5.4
3.9%
7.7
-6.7%
3.7%
4.7%
7.7
4.7%
level 2009
annual
growth
rate
Share of sector in
Manufacturing VA
RUEC
(% )
annual
growth
rate
-5.8%
level 2009
annual
growth
rate
Real Energy price
($/10MJ)
level 2009
level 2000 level 2009
2011
220.7
-6.5%
4.7%
4.6%
220.7
4.6%
59.0
-5.1%
5.3%
4.1%
59.0
4.1%
Rubber and Plastics
6.9
-6.5%
2.2%
4.0%
6.9
4.0%
Other Non-Metallic Mineral
24.1
-6.9%
5.0%
5.4%
24.1
5.4%
Basic Metals and Fabricated Metal
40.0
-6.5%
9.3%
9.9%
40.0
9.9%
Machinery, Nec
15.0
-3.8%
6.0%
4.8%
15.0
4.8%
Electrical and Optical Equipment
6.3
-0.4%
6.0%
6.9%
6.3
6.9%
Transport Equipment
9.3
-7.2%
5.2%
12.3%
9.3
12.3%
Manufacturing, Nec; Recycling
11.8
2.2%
5.9%
4.4%
11.8
4.4%
Total Manufacturing
24.1
-6.0%
24.1
133
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
Slovenia
Energy Intensity*
(10MJ/$)
Real Energy price
($/10MJ)
Share of sector in
Manufacturing VA
RUEC
(% )
RUEC
level
Share of sector in
Manufacturing VA
Food, Beverages and Tobacco
0.77
annual
growth
rate
2.5%
0.17
annual
growth
rate
1.8%
12.8
annual
growth
rate
4.4%
10.5%
8.4%
12.8
8.4%
Textiles and Textile Products
0.47
-3.6%
0.21
8.1%
10.0
4.3%
7.4%
3.5%
10.0
3.5%
Leather, Leather and Footwear
Wood and Products of Wood and
Cork
Pulp, Paper, Paper , Printing and
Publishing
Coke, Refined Petroleum and
Nuclear Fuel
Chemicals and Chemical Products
0.32
-13.6%
0.20
14.8%
6.2
-0.8%
2.0%
1.1%
6.2
1.1%
1.17
-0.2%
0.11
-0.7%
12.6
-0.9%
3.9%
3.3%
12.6
3.3%
1.56
-4.0%
0.12
4.4%
18.6
0.2%
8.4%
7.4%
18.6
7.4%
98.2
-25.1%
0.1%
0.0%
98.2
0.0%
0.91
-5.2%
0.18
15.0%
16.4
8.9%
11.0%
15.3%
16.4
15.3%
Rubber and Plastics
0.46
-1.7%
0.20
1.3%
9.1
-0.5%
5.5%
6.8%
9.1
6.8%
Other Non-Metallic Mineral
3.17
-0.7%
0.11
3.0%
34.5
2.3%
4.4%
3.9%
34.5
3.9%
Basic Metals and Fabricated Metal
0.93
-5.7%
0.24
10.2%
22.7
3.9%
16.3%
16.7%
22.7
16.7%
Machinery, Nec
0.23
-6.5%
0.26
5.1%
5.8
-1.7%
9.1%
11.6%
5.8
11.6%
Electrical and Optical Equipment
0.22
-2.9%
0.28
5.6%
6.3
2.6%
11.9%
10.7%
6.3
10.7%
Transport Equipment
0.34
-2.6%
0.18
-0.9%
6.3
-3.5%
4.0%
6.6%
6.3
6.6%
Manufacturing, Nec; Recycling
0.25
-4.3%
0.29
1.2%
7.3
-3.1%
5.4%
4.6%
7.3
4.6%
Total Manufacturing
0.77
-4.9%
0.18
6.6%
13.7
1.5%
level 2009
level 2009
level 2009
level 2000 level 2009
2011
13.7
Slovakia
Energy Intensity*
(10MJ/$)
Share of sector in
Manufacturing VA
RUEC
(% )
RUEC
level
Share of sector in
Manufacturing VA
Food, Beverages and Tobacco
0.63
annual
growth
rate
-13.9%
0.26
annual
growth
rate
17.5%
16.1
annual
growth
rate
1.1%
12.1%
9.1%
16.1
9.1%
Textiles and Textile Products
0.34
-11.9%
0.22
10.8%
7.6
-2.4%
5.9%
3.3%
7.6
3.3%
Leather, Leather and Footwear
Wood and Products of Wood and
Cork
Pulp, Paper, Paper , Printing and
Publishing
