ENERGY NEWSLETTER

Volume 1 - Issue 2 | November 2012

18 months on from Fukushima,

what does Europes energy future look like?

INSIDE THIS ISSUE

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03
Introduction

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04
MSLGROUP can make the difference

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07
Flip-flopping on nuclear energy bodes ill for Japans future
Popular opinion in Japan is rapidly turning anti-nuclear. The Government tries to reflect this in its energy policy but has run into major opposition inside and outside of Japan.

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New Italian National Energy Strategy: its time to join the conversation
In a difficult and uncertain macroeconomic scenario, all the countrys efforts must be geared towards the resumption of sustainable growth.

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Poland heading for nuclear power will it work?

While Germany is implementing its phase out from the nuclear program and Japan has just announced its decision to close its reactors too, Poland is simultaneously preparing to launch its first nuclear power plant by the end of 2023.

Contents
Introduction MSLGROUP can make the difference Where we are Flip-flopping on nuclear energy bodes ill for Japans future UKs energy future post-Fukushima Turbines in troubled waters Germanys Energy Shift: Does less haste mean more speed? Post-Fukushima issues for Frances energy transition New Italian National Energy Strategy: its time to join the conversation Poland heading for nuclear power will it work? How could Europe save more energy? The Dutch energy landscape: towards a hybrid policy? 03 04 06 07 10 12

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Volume 1 issue November 2012

Introduction
18 months on from Fukushima what does Europes energy future look like?
As 2012 draws to a close, there is time to pause and reflect on how the tragic events 18 months ago at Fukushima have changed the nature of the worlds energy market and nowhere more so than in Europe. At a time of such profound change, one might have expected a unanimity of approach particularly given the dirigiste nature of the European Union but a quick review of the European landscape reveals that, on this occasion, nothing could be further from the truth. Almost every country in the European Union has a unilateral, seemingly un-coordinated and often contrary position in respect of energy policy and their reaction to Fukushima has only amplified this. For example, Germany, which has always been sceptical of nuclear energy, boldly came out and committed to closing its fleet of reactors in record time, pinning its hopes on developing its leadership in renewables to plug the gap. With nuclear accounting for nearly 18% of demand, that is a big gap to fill. By contrast,there are countries like the UK and Poland, that remain quite bullish on nuclear. Yet the UKs nuclear programme is faltering, due to the Governments resistance to helping underwrite the associated costs and the reluctance of the private sector to commit to such huge and uncertain liabilities. You even have the bizarre situation in Sweden where environmental pressures have called the future of hydro power, hitherto the poster child of green energy, into question. Welcome, therefore, to MSLGROUPs latest energy newsletter where some of my learned colleagues have lifted the curtain on how Fukushima has shaken up the European energy landscape. There are no easy solutions, especially in this era of carbon reduction, and it is also clear that there is no single answer. Undoubtedly, there needs to be some hard headed decision making at the highest level to give direction and leadership in this critical area. Whatever happens, it is pretty clear that communications professionals will be kept busy for decades to come, explaining the impacts and outcomes to consumers and citizens alike.

Nick Bastin Managing Director, Capital MSL, Head of Energy, MSLGROUP EMEA

Energy Newsletter

Volume 1 issue November 2012

Our team

Anders Kempe
Regional president MSLGROUP EMEA Chairman JKL Group anders.kempe@jklgroup.com

MSLGROUP can make the difference

Nick Bastin
Head of MSLGROUP EMEA Energy Practice UK nick.bastin@capitalmsl.com

MSLGROUP is one of the worlds top five PR and events networks, employing more than 3,400 people in 22 countries around the world. We are Publicis Groupes speciality communications and engagement group, advisors in all aspects of communication strategy: from corporate PR to employee communications, from public affairs to reputation management and from crisis communications to event management. We work for a quarter of the top-100 most valuable brands globally.

Per Ola Bosson

Sweden per.ola.bosson@jklgroup.com

Specialist expertise
MSLGROUPs 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 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.

Alessandro Chiarmasso
Italy alessandro.chiarmasso@mslgroup.com

We offer in-depth sector understanding

From well head

To wall socket

George Godsal
UK george.godsal@mslgroup.com

From nuclear

To renewable

From crisis

To talent

Pierre-Samuel Guedj
France pierre-samuel.guedj@consultants.publicis.fr

Energy Newsletter

Volume 1 issue November 2012

Our team

Florian Wastl
Germany florian.wastl@mslgroup.com

We also understand the key communications issues that keep energy companies awake at night:

License to operate

Sustainability

Sustainability

Drilling

Coal

Brussels/ Sweden peter.steere@jklgroup.se

Super Critical

Peter Steere

Carbon

Financing

Emissions

Sustainability

Water

Financing

Talent

Deep water
Financing

NIMBY

Renewable

Water Regulation
Deep water

NIMBY

Renewable

Fracking

Wind

Talent

Coal

Water

Carbon

License to operate

Responsibility License to operate Drilling Fukushima NIMBY

Sustainability

Regulation

Fracking

Biodiesel

Deep water

Fukushima

NIMBY

License to operate

Financing

Financing

Pawel Tomczuk
Poland ptomczuk@publicrelations.pl

We can help to manage the risks

Holistic communications solutions

With both breadth and depth of energy communications expertise in Europes key markets, we share the belief that effective, best practice communications can deliver value to stakeholders across the energy value chain.

Erik Martens
Netherlands erik.martens@msl.nl

We look at the bigger picture in the context of energy market issues

Creativity Corporate Brand

Crisis

Digital/ Social media

Lotte Glad
Norway lotte.glad@jklgroup.com

M&A, IPO, restructuring

Talent

We help energy organisations to find better ways of communicating complex messages to multiple stakeholders often across multiple markets We deliver creative solutions that drive greater engagement with key audiences

Investor relations

Public affairs and regulatory relations

If you want to find out more about the work we do, or enquire as to how we might be able to help, dont hesitate to contact a team member in your market or contact Nick Bastin at nick.bastin@capitalmsl.com

Helmut Kranzmaier
Germany Helmut.Kranzmaier@cnc-communications.com

Energy Newsletter

Volume 1 issue November 2012

Where we are

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MSLGROUP O ce A liate O ce

Energy Newsletter

Volume 1 issue November 2012

Flip-flopping on nuclear energy bodes ill for Japans future

Japan has gone back to the drawing board on whether to let nuclear power stay in its energy mix. Japan is in desperate need of a more serious debate on its energy future. It must bring to the table representatives from all ends of society.

