EU needs stable energy policy, EDF warns

Sunday, October 05, 2008

Europe's governments must work together to deliver a "visible and stable" European energy policy or they will fail to attract the investment they need to meet sharply rising demand, according to Pierre Gadonneix, president of the World Energy Council and chairman of French energy group EDF.

The International Energy Agency has estimated that energy consumption will rise by 60 per cent between now and 2030, and capacity will have to double to meet demand. But Mr Gadonneix's warning comes as Brussels struggles to stop its member states from picking apart its attempt to forge a common approach on energy policy and climate change, including the plan to auction carbon emission permits.

Last month, the German government dealt a severe blow to the proposal to force companies to pay for the carbon dioxide they emit by backing an almost total exemption for industry. Other European Union members such as France are also pushing for concessions for certain energy-intensive industries.

But it also comes as the energy industry faces soaring costs on the construction of power plants and, in particular, on nuclear reactors whose return is longer-term and is so far unproven.

Mr Gadonneix admitted EDF was facing higher than expected costs on the construction of its new-generation EPR 1600 MW reactor in Flamanville, France. The initial estimate was €3.3bn ($4.5bn) but "we have probably passed this number now, given that it is in 2005 euros".

He said that Europe’s governments needed to agree common rules, especially on carbon trading, if investors were to invest in new power stations.

This was key for energy producers and "must be done at international level, otherwise there will be a distortion of competition", Mr Gadonneix said.

The EDF boss, fresh from agreeing the nuclear industry’s biggest takeover with the proposed deal to acquire British Energy for €15.7bn, also said he expected further consolidation in the energy sector.

"The restructuring has not yet finished. Only very big groups can assure the financing of the investment needed," he said, adding that nuclear power in particular required scale.

"When you build a plant you commit financing for 60 years. That can only be done by very large groups."

This article was featured on the Financial Times website.

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