Coke, Refined Petroleum and
Nuclear Fuel
Chemicals and Chemical Products
0.59
2.5%
0.19
8.6%
11.1
11.4%
2.4%
1.1%
11.1
1.1%
0.69
-5.5%
0.09
-0.2%
6.0
-5.6%
3.3%
6.4%
6.0
6.4%
4.60
8.7%
0.04
-6.3%
19.2
1.9%
7.7%
6.2%
19.2
6.2%
69.94
1.9%
0.18
9.7%
1268.7
11.8%
5.8%
1.6%
1268.7
1.6%
15.11
1.0%
0.09
14.1%
140.2
15.2%
7.4%
3.8%
140.2
3.8%
Rubber and Plastics
0.55
-9.4%
0.26
9.0%
14.5
-1.2%
3.9%
5.6%
14.5
5.6%
Other Non-Metallic Mineral
2.73
-11.2%
0.12
9.6%
32.5
-2.7%
6.1%
5.7%
32.5
5.7%
Basic Metals and Fabricated Metal
6.00
-5.5%
0.05
0.8%
30.7
-4.8%
16.5%
19.9%
30.7
19.9%
Machinery, Nec
0.25
-15.6%
0.33
14.1%
8.4
-3.7%
8.0%
6.9%
8.4
6.9%
Electrical and Optical Equipment
0.11
-10.8%
0.48
13.9%
5.4
1.6%
9.5%
13.8%
5.4
13.8%
Transport Equipment
0.34
-13.5%
0.17
15.8%
5.7
0.2%
8.2%
12.2%
5.7
12.2%
Manufacturing, Nec; Recycling
0.19
-17.1%
0.38
20.1%
7.3
-0.5%
2.9%
4.5%
7.3
4.5%
Total Manufacturing
4.67
-7.0%
0.09
5.6%
40.1
-1.8%
level 2009
134
Real Energy price
($/10MJ)
level 2009
level 2009
level 2000 level 2009
2011
40.1
Sta tistic a l a nne x
Finland
Energy Intensity*
(10MJ/$)
Real Energy price
($/10MJ)
Share of sector in
Manufacturing VA
RUEC
(% )
RUEC
level
Share of sector in
Manufacturing VA
Food, Beverages and Tobacco
0.77
annual
growth
rate
1.6%
0.10
annual
growth
rate
-0.3%
7.7
annual
growth
rate
1.3%
6.0%
9.7%
9.6
8.6%
Textiles and Textile Products
0.62
6.1%
0.08
-6.9%
5.0
-1.2%
1.5%
1.3%
5.6
1.1%
Leather, Leather and Footwear
Wood and Products of Wood and
Cork
Pulp, Paper, Paper , Printing and
Publishing
Coke, Refined Petroleum and
Nuclear Fuel
Chemicals and Chemical Products
0.29
-2.4%
0.05
-8.1%
1.6
-10.4%
0.3%
0.3%
1.7
0.2%
1.78
2.7%
0.06
-3.8%
10.5
-1.2%
4.6%
3.7%
10.4
4.4%
4.49
-0.6%
0.05
2.5%
20.7
1.9%
23.6%
15.7%
21.3
17.0%
56.34
-5.4%
0.16
7.0%
899.2
1.2%
1.3%
2.2%
1686.4
1.8%
2.83
0.6%
0.12
-2.0%
34.1
-1.4%
5.1%
8.5%
35.1
10.1%
Rubber and Plastics
0.87
1.1%
0.06
-0.2%
5.3
0.9%
3.2%
3.5%
6.2
3.5%
Other Non-Metallic Mineral
1.33
0.0%
0.10
3.9%
13.2
3.9%
3.1%
3.3%
16.7
3.5%
Basic Metals and Fabricated Metal
1.74
-3.1%
0.07
-0.1%
12.9
-3.2%
10.3%
12.8%
18.7
14.0%
Machinery, Nec
0.15
0.6%
0.11
-1.7%
1.7
-1.1%
10.5%
15.2%
1.7
16.9%
Electrical and Optical Equipment
0.08
-3.5%
0.16
12.0%
1.3
8.0%
25.4%
18.2%
1.5
13.4%
Transport Equipment
0.35
5.7%
0.09
-8.0%
3.2
-2.7%
2.9%
3.3%
2.5
3.2%
Manufacturing, Nec; Recycling
0.69
6.6%
0.06
-6.3%
3.9
-0.2%
2.2%
2.4%
4.9
2.2%
Total Manufacturing
2.87
-2.1%
0.10
6.5%
29.9
4.3%
level 2009
level 2009
level 2009
level 2000 level 2009
2011
42.9
Sweden
Energy Intensity*
(10MJ/$)
Food, Beverages and Tobacco
0.39
annual
growth
rate
-2.7%
Textiles and Textile Products
0.30
-2.4%
level 2009
Leather, Leather and Footwear