Jochen Legewie
Jochen.Legewie@cnc-communications.com

The Cabinet eventually approved the new energy plan on Sept. 19. But it had dropped the core reference to the 2040 deadline in a separate document. In other words, Japan has gone back to the drawing board on whether to let nuclear power stay in its energy mix.

Popular opinion in Japan is rapidly turning anti-nuclear. The Government tries to reflect this in its energy policy but has run into major opposition inside and outside of Japan. The result is a zigzagging course, which is creating huge unpredictability about Japans future nuclear policy. This limbo situation threatens to be even worse than either switching off all nuclear reactors or keeping them online. On 14 September 2012, the Japanese Government presented to the public a new national energy strategy. This longawaited plan included the objective of eliminating nuclear power by 2040. This came as no big surprise as recent surveys are showing that a majority of Japanese favor an exit from nuclear energy in the long run. Each Friday, tens of thousands of people demonstrate against nuclear power in front of the Prime Ministers residence and this has been going on for several months. Japan has not witnessed a larger public movement than this since the student riots in the 1960s. Only one week after 14 September, however, hopes for a nuclear-free

Japan were dashed. In the face of strong opposition from the business community, municipalities and prefectures that host nuclear reactors and fuel reprocessing plants, and from the United States, Great Britain and France, the Japanese Government decided to backtrack on its initial aspirations. The Cabinet eventually approved the new energy plan on 19 September. But it had dropped the core reference to the 2040 deadline in a separate document. In other words, Japan has gone back to the drawing board on whether to let nuclear power stay in its energy mix. This zigzagging on policy has left many in and outside Japan scratching their heads. Both proponents and opponents of nuclear energy are equally frustrated because neither groups concerns are being properly reflected by the Governments wavering course. The worst long-term damage, however, is probably being caused by the shaken belief that Japan has a predictable future in energy.

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The announcement of the new energy strategy on 14 September was filled with contradictions and ambiguities from the beginning. While aiming to close nuclear power plants by the end of the 2030s, the strategy allows work on plants already under construction to continue. It also calls for shutting down all reactors while the reprocessing of spent fuel shall continue. Likewise, the goal of tripling electricity output from renewable energy sources by 2030 sounds hollow because the Government does not offer any plans for generating the funding required to do so. In addition to these factual contradictions, members of Prime Minister Nodas Cabinet have been making inconsistent remarks over the past weeks. On 13 September the Government announced its plan to shut down the Monju fast-breeder reactor. Five days later it insisted that research and development activities at Monju would continue. On 17 September, Chief Cabinet Secretary Fujimura even told a news conference about plans to decommission three nuclear reactors in Fukui Prefecture only to retract the remarks a few hours later on the same day.

The ambiguity of the Government policy is best shown by the following remarks of Japans trade minister, Whether we can become nuclear-free by the 2030s is not something to be achieved only by policymakers. It also depends on the will of electricity users, technological innovation, and the international environment for energy in the next one or two decades. What remains for the time being is a temporary victory by the formidable coalition of pro-nuclear interest groups. But as long as unpredictability and immature communications continue to shape energy policy and public perception at home and abroad, there will be no real winner. Japan is in desperate need of a more serious debate on its energy future. The Government should take the lead in creating a proper framework and timeline for this debate. It must bring to the table representatives from all ends of society, including the growing group of outspoken nuclear opponents. Maybe, Japan should borrow a page from the book of the German Government. Right after the Fukushima disaster, the German Government installed the so-called Ethics Commission, made up of famous and highly respected individuals

Japan needs to develop its own approach in a political environment that lacks a history of long-term public discussion of nuclear power as Germany had, and which faces significant differences with Germany in terms of geography, geopolitics and other conditions.

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from academia, the church and other parts of society, including a business representative, to discuss the nations future nuclear policy. It later provided chancellor Merkel with the perfect blueprint legitimising Germanys nuclear exit. Japan needs to develop its own approach in a political environment that lacks a history of long-term public discussion of nuclear power as Germany had, and which faces significant differences with Germany in terms of geography, geopolitics and other conditions. But it is clear that Japan cannot afford to keep zigzagging on energy policy much longer. If it continues, the fears of both sides in the nuclear debate might come true. On the one hand, the continued unpredictability in policy will likely make energy-intensive businesses leave Japan. It will effectively dampen any further exports of nuclear technology while preventing the development of a strong new industry around renewable energies at the same time. It will even worsen relations with the U.S. and other Western allies that want Japan to stick with nuclear power but most of all request planning security.

On the other hand, if nuclear energy stays, it might lead to another major accident in earthquake prone Japan and thus combined with above result in the worst possible overall scenario. Facts and perceptions need to be taken into the equation as well. There are many ways to do so. One would be to start an annual international summit to discuss the challenges and solutions to the energy questions of today and tomorrow. The obvious annual date would be 11 March, with a venue in Fukushima prefecture. The Japanese Government owes it to its people, and also to the international community, to take the lead in addressing nuclear and other energy issues in a proactive and sustainable way. And it must communicate its course in a consistent and responsible way. If it did so, Japan might even be perceived as leading in a responsible way at home as well as abroad.

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UKs energy future post - Fukushima?

