Speech - The Energy Union and Keeping Europe Competitive


The Kangaroo Group in the European Parliament are a group of MEPs who believe in completing the European internal market. On the 14th of July I was invited to speak to the group in my capacity as Energy Spokesman for the UK Conservatives. I spoke alongside European Commissioner for Energy and Climate Change Miguel Arias Cañete on the subject of 'the Energy Union - Keeping Europe Competitive'. Below you can find my speech:

Thank you ladies and gentlemen. It is an honour to speak to you today. As a group of MEPs committed to completing the European single market can I say that we share the same priority: and I believe firmly that energy should form a key part of the single market.

In preparation for today I got to wondering why you call yourselves the kangaroo group, which put me in mind of the origins of the word. In Australia many moons ago two men were wandering the outback. One man saw an unfamiliar creature in front of him and tuned to his friend, ‘what is that?’, he asked. ‘Kangaroo’, his friend replied. Of course his friend wasn’t naming the beast - he was simply saying ‘I have no idea’.

And that story reminds me of the Energy Union we are here to discuss today. The Commission have set out a raft of ambitious priorities - the Energy Union will diversify our energy supplies, it will physically connect EU Member States, it will decarbonise the economy. While I admire that ambition, we still don’t know how each of these priorities will be realised. The Energy Union in its most meaningful sense still an unknown quantity. 

So I want to take some time today to spell out what I believe we need to see to make the Energy Union a reality, based on the three main obstacles facing Europe’s energy market.

First and foremost consumers, whether they be businesses or individuals, are paying too much for their energy. Europe’s energy prices are amongst the highest in the world: when we look to the United States we find wholesale electricity prices are 30% cheaper. Wholesale gas prices in Europe are more than twice, and in some cases up to three times higher than the US. It is absolutely crucial for Europe’s industry that we are able to compete on a global level, and in order to do that we must be able to produce at a comparative cost. What is more, with the advent of shale oil and gas energy in the US is set to get cheaper, meaning the scale of the challenge we face is set to widen, not narrow.

How do we deal with high energy costs? Well the first thing that we need to do is exploit the natural resources on our doorstep. That means allowing member states to make the most prudent choices about how they source their energy. Some member states may prefer nuclear, some gas; In Scotland, the region I represent, we have housed Europe’s oil and gas industry since the 1960’s. However this energy may be sourced, the right of the member state to invest how they see fit needs to respected, and we need to take cognisance of the market price of that energy. Too much interference from the European Commission through subsidies or expressed preference, no matter however well intentioned, will only push up European energy prices further. And so on the tougher questions, on nuclear, on fracking we need the European Commission to take a back seat.

The second serious challenge we face is with the volume of regulation. Let me give you an example. On Sunday new oil and gas offshore safety regulations came into force. On Monday the European Commission announced they are to explore regulations around onshore and offshore extraction with a view to filling 'regulatory gaps'. Sunday’s enforcement deadline and Monday’s announcement mark the 57th and 58th piece of European legislation respectively that govern Europe’s oil and gas industry. While regulation can set a level playing field internally, we need to bear in mind that every new rule costs time and money for industry to implement, and that affects our global competitiveness. We must therefore be more judicious than we have been in the past about the regulations we choose to create.

My third observation is that we have not innovated, nor have we created since the economic downturn. In an energy sense Europe has been paralysed by a complex system of subsidies and regulation that leaves little room for technological innovation. The NER300, attached to the ETS was a failure. The fund was so complex and difficult to access that only one Member State, the UK, was able to benefit from it. We must create a simpler system for accessing new technologies such as CCS. Similarly, we must revisit our infrastructure priorities and follow through the detailed plans on projects like the North Sea Grid with the investment they need to get off the ground.

Ladies and gentlemen those are the main issues as I see them, but I want to leave you with three ideas to overcome them.

We must diversify our energy sources. All around Europe, whether it be to our East in Russia, our South in North Africa, or West in the US there is an abundance of gas in the ground. 200 years worth, BP estimate. We have to take advantage of that supply if we are to meet our target of increasing Europe’s industrial base. There is a role here I believe for trade deals, and not least TTIP, in overcoming the US oil export ban.

Second of all we must fix the Emissions Trading System, It is our flagship climate change tool, but it must not disincentives industry as it does now. The ETS needs significant reform and that reform must strike the right balance between reducing emissions and facilitating industrial innovation, particularly in abatement technology such as CCS - these aims need not be mutually exclusive.

And lastly, we need to protect research and innovation funding. Through our universities and our colleges we will find the solutions to today’s energy problems but not if we continue to syphon off funding for other purposes. If we get the science right, if we can create the technology here in Europe, then the rest will follow suit.