Wood and Products of Wood and
Cork
Pulp, Paper, Paper , Printing and
Publishing
Coke, Refined Petroleum and
Nuclear Fuel
Chemicals and Chemical Products
Real Energy price
($/10MJ)
0.22
annual
growth
rate
9.6%
0.19
4.7%
level 2009
Share of sector in
Manufacturing VA
RUEC
(% )
8.6
annual
growth
rate
6.6%
5.8
2.1%
level 2009
RUEC
level
level 2000 level 2009
Share of sector in
Manufacturing VA
2011
7.8%
8.8%
8.7
7.3%
1.1%
0.9%
5.9
0.9%
0.1%
0.0%
1.23
-5.6%
0.11
13.1%
13.6
6.8%
3.5%
4.0%
14.8
3.5%
4.16
1.3%
0.05
7.4%
20.8
8.8%
15.7%
12.4%
21.3
11.3%
40.02
-23.7%
0.25
32.5%
988.1
1.1%
1.0%
1.5%
1127.2
1.4%
1.07
-7.4%
0.17
14.9%
17.9
6.4%
11.0%
14.3%
17.9
12.3%
2.9%
Rubber and Plastics
0.75
3.4%
0.08
3.3%
6.3
6.8%
2.9%
3.0%
6.5
Other Non-Metallic Mineral
1.18
-5.0%
0.19
5.7%
21.8
0.4%
2.0%
2.6%
22.3
2.7%
Basic Metals and Fabricated Metal
1.64
1.3%
0.09
2.8%
14.0
4.2%
13.7%
13.2%
15.7
14.2%
Machinery, Nec
0.09
-2.9%
0.29
3.3%
2.6
0.4%
11.8%
12.6%
2.7
15.3%
Electrical and Optical Equipment
0.06
-14.5%
0.29
17.4%
1.6
0.4%
12.2%
15.0%
1.7
13.2%
Transport Equipment
0.22
-0.2%
0.24
8.6%
5.2
8.4%
14.5%
8.8%
5.1
12.8%
Manufacturing, Nec; Recycling
0.53
-0.6%
0.14
-0.5%
7.2
-1.1%
2.8%
2.8%
7.9
2.1%
Total Manufacturing
2.60
-2.3%
0.10
8.0%
25.1
5.6%
26.5
135
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
UK
Energy Intensity*
(10MJ/$)
Share of sector in
Manufacturing VA
8.6
13.4%
15.2%
8.9
16.0%
Textiles and Textile Products
8.0
5.7%
3.9%
2.5%
8.3
2.4%
Leather, Leather and Footwear
Wood and Products of Wood and
Cork
Pulp, Paper, Paper , Printing and
Publishing
Coke, Refined Petroleum and
Nuclear Fuel
Chemicals and Chemical Products
3.1
4.3%
0.5%
0.2%
3.2
0.3%
7.9
2.7%
1.5%
2.1%
8.3
1.8%
6.1
5.6%
13.4%
13.1%
6.3
11.4%
624.9
2.5%
1.6%
1.9%
627.5
2.8%
13.3
2.6%
9.9%
11.4%
13.9
9.6%
Rubber and Plastics
10.4
5.9%
5.1%
5.5%
10.8
5.0%
Other Non-Metallic Mineral
17.0
3.4%
3.3%
4.0%
17.5
3.7%
Basic Metals and Fabricated Metal
14.6
4.6%
10.6%
10.7%
15.6
11.1%
Machinery, Nec
6.6
3.4%
8.2%
8.6%
6.7
10.1%
Electrical and Optical Equipment
4.0
3.1%
13.5%
9.6%
4.1
8.7%
Transport Equipment
5.8
3.5%
10.6%
10.7%
5.9
12.8%
Manufacturing, Nec; Recycling
7.7
6.3%
4.3%
4.4%
8.1
4.4%
Total Manufacturing
20.5
4.6%
* including feedstock
136
RUEC
level
Food, Beverages and Tobacco
level 2009
annual
growth
rate
Share of sector in
Manufacturing VA
RUEC
(% )
annual
growth
rate
4.0%
level 2009
annual
growth
rate
Real Energy price
($/10MJ)
level 2009
level 2000 level 2009
2011
26.2
Sta tistic a l a nne x
EU-27 Member States average (2010-2012) intra and extra-EU imports and exports of Solar
components, in million EUR
Export
Import
Extra
Intra
Extra
Intra
Austria
16.40
219.00
89.70
143.00