The Tsunami off the coast of Japan that led to the Fukushima disaster has had a powerful and long reaching effect on global energy policy and its impact has circumnavigated the world including reaching the UK and affecting its energy policy choices.
Even prior to Fukushima,the UK was facing some very difficult decisions; how could its ageing fleet of nuclear reactors be phased out and replaced with enough new capacity to keep the lights on? Should nuclear remain a core component of the UK electricity supply? What mix of fuel gave the best blend of security of supply, cost efficiency and would help to lower the UKs carbon footprint; how could prices be kept affordable; and what was the right balance between intermittent and base load solutions? Perhaps, unsurprisingly, the role of nuclear power has been questioned as never before, with an added irony being that this came at a time that the UK seemed to have unblocked a log jam in its development of new nuclear power stations and was well advanced in the planning for the construction of a fleet of up to eight new plants. However, unlike in other countries, like Germany and Japan, the desire to withdraw from nuclear power has not come from Government wilting under popular protest, but from private sector reluctance to commit to the projects under the proposed terms. The swift action taken by Angela Merkels Government to shut down nuclear power in Germany, was followed rapidly by E.On and RWEs withdrawal from bidding for the Horizon consortium that was hoping to build two new plants at Wylfa and Oldbury on Severn. The Government was presented with an awkward conundrum, as the subsequent bids from a variety of consortiums to take over the project have been less palatable and had potentially included two Chinese Stateowned bidders - China Guangdong Nuclear Power Group and Nuclear Power Technology Corp. Although neither of these ultimately participated in submitting a bid, it did raise the controversial prospect of the Chinese State being a significant shareholder in the privatised UK nuclear industry. This would have brought its own communications challenges, as it seems unlikely that the British general public would have readily accepted Chinese ownership in such a sensitive area particularly when there is no prospect for reciprocity in China. The problem is that if trusted partners, like E.On, RWE and Areva pull out, there is not much choice of other suppliers who have the technical or financial ability, or willingness, to bid, particularly if you exclude Chinese or Russian bidders for political reasons. In this case, Hitachi have ridden to the rescue by agreeing to buy Horizon from E.On and RWE, but there is still a complex negotiation to be had over pricing and the financial return, with Hitachi seemingly having to trust the UK Government to do the right thing. It seems unlikely that more nuclear power stations can realistically be built without a greater level of Government involvement, due to the extremely long term liabilities and costs, which are increasingly hard for private companies to stomach. But the ripples of Fukushima are more subtle than just whether the UK should build more nuclear power stations. The question is also, if not nuclear, then what? With a reluctance to be more dependent on Russian gas and with declining production in the UK North Sea, the options for a robust alternative are limited. Despite theoretical support for renewables like wind, there is increasing push back from communities on the impact these have. Recent proposals for a huge wind farm along the banks of Loch Ness in Scotland have galvanised intense

Nick Bastin
nick.bastin@capitalmsl.com

The Government was presented with an awkward conundrum, as the subsequent bids from a variety of consortiums to take over the project have been less palatable and had potentially included two Chinese State-owned bidders - China Guangdong Nuclear Power Group and Nuclear Power Technology Corp.

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opposition and it is clear that the difficult choices people need to make about their power sources are not going to go away. All of these challenges will require effective communications to help people make the right decisions with consumers struggling under ever increasing energy bills, and a growing number enduring fuel poverty, the correlation between those choices and politics will become ever narrower. The Government is trapped between the rock of deficit reduction and the need for long term planning / financing of these projects, if you throw in carbon reduction targets and the hornets nest of opposition from special interest groups, then you can see why decision making is often glacial.

But there is no easy way out, consumers need to be informed about the reality that we face; with most renewables currently unable to meet baseload power requirements, and requiring huge Government subsidies to get off the ground, all of the alternatives remain unpalatable on one level or another. It is inevitable that ultimately we will need a mix of energy sources to meet our needs, and nuclear will need to be part of that mix. I am sure nuclear power operators, and the British public for that matter, would value more open and transparent communications from the Government on how these plans will affect them, and they will need to fully understand the costs and ramifications that those choices will have, both in the present but also in the future, 20 years hence.

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Turbines in troubled waters

What will the impact be of Swedens plans to revise the environmental permits of the countrys 2,000 hydro plants

Per Ola Bosson

per.ola.bosson@jklgroup.com

I cant understand why Sweden is doing this! Hydropower is necessary, as we all know. Not only because it is renewable - it is also needed to regulate fluctuations in wind power production. These words were spoken by a German electrical engineer, who was astonished by Swedens plans to cut hydropower production. Or more precisely, Swedens plans to revise the environmental permits of the countrys 2,000 hydroelectric plants. Most hydro plants operate under permits that are 50-100 years old and were granted under old legislation. A revision of the permits in accordance with new legislation would compel the hydro plants to meet more stringent requirements and comply with new environmental law principles, including the Duty of Care, Best Available Technology and Polluter Pays Principles. The few cases in which new environmental legislation has been applied to hydropower have always entailed a decrease in production. This is due to the requirement that a greater share of flowing water be released alongside the turbine into new or existing fish streams, which is expected to improve the chance of survival for migrating fish and mussels. Each additional cubic metre of water released past the turbine means lost electricity production.

A power plant required to release a certain minimum flow alongside its turbine has an impact on up and downstream power plants. The ability to use hydropower as energy storage is restricted when flow cannot be freely regulated. Rewriting permits for all power plants under todays environmental legislation is expected to reduce production by 5 TWh, according to industry body Swedenergy. Regulating capacity the ability to store energy in regulated rivers will also be reduced. Others estimate that the production decrease may be as much as 10 TWh. Today, 65 TWh is produced by hydropower. A crucial question will be how environmental regulations should be applied to the largest hydro plants. Most hydroelectric production is generated by the 200 largest plants; this is also where the regulating capacity lies. The parliamentary majority that has pushed the plans does not care to provide a forecast as to the size of the production decrease it wants the issue to be analysed by the Government investigator who was commissioned last June to draw up a legislative proposal. The proposal will be finalised by the summer of 2013. Meanwhile, Sweden is preparing a plan for making the entire energy supply climate neutral by 2050. With less

The few cases in which new environmental legislation has been applied to hydropower have always entailed a decrease in production.

