Rising consumer prices, unrealistic renewable energy subsidies, crumbling financial models -- in this report, we share insights on the challenges facing the European power market and the role of communications in trying to re-establish trust and build empathy between producers and their customers. At MSLGROUP, we represent a wide range of power companies across Europe, ranging from large scale utilities to small scale renewables; from nuclear to solar and all points in between. We are actively engaged in helping our clients communicate around these issues and relish the challenge! We hope that you enjoy this report and welcome your feedback. So don’t hesitate to contact us with your thoughts.

1. ENERGY
REPORT
Issue 4 | January 2014
Keeping the lights on
- Europe's energy challenge
INSIDE THIS ISSUE
PAGE
4
PAGE
6
1
Poland
A report on Poland’s tricky navigation between
coal dependence, a need for independence
from Russia and calls for more renewables.
Germany
Trouble in Europe’s green energy powerhouse.
Too fast, too expensive? Will the grand coalition
be able to provide an answer?
PAGE
8
PAGE
14
France
France’s energy giants look elsewhere for
investment opportunities, while the push for
more renewables is at a standstill.
UK
The big energy companies get no love from the
public. Here’s why.
ENERGY REPORT
January 2014

2. Contents
Contents
Introduction
3
The dark winter of 2015?
4
Back To The Future: Is German Energy Policy Becoming
‘More Normal’?
6
Keeping the lights on:
What energy policy for France?
8
ENI’s Scaroni leads the discussion on the future of
Europe’s energy and industry
The merchant and the preacher try to
bridge their interests
12
Cold headwinds for the UK
14
What’s next for European energy networks?
16
A formative moment for energy policy?
19
MSLGROUP can make the difference
21
Where we are
2
10
22
ENERGY REPORT
January 2014

3. Introduction
Welcome to MSLGROUP’s report into the European power
market and the communications challenges that are threatening the industry.
While each European country has a very different structure to its energy market, with France leading on nuclear and Germany increasingly
focused on renewables for example, there has been growing unanimity
among power producers that something needs to change.
In September, nine of the EU’s largest power companies came together
to warn that Europe’s energy security was under threat. In particular, they
highlighted that unrealistic renewable energy subsidies were creating a
major problem – pushing up prices for consumers while destroying the
financial model their business was built on.
In an era of rising consumer prices, the general public may have little
sympathy for these claims. However, no one can deny that with over
500,000 employees and €900bn of annual sales, these companies
carry huge economic clout and are critical to delivering the energy infrastructure that Europe needs.
There is no question that power companies need to respond to the dynamic situation they find themselves in. With fuel poverty finding its way
into front line politics, as in the UK, power producers cannot afford to
allow themselves to be tarred with the ‘banker bashing’ brush. Momentum is building and needs to be addressed, before sentiment runs away
from them.
Communications undoubtedly has a key role to play, not only explaining
to customers why their bills are going up and how the cost elements
break down. But, perhaps more importantly, in trying to re-establish trust
and build empathy between producers and their customers. This will be
critical to the long term relationship power producers have with society
and, ultimately, to their licence to operate.
At MSLGROUP, we represent a wide range of power companies across
Europe, ranging from large scale utilities to small scale renewables;
from nuclear to solar and all points in between. We are actively engaged
in helping our clients communicate around these issues and relish the
challenge! We hope that you enjoy this report and welcome your feedback. So don’t hesitate to contact us with your thoughts.
Nick Bastin
Managing Director, Capital MSL and Head of MSLGROUP EMEA Energy Practice
3
ENERGY REPORT
January 2014

4. The dark winter of 2015?
“
If the European Union’s energy security is to be ensured, it must use all the resources
at its disposal. For Poland, resources are coal and shale gas - if it is confirmed. However, this should be done with use of latest technologies to protect the environment .
Jerzy Buzek, former President of the European Parliament.1
Jakub Zajdel
Poland
jakub.zajdel@mslgroup.com
The production of electricity by Polish power plants
decreased by 2% (159.853 GWh) in 2012, from
163.153 GWh in 2011, while energy consumption also
slightly decreased during the year from 157.910 in
2011 to 157.013 in 20122. From an analysis of this data,
one might assume that Poland is far from being short
of energy supply. However, a growing economy, the
decommissioning of obsolete units and delays to new
investment may quickly turn the tables.
According to a report by the Polish Ministry of Economy3 in August 2013, the first capacity deficit may appear in the winter of 2015. Furthermore, the problems
with the power supply, which may influence not only
the Polish economy but the quality of life of its citizens, will last up until the summer of 2018 – always
assuming that all planned investments are completed. If key projects are delayed or significant failures of
old units arise, the stability of the power supply will be
threatened.
Another important characteristic of the Polish market
is the share of different fuels used in energy production4. Coal is the main source of energy, with hard coal
having a share of 50.6% and lignite 33.5%. Renewable
energy sources account for 10.4% and natural gas only
for 3.3%.
New projects will barely replace the old ones
forced capacity of 37,720 MW as at the end of 20125.
Although installed capacity has risen by 6.4% between
2010 and 2012, it was mainly due to the commissioning of one power plant in Belchatow (858 MW) and a
number of small renewable energy projects. One of
the biggest problems is that almost 55% of installed
units are over 30-years old6, a number of them may be
modernized, but some need to be shut down.
The future of each unit will depend on their efficiency,
emissivity and maintenance costs; however, operating
periods cannot be extended indefinitely. Over the long
term, we should not worry, because, according to a
Ministry of Economy report7, new capacity of 13.2GW
will be built by 2020 and 14GW more by 2030. However, apart from a number of small renewable energy
sources, only two large units are currently being built
in Stalowa Wola (450 MW) and Włocławek (460 MW)
- both should be finished by 2015. There are several
other investment projects at different stages of preparation, but the next large power plant is to be connect-
Fuels used in energy production
Renewable energy
sources 10.4%
Natural gas
3.3%
Lignite
33.5%
Hard coal
50.6%
Poland has one of the biggest electricity grids in Europe with 38,046 MW of installed capacity and un-
Part of Jerzy Buzek inauguration speech of the X Congress of the New Industry magazine, 16th October 2013
http://www.pse.pl/index.php?modul=8&y=2012&m=12&id_rap=212
3
The Ministry of Economy report
(http://bip.mg.gov.pl/files/upload/14223/PL_MG_DE_sprawozdanie_2011_2012_20130731_SKAN_w_ost.pdf), page 53
4
Data of the Energy Market Agency from 2012 - http://www.are.waw.pl
5
The Ministry of Economy report, page 6
1
2
4
ENERGY REPORT
January 2014