Belgium
15.30
793.00
897.00
531.00
Bulgaria
0.40
8.01
94.00
207.00
Cyprus
0.04
54.90
7.38
32.10
Czech Republic
17.90
592.00
714.00
374.00
Denmark
3.46
18.90
57.60
31.10
Estonia
0.08
0.92
1.05
4.05
Finland
6.16
8.51
23.60
12.70
France
92.70
282.00
818.00
935.00
Germany
768.00
3780.00
5730.00
3130.00
Greece
0.81
43.90
232.00
344.00
Hungary
2.72
335.00
231.00
16.20
Ireland
0.52
2.79
3.58
8.79
Italy
58.90
199.00
3160.00
2700.00
Latvia
0.13
0.01
0.08
0.26
Lithuania
0.28
0.89
2.69
3.74
Luxembourg
0.42
98.30
17.20
80.20
Malta
0.02
0.02
4.34
2.39
Netherlands
39.10
3660.00
4220.00
257.00
Poland
1.03
61.50
3.72
10.90
Portugal
7.55
53.00
20.40
58.40
Romania
0.28
41.40
8.44
66.40
Slovakia
0.86
41.20
57.20
258.00
Slovenia
2.44
111.00
113.00
45.80
Spain
53.40
753.00
546.00
382.00
Sweden
14.70
132.00
84.60
29.10
UK
52.30
376.00
461.00
275.00
Note: the solar components include the hscodes presented in box III.3.2
137
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
EU-27 Member States average (2010-2012) imports and exports of Solar components to China,
Japan and the USA, in million EUR
Exports
China
Japan
USA
Imports
Others
China
USA
Others
Austria
0.77
0.03
1.35
14.25
40.10
1.66
1.53
46.41
Belgium
1.31
0.84
0.81
12.33
757.00
7.67
55.30
77.03
Bulgaria
0.04
0.00
0.00
0.36
60.40
0.01
0.97
32.63
Cyprus
0.01
0.00
0.00
0.03
5.95
0.00
0.02
1.41
Czech Republic
1.64
6.40
3.03
6.83
488.00
95.40
11.70
118.90
Denmark
0.65
0.06
0.99
1.76
48.40
0.27
4.83
4.10
Estonia
0.01
0.00
0.00
0.06
0.77
0.01
0.01
0.25
Finland
0.20
0.08
0.07
5.81
1.08
4.22
11.00
7.31
France
21.90
2.63
9.30
58.87
390.00
16.40
84.30
327.30
Germany
111.00
129.00
123.00
405.00
3610.00
277.00
288.00
1555.00
Greece
0.17
0.16
0.01
0.47
213.00
0.68
1.75
16.57
Hungary
0.85
0.46
0.78
0.63
2.46
226.00
0.04
2.50
Ireland
0.01
0.06
0.27
0.18
1.62
0.51
0.99
0.46
Italy
4.11
0.22
1.53
53.03
2440.00
62.20
64.00
593.80
Latvia
0.00
0.00
0.00
0.13
0.06
0.00
0.01
0.01
Lithuania
0.00
0.00
0.02
0.25
2.05
0.19
0.14
0.31
Luxembourg
0.00
0.00
0.04
0.38
4.27
0.02
0.05
12.85
Malta
0.02
0.00
0.01
0.00
2.15
0.00
0.05
2.14
Netherlands
3.14
2.50
5.43
28.03
3230.00
16.10
20.10
953.80
Poland
0.02
0.01
0.08
0.92
1.81
0.28
0.11
1.52
Portugal
0.07
0.00
0.09
7.39
15.80
0.05
2.31
2.24
Romania
0.02
0.00
0.06
0.20
5.24
0.25
0.15
2.80
Slovakia
0.01
0.00
0.00
0.84
30.70
0.36
0.25
25.89
Slovenia
0.00
0.00
0.00
2.43
85.70
0.23
0.56
26.51
Spain
11.00
1.12
7.04
34.24
293.00
5.74
27.70
219.56
Sweden
3.29
0.24
3.86
7.31
13.40
7.53
2.72
60.96
UK
1.45
23.70
13.70
13.45
170.00
116.00
11.70
163.30
Note: the solar components include the hscodes presented in box III.3.2
138
Japan
Sta tistic a l a nne x
EU-27 Member States average (2010-2012) intra and extra-EU imports and exports of Wind