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hydropower, Sweden will need more wind power. This in turn increases the demand for regulating power i.e., hydropower. The upshot is that Europe can hardly count on Swedish hydropower in any significant way to regulate expanded wind power and solar energy, as Sweden will need the hydropower for its own regulation of supply and demand. A salient point is that Sweden has no natural gas network and thus lacks the option of using electric power generated by natural gas as a regulating power. The political game behind hydropower is complicated, as it always is with Swedish energy policy. Due to high per capita electricity consumption, energy is an important issue. In the battle between various stakeholders, certain types of energy (e.g., natural gas) have been rejected on less than objective grounds. It is hardly a coincidence that the most nuclearfriendly party the Liberal Party is also critical of hydropower. But even the environmental movement criticises hydro, which it views as large-scale and a threat to biological diversity (as if global warming doesnt also threaten biodiversity). Most people recognise hydropowers great importance to Swedens economic welfare, but no party or group of voters actually likes hydropower. For people living near the plants, its hard to like hydro. Hydroelectric plants today do not employ local staff but control operations remotely from national operations rooms. Hydropowers advantages become evident far from the people who live near the plants, and this distance would be even greater if electric power were exported. Taken together, this all means that the decision making process on hydroelectric plant environmental permits that is now underway will most likely carry severe consequences and entail a significant decrease in

production for existing hydro plants. It is inconceivable that a parliamentary majority will have a sudden attack of remorse and admit that it forgot about climate change. A further expansion of hydropower in Sweden is also inconceivable, even in the long term. There are unused watercourses, but they are clearly protected by law. For safetys sake, the remaining Swedish rivers (including four large, entirely undeveloped Norrland rivers) are protected by both Swedish law and the EUs Natura 2000, and the major rivers have also been classified as National Rivers. Watercourses are thus triply protected from expansion. Angry opinions are immediately heard at the mere mention of hydropower expansion. Neither is it possible to increase electricity production in existing hydroelectric plants, since production there will be reduced by the release of more water into fish streams alongside the turbines. The German electrical engineer cited above points out that Europe will need Swedish hydropower to regulate all the future wind power and solar energy. But references to Germanys or Europes need for Swedish hydropower fail to resonate with Swedish public opinion in fact, such references have the opposite effect. Swedes do not want fish migration blocked by hydropower plants just so electricity can be exported. Neither do they think more hydropower is needed in Sweden hydropower already provides nearly 50 per cent of the electricity consumed in Sweden. So its more enjoyable to fish for trout in Swedish rivers, and canoeists wont have to haul their canoes past hydropower plants. And after all, electricity on the Nordic market is cheaper this year than its been in a very long time.

A further expansion of hydropower in Sweden is also inconceivable, even in the long term. There are unused watercourses, but they are clearly protected by law.

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Germanys Energy Shift: Does less haste mean more speed?

Germanys energy shift is not only lagging severely behind schedule, it is also about to slow down even further. Ultimately, this could be a virtue for German energy policy.

Florian Wastl
florian.wastl@mslgroup.com

In the early summer of last year, only three months after the Fukushima nuclear disaster, Angela Merkels Government dramatically overturned its original decision to slow Germanys exit from nuclear power, bringing the date for the final decommissioning of all German nuclear reactors forward to 2022. Alongside the faster nuclear phase-out, the Government embarked on a hugely ambitious plan to replace Germanys nuclear capacity with power from renewable energy sources. Since then, progress in Germanys socalled Energiewende (Energy Shift) has been painstakingly slow, with many projects lagging severely behind schedule. This is best exemplified by the status quo of one of the key pillars of the Energy Shift, i.e. the building of offshore wind parks in the North Sea. More than a year into the Energiewende, decision-makers have still not created the regulatory environment to give investors the financial security they require (although a law to do this is about to be passed at the time of writing). Meanwhile, the state-owned Dutch grid operator TenneT, tasked with connecting the proposed offshore wind parks to mainland grids, is in severe financial difficulty. Separate deals between TenneT and investors to secure funding for individual projects are now beginning to get underway but no overall solution to TenneTs financial troubles appears to be in sight. As a

result of these problems, only two small offshore wind parks have so far been built, with a joint capacity of a meagre 0.5 Gigawatts. According to the Governments plans, however, offshore wind power will have to generate a whopping ten Gigawatts by 2020. Whats more, the pace of the Energy Shift is set to slow down even further in the months ahead. This is for two reasons: First, the strongest proponent within the Government of a speedy transition to renewables, environment minister Norbert Rttgen (CDU), lost his ministerial post in May 2012, following a poor showing as CDU frontrunner in a key regional election. The new man in charge of the environment brief, Peter Altmaier (also CDU), is determined to focus less on speed than on feasibility. This is likely to include a temporary strengthening of fossil energy production. Secondly, Germany is facing a general election in September 2013. With energy issues likely to dominate the election, political parties are already beginning to stake out their positions. As the election draws nearer, the policy window will close in the spring and is unlikely to reopen until early 2014. However, it is not all gloom: While Peter Altmaier may be putting his foot on the brake with regard to renewables, he has also begun to frame the debate towards a more pragmatic, results-oriented approach

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Only the Green Party are likely to step out of line: They will insist that costs are not being pushed up by the effort to extend renewable energy production but by a rebate for industry which should be scrapped.

to the Energy Shift. As the Government has just had to raise its green energy levy to cover the increasing cost of the Energy Shift, Altmaiers key focus will be on keeping overall costs down or, rather, of spreading them out over a greater period of time. While Altmaiers CDU (and, to some extent, also the Social Democrats) will be arguing in their election campaigns that energy must remain affordable to consumers, the CDUs coalition partner FDP will emphasise the importance of cheap energy for the continued competitiveness of Germanys exportdriven economy. Only the Green Party are likely to step out of line: They will insist that costs are not being pushed

up by the effort to extend renewable energy production but by a rebate for industry which should be scrapped. With a Grand Coalition between Christian Democrats and Social Democrats the most likely outcome of the election, Altmaiers approach is set to prevail. It is therefore likely that Germany will experience a significant slowing-down in the shift to renewable energy production, but that targets, timings and the cost of the Energy Shift will become more realistic. Given the inevitable extension of fossil energy production, however, one target will hang in the balance more than ever before: Germanys commitment to cut CO2 emissions.

