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Energy priorities for Europe

Presentation of J.M. Barroso,President of the European Commission,to the European Council of 22 May 2013

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Presentation of J.M. Barroso to the European Council, 22 May 2013 1

New realities in the global energy market

Fukushima

Shale gas

Impact of thefinancial crisis

Some countries phase outnuclear power production

Source: IEA

Fall in private investment,tight financing conditions

By 2030, world economyset to double and energy

demand to rise by 1/3

US oil and gas production

Unconventional gas Conventional gas

Unconventional oil Conventiona l oil

5

10

15

20

25

1980 1990 2000 2010 2020 2030 2035

mboe/d

Rising demandrising prices

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Presentation of J.M. Barroso to the European Council, 22 May 2013 2

Prices affect competitiveness

Source: IEA

Trends in energy price indexes2005-2012

Electricity price index

Industry

EU38%

US-4%

EU22%

US8%

Electricity price index

Households

EU35%

US-66%

Gas price index

Industry

EU45%

US3%

Gas price index

Households

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Presentation of J.M. Barroso to the European Council, 22 May 2013 3

Cement, lime and plaster

Basic iron and steel

Glass

Pulp, paper and paperboard

Non-ferrous metals (incl. aluminium)

Basic pharmaceuticals

Clay building materials

0 5 10 15 20 25

Energy-intensive industries are most exposed

Source: European Commission

Share of energy in % of production costs selected sectors in Germany (2010)

Wood and cork

Furniture

Average manufacturing

Consumer electronics

% of total production costs

Automotive

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Presentation of J.M. Barroso to the European Council, 22 May 2013 4

Europe's dependence is set to increase

Source: IEA

Net oil and gas import dependence by region

2010 2035

0%

20%

40%

60%

80%

100%

20% 40% 60% 80% 100%

Oil imports

Gas imports

United States

ChinaIndia

European Union

Japan

20%Gas exports

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Presentation of J.M. Barroso to the European Council, 22 May 2013 5

Our energy mix will evolve

EU gross inland consumption2011

EU gross inland consumption2030 (scenario)

14%

18%12%

33%22%

Oil

Solid fuels

Renewables

Nuclear

Gas

Source: European Commission

14%

10% 17%

35%24%

Oil

Solid fuelsRenewables

Nuclear

Gas

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Presentation of J.M. Barroso to the European Council, 22 May 2013 6

Massive investments are required

Power generation: ~ 500 bn Transmission and distribution: ~ 600 bn

Distribution: ~ 400 bn

Transmission: ~ 200 bn

Renewables: ~ 310-370 bn

Source: European Commission

Total energy investment needs between 2010-2020:over 1 trillion

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Presentation of J.M. Barroso to the European Council, 22 May 2013 7

0%

2%

4%

6%

8%

10%

12%

14%

16%

Business-as-usual s cenario Decarbonisation s cenario

Will there ever be cheap energy for Europe?

Source: European Commission

Energy costs to rise in all scenarios butEurope will benefit most from decarbonisation

(in % of GDP, annually until 2050)

%o

fGDP

EU today

Business-as-usualscenario 2050

Decarbonisationscenario 2050

Fuel imports Other energy purchase (domestic)

Investment in infrastructure Investment in energy efficiency

EU in 2050: energy costs at around 14% of GDP in both scenarios

-1.4%imports

+1.9%investment ininfrastructureand efficiency

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Presentation of J.M. Barroso to the European Council, 22 May 2013 8

A "no regrets" scenario for Europe

Security ofsupply

Competitiveness

SustainabilityRenewable sources

Diversified supply

Competitive marketsSmart infrastructure

Energy efficiency

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Presentation of J.M. Barroso to the European Council, 22 May 2013 9

Barrels ofoil the EUdoes nothave to

importper year

Money savedat

conservative73

EUR/barrelper year

=

2.6billionbarrels

193billion

=

Priority 1. Boosting energy efficiency

Benefits of EU energy savings target of 20% by 2020

1 000fewercoal

powerplants

=

GDPof

Finland

(in 2012)

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Presentation of J.M. Barroso to the European Council, 22 May 2013 10

Priority 2. Completing the internal energy market

Source: European Commission

After 1 year After 5 years After 10 years

-0,8%

-0,6%

-0,4%

-0,2%

0,0%

0,2%

0,4%

0,6%

0,8%

1,0%

Estimated effects of opening gas & electricity markets(in % of GDP - ranges)

Effect on GDP

Effect on employment

Effect on inflation

% of GDP

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Presentation of J.M. Barroso to the European Council, 22 May 2013 11

Priority 3. Smarter infrastructure

Source: European Commission

Rank Country Rank Country

BalticEnergy Market

InterconnectionPlan

Electricity

& Gas

North-South Gas Corridorin Western Europe North-South GasInterconnections& Oil Supply

South WesternElectricity Interconnections

Central / South EasternElectricity Connections

SouthernGas Corridor

North SeasOffshore Grid

Gas

Electricity and gas

Smart grids forelectricity in the EU

Oil and gas

Electricity

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Presentation of J.M. Barroso to the European Council, 22 May 2013 12

Priority 4. Cost-effective use of renewable sources

Production costs versus subsidies for renewables(averages, in /MWh, latest year available)

Wind energy on-shore Solar energy (photovoltaics)

Subsidies over production costsProduction costs Subsidies below production costs

Source: Fraunhofer

0

20

40

60

80

100

120

140

SE UK IE LV DK NL EE MT RO ES CZ PL LT PT SI SK BG IT HU CY LU FI EL FR BE AT DE0

50

100

150

200

250

300

350

400

450

500

ES MT CY PT EL IT BG RO FR HU AT SI SK LV EE LT PL CZ DE IE LU DK NL UK BE SE FI

/MWh /MWh

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Presentation of J.M. Barroso to the European Council, 22 May 2013 13

Priority 5. The external dimension

The example of the Southern Corridor

Corridor opening options (2018 - Shah Deniz II)

Nabucco-West

Trans-Adriatic Pipeline

Trans-Anatolian Pipeline &

South-Caucasus Pipeline

Corridor enlargement

Extension of transport routes

& new transport routes

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