components, in million EUR
Export
Import
Extra
Intra
Extra
Intra
Austria
34.10
53.70
2.12
36.40
Belgium
30.60
75.90
5.62
61.90
Bulgaria
2.40
24.70
3.68
12.10
Cyprus
0.06
0.02
1.44
1.83
Czech Republic
10.80
33.80
5.82
33.70
Denmark
170.00
288.00
11.20
28.30
Estonia
2.47
12.10
0.41
1.80
Finland
10.70
2.57
4.07
11.10
France
28.10
38.40
7.03
98.40
Germany
240.00
369.00
44.80
238.00
Greece
0.38
7.77
1.96
28.00
Hungary
3.06
31.80
2.02
16.60
Ireland
0.10
5.49
0.27
12.60
Italy
65.00
37.50
8.07
84.90
Latvia
2.40
0.63
0.08
2.52
Lithuania
0.32
0.79
1.07
1.37
Luxembourg
0.01
0.22
0.01
0.49
Malta
0.01
0.00
0.05
0.05
Netherlands
36.40
21.20
10.90
17.80
Poland
3.07
34.90
5.19
40.30
Portugal
7.38
16.60
0.61
4.15
Romania
8.68
28.00
9.84
64.40
Slovakia
1.09
20.00
4.15
21.70
Slovenia
1.60
8.77
6.11
18.90
Spain
101.00
195.00
14.60
35.00
Sweden
13.00
15.10
7.54
90.00
UK
34.50
20.50
26.80
221.00
Note: the wind components include the hscodes presented in box III.3.2
139
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
EU-27 Member States average (2010-2012) imports and exports of Wind components to China,
Japan and the USA, in million EUR
Exports
Imports
China
Japan
USA
Others
China
Japan
USA
Others
Austria
5.28
0.32
11.10
17.40
0.42
0.61
0.02
1.07
Belgium
4.60
1.02
3.78
21.21
0.81
6.51
0.90
0.00
Bulgaria
0.00
0.00
0.00
2.39
0.83
0.00
0.00
2.84
Cyprus
0.00
0.00
0.00
0.06
0.61
0.00
0.01
0.81
Czech Republic
1.34
0.05
1.27
8.14
0.89
5.36
0.24
0.00
Denmark
0.62
0.11
82.90
86.37
4.39
0.14
0.04
6.64
Estonia
0.06
0.04
2.69
0.00
0.04
0.00
0.08
0.29
Finland
1.03
1.51
0.57
7.59
1.22
0.07
0.04
2.75
France
3.08
0.49
1.31
23.22
2.84
0.67
0.52
3.00
Germany
19.30
12.20
34.30
174.20
7.11
0.57
2.69
34.43
Greece
0.00
0.00
0.00
0.38
0.81
0.00
2.14
0.00
Hungary
2.72
0.07
0.84
0.00
0.26
0.79
0.16
0.81
Ireland
0.00
0.00
0.02
0.08
0.17
0.00
0.07
0.03
Italy
1.47
0.20
29.10
34.23
3.53
0.10
1.11
3.33
Latvia
0.00
0.00
0.00
2.40
0.05
0.00
0.05
0.00
Lithuania
0.00
0.00
0.00
0.32
1.20
0.00
0.00
0.00
Luxembourg
0.01
0.00
0.00
0.00
0.01
0.00
0.00
0.00
Malta
0.00
0.00
0.00
0.01
0.01
0.00
0.08
0.00
Netherlands
0.07
0.88
0.36
35.09
8.64
0.97
0.40
0.89
Poland
0.72
0.37
0.26
1.72
4.98
0.16
0.07
0.00
Portugal
0.00
0.00
0.04
7.34
0.70
0.10
0.01
0.00
Romania
1.55
0.37
0.48
6.29
6.84
0.00
1.91
1.08
Slovakia
0.20
0.00
0.10
0.79
0.16
0.66
0.26
3.07
Slovenia
0.08
1.74
0.13
0.00
0.18
0.00
0.02
5.91
Spain
4.81
0.60
19.60
75.99
9.43
0.86
0.91
3.40
Sweden
0.21
0.17
7.49
5.13
3.71
0.18
0.06
3.60
UK
1.00
0.99
12.00
20.51
7.80
7.41
6.84
4.74
Note: the solar components include the hscodes presented in box III.3.2
140
Sta tistic a l a nne x
EU28 Member States average (2010-2012) exports of Solar components to the other EU Member