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Post-Fukushima issues for Frances energy transition

We are more and more aware that we are living in a resource limited world. While 80% of our energy currently comes from fossil fuels, this cannot be sustained in the future.
Indeed, in a world where the need for energy is constantly growing, fossil energy resources are slowly being depleted and the scrutiny of their environmental impact dramatically increasing, an energy transition is necessary. In light of these issues, the accident at Fukushima could have been an accelerating factor for the transition. However, in France nuclear energy is too important and too competitive to be replaced. Hence, its role has not really been questioned following the Fukushima event. Nevertheless, for political reasons, the French Government has had to get involved in the development of renewable energies. This is what lies behind the recent announcement, during the Environmental Conference, that a national debate will be organised around the energy transition and the associated issues and that this will lead to a new planning law before summer 2013. Seemingly, the idea behind this declaration is to hide nuclear energy under a carbon-free layer, forbidding for example shale gas, to make it more acceptable. Whatever will be decided later this year, the lives of companies will undoubtedly be affected. For some sectors, like the public construction sector, or the renewable energy sector, this transition will be an opportunity to expand their activities, thanks to new public projects and new invitations to tender in the photovoltaic sector for instance. For some others, such as in the hydrocarbon sector, it will require major changes to their activities. All these changes lead to numerous questions for those companies linked to the energy transition. How will the debate be organised and led? Who and how will it be financed? What regulatory framework will be used?

Pierre-Samuel Guedj
pierre-samuel.guedj@consultants. publicis.fr

Companies are both the agents of the transition and key to it. If we want it to be successful, it must take into account their worries and expectations.

These are some of the questions for which those companies that are affected seek answers.

Companies required to enter the debate

Companies are both the agents of the transition and key to it. If we want it to be successful, its must take into account their worries and expectations. After having being left out in the latest Environmental Conference, companies have to be reintegrated into the debate. Hence, the governance of the energy transition debate to date has to be questioned. Companies want a balanced and coherent discussion, in particular in the debate on shale gas and this will need to be re-examined and involve all stakeholders.

A need for clearer information about funding

Once the direction has been settled, companies expect clearer information on whom will pay for the transition and how it will be organised. Indeed, the Government has already announced strong measures, in particular in the automobile and public construction

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sectors. For example, the Government has requested that in ten years time cars should consume two litres per 100 kilometres and that one million houses should comply with modern standards every year. These measures have a cost and this has led to the Government studying the creation of a Public Investment Bank, to support this.

Necessity of a simplified regulatory, tariff and fiscal framework

Finally, French companies need a simplified and stable regulatory, tariff and fiscal framework in order to be competitive. Laws must make the transition simpler. For example, in the wind power sector, companies are glad that the Government decided to open a new tender, but they want the administrative procedures to be simplified and the tariff situation to be fixed. In respect of energy efficiency, companies want the publication of decrees under development and the Grenelle Building Plan to become perennial.

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Volume 1 issue November 2012

New Italian National Energy Strategy: its time to join the conversation
Indeed, the renewal of the Italian energy sector, in the Governments vision of things, can and must play a key role in improving the overall competitiveness of the country system.

David Sevali
david.sevalie@mslgroup.com

and

Alessandro Chiarmasso
alessandro.chiarmasso@mslgroup.com

In a difficult and uncertain macroeconomic scenario, all the countrys efforts must be geared towards the resumption of sustainable growth. This can only happen if there is substantial enhancement of the Italian economic systems competitiveness. This is the opening statement of a public consultation document with which the Italian Government presents its new national energy strategy. Its no coincidence that the energy plan was included in the countrys growth agenda. Indeed, the renewal of the Italian energy sector, in the Governments vision, can and must play a key role in improving the overall competitiveness of the country. The document includes more than 100 pages of industry development guidelines, from now to 2020, outlining core decisions, defining objectives, and identifying priority actions to be implemented. Reading between the lines, theres a determination to assure coherence for a course of action that will lead the country towards a reduction of its overall energy bill as a medium-term response to the current state of economic crisis and leading, and in the long run, to a secure future of growth and development.

A key step for the implementation of the strategy will be the modernization of the governance system, aiming to enhance the effectiveness and efficiency of decision-making processes.

The plan identifies four main objectives: Closing the energy costs gap for consumers and businesses, aligning with European energy prices and costs, including the reduction of a price differential of over 25% for electricity, which has a decisive impact on the competitiveness of enterprise and on household budgets. Achieving and surpassing the environmental objectives defined by the EU Climate and Energy Package 2020 (known as20-2020), decreasing greenhouse gas emissions by 19% compared to the 18% target. Continuing to enhance the reliability of supply, especially in the gas sector, and reducing dependence on foreign countries, lowering it from the current 84% to 67%, saving 14 billion euros per year on the countrys energy bills, which currently amount to around 62 billion euros each year. To achieve these goals, investments of 180 billion euros are planned in the green and white economies (renewable energy and energy efficiency), as well as in traditional sectors (mains, LNG terminals, storage, hydrocarbon production). Italy is already a virtuous country in terms of energy efficiency:

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by reinforcing its commitment, its aim is to achieve a reduction of 4% compared to 2010 (-24% compared to inertial trend for 2020). For renewables, on the other hand, the goal is to impact by 23% on primary consumption with a reduction from 86% to 76% of fossil fuels, to bring down utility bill fees. The strategy provides for a reduction of incentive costs, to align with European levels, a shift from renewable electricity to renewable thermal energy and a preference for technologies with greater impact on the national economic supply chain.