5. ed in 2017. Any nuclear power plant project is still at a
very early stage and only optimists believe that the first
unit will start production before 2025.
level in order to ensure the stable development of the
energy sector.
• Regulations - creating an economic environment in
which foreign and domestic companies will want to
invest in the energy project:
• Renewable energy sources - stable regulations that allow
investment projects and support systems to be planned
and to ensure the development of the industry
• Shale gas exploration - transparent tax system that will
encourage companies to explore for shale gas in Poland
• Fuel - creating a comprehensive strategy for the
development of each fuel
• Nuclear power - decision whether to build a nuclear power
plant, which partners to attract and where to locate it
• Coal - how to manage current assets, whether to support
new projects and how to limit the negative impact on the
environment
• Gas – the role of gas in the Polish economy as an energy
source, usage of LNG terminals and the responsible
extraction of shale gas in the future
Driven by renewable energy sources
An initial estimate of the Ministry of Economy8 from
August 2013 assumes that from 2014 onwards new
capacity of approx. 0.5 GW from renewable energy
sources will be built each year. However, in September 2013 the same Ministry published support mechanisms for producers of electricity from renewable
energy sources9. The renewable energy industry has
been waiting for this proposal for some time, because
lack of a clear support system for green energy has
affected their ability to plan their business. The proposal involves replacing certificates with an auction
system; however no ratios or data are specified. Representatives of foreign and Polish energy companies
are complaining about the lack of regulations for renewable energy – more and more investment projects are put on hold.
Facing the future
The short term outlook of the Polish energy market
leads to a long list of potential challenges in different
fields. Some solutions need to be created on a country
• Matched renewable energy type – creation of a renewable energy mix (wind, biomass, biofuels) that will address
political and geographical location of Poland
Poland, as a European Union member, needs to deal
not only with internal problems, but also face the common European goals.
• Unwanted energy resources - discussion on the
future of coal and shale gas in Europe
• The climate and energy package - discussion regarding the impact of the package on the development and competitiveness of the EU economy
• Common energy market - usage of opportunities
offered by cooperation in the energy fields between
countries – example in the Visegrad group (Poland,
Czech Republic, Slovakia and Hungary)
The article describes the main challenges facing the
Polish energy market. However, due to the complexity
of the issue and uncertainty related to ongoing legislative changes, each sector of Polish energy industry
should be subjected to separate, in-depth analysis.
Data of the Energy Market Agency from 2011 - http://www.are.waw.pl
The Ministry of Economy report, page 39
8
The Ministry of Economy report, page 38
9
http://www.mg.gov.pl/files/upload/19072/Prezentacja%20na%20strone.pdf
6
7
5
ENERGY REPORT
January 2014

6. Back To The Future: Is German Energy Policy
Becoming ‘More Normal’?
One thing that cannot be said about Germany’s supposed quantum leap in energy policy is that
it has been taking great leaps forward or, in fact, that it has been moving anywhere at all recently.
Progress in the country’s much-hailed Energiewende has all but come to a standstill. Election
years don’t usually help to speed things up, and they are particularly drawn out in Germany.
A year of inaction and paralysis in the run-up to polling day was replaced in the autumn by
three months of painstaking negotiations between Angela Merkel’s CDU/CSU and the Social
Democrats (SPD) about the formation of a new coalition government.
Florian Wastl
MSL Germany
florian.wastl@mslgroup.com
Too much, too quickly
It is plain for everyone to see that the current model
is not working. The problem at the core of Germany’s
energy woes is a very simple one: The huge increase
in renewable power generation in Germany over the
past few years has led to excess energy flooding the
market. This has not only forced power generation
at conventional plants to be cut back, making these
plants economically less viable, but it has also created an ever-widening gap between wholesale energy
prices, which have been falling, and the guaranteed
feed-in compensation for energy from renewable
sources. This dilemma at the core of the system
causes a whole raft of other problems. The following
are just some of the most pertinent ones:
The country’s green energy levy
(EEG-Umlage), designed to bridge the
gap between wholesale prices and the
fixed feed-in compensation for renewables, continues to rise: Following last year’s increase from 3.59 to 5.28 cents per kilowatt hour,
it was announced in the autumn that the levy
will rise to 6.24 cents this year. The levy is paid
by consumers, and this year’s increase will add
another €34 to the average household’s annual
energy bill, bringing the total yearly cost of the
levy for the average household to €218.
1
6
Low wholesale prices continue to put
pressure on energy suppliers such as
RWE and Eon. RWE chief executive
Peter Terium just announced plans for
another cost-cutting programme in which the
company’s power plant division alone will need
to save more than €500m. Terium also signalled
that RWE may be forced to merge with another
power supplier to return to profitability.
2
“Energy-intensive” companies have
been (partially) exempt from paying
the green energy levy (EEG-Umlage)
and grid charges. This could amount
to an inadmissible subsidy under EU law, and is
currently subject to an investigation by the European Commission. In the best-case scenario, the
Commission could ban the subsidy. However, the
worst case could see Brussels demanding that
companies pay back the money they have saved
as a result of the exemptions. The commission’s
ruling on the matter has been postponed several
times, giving rise to rumours that it was deliberately putting the decision off until after a new German government was formed and the Renewable
Energies Act (EEG) could be reformed.
3
Many companies are now installing
their own on-site power stations. They
are not only worried about rising prices, brought on by the possible abolition of exemptions, but also about the quality of
service, as supplies and grids are becoming more
volatile. This is an additional threat to the market
shares of power suppliers such as RWE and Eon.
4
ENERGY REPORT
January 2014

