Energy in Europe

Citation

(2001), "Energy in Europe", Property Management, Vol. 19 No. 4. https://doi.org/10.1108/pm.2001.11319dab.023

Energy in Europe

Energy in Europe

Despite a commitment to competition in energy markets throughout the EU, Europe's businesses have yet to really benefit from deregulation, a major new survey has revealed. Prices still have some way to fall to a true market-led position, cross-border trade is limited to only the very biggest users and progress in Northern Europe is far more dynamic than in the states of Southern Europe.

Sulzer Infra CBX – the leading infrastructure solutions company-conducted a "blind" survey of energy suppliers in EU states, asking them to supply forward-looking prices for the year 2001 for a contemporary, mid-range electronics manufacturing and assembly facility. The results revealed wide variations in the progress of market liberalisation, environmental taxation levels, choice of suppliers available and, most crucially, that national frontiers are still very much in existence in the supply of energy continent-wide. In fact, there are significant blocks in place to transnational power procurement.

Since the EU introduced the concept of competition into electricity and gas markets via its 1996 Directive, there has been a great deal of hype about the effects of market liberalisation. Pundits have consistently pointed to a future where energy suppliers, managers and consultants will be responsible for over $500 billion of contestable annual revenues in gas and power production and’trading <www.uilondon.org/sym/2000/whitwill.htm > – "European Deregulation: One Year On", driving costs down and consumer choice up. Commentators have also suggested the advent of a wealth of value-added services, including on-line facilities which would help businesses manage their energy procurement on pan-European levels, delivering a real impact to the bottom-line.

"Our survey shows that all these advantages are obviously on the way", said Mike Cairney, Managing Director, Sulzer Infra CBX, "but it is simply not an option for a company to purchase power from a supplier in another member state at this time for a facility of this nature. The fact that merger and acquisition activity in the power sector accounts for over 60 per cent of all cross-border deals over the last year means that we are sizing up for a competitive future, but have some way to go. The Sulzer Infra CBX survey is the first to be based on tender responses for future supply to a site with a detailed energy consumption profile – the results depict the reality of the current state of the market."

Key results include:

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  Energy prices are dropping through competition – offset to some extent by environmental and other taxes. However, they have some way to go. Full deregulation will not be established throughout the member states until between 2007 and 2010.

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  Competition is significantly more advanced in Northern Europe-particularly in the Scandic countries, Germany, Austria, Switzerland and Benelux. France and the Mediterranean countries did not respond with anything like the same commercial aggression.

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  Denmark – by virtue of its extensive environmental taxation – is significantly more expensive in terms of power supply than all other member states and Switzerland.

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  While six countries – the UK, Spain, France, Ireland, Switzerland, Germany – were all within a close range of one another, once gas and electricity supplies were taken into account –- Belgium emerges as the cheapest place to locate the plant in terms of utility costs.

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  The UK – which has liberalised its power market, gradually, ahead of the rest of the EU – does NOT offer a more competitive regime than countries still deregulating.

"The idiosyncracies of local markets will continue to mean a shifting supply regime", concluded Mike Cairney. "Market knowledge and demand data will become increasingly important. Energy is a commodity product and suppliers must compete on more than price.

"Sulzer Infra CBX procure and manage energy for organisations across Europe – this detailed knowledge of local markets will not only underpin the services we provide, but also ensure that we can add real value to customers seeking to make sense of this evolving marketplace. Suppliers want certainty of demand and consumption profile. In a deregulated market with an increasing array of offers, it will be those organisations with the best information and data that strike the best deals."