Europe strives to achieve economic growth, which includes sustainable competitiveness, economic security, open strategic autonomy and fair competition. The goal is to create conditions for the success of the company, a protected environment and the possibility that everyone has an equal chance for success. Mario Draghi, former president of the European Central Bank and one of the greatest European economists, was tasked by the European Commission to prepare a report on his vision for the future of European competitiveness.
In the framework of the report entitled The future of European competitiveness (eng. The future of European competitiveness), a special part is dedicated to the energy sector. Energy represents an important aspect of the difference in the competitiveness of the European Union compared to other regions of the world. However, the energy crisis and the problem in the structure of the energy policy in the last two years worsened this difference.
One of the major challenges in maintaining the competitiveness of the European Union on the global energy market is the price of energy itself, which is high in the countries of the European Union compared to the United States and China. Some of the reasons for this are the high costs of carbon dioxide emissions, higher taxes and more. The price of electricity is significantly influenced by the price of gas. Although its share in production is smaller, it has a significant impact. For example, in 2022, gas was a key factor in price determination as much as 63 percent of the time, although it accounted for only 20 percent of the energy mix.
Also, there are significant differences in wholesale energy prices from country to country. Such a difference is influenced by the different energy mix and the level of infrastructure development.
Although PPA contracts (Power Purchase Agreements) allow companies to buy energy at pre-agreed prices and thereby protect themselves from variations in the price market, there are certain challenges. Contracts bring stability and in the European Union the number of companies that use them is increasing, but the market is still not sufficiently developed. Many companies are still unwilling to use them due to obstacles such as the lack of adequate financial guarantees, as well as the complexity of contractual terms.
Physical limitations in gas and electricity networks, which make it difficult to integrate the single market of the European Union, are cited as another challenge. At the same time, it prevents a more efficient exchange of energy between member states, which can lead to an increase in prices and other costs. The increase in costs is also reflected in the necessary modernization of the power grid, in order to support the development and integration of renewable energy sources.
Speaking of renewable energy sources, the problem is also reflected in the process of obtaining permits for new energy projects, such as solar and wind power plants. The processes are long and demanding, and in some member states they can last up to nine years. Although the European Union increasingly insists that they be shortened and simplified, implementation at the national and regional level remains a challenge.
As a last example, one could mention the challenge related to the high prices of taxes, fees and subsidies. All of this affects the final price of energy for consumers, and considering that each member state has a different policy on this, prices vary across the European Union. Also, state aid is not the same in every member state, which is why countries that have more money can help their companies more, which creates unequal conditions of competition within the European Union itself.
There are numerous challenges that the European Union faces when it comes to the energy sector. However, in order to maintain competitiveness at the global level, that is, its advantage, it needs to work on solving such obstacles, through the modernization of infrastructure, reduction of energy costs and acceleration of the energy transition.
Katarina Vuinac
Source: energetskiportal.rs