tons of oil annually. Yet Italy is one of the leading countries in continental Europe for the reserves it has available: The potential amount is 700 MTOE, corresponding to the current annual quota of 12 MTOE for a period of over 50 years. Excluding Nordic countries with significant offshore assets, proven Italian reserves are the largest in continental Europe. A key step for the implementation of the strategy will be the modernization of the governance system, aiming to enhance the effectiveness and efficiency of the decision-making processes. Consequently, bureaucracy will be addressed, introducing a single authorisation, offshore protection limits will be reformulated, and the advisability of changing Article 117 of the Constitution will be evaluated for restoring the States energy expertise, at least with regard to strategic infrastructure. These are the cornerstones of the draft submitted to the Ministry for Economic Development. The publication of the document immediately raised a series of criticisms, especially from environmentalists. On the one hand they criticise the time frame of 2012 to 2020, which they say is too limited considering the time required for approving and implementing measures, and the time that elapses from the decision to invest to the commissioning of works. On the other hand, they criticise an approach that seems to look primarily at traditional sources (hydrocarbons) while penalising renewables where incentives are cut back. The Government intends to use the national energy strategy document as the basis for extensive public consultation, which will start with the main players involved directly and indirectly in the energy sector. All

The Government intends to use the national energy strategy document as the basis for extensive public consultation, which will start with the main players involved directly and indirectly in the energy sector.

But what are the priorities for implementing these goals?

The development of a competitive gas and electricity market, fully integrated with Europe and with aligned prices; in particular, the aim to make Italy the main southern European gas hub through the construction of LNG terminals and storage centres, expanding import pipeline networks. The restructuring of refining and of the fuel distribution network, with the aim of realising more sustainable structures, with European levels of competitiveness and service quality through liberalization measures. Sustainable development of domestic hydrocarbon production, to free the country from its dependency on foreign suppliers, which today stands at just under 90%.The goal would be to increase from 8% to 16% of national energy requirements, with investments of 15 billion euros and about 25,000 new jobs, saving 5 billion euros on annual energy bills. In twelve years, Italys extraction of oil and gas has halved, dropping approximately from the equivalent of 24 to 12 million

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Moreover, the environmentalists, who have already spoken out against the documents strategic guidelines, might attempt to leverage public opinion to delay Government action, hoping for a change of direction on the part of the political forces that win the elections.

points will be the subject of political debate, involving regional authorities, industries and unions concerned, thus arriving at the definition of a new energy strategy for Italy. This phase of public consultation provides a key moment for anyone who wants to play an active part in defining the final document, bringing their experiences to the heart of the discussion. The communication role will thus peak in this initial stage, when there is still time to redefine some of the vital steps. The duration of this exploratory phase is yet to be decided. Since the current Government still has six months in office, there may not be enough time to complete the definition of the plan before election campaigning begins and energy issues start being manipulated for political confrontation. Moreover, the environmentalists, who have already spoken out against the documents strategic guidelines, might attempt to leverage public opinion to delay Government action, hoping for a change of direction on the part of the political forces that win the elections.

Some key points of the draft strategy and in particular the implementation of a gas hub underpinning the development of a transport and storage infrastructure network, and increased exploitation of hydrocarbon resources, with what this implies in terms of exploration and development of mining and processing plants, will be easy weapons to field for those who want to take advantage of increasingly widespread and heated NIMBY sentiments, especially as a result of international (BP in the Gulf of Mexico) and domestic (environmental impact of Tarantos ILVA steel plant) pollution scandals, which recently alarmed in the Italian population. If the Government wants to push through key points of the draft under discussion today and implement its projects in the future, it must engage across the board in an intense communication campaign designed to educate and inform local institutions and citizens, actively involving them in decision-making processes, while preventing the paralysing stand offs that occur time and again.

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Poland heading for nuclear power will it work?

While Germany is implementing its phase out from the nuclear program and Japan has just announced its decision to close its reactors too, Poland is simultaneously preparing to launch its first nuclear power plant by the end of 2023.
That is despite huge costs and European public opinion negatively positioned towards any nuclear investments.

Marcin Roszkowski
marcin.roszkowski@publicrelations.pl

A fast developing country that lacks energy

Behind every country lies a different energy story. Polands annual demand for energy is over 35,000 MW, and 90% of it is fulfilled by coal power plants. At the moment, renewable energy sources, including theoretical shale gas production, cant be seriously taken into consideration in Poland for the next two or three decades. The real problem for the Polish energy sector is not the dependence on coal and the perspective of high prices for CO2 emission rights, but the modernisation process for the old coal power units. In May, the Polish Energy Regulatory Office advised that after 2015 the country may experience blackouts due to growing energy demand. The reason is that older power units are being closed, rather than modernised or replaced, and the Polish power system may not be able to produce enough energy to meet the increase in demand. Furthermore, despite Polands location, the countrys power grids are insufficient to transit large amount of energy from neighboring states.

The Polish Government plans to build two nuclear power plants (3,000 MW each) for ca. Euro 20-30 billion. The first one should be completed in 2023 and the second one connected to the network by the end of 2035.

well as new coal and natural gas power units. The mix of those energy sources should secure Polish demand for the next decades. However, it is obvious that the sudden disappearance of 6,000 MW of nuclear capacity would be hard to replace.

Public attitudes
At the beginning of 2012 the Government launched an information campaign to present nuclear energy and to open the public debate about the project. Its goal was to present nuclear energy as a safe and efficient technology which, despite high initial cost of investment, will provide inexpensive energy in the future. Public opinion polls show that Poles are divided: 40% of respondents are in favor of nuclear energy, 53% against and 7% undecided. The real challenge arises when it comes to the location of the future nuclear plants near specific communities then 63% of respondents refuse to have nuclear in Poland.