7. Changing priorities, and one loser
While negotiations to form a new government may
have been long and protracted, they have also produced a marked shift in energy policy at last. Hannelore Kraft, Prime Minister of Germany’s industrial
power house North Rhine-Westphalia and head of the
SPD’s negotiating team on energy policy, made this
very clear, saying that jobs, low energy prices and energy security mattered more than ambitious targets for
renewables.
Following the coalition talks between CDU/CSU and
SPD, a number of key changes are likely to be enacted
early on in this parliamentary term: The most important ones will be (i) a slowdown in the expansion of renewables accompanied by a downward adjustment of
fixed feed-in compensation rates (for example, national targets for offshore wind power will be reduced from
10/25 GW to 6.5/15 GW by 2020/30), (ii) measures to
spread out the financial burden of the Energiewende
7
more evenly (i.e. fewer exemptions for industry), and
(iii) a renewed focus on the role of power generation
from fossil fuels, especially coal (for example, the
need for constructing new conventional power plant
capacity is to be reviewed).
Things could have turned out very differently. If Merkel’s
CDU/CSU had formed a government with the Green
Party, the shift in priorities would have been decidedly
less marked. The Greens are strong advocates of a fast
and decisive transformation towards renewables. They
are also strongly opposed to coal-fired power stations,
deeming them to be dirty and not flexible enough for
the requirements of a decentralised energy system.
Likely to be condemned to four more years in opposition, they are beginning to feel the pinch, and have
been lambasting CDU/CSU and SPD as ‘blockaders of
the Energiewende’.
ENERGY REPORT
January 2014

8. Keeping the lights on:
What energy policy for France?
Why is it that little by way of energy production is happening in France, while three of the biggest French energy leaders – EDF, GDF SUEZ and Areva – have announced investments in
huge projects in the UK? Energy giants EDF and Areva have confirmed construction of two
EPR (nuclear) reactors, the first in Europe since the Fukushima accident, while GDF SUEZ has
bought stakes in thirteen onshore shale gas licenses, worth an estimated €8.8 million. Why
nothing similar in France?
Antoine Bourdeix ,
Felix Thomson
France
antoine.bourdeix@consultants.publicis.fr
François Hollande was elected in 2012 with a clear plan
to change the French energy mix which has been dominated for decades by nuclear energy. France‘s long
history with nuclear energy production has made the
country the most nuclear-dependent country in the
8
world, operating some 58 reactors. Because of long
standing policies based on energy security, nuclear
energy has been consistently generated and currently represents 75% of electricity produced. This investment in energy production has meant that for France,
reactors, fuel products and services have been a major
source of exports. Indeed, France is the world’s largest net exporter of electricity due to its very low cost
of generation, from which it earns over 3 billion euros
per year.
For the Green party, which makes up part of the left
wing coalition government with the Socialists, a primary
ENERGY REPORT
January 2014