States, in million EUR
Austria
Austria
Belgium
Bulgaria
Croatia
Cyprus
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Ireland
Italy
Latvia
Lithuania
Luxembourg
Malta
Netherlands
Poland
Portugal
Romania
Slovakia
Slovenia
Spain
Sweden
UK
0.73
0.05
0.34
0.35
3.23
0.68
0.00
0.69
104.00
0.22
8.07
6.95
0.21
14.70
0.02
0.05
0.01
1.47
0.33
1.79
1.15
0.96
Italy
Austria
53.30
Belgium
77.60
Bulgaria
0.97
Croatia
44.30
Cyprus
4.15
Czech Republic 53.40
Denmark
0.35
Estonia
0.00
Finland
0.12
France
95.10
Germany
1460.00
Greece
11.20
Hungary
35.90
Ireland
2.03
Italy
Latvia
Lithuania
0.30
Luxembourg
5.23
Malta
0.02
Netherlands
278.00
Poland
6.36
Portugal
4.70
Romania
27.00
Slovakia
0.58
Slovenia
43.00
Spain
384.00
Sweden
19.70
UK
122.00
Belgium Bulgaria
11.10
19.50
8.52
0.08
0.00
3.28
0.01
0.03
1.39
18.40
189.00
0.34
13.60
0.09
4.01
0.01
56.10
0.00
248.00
0.00
0.53
0.00
0.00
7.46
9.97
1.22
3.50
Latvia
0.01
0.00
0.00
0.00
0.01
0.01
0.02
1.09
0.00
Croatia
0.13
0.01
0.03
Cyprus
0.03
2.72
0.08
7.83
0.00
0.11
0.01
0.00
0.00
0.00
0.42
74.30
21.30
0.20
0.04
1.32
0.00
0.00
0.82
32.90
1.13
6.46
9.24
2.16
0.00
1.47
1.38
0.00
0.00
73.80
0.01
5.65
3.89
1.11
11.20
1.21
0.00
0.09
0.08
0.01
0.00
0.02
0.80
0.02
0.00
0.02
Lithuania Luxembourg
0.01
1.37
0.49
9.88
0.00
0.00
0.07
0.10
0.00
0.09
0.15
3.98
11.20
38.80
0.02
0.08
0.07
0.00
0.20
0.00
3.27
0.00
0.00
1.73
0.18
6.32
0.00
0.02
Malta
0.14
0.02
0.01
0.00
1.01
3.72
0.32
0.19
0.00
0.01
0.02
0.01
0.02
0.01
0.33
0.02
0.08
0.01
0.20
0.21
40.70
0.10
0.00
0.00
0.81
0.14
0.24
375.00
0.46
1.91
0.01
2.18
0.16
0.00
0.04
0.03
0.09
0.16
3.83
28.60
2.53
2.01
0.16
18.50
11.00
12.20
10.30
0.44
0.00
0.00
0.01
0.84
32.80
0.66
0.01
2.82
5.58
3.15
2.90
0.00
0.00
0.27
0.00
0.04
0.01
0.00
7.54
0.00
0.22
0.00
0.05
0.00
1.47
1.73
1.99
0.03
0.00
0.00
0.11
Netherlands Poland
1.25
1.91
60.30
2.49
0.68
0.00
0.09
0.02
0.95
1.14
0.11
10.50
0.42
0.00
0.00
0.08
0.03
4.73
0.46
157.00
32.80
0.08
0.00
15.60
0.09
0.00
0.20
1.93
2.21
0.00
0.26
0.00
0.01
0.89
0.00
0.04
7.35
20.40
3.69
13.60
Finland
0.05
0.02
0.10
0.02
0.00
1.61
0.00
Czech Republic Denmark Estonia
5.48
0.31
0.01
17.40
1.94
0.16
0.47
0.00
0.02
0.09
0.00
0.00
0.00
0.00
2.96
0.00
0.01
0.01
0.01
0.75
0.30
0.25
0.00
0.00
0.00
1.02
0.05
0.00
0.18
0.70
France
6.37
177.00
0.06
0.04
2.01
4.61
0.30
1.05
0.01
0.00
0.00
1.01
0.01
0.02
0.00
0.02
14.10
0.23
511.00
0.22
34.50
0.14
12.40
0.00
0.01
16.20
94.70
0.11
2.17
0.57
0.02
0.62
101.00
5.08
22.80
Germany Greece
74.30
1.44
372.00
5.70
1.45
3.51
3.99
41.60
7.97
441.00
9.15
4.42
0.01
0.15
4.02
0.07
86.90
3.52
285.00
6.52
187.00
3.19
0.10
0.00
101.00
36.70
0.00
0.00
19.40
0.14
0.00
2460.00
28.30
51.50
0.00
28.60
2.30
5.04