Why we need nuclear rational arguments

The Polish Government plans to build two nuclear power plants (3,000 MW each) for ca. Euro 20-30 billion. The first one should be completed in 2023 and the second one connected to the network by the end of 2035. Simultaneously, the Government expects to develop new power capacity from renewable energy sources, as

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Photo by: ilm19 on flickr

Will it work?
The Government and key experts are confident in finalising the first stage of the project by 2023 (when the first power plant is scheduled to open). The rational arguments in favor of nuclear energy and stable State financing are not the only drivers fueling the program. The strongest is Polands positive attitude towards developing and modernising the country and whats even more important - making it more independent from its mighty neighbor Russia. Every year, more and more Poles care about the environment, but only when it doesnt severely influence their wallets. Nuclear energy has a chance to be cheap while giving Poland energy independence. Polish nuclear energy is still in its infancy, but all the necessary elements seem to be in place. Recently, Polands largest energy and energyrelated companies have signed a partnership agreement to finance the project, together with the State. Also, the potential locations of power plants have been chosen and the Governments information campaign is gaining momentum. So, lets hope that future Governments will not waste the huge amount of work that has already been completed.

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How could Europe save more energy?

According to the European Commission, the new provisions of the Directive would achieve 15% energy savings by 2020. Other complementary measures are expected to deliver the remaining 5%.
The objective of a Directive on energy efficiency was to support the only nonbinding target of the EU climate and energy package, but also to contribute to the energy transition presented in the 2050 Roadmap. In June 2011, the European Commission presented its proposal for a Directive on energy efficiency on the grounds that the target of 20% energy savings by 2020 would not be reached without additional measures. More than a year after the beginning of the co-decision procedure, the Council of the European Union and the European Parliament found a compromise, after an intense debate on the level of ambition to adopt for the text. Member States will now have 18 months to transpose the Directive into national law. Political Background This Directive was the first major energy legislative proposal of the Commission Barroso II and a flagship project of the Energy Commissioner, Gnther Oettinger. The objective of a Directive on energy efficiency was to support the only non-binding target of the EU climate and energy package, but also to contribute to the energy transition presented in the 2050 Roadmap. During the negotiations, many Member States, including the acceding countries, argued that they would not have the financial means to implement the energy efficiency measures under discussion. In this regard, the Danish Presidency of the EU (January-June 2012) estimated that the provisions of the Directive would cost 24 billion Euros investment per year for Member States, but would reduce annually by 44 billion. The final compromise eventually took into account national budgetary constraints and set obligations of energy savings for both public and private sector.

The European (new) deal on energy efficiency:

An exemplary public sector

A national 2020 target for each Member State According to the new provisions, Member States will have to set a national energy efficiency target for 2020, with the possibility to take into account, if they wish, national circumstances affecting their primary energy consumption, GDP, energy mix or external energy balance. They will have to communicate their target through action plans for energy efficiency submitted every three years to the Commission. In 2014, the European Commission will assess the European coherence of all national targets. It may subsequently deliver recommendations to Member States and submit, if necessary, new proposals to ensure the achievement of European objectives. Renovation of central Government buildings for public sector Central Government will be obliged to acquire products, services and buildings with high performance in terms of energy efficiency. Regions and local authorities will be encouraged to follow their example. Member States will also have to renovate annually 3% of the buildings owned and occupied by the Central Government. The obligation will firstly focus on buildings with a floor area over 500m2, and from July 2015 to those whose area exceeds 250m2. Each Member State may establish a National Fund for Energy Efficiency funded annually by energy distributors and suppliers (at the level of the investments needed for the renovation of public buildings).

Henrik Bernitz
Henrik.Bernitz@jklgroup.com

According to the new provisions, Member States will have to set a national energy efficiency target for 2020, with the possibility to take into account, if they wish, national circumstances affecting their primary energy consumption, GDP, energy mix or external energy balance.

A responsible private sector

Energy audits for large companies All large enterprises would be required to undergo energy audits. These audits

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should begin within three years after the entry into force of the Directive and must be carried out every four years by qualified and accredited experts. Households and small and mediumsized enterprises would be excluded from this requirement. Energy obligations schemes for energy suppliers After long negotiations in the Council, Member States agreed to establish a mechanism requiring energy distributors and suppliers to reach a target of energy savings by 2020, corresponding in volume to at least 1.5% of their average annual sales. However, Member States get some flexibility, regarding for example the possibility to set incremental targets every two years, to exclude from this obligation industries already subject to the EU Emission Trading System (ETS) or to take into account energy efficiency measures taken since 2009. Smart meters for clients The energy efficiency Directive maintains the 3rd energy packages objective to equip 80% of consumers with smart meters by 2020, but specifies the technical specifications required for the use of future devices (list of data to be available, privacy protection, integration of consumers production). The Directive also introduces the obligation, subject to technical and economic feasibility, to base the consumer bill on actual consumption at the latest by 1 January 2015. Billing and information for consumers will have to remain free of charge. This obligation also includes access to historical consumption. High-efficiency in cogeneration and heating and cooling for all Member States shall encourage the development of infrastructures for district heating and cooling compatible with high efficiency cogeneration.

They will have to carry out cost benefit analysis to assess the possibility of including a cogeneration unit for any construction or renovation of thermal power station with a power capacity above 20MW. The Directive also introduces a priority or guaranteed access to the grid for electricity produced from cogeneration. As a previous Directive already provided a priority access to renewable energies, Member States would have to publish a ranking of priority sources for the access to the network.

Next steps
According to the European Commission, the new provisions of the Directive would allow the achievement of 15% of energy savings by 2020. In the absence of a directive, the European Union would have saved only 9% of energy over the same period. Other complementary measures are expected to deliver on the remaining 5%, such as a proposal for energy labeling of household heating boilers, currently under (intense) discussions. In 2013, Heads of State and Government will discuss the implementation of EU energy efficiency targets and may request the Commission to prepare new proposals. The Commission, on another hand, will publish in 2014 after the deadline for the transposition of the Directive in national law in 2014, its first report on the coherence of the national action plans for energy efficiency and in 2016 another report on the implementation of the energy obligation schemes of 1.5% for energy distributors and suppliers. Finally, and outside the European framework, the International Energy Agency (IEA) will publish by the end of the year its own report on energy efficiency delivering complementary policy recommendations.
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The Directive on energy efficiency also presents in the appendix a statement on the EU ETS. In a context where the current price of carbon is low (about 7 per tonne CO2), the European Commission will monitor the directives impact on industry sectors, and particularly those exposed to a significant risk of carbon leakage, so as to ensure that the directives provisions promote, rather than impede, the development of these sectors.