9. condition for the formation of the coalition was prioritizing energy reform and shifting the focus towards renewable energy sources. France has been slowly embracing heavily-subsidized renewable energies, such
as wind and solar power, which only currently make up
13 percent of the energy mix, far behind Germany and
Spain, and well below the 23-percent target set by former President Nicolas Sarkozy for 2020.
Working to fulfill key electoral pledges, French President François Hollande announced his objectives to
cut the share of nuclear power in the electricity mix to
50 percent by 2025, reduce the country’s appetite for
oil, boost renewable energy sources and improve energy efficiency. As such, several measures were promised: the shift away from nuclear production, with the
promise of shutting down many of France’s oldest reactors by 2025 and notably the oldest nuclear reactor
based at the border with Germany and Switzerland’s
at Fessenheim. Hydraulic fracturing for shale gas and
oil production was banned, and a reform of the mining code was promised to include more environmental
regulation for oil and gas research and production. The
government also launched a national and regional debate on energy transition. All of these measures were
part of the government’s ‘Transition Energetique’ plan
to reform traditional energy sources and invest further
into alternative energy.
Yet after all of this, there is no clear roadmap to energy
transition that has been announced. The government’s
proposed plans are still unclear. The eight month long
national and regional debate engaged 170,000 stakeholders, who took part in 1,000 regional debates, and
more than 1,000 submitted recommendations over the
internet but reached no consensus. It failed to develop
specific proposals on key issues, particularly nuclear closures. The resulting lack of consensus means that any
proposed bill is likely to face fierce opposition in the National Assembly, delaying the adoption of the measures.
Nuclear production is not expected to change significantly over the next four years, as EDF plans to bring
the 1.65GW third-generation Flamanville 3 EPR online
before the end of 2016, which would compensate for
any lost base load capacity arising from the closure
of the Fessenheim plant. Regarding oil and gas, the
promised Mining Code reform has been constantly
postponed and is now not expected before the end of
2014 after the pressure of local and European elec-
9
François Hollande meets representatives of Fessenheim
Photo by François Hollande/Benjamin Boccas on Flickr
tions fizzles. Companies set to explore oil and gas have
been waiting some two years for permits acceptance
or renewal. But if the fate of nuclear and fossil energy
sources is not to be known before the end of 2014, that
of renewables is still equally unclear, not only because
of government’s decision to reduce tax breaks, but
also ironically due to local environmental opposition.
Ten wind turbines in northeast France owned by GDF
SUEZ were recently removed by a provisional court decision, while the 11% tax break supposed to boost the
installation of rooftop solar panels has been scrapped
by the government.
If the intentions and the promises of the government
were clear, the reality of politics and policies has undermined the willingness to move away from nuclear. Not only was no consensus reached and no policy
adopted but major investments in all types of energy
sources are on hold awaiting for a well-defined roadmap for a clear energy transition. President Hollande’s
campaign slogan was “change is now” but since he
has been in office, another catchphrase inherited from
the previous Socialist president, Francois Mitterrand,
is prevailing – “Donner du temps au temps”, which
roughly translates as “all in due course” or “be patient,
don’t rush things”.
Many of those who signed up for “change is now” are
none too happy about being told to be patient. With
local and European elections scheduled this year,
change in the country’s energy policy might also have
to wait at least till the end of the year to see light at the
end of the tunnel.
ENERGY REPORT
January 2014

10. ENI’s Scaroni leads the discussion on the future of
Europe’s energy and industry
The future of the European energy sector hangs in the balance. Still, EU institutions have not
yet adopted a strategy to tackle key issues. European majors, including Italy’s ENI, have warned
of risks, calling upon EU leaders to take a fresh approach to the European energy policy. The
issues brought to EU leaders’ attention will be on the agenda at the upcoming European Council meetings in February and March 2014. There has been broad criticism spanning from renewable energy subsidies being no longer sustainable to the emissions trading scheme (ETS)
being inefficient and in need of review. Notably, among the issues that are most concerning is
Europe’s reluctance to embrace the shale gas revolution.
Alessandro Chiarmasso
Alessandro Paoletti
Italy
Alessandro.chiarmasso@mslgroup.com
Alessandro.paoletti@mslgroup.com
The shale gas revolution is a promising opportunity
and sitting on hands might actually kill the chance to
win the competitiveness challenge and the ability to
attract investment to energy-intensive industries, losing out to the US that started extracting gas from shale
rock long ago. This affects businesses and consumers
in Italy too. Concerns were voiced among others by ENI
Chief Executive, Paolo Scaroni, during a hearing before the EU Parliament`s Industry Committee, as well
as in statements reported by Italian and international
media, including Italy’s daily Corriere della Sera and
the Financial Times.
Specifically, regarding shale gas, the CEO of ENI said
to Corriere della Sera that if we fail to embrace the
shale gas revolution we risk “loosing out further to the
US where the cost of gas for businesses is a third and
the cost of electricity is half. If nothing changes who
is going to invest in the EU?” Essentially the concern
expressed by Mr Scaroni is that businesses - especially
energy-intensive ones, such as petrochemical companies now moving their production to Texas - choose
the US where “energy is cheaper, labour costs are 20%
lower, there is more flexibility, there are managerial
resources, a market and a business friendly environment.”
These concerns were reiterated during the “FT Global Shale Energy Summit” and also reported by the Financial Times. Mr Scaroni said the commencement of
exports of shale gas from the US to European markets
could bring down prices. However, he added “I think
this isn’t enough to compete with the US.” Even if the
US becomes a big exporter of gas, the situation here
would not improve because “we would get it at double
the price paid in the US and this would be equally unsustainable.”
Mr Scaroni sees tangible opportunity in the UK, the
only country in Europe to have embarked on shale gas
development. It is hoped that other European partners
would follow London’s suit, as what is now seen as an
opportunity whose potential is not easy to fulfil is soon
going to become a compelling need.
ENI has not been sitting on its hands in the past years,
it has won licences to extract shale gas in Ukraine, Pakistan and China. Still, Russia is the country in relation
to which Europe, and Italy as part of it, need to make a
strategic choice to bridge the gap with the US. Russia
is a country which is “an almost inexhaustible source
of low cost energy” Mr Scaroni told Corriere della Sera.
Paolo Scaroni, Chief Executive Officer, ENI
10
ENERGY REPORT
January 2014

11. Other choices made by the EU are responsible for the
excessively high energy costs and the poor competitiveness of the European energy sector. Among them,
renewable energy subsidies that many argue are no
longer sustainable. Supporting renewable energy
sources has a cost of over €30 billion p.a. for consumers and weighs on energy bills for some 18%. If the
goals were energy security, competitive energy prices
and the least possible environmental impact, experience has shown that none of them has been attained.
This is true also for Italy, where subsidies have undermined the competitiveness of gas and other traditional energy sources. Renewables subsidies are a burden
for consumers and hamper the competitiveness of domestic businesses, if they were to be limited this would
reduce the energy bill for consumers and businesses.
Hopefully, this would also bring about more investment in R&D on less ‘mature’ renewables such as tidal
power.
Competitiveness in Europe is also being lost as a result
of greenhouse gas emission (GHG) reduction targets
that have been unilaterally set and are too ambitious.
ENI and other energy giants have called for realistic
11
“
In Continental Europe, before you can really start any kind of exploration for shale
gas, you have to spend months and years
talking, discussing, explaining...
Paolo Scaroni
GHG reduction targets by 2030, as well as investments
to make energy generation from renewable sources
more efficient through storage and conservation.
The energy sector proves once again to be an industry
with many opportunities, as well as many challenges,
involving complex issues and different stakeholders.
According to Scaroni, there is a major problem in Europe related to very slow decision making processes.
“In Continental Europe, before you can really can start
any kind of exploration for shale gas, you have to spend
months and years talking, discussing, explaining...”. In
such a context the ability to handle stakeholder relations to quickly drive consensus towards strategic decisions represents a key competitive advantage for a
company, the industry and for the entire economies.
ENERGY REPORT
January 2014

