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Idle talk of ‘unbundling’ highlights EU’s energy dependency woes

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The EU Transport, Telecommunications and Energy Council met in Brussels Feb. 15, and the chief item on the agenda was the “unbundling” of power networks.

The idea is that in order to promote competitive practices in the power industry and reduce energy prices, energy companies that were formerly government monopolies should surrender control of their transmission networks. This would open the door to outside firms who could supply power from nontraditional sources (wind, biomass, solar, etc.), or to nontraditional locations (across borders to other EU countries).

But, as is often the case in EU affairs, the 27 ministers could not agree and the proposal was shelved. Instead, they passed responsibility for the matter to the European Commission, which must provide more information on the benefits of such a move at another meeting in March.

What does this have to do with Japan?

As with many policy discussions, what at first seems like yet another in an endless series of round table talks later turns out to have big consequences not only for Europe, but also for Japan. And an issue like energy is no small consideration in these times.

To begin with, it should be noted that Japan and Europe are both very similar in their energy positions: They don’t produce nearly enough to meet their needs.

In Japan’s case, dependence on foreign energy imports is 80 percent (99 percent in the case of oil), while for Europe the figure is 56 percent. Germany, however, is above the EU average and closer to Japan at 65 percent dependency.

In an effort to reduce this dependency, and in continued reaction to the oil shocks of the 1970s, Japan, Germany, and others in Europe — especially France — began to use nuclear power as an alternative energy source. Being able to produce electricity domestically offers a multitude of benefits and prevents a nation from being held hostage by oil-producing nations.

But nuclear power is not without its drawbacks, as Japan knows well. A criticality accident at the uranium-processing center in Tokai, Ibaraki Prefecture, in 1999 resulted in the deaths of two workers and the mass evacuation of local residents. It was not the first incident at the plant either.

In Germany, reactors have been run without major accidents so far, but the memories of nearby Chernobyl still run strong. The Soviet-built plant exploded in 1986, instantly killing about 40 people, forcing the resettlement of hundreds of thousands more, and spreading radioactive contaminants for hundreds of kilometers around.

Indeed, the psychological impact of the Chernobyl incident was surely one of the reasons that led Germany to swear off nuclear power altogether in 2000. The plan, put into place by former Chancellor Gerhard Schroeder, calls for all of Germany’s 19 plants to shut down completely by 2020.

But recently, more and more politicians in Germany are revisiting the nuclear issue, one major reason being the rapidly increasing need to reduce greenhouse gases like carbon dioxide. Although nuclear power plants may emit dangerous radiation if not properly monitored, they do not release any carbon dioxide in the production of electricity.

It is a complex tradeoff of environmental risks: global warming versus radioactive waste. And just when it looks like things can’t get any worse, a seemingly maverick nation with a chip on its shoulder enters the picture: Russia.

Russia is elbowing its way into markets almost everywhere, and one place it is doing so with great effect is energy. The collapse of the Soviet empire may not have left much in the way of manufacturing or social resources, but there is plenty of oil and gas. And Russia is all too happy to sell these commodities to its western comrades.

Gazprom, the semiprivate firm that runs the gas industry and several others besides, is making deals all over for the supply of natural gas. Already it provides nearly 25 percent of all the natural gas used in the EU. This dependency on one single supplier, whose reputation for delivery was recently undermined, has its share of skeptics.

Twice in the past two years, delivery of oil and gas was interrupted after price disputes with Ukraine and Belarus, two of the countries through which Gazprom’s pipelines run. Such disruptions lend considerable weight to the pronuclear lobby’s arguments for energy security.

But a newly proposed pipeline through the Baltic Sea is being touted as a way to bypass the risk of interruptions. On paper, it seems like a viable alternative, until one realizes that the company behind the scheme is 51 percent owned by Gazprom, again raising the question of whether the project offers any real change in terms of energy independence or security.

Japan, too, has had its run-ins with Gazprom. The Sakhalin-2 project, a massive natural gas deposit being developed in partnership with Shell of the Netherlands, Mitsui and Mitsubishi, was broken up when Gazprom insisted on getting in on the deal. With tacit support from Russian President Vladimir Putin, the Japanese firms were compelled to surrender 50 percent plus one share to the Russian firm. Control of the project now sits firmly in the hands of Gazprom, and Japanese attempts to reduce dependence on Middle Eastern oil have suffered yet another blow.

So when the European energy ministers meet next in Brussels, the uncertainty over how to deal with the dependency on Russian gas will be lingering in the background. Liberalizing power networks to make better way for alternative energy and nuclear power would be a significant step away from this dependence, although it remains to be seen if consensus can be achieved. Nevertheless, it could mean that, in the future, Gazprom will be forced to look more closely at other energy-dependent markets, markets such as one finds here in Japan.

In this light, what looks like just another meeting in Brussels could take on a whole new meaning for energy-scarce Japan.