0.01
0.57
0.01
22.60
0.75
161.00
19.50
61.90
0.04
193.00
1.29
Portugal Romania Slovakia Slovenia
0.32
1.94
13.10
9.79
7.18
1.39
1.93
10.50
0.01
0.90
0.00
0.00
0.00
0.21
0.36
0.01
3.24
0.00
0.00
1.24
14.10
0.02
0.04
1.30
19.40
0.26
0.17
4.40
0.05
0.01
0.01
7.00
0.97
0.01
0.20
0.25
2.33
0.00
Spain
3.87
13.00
0.08
0.05
Sweden
0.96
0.32
0.02
0.81
0.05
0.75
4.10
21.80
UK
9.09
20.30
0.36
0.13
0.13
7.39
0.70
0.01
0.03
21.30
159.00
0.01
28.60
0.18
5.88
0.00
0.01
0.06
2.66
1.62
3.65
0.38
0.03
0.04
0.01
5.92
0.03
0.94
0.00
4.97
0.00
0.00
0.01
2.10
4.54
0.83
2.01
0.46
0.06
0.25
0.04
1.58
3.64
0.00
0.01
0.02
0.00
0.25
15.80
0.05
0.14
10.70
0.84
0.81
0.01
0.65
0.18
0.00
0.00
0.00
1.65
18.70
0.50
0.32
0.02
0.17
0.00
0.00
0.00
0.43
19.90
0.16
0.69
0.37
0.00
0.03
21.00
168.00
0.37
3.50
0.06
6.22
42.50
0.02
0.93
Ireland
0.02
0.01
0.00
0.53
55.50
0.00
0.00
0.04
0.37
49.80
1.89
0.33
21.60
0.00
0.18
0.00
Hungary
2.14
0.22
0.05
0.03
203.00
0.72
5.85
7.26
0.01
0.18
9.85
4.20
0.00
0.00
0.48
0.00
0.00
0.00
0.00
2.87
0.02
0.00
0.03
0.00
0.01
0.00
0.14
0.01
1.43
94.70
0.03
0.06
0.01
0.01
2.67
9.86
0.09
1.43
Note: that the solar components include the hscodes presented in box III.3.2)
Note: The values represent exports from the Member State in column A to the trade partner in the other
columns
141
Euro p e a n Co mmissio n
Ene rg y Ec o no mic De ve lo p me nts in Euro p e
EU28 Member States average (2010-2012) exports of Wind components to the other EU Member
States, in million EUR
Austria
Austria
Belgium
Bulgaria
Croatia
Cyprus
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Ireland
Italy
Latvia
Lithuania
Luxembourg
Malta
Netherlands
Poland
Portugal
Romania
Slovakia
Slovenia
Spain
Sweden
UK
Austria
Belgium
Bulgaria
Croatia
Cyprus
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Ireland
Italy
Latvia
Lithuania
Luxembourg
Malta
Netherlands
Poland
Portugal
Romania
Slovakia
Slovenia
Spain
Sweden
UK
2.57
0.10
0.07
Belgium Bulgaria
2.17
1.51
0.12
Croatia
0.40
0.09
0.02
0.23
0.68
1.80
0.00
2.58
3.12
26.70
0.01
5.70
0.00
2.87
0.51
0.30
0.02
2.84
0.67
0.09
9.13
0.30
0.09
0.13
0.05
1.47
0.84
0.13
0.01
0.00
0.17
0.01
0.00
0.00
0.01
0.07
1.13
0.63
10.50
1.74
1.06
0.96
0.05
3.64
6.52
3.22
0.33
11.50
2.38
0.02
3.83
0.09
1.08
0.01
0.01
0.10
0.14
1.19
0.05
1.72
0.04
0.03
0.01
0.01
1.82
Italy
10.70
4.41
2.27
0.41
Latvia
0.25
0.30
1.00
7.70
1.57
7.21
4.74
70.20
1.96
9.39
0.00
0.01
1.76
0.16
0.07
0.06
0.67
1.24
0.76
1.64
1.63
23.50
0.11
2.56
1.53
0.00
0.00
0.00
0.19
Cyprus
0.06
0.08
0.12
0.01
0.32
2.61
0.01
0.02
Lithuania Luxembourg
0.12
0.03
0.30
0.23
0.01
1.11
0.05
0.40
0.05
1.88
0.04
0.01
0.00
0.13
0.13
0.00
0.30
0.27
0.00
2.79
1.85
2.41
0.73
0.91
0.10
42.60
0.46
1.64
0.07
0.11
0.04
