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EFET is concerned that ESMA’s proposed way of implementing this important EU financial sector legislation could have a negative impact on competitiveness, energy security, affordability and sustainability.

It would not only significantly increase the costs of doing business for the energy sector,  increase energy prices, but it would also result in substantial additional costs for the European economy and would harm EU competitiveness. This would be in stark contrast with some of the key policy objectives of the new European Commission. 

Impacts on the energy sector

The main goals of the Energy Union are to increase competition, to drive down energy costs for citizens and businesses, to boost growth and to complete the internal energy market. The immediate impact of these new rules on energy markets will be on market liquidity due to the anticipated reduction of activity of market participants in traded markets. Liquid wholesale energy markets are indispensable to achieve the goals of the Energy Union. Less liquid markets mean less efficient, competitive and secure markets. Energy regulators themselves have identified liquidity in wholesale markets as a key factor for a healthy market and competitive prices for energy consumers. 

Impacts on energy consumers

The knock-on effect of reduced liquidity on consumer energy prices would be substantial. EU electricity consumers would pay about €5bn1 every year for every percentage increase in final prices resulting from lower competition and efficiency. EU gas consumers would pay about €1.8bn2 every year for every percentage increase in final prices resulting from lower competition and efficiency. Every additional hour that supply is expected not to meet demand by causing a blackout, could cost European consumers and the European economy up to €12bn3 (i.e., one hour of blackout per ten year would still cost the EU economy on average €1.2bn per year).

Additional impacts

Adopting proposals that would inflict significant additional costs on the European economy and harm EU competitiveness would be in stark contrast with some of the key policy objectives of the European Commission. They would come in addition to another recent ESMA proposal – to remove the hedge exclusion under the EMIR regulation - that would cost European business some €200bn according to recent research by the Deutsches Aktieninstitut.

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1Source: Eurostat. The estimate is based on annual EU28 generation of 3,100 TWh in 2012 and the average of  EU28 household and industrial prices in the first half of 2013.
2Source: Eurostat (prices) and Eurogas (volumes) combined to estimate annual EU28 spend on gas.
3Source: Based on Entso-E (i.e. not EU-28) peak demand of 530 GW in January 2013, a value of lost load of £17,000/MWh at €1.35/£ (as calculated in discussions for the UK capacity market – page 8 “Annex C: Reliability Standard Methodology”, July 2013 – UK Department of Energy & Climate Change).