12. The merchant and the preacher try to
bridge their interests
Catch-22 in ‘The Dutch Energy Polder’
The Dutch have a tradition of organising societal change not via legislation, but rather via ‘the
Polder’. The expression dates back to 1982 when the ruling government closed a long-term
deal with employer organisations and trade unions to restructure the economy. This led to 25
years of stability and prosperity, until the bubble burst in 2008.
Erik Martens,
Timen van Haaster
Netherlands
erik.martens@msl.nl, timen.van.haaster@msl.nl
Over the years, the Polder has become a synonym
for the somewhat murky deals the government closes with NGOs, pressure groups, environmental bodies, advisory boards, trade unions, etc. You could say
it even by-passed the legislative, and thus democratic,
process. Its objective is to create ‘common ground for
a step-by-step change’.
Recently, more than 40 organisations closed a deal
with the government on the future of energy in this tiny
country. In collaboration with the government, the Energy Agreement on Sustainable Growth roadmap was
crafted. It outlines a high level view of the energy landscape in 2020. The communication rationale behind
this agreement is: ‘together we can fix this’. Concrete
objectives are set forth in 10 pillars:
1
Realise energy savings: reduce annual national
energy consumption by 1.5% per year.
2
Scale up the production of renewable energy to
14% of total energy production by 2020 (currently: 4%). On- and offshore wind energy-, solar energy and the use of biomass are to be boosted via
subsidy programmes.
3
Decentralised exploration of energy by supporting civic programmes.
4
Make the transportation network fit for the future.
5
Lobby in Brussels for a well-functioning ETS system
(we do not shrink from setting ambitious targets…).
6
Close down all 5 coal-driven power plants by
2016.
12
7
Develop a smarter and more efficient transportation system.
8
Enhance employability in the installation and
construction sector.
9
Focus on energy innovation and export of sustainable solutions. The Dutch want to be ranked
among the Top 10 Clean Tech Countries by 2030,
currently holding a number 21 position.
10 Craft a financial structure to realise the above
goals.
This may all sound very ambitious, but in reality it will
prove to be practically impossible to distil SMART
goals from these ambitious targets that will suit all 40
organisations involved. It will lead to heavy lobbying
per square millimetre (as we put it) and every stake
will be battled for. Final result: a lot of frustration and
probably a lack of results. It is notable too that hidden
somewhere in the 60-page report, it is almost secretly stated that at least until around 2050, Dutch society will remain dependent on fossil energy. On top of
that, being one of the smaller EU member states, The
Netherlands should not just act from a national point
of view but from a European one. Only then can all objectives for energy policy ultimately be fulfilled.
So much then for the resurgence of the Polder. The
Energy Agreement on Sustainable Growth can also be
seen as part of an even older Dutch tradition: the one
of ‘the merchant and the preacher’, which dates back
to days of Dutch colonialism. The Dutch always tend to
search for new business opportunities around the globe
(‘the merchant’) but this is always accompanied by an
urge to spread their own lofty ideals and beliefs (‘the
preacher’). In a way, the Energy Agreement can be seen
as a typical manifestation of ‘the preacher’, through
which The Netherlands wants to show its belief that sustainable growth is the only way for the future.
ENERGY REPORT
January 2014

13. However, like in the old times, the merchant tends
to prevail. Besides the economic goals in the Energy Agreement and the cautious statement that fossil
fuels will remain essential through 2050, The Netherlands also publicly aims to become the ‘Gasrotonde’
(‘Gas Nexus’) of Europe. This initiative is already a couple of years old and has had a good start with the port
of Rotterdam already being an important distribution
hub in northwest Europe and several influential Dutch
(gas) companies involved such as Gasunie, GasTerra
and NAM. An additional advantage is the homogeneity
of the participants. A lot of progress has been made
so far in terms of the setup of a gas exchange and the
LNG and gas infrastructure due to shared interests.
The contrast between the two initiatives is striking.
Where the Gas Nexus has made a good start and
shows potential, the Energy Agreement is already in
deep trouble before it has even come into effect: the
Dutch Competition Authority, ACM, announced in September that the closure of 5 coal-driven power plants
could well be in violation of European competition
13
legislation. And, where the Gas Nexus has participants
with largely shared interests and objectives, the Energy Agreement consists of 40 parties with all kinds of
different, all too often unbridgeable, interests. In the
final analysis, it’s the classic clash between realism and
ideology.
As we noticed before, there is a lack of clear choices regarding sustainable energy growth and a SMART plan
of action in the Dutch Energy Agreement. What we
have now is a soft, all-encompassing approach which
contains few concrete choices. It will do little to improve the current position of The Netherlands as one
of the ‘dirtiest’ member states of the European Union
in terms of sustainable energy, especially if the focus
remains national instead of European. Compared
to other approaches in Europe, such as the Energiewende in Germany, where clear choices and an action
plan are in place, in The Netherlands the catch-22 between the preacher and the merchant will continue to
exist for some time.
ENERGY REPORT
January 2014

