IFIEC Europe [IE] welcomes the communication from the Commission on the Integrated Energy Market issued on November 15, shares the concerns regarding the 2014 target and supports the initiatives to be taken to accelerate market integration. This is necessary for internal competition purposes, for Security of Supply reasons and to reduce the overall cost of adapting the EU energy system to the new generation mix.

More specifically, IE insists on :

- giving the investors the necessary assurance about a stable regulatory framework to enable grid developments;

- adjusting the growth speed of intermittent RES-E to what TSOs and DSOs can manage without putting system stability at risk and implementing best practices in renewable energy support schemes in order to optimize costs and incentivize adequate market response;

- using capacity mechanisms only as a last resort solution and only after promoting other measures such as voluntary demand response. Energy Intensive Industries [EIIs] can contribute in a cost and climate efficient way to reduce investment needs in additional generation capacities provided the conditions are designed adequately;

- developing a long term market based on transparent pricing mechanisms: Electro-intensive industries do need long term contracts and power price visibility.

IE underlines that even so, these actions do not fully address the critical situation faced by EIIs in Europe:

- natural gas prices 3 to 4 times higher than in North America, leading to an alarming shift of investment from Europe to the USA

- electricity prices twice as expensive as in competing regions such as North America or Asia;

- ever increasing costs to support the development of intermittent RES-E which, in addition, puts system stability at risk;

- a structural and continuous cost deterioration due to upcoming Phase 3 ETS allocation rules and a declining or even lacking compensation of indirect ETS costs.

At a time when politicians/governments are recognising that industrial growth is the only way to exit from the European crisis while, at the same time, contributing to global climate action thanks to lower carbon emissions per product manufactured here, it is essential that adequate measures are taken to back the reindustrialization of Europe.

Long term assurance must be given to investors and measures implemented to restore a globally level playing field with the following priorities:

- address urgently the critical situation faced by gas intensive industries: no lever to alleviate this cost handicap should be excluded;

- actively fight against “carbon leakage” by restoring trust for industrial growth:

• we do not need a “stronger” ETS for EU-27, but a globally deployed ETS with common rules; the Australian linkage is a first step which must be leveraged now based on fair and equal carbon costs to set up a truly global system
• Member States should make full use of the compensation of indirect costs to safeguard the global competitiveness of Energy Intensive Industries

- limit the cost impact to industry of RES support schemes at a level which does not jeopardize industrial competitiveness.

We need to create an environment to unleash industrial growth potential in the EU by reinstalling trust through structural measures. IE is willing to positively work with all stakeholders involved to identify the best schemes. Integrated energy markets having the genuine support of all EU Member States have to be one of the first steps.

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For further information please contact:

Lars Jope, Director of Coordination IFIEC Europe

M: +49 172 26 99 063; email: jope@ifieceurope.org

16 November 2012

IFIEC Europe represents energy intensive industrial consumers where energy is a major component of operating costs and directly affects competitiveness.