Interview: Anne-Lorene Vernay, Co-Author of French Energy Market Barometer Report
Natural Gas Europe had the pleasure to speak with Anne-Lorene Vernay, Junior Lecturer at Grenoble Ecole de Management, co-author of the Energy Market Barometer Report. In a moment of great geopolitical confusion and financial difficulties for several European countries, we tried to shed some light on the future of European energy policies, with an eye on the role of France. Commenting the results of the report Energy Market Barometer Report, we spoke about the need of a coordinated Europe and the future of energy prices. We also discussed the role of a special commission that could open a "first door" to fracking in France.
Your report stems from an idea originally had in Germany. In other words, Grenoble Ecole de Management (GEM) Energy Market Barometer Report follows a similar work done by ZEW, the Centre for European Economic Research, since 2003.
In part, yes. In part.
To what extent is this representative of the fact that Germany is leading the European Union to define shared energy practices?
Well, we have global targets and then every country decides what to do. Every country is going in its way. Germany is doing completely different from Poland, and that is completely different from what France is doing, So, I would not say that Germany is leading Europe for what concerns energy policies.
In your report, you wrote that two out of three experts believe that exploring shale gas will be authorized in France in the future. What is your understanding?
Probably it is not about to agree or disagree, but it is more about to put things in the right context. If you see what our experts said, it is quite clear that there is quite uncertainty about shale gas – will it be authorized or not? For what concerns the energy policy field, I see in politicians quite a lack of consistency in the environmental ambitions and targets. This uncertain context is reflected in the entries from the experts. You see that, ok, it is not possible to do fracking, but the government should soon set up a commission that could allow planning. The commission is not set up yet; it has just one member.
Do you expect that fracking will be allowed before the end of Hollande’s presidency?
If you see the responses of our experts, some of them - about 20% - already think that it could happen within the next five years which we can interpret as experts thinking that fracking could already be allowed during Hollande’s presidency.
We were speaking about the commission, introduced by a 2011 law, which also introduced the option for the government to give research permits for project using hydraulic fracturing. When do you think the commission will eventually be set up? When will it be starting to do its work?
The special commission was planned to be set up in 2012. The government should decide who takes a place in the commission. So far the government has appointed just one person.
When do you expect the commission to be set up for good?
That is hard to say. One of the reasons why people have been thinking that shale gas could happen is because of this commission. If the commission give permissions, that is already a first door. That is why, probably, the government has not set it up yet. That it is why it is quite tricky. So, I don’t know when they would do it. It is hard to tell.
In your report you say that French shale gas would be cheaper than shale gas in Germany. Do you think that this suggests that a shale gas revolution would happen in Europe only in case of U-turns in France? In other words, do you think that France is central for the future of shale gas in Europe?
Our experts did not say that it would be cheaper. We asked them which would be the price for shale gas to be feasible. French experts see that shale gas would be feasible at lower prices, at least with respect to Germany. In relation to the second part of the question, if you look at the countries currently going for it, you would see Poland, Slovakia and the United Kingdom. I don’t know. Probably the French need to be convinced that fracking is possible without harming the environment before doing it. I don’t know if there will be a revolution, but I think those interested in this revolution should not wait for France.
Do you expect any law on shale gas in the next five years at a European level? The majority of your experts said that they expect new regulation to affect exploration of shale gas in the EU. What’s your viewpoint?
You know that the EU wanted to have compulsory Environment Impact Assessment on fracking. Eventually they have decided to have a very open text. I think that if we want to go forwards or not with shale gas, we should have a clear framework at a European level. If you ask me, do you think it would happen, I would say that it should happen. This should happen. We should have a framework at a European level on which we clearly stipulate the conditions in which fracking should be allowed.
Let’s switch the conversation and let’s consider the electricity generation issue, which is the main point of your report. What about the distribution of fuel types within France’s overall electricity generation in the next 10 and 30 years? What do you think will happen? What are the evidences coming out of your report?
The share of renewables will be increasing in both than 10 and 30 years. We have very divergent evidences about nuclear power. Some experts see a fast decline; some others expect the nuclear share to decrease slowly.
But this report refers to answers given before the standoff over Ukraine. Do you think that this assessment would change in light of the tensions between Russia and the West?
That is an interesting question, but we don’t have material to say what will happen. We will address this question in the next report. In my understanding, however, I would not think that policies change so fast. A nuclear power plant takes decades. Building a gas infrastructure takes time as well. We don’t change plans all the times a crisis takes place.
But in this specific case, do you think that the standoff will lead to changes? Don’t you see any major significant changes in European policies? What’s your personal understanding?
France has increased its dependence on Russian gas, so there is a possibility that France will revise its policies because of it. More than 20% of natural gas come from Russia, it was much less before. We might reconsider this. The next question is where else to get the needed gas from?!
Uncertainty seems the word better depicting French and European energy markets. What could be the factors that could change this trend? What could be the certainty needed by the industry to contribute to energy security in Europe?
From the experts’ answers, we can see that the prices will be increasing over time. But how could we change the trend? I don’t know the answer to this question.
What do you think consumers need in this context? So, what will be the impact on energy bills? How to eventually mitigate the impact on consumers?
It is interesting to put things in context. In France we have regulated tariffs – consumers can decide to stick to regulated tariffs or to go for any energy provider. In this particular French context, we have to work more on energy efficiency. In my opinion, energy prices will just keep growing.
So you are basically saying, let’s stop thinking about energy supply, but let’s rather have a look at energy demand.
Yes.
What are the feasible, viable policy measures to achieve this goal?
Clearly, firstly, we have to look at the buildings, especially at the old buildings. In France, they have a very high ambition about isolation of buildings. But few believe that that the ambition will be met. This is partly due to an unstructured sector.
In your report, electricity and hydrocarbon prices are expected to rise in the next five years. You basically said that it is almost impossible to reverse this trend, right?
Yes.
And do you expect this trend to continue also in the long term?
Yes, yes, I think so. We had cheap prices because we had nuclear power. We did not pay for the full price. We don’t know how to get rid of nuclear wastes, new nuclear plants are very expensive and they also rely on subsidies. My feeling is that we have not paid the real price for energy. People are not used to pay the real price. We will have to change this.
In this context, what’s the role of renewable energy?
That is a difficult question. They are getting more and more competitive, but of course renewable energies are more expensive. There is a risk, at least on the medium term, that the more you go for renewable energy the more the energy prices will be higher.
Do you think that this trend would take place just in Europe, or do you think it could happen also in Asia and North America? In this case, what should Europe do? Should it redirect its attention from energy intensive sectors to services? What is the most plausible scenario?
Other continents also go for renewables. China invests a lot in hydro, wind and photovoltaic. India as well. In the medium term, it is costly to invest in renewable energy, but in the longer term, if you see the prices of fossil fuels, it will pay out. In the meantime, we need to have a smart way to manage the transition. We really need to have strong policies in Europe. Europe needs an ambitious industrial policy if we don’t want industrial production to move elsewhere.
Sergio Matalucci