14. Cold headwinds for the UK
In September 2013, as the summer months and warm evenings began to draw in, nine of Europe’s biggest utility companies came together to warn the European Parliament that energy
policies and regulations were putting the continent’s power supplies at risk.
Liam Clark
UK
liam.clark@capitalmsl.com
The likelihood of black and brown outs was no longer a
possibility, but more a certainty unless a radical change
in approach was agreed. Agreement and a common
pan-European energy policy were, as usual, at the
heart of the issue. The nine highlighted that the lack of
common policy and assurance was creating a climate
for non-investment, and beyond this, hugely generous
renewable energy subsidies had pushed up costs for
consumers and left energy companies with little margin for investment.
By October 2013, the UK had seen energy prices, policy, generation and investment methods become a political hot potato and mainstream consumer issue.
A storm brewing
The debate started with Ed Miliband, leader of the
Labour Party and the opposition, calling foul against
the UK’s ‘big six’ utility companies on the back of SSE
raising energy prices by an average of 8.2%. Miliband,
who was Energy Secretary during the previous Labour
Government, claimed that energy prices were far too
high and had increased fuel poverty in the UK. In a bid
to win back dwindling voter support, he proposed a
freeze on energy prices, if elected, until the next general election. A media circus followed, with the majority of commentators making the claim that the policy
was not implementable, that it was uncompetitive and,
most likely, illegal.
In subsequent weeks, and at the time of writing this
article, energy policy and prices remains front page
news. Energy, and specifically energy generation, was
now a mainstream consumer issue.
David Cameron, conscious that Miliband had a PR
coup with his ‘freeze prices not pensioners’ campaign,
needed a solution and a strategy that would not hit the
pockets of the ‘big six’ too hard. It is worth noting that
14
Cameron appreciates that whilst they are certainly not
much loved, the ‘big six’ have a vital role in securing
Britain’s energy future. They needed to be kept engaged and onside, especially with the forthcoming announcement that France’s EDF Energy would play the
central role in the £16bn construction of Britain’s first
nuclear power plant in 20 years at Hinkley Point.
His solution, to the shock of the Liberal Democrats,
his coalition partners, appears to be the removal, or
heavy reduction of, the hugely generous renewable
energy subsidies. In a desperate bid to regain the initiative and with the knowledge that green taxes add
roughly £112 per year to the average household energy bill, Cameron told Miliband in Parliament; ‘We need
to roll back the green charges that you put in place as
Energy Secretary’. Miliband, knowing that he still had
the advantage simply replied; ‘Sixty per cent of green
taxes were introduced by him. Who is the man who said
‘vote blue to go green’? It was the Prime Minister’. The
debate rumbled on for a few more weeks, right up to
the Autumn Statement on 5th December. The government claimed that it would ‘introduce reforms to
save the average energy bill payer £50, whilst maintaining support for the poorest families’. In reality it
was semi-smart accounting, with the £50 saving being
made up by the Treasury and existing income tax rates,
and many will not see this saving until Spring 2014. So,
what does this all mean and what have we learnt from
a communications perspective? We see a number of
reoccurring themes.
1
A lack of public understanding
Energy production and supply has never been a glamorous subject in the UK, and as an island which historically has had a plentiful supply of North Sea oil and
gas and a functioning nuclear sector, the UK’s energy
sector had, for many years, operated somewhat in the
shadows. You flicked a switch and the light came on,
you turned on the tap and hot water would flow, all
for, until relatively recently, a fraction of your overall
income. Where the raw energy source or feedstock
came from, and how the energy was generated, was
irrelevant to the masses. It just worked. It still works,
but years of underinvestment have changed the game
ENERGY REPORT
January 2014

15. and the public does not understand why. The Government, both current and past, needs to do a better job at
explaining this, with both sides accepting some of the
blame for past failures and indecision.
2
Energy companies are not good
communicators
It is, perhaps, ironic that the ‘big six’ continue to spend
millions of pounds on consumer advertising in an effort to make the British public fall in love with their
brands. Most involve a mascot or character akin to an
electrode or gas flame and have a child like presence
appearing in everything from national newspapers to
Saturday night television commercial breaks.
3
Issue will not go away
The third theme is that this issue will not go away.
While it may diminish come next spring, the energy
debate is here to stay. Consumers and bill payers have
had enough. Although the UK has some of the cheapest prices in Europe, they have jumped too high, too
quickly. A huge amount of trust has been lost between
companies and their customers and energy bills and
policy will be at the heart of the next General Election.
How the industry responds will be critical but there is
little doubt that better communications should lie at
the heart of their approach.
While this investment may have helped keep them
front of mind, it adds little in terms of building relevance and understanding among consumers. Secondly, this investment has resulted in the strongest brands
standing out and taking much of the consumer frustration when there is industry-wide bad news, like the
recent price rises.
The recent British Gas ‘#askBG’ twitter campaign is
the perfect example of unfortunate tactics, triggering
a heated public debate and a high level of negative
brand awareness, culminating in a communications
disaster.
15
ENERGY REPORT
January 2014

