Sustainable development is the key concept

The Green Paper (1) published in March by the European Commission proposed an energy policy which is part of the line of previous documents, in particular, the Strategy Paper of March 2004. It must also be analysed in the light of demand letters sent in April to 17 of the 25 Member States for failing transposition of directives of June 2003 on the opening of the gas and electricity markets.

The various texts of the Commission form a coherent approach, which becomes bigger with time and events (blackout in the United States, Italy and the United Kingdom in 2003 and 2004, closure) partial supply of Russian gas during the winter of 2005-2006. The leitmotif in the final however creation of an individual in the industry by promoting free competition, should allow to reduce the price environment.

Clear objectives...

Three objectives are recurrent and determinants in the European vision:

-the opening of the markets. This aspect was historically very oriented on fragmentation (break-up of the value chain between actors, fragmentation of the actors at each stage of value, separation between gas and electricity) and became focused on rules of the transparent and respected game, in particular as regards access to the resource and the networks. He advocates in all cases the creation (in horizons however to become more distant) a market European by construction of interconnections between countries or areas, both for the gas and electricity. He wants to promote the creation of an open European market, factor, according to the commonly accepted vision of increased competition and therefore lower prices.

-the security of the system. Initially centered on the problems of capacity to meet peak demand (and therefore the construction of means of peak electricity and the development of electric and gas interconnections), this theme is expanded to the security of the (especially electrical system, because of the blackout) and, therefore, the harmonisation of the rules of safety and management of electric transport between countries and regions. He has more recently integrated the security of supply (gas in particular) and the concern to create so-called strategic oil and gas stocks (as have the United States in oil since the 1973 crisis). European coordination (of more diplomatic than economic or technical nature) is so desired by the Commission since the beginning of 2006 and the crisis of Russian gas;

-the environment. Sustainable development is the key concept. It focuses on three areas: the development of renewable energy, CO2 emissions reduction and control of energy (i.e. the demand reduction).

... but the inconsistencies

However, and in addition to actual impossibilities (today can hardly build lines of 400 000 volts in the garden of his constituents), these goals face of real economic barriers. Because you can not both want to let the rules and terms of a "pure and perfect" market operate see prices lower and at the same time want to regulate electric peak means (which are not rentabilisables and therefore not renewed in a deregulated market), helping to fund new interconnectors, subsidize renewable energyforce gas storage policies - by bear the extra cost three recent actions to consumers - and make pay CO2 emissions for the "polluters", which they also repasseront the cost more later... For example, renewable energies are more expensive than fossil fuels, even with the currently very high prices of the latter. Or the guarantee of security systems, in terms of functioning such as storage, represents for the specialists of the additional costs not or in any case insufficiently offset by compensation markets.

In addition, dé-integration of actors is not viable: in an industry of capabilities to strong output as electricity costs non-integrated downstream profitability cycles are unavoidable non-regulation and price control. Evidenced-based chemistry, airline companies, the paper industry, etc. Only, if bankruptcy or temporary disruptions are acceptable in these industries, they are little imaginable in electricity because would they help then harm the national economy whole. In the energy marketers not integrated upstream, they are, or in a business of convenience with tiny margins if they sell to large customers (little attractive position, including investors), is exposed to strong fluctuations in the wholesale of energy prices that they can not pass immediately on their prices, for reasons of image and regulatory constraint (2).

Thus, the situation of actors not integrated is structurally not perennial. And the open energy market must undergo many regulations on costs and prices.

Water in the wine regulatory

Needed so that, on one point or another, the European Commission put water in his regulatory wine.

Security compromise is not acceptable - anyone could not concede knowingly left to develop the probability of a blackout. Compromise the environment is hardly tolerable, at a time where the concerns of peak oil, cost of fossil fuels and global warming of the atmosphere are subjects taking a growing importance in the public opinion. Then, it remains the goal of a free and open market in Europe...

Either the Commission accepts that his ideal of fragmentation, which is measured in particular by the evolution of the market shares of the historical actors, can not be applied and therefore continued in the energy, will continue to live in pretexting, where everyone pretended to show that the markets are open and competitive, then the historical actors continue to be dominantwhich provides the overall viability of the industry.

The tactics of the sorcerer's apprentice

The deregulation of industry also vital for the economy that it is the energy must not be at the mercy of modes or one-time events, also publicized as they are. It is not conceivable that responsible public authorities modify key elements of a regulation on the basis of a public opinion which stops the versatility...

On the other hand, some deep-seated economic precepts are not to be as universal as claimed. Say that economic deregulation inevitably brings a decline in prices is to say that the previous situation (of national or regional monopolies) was poorly managed and that too much value was wasted in the chain from producer to the final consumer. It was not, by far, the General case.

Go to a deregulated market is in any case to pay more to customers (individuals) unlikely to compete consistently and effectively their suppliers, and to pay less to major customers (the électro-intensifs) likely otherwise to "vote with their feet" in relocating their factories to areas of low energy and labor costs.

Want to prevent such developments imply a re-regulation of the industry and, therefore, to abjure the creed of a market open to organizing itself in economic and transparent rules. Deregulation for re - regulate then appears, at best a waste of resources, at worst, be the sorcerer's apprentice. European public authorities should make amends and to recognize that not all the objectives of the regulation are coherent and even that some are more truly relevant.

The regulation is not now a tag on which players can shape their strategies and tactics. It is opaque and its developments are unpredictable. It would be better to cut the knot...

1 Green paper on the development of a common and coherent EU, European Commission energy policy, March 8, 2006.

2 Cf. in France Poweo results, for example, or those of the sellers said low cost (in fact low price) that flourished in period of price large lower (2002-2003) and then disappeared at the United Kingdom.

Vice president, Estin & Co