EU unveils plans for historic single energy market

European Commissioner for Energy Union, Maros Sefcovic, holds a joint news conference with EU Commissioner for Climate Action and Energy Miguel Arias Canete (not pictured) at the EU Commission headquarters in Brussels, Belgium on Feb 25, 2015. T
European Commissioner for Energy Union, Maros Sefcovic, holds a joint news conference with EU Commissioner for Climate Action and Energy Miguel Arias Canete (not pictured) at the EU Commission headquarters in Brussels, Belgium on Feb 25, 2015. The EU unveiled plans on Wednesday for a continent-wide single energy market to reduce its uneasy reliance on Russian supplies and cut a massive annual import bill of some 400 billion euros. -- PHOTO: EPA

BRUSSELS (AFP) - The EU unveiled plans on Wednesday for a continent-wide single energy market to reduce its uneasy reliance on Russian supplies and cut a massive annual import bill of some 400 billion euros.

The proposals by the European Commission, the executive body of the 28-nation bloc, are timely as Russia once again threatens to cut gas deliveries to Ukraine, putting onward supply to Europe at risk.

"Today, we launch the most ambitious European energy project since the Coal and Steel Community," said Maros Sefcovic, the Commission vice president in charge of the dossier, citing the 1951 precursor of the modern-day EU.

The European Union imported 53 percent of its energy needs last year at a cost of 400 billion euros (S$610 billion), a dangerous vulnerability in itself at a time of growing global insecurity, not least tensions with Russia.

The plans for 'energy union' include completing the single market, increasing energy security, boosting efficiency, reducing the use of fossil fuels and increased research on new energy sources.

But efforts to centralise energy policy in Brussels are potentially divisive EU member states jealously guard the right to decide their own energy mix.

Germany, for example, depends largely on Russian gas and is shutting its nuclear plants; Poland relies almost entirely on its own coal mines while Britain favours renewables and is investing heavily in new nuclear plants.

The Commission tackled this head on, calling on the 28 to sink their differences and create a single market to provide the environmentally sound, cheap and secure energy needed for the future.

Its report said this "fundamental transformation of Europe's energy system" will require investment in resources and infrastructure of more than one trillion euros by 2020.

Some 75 percent of the EU housing stock is energy inefficient, the transport sector relies on oil, 90 percent of which is imported, while distorting subsidies cost 120 billion euros, the report said.

Worse still, EU electricity prices are 30 percent higher than in the United States and gas prices more than double, putting the bloc at a serious economic disadvantage.

"Europe needs to make the right choices now," the report said, adding that it should seize the "historic opportunity" of current low oil and gas prices.

The global situation including the standoff with Russia over Ukraine also showed the need for action, the Commission added.

"The political challenges over the last months have shown that diversification of energy sources, suppliers and routes is crucial for ensuring secure and resilient energy supplies," it said.

Russia supplies about a third of all EU gas needs, with half of that amount transiting Ukraine. It also remains the sole source for many former Soviet republics in eastern Europe.

Earlier this week, Russian giant Gazprom warned it could cut off supplies to Ukraine, threatening a repeat of 2006 and 2009 when Moscow tightened the screws on Kiev.

Against this backdrop, the Commission recommended that work on the EU's Southern Corridor pipeline, bringing gas from central Asia, "must be intensified." President Vladimir Putin abruptly cancelled Russia's South Stream pipeline in December, saying the EU was deliberately sabotaging a project designed to bypass Ukraine and avoid supply problems.

"When the conditions are right the EU will consider reframing the energy relationship with Russia based on a level playing field," the Commission said.

Business groups largely welcomed the Commission report but environmentalists found serious fault.

"The proposed holistic approach is a good foundation to balance the EU's energy, climate and industrial challenges better than in the past," the BUSINESSEUROPE group said.

For Greenpeace, the Commission proposals amounted to a "patchwork of policies." "The left hand doesn't know what the right hand is doing with this plan. Europe needs a coherent, joined-up plan if it's going to play its part against climate change and be the world number one in renewables," it said.

EU energy ministers will take up the recommendations next month, with work to turn them into legislative proposals for member states to agree likely to take some time.