0.12
0.10
0.03
0.00
0.01
0.12
0.02
0.12
0.09
0.00
0.01
0.01
0.02
0.02
0.03
0.15
0.23
0.16
4.77
1.53
0.01
0.35
0.07
0.36
2.38
0.02
0.10
0.00
0.23
0.00
0.01
0.01
0.00
1.13
0.24
1.65
0.00
0.04
Malta
0.03
0.11
0.00
0.00
0.03
0.22
0.00
0.00
0.00
0.03
Czech Republic Denmark Estonia
3.25
1.90
0.43
3.93
1.85
0.27
0.35
0.09
0.49
1.65
1.18
0.00
0.01
0.05
13.80
1.74
0.52
49.50
0.57
0.00
0.04
0.51
0.08
0.03
0.01
0.33
3.76
0.17
0.19
3.14
0.24
1.52
0.59
0.40
0.19
0.36
0.04
0.24
5.42
0.00
2.24
0.34
1.52
1.06
1.47
28.40
0.07
8.99
Netherlands Poland
2.05
1.51
1.06
4.81
0.00
0.11
0.41
0.04
0.19
6.65
0.09
3.15
3.29
17.80
0.00
0.01
0.01
1.16
0.21
0.01
0.19
0.00
0.03
0.04
0.00
0.02
0.00
0.00
1.12
0.00
0.01
0.01
0.03
0.01
1.93
8.53
0.00
1.01
1.82
15.50
1.42
0.03
0.78
2.55
0.02
0.05
0.02
0.55
0.23
0.12
0.00
29.30
0.39
0.32
0.10
0.88
5.56
8.73
0.08
0.25
0.11
0.00
0.07
0.19
France
5.58
7.57
0.31
0.36
3.29
5.48
2.64
0.21
8.16
0.00
0.02
1.03
0.08
0.01
0.03
0.01
0.00
0.09
0.16
0.00
1.24
0.01
0.03
0.71
0.00
0.51
0.71
0.12
67.80
0.66
6.10
0.02
9.03
0.00
0.31
1.39
7.42
3.94
2.05
0.87
0.45
16.70
1.66
3.30
Germany Greece
28.00
1.66
35.10
0.56
3.63
3.02
0.04
0.31
13.30
0.07
41.20
0.53
3.20
13.60
0.64
13.60
0.23
17.90
0.46
21.00
0.00
0.00
24.90
2.81
0.12
0.06
0.00
0.15
6.85
9.41
4.43
4.16
6.32
3.79
15.20
12.40
5.73
Portugal Romania Slovakia Slovenia
0.90
2.97
3.50
0.73
1.08
3.36
0.71
2.68
14.30
0.00
0.01
0.01
0.47
0.15
0.17
0.05
0.05
0.22
Spain
2.62
6.46
0.67
Sweden
1.02
2.72
0.00
0.02
UK
2.88
4.23
0.07
0.00
0.75
39.60
0.04
3.27
0.62
12.90
5.47
130.00
0.70
0.84
9.51
0.17
0.52
0.31
0.44
7.37
0.13
0.53
9.76
3.17
0.76
0.77
0.00
0.02
0.01
0.75
0.00
0.00
0.04
0.01
0.00
0.05
2.70
0.02
0.21
0.09
0.92
0.84
0.53
1.53
0.01
0.04
0.00
23.10
0.00
0.03
3.30
0.03
0.07
0.10
0.09
0.22
0.10
0.02
0.83
0.44
0.00
0.01
0.05
0.16
0.09
0.02
1.45
0.48
2.55
12.70
0.03
0.50
0.31
0.49
8.07
1.04
0.04
0.02
0.37
0.57
3.42
0.08
0.01
1.34
0.55
0.10
0.00
6.59
0.02
0.03
0.59
5.37
0.78
4.23
5.08
29.00
1.54
6.28
0.00
2.92
0.01
0.02
0.01
2.59
0.06
0.32
0.18
6.03
0.00
0.00
1.09
0.19
0.01
0.41
0.48
0.02
0.27
1.76
0.19
0.77
Ireland
0.23
0.45
0.01
0.18
3.57
13.70
0.00
0.34
Hungary
1.69
8.50
0.00
1.68
0.01
0.42
3.84
0.68
2.26
0.02
0.80
1.45
0.00
1.42
1.71
5.35
0.01
0.06
Finland
0.29
1.54
0.49
2.84
3.40
0.32
0.11
0.11
0.10
1.57
0.12
0.00
0.42
0.03
0.21
0.06
0.21
3.36
0.02
0.02
2.61
0.00
7.69
3.41
0.01
0.79
3.30
7.19
40.10
5.48
0.16
4.60
9.07
0.00
0.07
7.76
1.98
2.29
0.55
0.39
0.34
18.40
0.51
0.74
Note: the solar components include the hscodes presented in box III.3.2
Note the values represent exports from the Member State in column A to the trade partner in the other
columns
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