16. What’s next for European energy networks?
The promotion of the interconnection of energy networks is one of the key objectives of EU energy policy and a critical factor to attract new investment and overcome the chronic gaps in the
energy grid that undermine the security of energy supply and the competitiveness of European
industry. According to the Commission there is a need to increase investments in energy infrastructure by 30% for gas and by 70% for electricity compared to 2010. The EU and its Member
States are still far from delivering against expectations for both consumers and industry, with
the 2014 deadline for completing the European internal energy market looming.
Leonardo Sforza
Brussels
leonardo.sforza@mslgroup.com
Nevertheless, the EU’s agenda and the Commission
work programme for 2014, that will close the mandate
of the Commission in office before its renewal, remain
dense and bold in its aspiration for energy policy.
Last October, the European Commission has adopted
the first list of some 250 key energy infrastructure projects that will be instrumental to modernise a substantial part of the energy systems in Europe. The list is
the result of the work undertaken by twelve regional
groups, which brought together the representatives
of the Member States, national regulatory authorities,
project promoters as well as the European networks of
transmission system operators for electricity and gas,
the Agency for Cooperation of Energy Regulators and
the Commission. These “projects of common interest”
will benefit from accelerated licensing procedures and
improved regulatory conditions and may have access
to financial support from an EU funding facility under
which a €5.85 billion budget has been allocated to
trans-European energy infrastructure for the period
2014-20. This will help them get implemented faster and make them more attractive to investors. Once
completed, these projects will help Member States to
integrate their energy markets, enable them to diversify
their energy sources and help bring an end to the energy isolation of some Member States. They will also enable the grid to take increasing amounts of renewables,
and consequently help reduce CO2 emissions.
The list includes up to 140 projects in the field of electricity transmission and storage, about 100 projects in
the field of gas transmission, storage and LNG, and
several oil and smart grids projects.
16
Under this EC initiative, the projects will benefit from a
number of advantages:
• accelerated planning and permit granting procedures (binding three-and-a-half-year time limit);
• a single national competent authority will act as a
one-stop-shop for permit granting procedures;
• less administrative costs for the project promoters
and authorities due to a more streamlined environmental assessment procedure, whilst respecting
the requirements of Union law.
• increased transparency and improved public
participation;
• increased visibility and attractiveness for investors
thanks to an enhanced regulatory framework where
costs are allocated to the countries that benefit
most from a completed project;
• possibility to receive financial support under the
Connecting Europe Facility (except for oil projects
which are not eligible for funding) and leverage the
necessary private and public funding.
The funding facilities can take two forms: a) grants, and
b) financial instruments made available in cooperation
with financial institutions such as the European Investment Bank.
In the case of grants, the first call for proposals under
the Connecting Europe Facility is scheduled for the beginning of 2014. Project promoters can apply for grants
for studies and grants for construction works. Grants
for works, however, will be available only to those that
face difficulties in their commercial viability and subject to objective cost-benefit analysis.
In the case of financial instruments, enhanced loans,
project bonds and equity instruments will be available
outside any call for proposals, offered and managed by
international financing institutions.
ENERGY REPORT
January 2014

17. Energy Infrastructure - Electricity
Projects of Common Interest:
High-Voltage Lines
Commissioning date < 2017
Commissioning date 2017 to 2020
Commissioning date > 2020
Electricity Storages
Commissioning date < 2017
Commissioning date 2017 to 2020
Commissioning date > 2020
Offshore hubs
Baltic Integration and Synchronisation
Source: © Eurogeographics for the administrative boundaries;
© PLATTS for the underlying energy network.
Cartography: European Commission, Energy DG, June 2013
Energy Infrastructure - Natural Gas
Projects of Common Interest:
Gas Pipelines
Commissioning date < 2017
Commissioning date 2017 to 2020
Commissioning date > 2020
Terminals for Liquefied Natural Gas (LNG)
Commissioning date < 2017
Commissioning date 2017 to 2020
Commissioning date > 2020
Storage Facilities
Commissioning date < 2017
Commissioning date 2017 to 2020
Commissioning date > 2020
Reverse Flows
Commissioning date < 2017
Commissioning date 2017 to 2020
Commissioning date > 2020
Source: © Eurogeographics for the administrative boundaries;
© PLATTS for the underlying energy network.
Cartography: European Commission, Energy DG, June 2013
17
ENERGY REPORT
January 2014

18. The list of projects will be updated every two years with
the aim to integrate newly needed projects and remove
obsolete ones. The selection criteria for a project to be
included in the “common interest” list, are:
• involve and have a significant impact on at least two
EU Member States;
• enhance market integration and contribute to the
integration of Member States’ networks;
• increase competition on the energy markets by
offering alternatives to consumers;
• enhance security of supply;
• contribute to the EU energy and climate goals and
facilitate the integration of an increasing share of
energy from variable renewable energy sources.
18
The concept of Projects of Common Interest was
defined in the context of the Guidelines for transEuropean energy infrastructure (TEN-E Guidelines)
in 2011. The TEN-E Guidelines identify nine strategic
infrastructure priority corridors in the domains of electricity, gas and oil, and three EU-wide infrastructure
priority areas for electricity highways, smart grids and
carbon dioxide transportation networks.
Amid criticism surrounding the selected projects,
seen more as a puzzle of different priorities of national governments rather than a coherent EU policy,
the EC decision remains an important step towards
a cross-border operational dimension in the field of
electricity and gas, connecting EU countries to Switzerland, Norway, Ukraine, Russia, Turkey, the Caspian
region and north Africa.
ENERGY REPORT
January 2014

