Technology consultant Capgemini has released its 14th annual European Energy Market Observatory and it concludes that utilities’ future profitability is under threat because of governmental pressure.
The report asserts that governmental and regulator behaviour is also threatening utility capacity to invest in future infrastructure projects.
Capgemini found that price volatility and stagnating European energy consumption in the wake of the global financial crisis had caused “downward pressures” on utility firms’ earnings and stock performance.
In particular the changes implemented by some governments in response to Fukushima and EU regulations, which punish clients who fail to meet energy savings targets, along with new taxes were all contributing to “increasingly difficult short-term conditions”.
With investment of as much as one trillion euros required in European energy infrastructure over the next decade, governments should “be careful not to kill the goose that lays the golden egg, especially as large utilities are currently divesting from Europe”, said Colette Lewiner, an adviser to Capgemini’s chairman.
“Undermining utilities’ attempts to make much-needed investment in energy infrastructure could be costly once the economy rebounds and demand for electricity and gas increases again,” she added.
The report warned that the EU’s target of producing 20 per cent of its energy supply from renewables by 2020 would be “difficult to meet” because of the decision by governments to cut subsidies and tax incentives. Reducing the share of nuclear in the energy mix in the wake of Fukushima – in favour of renewables and gas – would also increase costs, it said.
Meanwhile, the exploitation of shale gas in the United States meant prices there were being driven down compared with Europe. With the resulting coal surplus in the US, which has seen prices fall in Europe, it has led to the closure of gas plants in the EU that are “badly needed to back up renewable energy generation”.
While the EU’s energy efficiency targets “will be difficult to meet”, emissions goals for 2020 should be reached – but only because of the fall in output associated with economic crisis and the relocation of industrial plants to Asia, claimed the report.
In addition, political decisions like the accelerated nuclear phase-out in Germany and annual taxes on nuclear power generation imposed by Belgium and recently by Spain show that key stakeholders still see Utilities as an easy source of revenue
The report was supported by Exane BNP Paribas, CMS Bureau Francis Lefebvre and VaasaETT Global Energy Think Tank.
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