GEM Energy Market Barometer: Experts Divided on the Ukrainian Crisis Impact

The second edition of Grenoble Ecole de Management (GEM)’s Energy Market Barometer examines the impact of the Ukrainian crisis, the economic implications of energy transition and the development of energy prices. The aim remains the same as the first barometer: finding out the short, medium and long-term trends in the energy market. 

“Findings on the impact of the Ukrainian crisis are compared to that of a parallel survey conducted in Germany, by the Center for European Economic Research (ZEW)” explains Joachim Schleich, researcher at Grenoble Ecole de Management and the barometer coordinator.

 Among the major conclusions drawn were:

 1/ The Ukrainian crisis impact

- About three quarters (76%) of the French energy experts think that the current Ukraine-Russia conflict worsened Russia’s reliability as a natural gas supplier. In comparison, German experts are more optimistic, with only 47% believing that Russia’s reliability slightly worsened. 

- Security of natural gas supply in France: French experts highly divided. Whilst half of the French experts believe that the conflict has worsened the security of natural gas supply slightly (47%) or strongly (3%), the other half mostly considers the security of the supply to be unchanged.

- With regards to the EU, the French experts expect more severe consequences; 81% believe that the security of natural gas supply has worsened. In comparison, 47% of the German experts believe that the security of supply for the EU has declined.

“The findings are surprising, as Germany depends much more on natural gas supplies from Russia, than France does. It is possible that the German experts’ judgment was influenced by the fact that Russia has been a reliable energy supplier and partner in the past. In any case, it is not in Russia’s interest to put at risk its position as the main natural gas provider in Europe”, explains Joachim Schleich.

German and French experts identify the same measures to ensure the security of the EU’s natural gas supply:  strengthening the EU energy market integration, investing in liquefied natural gas infrastructure and, most importantly, improving energy efficiency in order to lower natural gas consumption.

2/ Energy policy in France

- The French government’s announced emphasis on energy efficiency is justified for those surveyed: 61% of the French experts believe that improving energy efficiency is an important policy focus.

While almost 50% of experts think that affordability of energy prices for households is a focus of current energy policy, only 1/4th think this is justified.

“The focus on prices and security of supply in the current debate on French energy policy seems somewhat disproportionate” notes Anne-Lorène Vernay, researcher in the Energy Team at Grenoble Ecole de Management.

- French energy transition is expected to make utilities worse off; but to benefit technology providers and economy as a whole. 42% believe that the competitiveness of utilities will worsen, and 81% think that providers of power plant engineering and construction will benefit.
Overall, almost 60% of our experts believe that the energy transition will have positive (46%) or very positive (13%) effects on the French economy in the next 5 years.

3 / The development of energy prices

- Most energy experts expect the prices of all energy sources to remain stable over the next six months. In contrast, prices of all energy sources (besides coal) are expected to rise in the medium term (5 years). This result is stable compared to the previous edition of the barometer.

- Compared to the previous GEM Energy Market Barometer and to current prices of about 6 €/t, expected prices of CO₂ certificates are slightly higher, in particular for the medium term. Joachim Schleich explains: “This means that the recent EU Commission’s actions such as backloading or proposals for more ambitious future emission targets did not convince the experts that the prices of certificates would rise substantially.”

All results here : http://www.grenoble-em.com/2518-rapport-2-2.aspx

About the GEM energy market Barometer:

The GEM energy market Barometer is a half-yearly study carried out with around 200 French energy market experts from the fields of industry, research or public administration. The experts are asked to evaluate short, medium and long-term developments in energy markets both nationally and internationally. The study upon which this report is based was carried out in June 2014, with 113 participants. The survey is carried out in collaboration with the ZEW – the Center for European Economic Research, which conducts a similar barometer in Germany.

In the previous barometer, findings showed that:

- A majority of experts (2 out of 3) are convinced that Shale gas will be legalised in France at some point

- It will take about 30 years for the share of nuclear energy in the production of electricity to drop from 75% to 50%.

- Most experts do not expect to see a rise in the price of the following energy sources: electricity, oil, gas and coal over the next months. However, over 80% think that the sale price of electricity and oil will rise within 5 years.

First report : http://www.grenoble-em.com/2517-report-1-2.aspx