19. A formative moment for energy policy?
“
The free electricity market will become parenthetical. We will have to revert to
centrally-planned electricity production.
Per Ola Bosson,
Björn Wåglund
Sustainability
Sweden
perola.bosson@jklgroup.com
bjorn.waglund@jklgroup.com
These words, spoken by a person with a long management career in Swedish electricity supply, were
pronounced during a conversation on the challenges
facing energy policy. With today’s developments, it
doesn’t look like any of the EU’s three targets in the
energy policy “trilemma” will be able to be achieved.
Several countries are increasing their coal consumption and CO2 emissions. Energy security is threatened,
and the energy supply is hardly conducive to strengthening Europe’s competitiveness.
The US can enjoy lower energy costs and a growing interest in moving production to their side of the Atlantic,
while at the same being able to export coal to Europe.
Less than a year ago, IEA chief economist Fatih Birol
referred to the energy issue as an opportunity for Europe. Owing to low energy costs he now warns of the
US having a competitive advantage for a long time to
come and being in a position to increase its market
share.
EU member states and energy market operators have
been engaged for some time in fine tuning energy policy. The target for renewable vehicle fuel has been adjusted downward from 10 per cent to 5 per cent, and
the issue of “back loading” the system with emission
rights has been debated heatedly. This type of adjustment will continue, of course. But when no targets are
met with the current policy, a discussion that looks
beyond the details have to take place sooner or later
– and the entire policy will be called into question. Historians sometimes refer to “formative moments” in de-
19
The “Trilemma” of
European Energy Policy
Security of Supply
Competitiveness
velopment, and there are many indications that we are
seeing just such a moment right now for energy policy
– on the EU level as well as in the individual member
states.
We have already witnessed the beginning of such a
discussion. More and more people are openly critical of the current policy and are demanding that it be
changed. The next step is to begin discussing possible
changes. The energy issue will therefore soon move to
the top of the agenda for EU leaders – along with the
issue of Europe’s competitiveness.
Sustainability will still be a defining force for a new
energy policy, but we will also see a strong focus on
competitiveness. There is a risk that energy costs for
European companies will be twice as high as those for
their American counterparts in coming decades.
ENERGY REPORT
January 2014

20. Swedish industry consumes 50 TWh of electricity annually
The issue of industry’s competitiveness casts a shadow over energy policy – not least in Sweden, where a
large, energy-intensive industrial sector is combined
with a high export share of GNP. Swedish industry consumes 50 TWh of electricity annually and answers for
most of the country’s exports. The big political question in Sweden at the moment is the lack of resources for schools, but this debate will be meaningless in
the long run if Sweden can’t stimulate its industry and
maintain its exports.
Sweden’s prevailing energy policy is strongly influenced by the era during which it was produced – namely, the wave of deregulation and market adjustments of
the 1990s. A pinnacle of this policy is the pricing mech-
20
anism that should reflect the marginal cost in the system. The price signal would then trigger investments
in new generation capacity when needed. But as energy policy now approaches a “formative moment”, it no
longer needs to be held sacred – not even in Sweden.
The merit order in Swedish electricity production today
is based on marginal cost. Politics should not intervene
in this order. Hence Swedes find guaranteed prices
strange (for instance, the British decision on the Hinkley nuclear project). But things might change if the industry’s exports are threatened and economic welfare
is put at risk, and Sweden might well be arguing from
a new position in Brussels. Economic welfare prevails
over any energy policy. Especially in Sweden.
ENERGY REPORT
January 2014

21. OUR TEAM
Anders Kempe
Regional president MSLGROUP EMEA
anders.kempe@mslgroup.com
Nick Bastin
MSLGROUP can make the difference
Head of Energy
MSLGROUP EMEA
nick.bastin@capitalmsl.com
Per Ola Bosson
Sweden
per.ola.bosson@jklgroup.com
Alessandro Chiarmasso
Italy
Alessandro.chiarmasso@
mslgroup.com
personer
Liam Clark
UK
liam.clark@capitalmsl.com
Seth Goldschlager
France
seth.goldschlager@
consultants.publicis.fr
Helmut Kranzmaier
Germany
Helmut.Kranzmaier@
cnc-communications.com
Peter Steere
Belgium/ Sweden
MSLGROUP is Publicis Groupe’s strategic communications and engagement group, advisors in all aspects of communication strategy: from
consumer PR to financial communications, from public affairs to reputation management and from crisis communications to experiential
marketing and events. With more than 3,500 people across close to 100
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MSL GROUP’s EMEA Energy Practice is a leader in advising companies
from Europe and around the world on communications issues in the energy sector. Across 15 countries and 27 offices, our European network
supports clients that range from large publicly listed Fortune 500 organisations, to small, privately held companies. We currently advise a third
of the energy companies in the Eurotop 100.
From attracting the best talent, to communications with investors; from
crisis preparedness, to corporate reputation management; and from nuclear to renewables: we understand the key communications issues that
keep energy companies awake at night.
With both breadth and depth of energy communications expertise across
Europe’s key markets, we know that effective, best practice communications can deliver value to stakeholders across the energy value chain.
If you want to find out more about the work we do, or enquire as to how
we might be able to help, don’t hesitate to contact our team member in
your market – or contact Nick Bastin at nick.bastin@capitalmsl.com
Peter.steere@jklgroup.com
Pawel Tomczuk
Poland
pawel.tomzczuk@mslgroup.
com
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Netherlands
erik.martens@msl.nl
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Brussels
leonardo.sforza@
mslgroup.com
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Germany
florian.wastl@mslgroup.com
21
ENERGY REPORT
January 2014

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22
ENERGY REPORT
January 2014

23. ENERGY
NEWSLETTER
www.mslgroup.com
To find out more about MSLGROUP’s services,
please contact
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23
ENERGY REPORT
January 2014