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The Dutch energy landscape: Towards a hybrid policy?

The current energy policy in the Netherlands is formulated by the outgoing minority cabinet, formed by VVD (Liberals) and CDA (Christian Democrats) and supported by the PVV (Nationalists).
The energy policy has two main goals. To curb the emission of CO2 and to become less dependent on fossil fuels. In order to achieve these goals, the Netherlands have to switch gradually to clean, renewable energy. The Netherlands strive for a low carbon society by 2050. This is consistent with the energy goal of the European Union. The EU aims to reduce CO2 emissions by 80-95% in 2050 in comparison to the situation in 1990. To face these challenges, the cabinet aims to: Work together with entrepreneurs and researchers to develop new energy techniques, such as bio energy; Innovation is working on a legislative proposal to revise the outdated laws. A draft proposal is expected to appear in the autumn of 2012. However, elections for the House of Representatives have taken place on 12 September, which are likely to bring about a change of policy. Beforehand, many were concerned the results of the elections would lead to a severely fragmented political landscape. In the last couple of weeks though it turned into a close struggle between the VVD (Liberals) and the PvdA (Labour). This led to a result where these parties were able to form a majority cabinet together, while there were few other combinations possible with less than five parties involved. In a way, both parties were forced to successfully complete negotiation talks on a new cabinet.

Erik Martens
erik.martens@msl.nl

and

Timen van Haaster

Take into account nuclear energys reliability as an energy source because it instantly produces energy, while, for example, solar and wind energy still fluctuate too much;

Reduce the use of fossil fuels by raising the tax on energy products; Ensure reliable and affordable energy supply by taking care of a balanced and cheap mix of green and gray energy from domestic and foreign suppliers; Take into account nuclear energy as a reliable energy source because it always continues producing energy while for example solar and wind energy still fluctuate too much; Stimulate innovative projects which make energy techniques profitable in order to enlarge the opportunities for renewable energy; Revise existing laws and regulations concerning the energy policy. These laws are outdated as they are not able to take into account new developments.

Negotiations on energy policy

At this moment, the negotiations between the PvdA and the VVD to form a new cabinet are still proceeding. Because of that, the shape of the energy policy for the coming years is not yet clear. Therefore, we sketch a brief overview and analysis of the energy policy chapters from the election programmes of both parties. VVD The liberal VVD states in its programme that it wants to pursue a responsible energy policy. In order to achieve this, the Netherlands should focus on new energy sources, because the increasing scarcity of fossil fuels will lead to deteriorating competitiveness and dependency on third countries. Besides these considerations, a transition to renewable energy sources will offer opportunities to develop new economic activities and to become a leader in the area of knowledge and innovation.

Elections for the House of Representatives

At this moment the Ministry of Economic Affairs, Agriculture and

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This transition however should not be enforced or be subsidised by the Government. It has to come from private initiatives. The VVD does not want to get in the way of companies and entrepreneurs and proposes to remove as many legal obstacles as possible to provide them with an incentive to innovate. Prolonged subsidies in this area are to be abolished. Apart from renewable energy, attention is also given to nuclear energy as a relatively clean and reliable energy source. This point of view is under pressure at the moment, because of the recent negative results in the investigation on the safety of nuclear facilities by the European Commission. Research on the extraction of shale gas is also an option. On the international level the VVD acts out of the polluter pays principle to achieve sustainability and energy efficiency. It wants to enforce this principle by continuing the system of emission trading and compliance of the strict international agreements. However, realistic pricing of emissions and a level playing field within the European Union should be guaranteed. PvdA The PvdA (Labour) on the other hand puts the emphasis mainly on climate change and the scarcity of fossil fuels when dealing with energy policy. But it also acknowledges the opportunities for economic growth flowing from innovation and increasing sustainability. The PvdA wants to achieve a 100% sustainable production of energy in 2050. It has several plans to accomplish this goal. The Government has an important role in this process according to the Social Democrats. For example, energy companies should be legally

forced to comply with (an annually increasing) compulsory share of sustainable energy in their production. Coal plants are obliged to use biomass for their production and new ones will only receive permits if they store CO2. Building permits for new buildings should include solar panels in order to make all new buildings energy neutral in 2020. Other laws and regulations should be adapted to encourage the recycling of heat and waste, while other ones should be abolished to foster local initiatives. The PvdA opposes the use of nuclear energy. It proposes to build a power grid and wind farms in the North Sea, while also adapting our power grid to locally generated energy. They also want to set up a European super high voltage grid to create jobs and to increase sustainability. Consumers should be provided with the opportunity to invest in sustainable energy projects. They should also be provided with full transparency on product chains as they consciously choose their products based on their origins.

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The PvdA however sees an important role for the Government in setting standards and obligations for sustainability. Another friction point is the use of nuclear energy.

Analysis Both parties are aiming for sustainable energy in the future. The VVD mainly worries about issues concerning competitiveness and dependency, while the PvdA focuses on climate change and scarcity problems. But, the ways in which the parties want to achieve sustainability in the future differ. The VVD is opposed to Government involvement and emphasises the role of companies and entrepreneurs. The PvdA however sees an important role for the Government in setting standards and obligations for sustainability. Another friction point is the use of nuclear energy. There are some points of agreement too. Both parties want to get rid of laws and regulations hindering private initiatives. They also agree on the opportunities for economic growth

that a transition to sustainable energy will provide. Besides that the transition could lead to a leading position for the Netherlands in the area of innovation, knowledge and sustainability. It is uncertain how the future energy policy in the Netherlands will look like. One can assume that a fairly balanced agreement based on a mutual quid pro quo will be made because only two parties are involved which are approximately equal in size (VVD has 41 seats, PvdA has 38, out of a total of 150). This may well lead to a mix of both visions on energy policy, hence the term hybrid policy in the title.

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