* Some heavy industry already choosing U.S. for new projects
* Utilities say costs could rise for consumers if more
business is lost
* Utilities call for clearer signal from EU policy
By Barbara Lewis
BOLOGNA, Italy, June 5 Europe's squeezed utility
firms say they cannot cut prices to stop their big industrial
clients moving to the United States, where fuel costs around a
quarter as much.
Losing the business of heavy energy users, such as chemical
giants, cement and steel makers, could force the power companies
to put up prices for households, hurting consumer budgets and
making it harder for Europe to spend its way out of recession.
While U.S. energy companies have been able to cut prices
because of a shale gas boom, utilities say the answer in Europe
is a clearer regional energy policy to guide investment and to
end green subsidies they blame for swelling fuel bills.
"We need (heavy industry). If energy prices are too high for
them, either we need to subsidise or the (European Union's)
energy strategy is wrong," Johannes Teyssen, the CEO of German
utility EON, said at a utilities conference in
"It would be a big mistake to forego energy intensive
Some big companies are already moving west.
In March, Austrian steelmaker Voestalpine said it
would build a plant in Texas to capitalise on the U.S. shale gas
boom. German carmaker BMW has also said energy costs
were decisive in choosing a site in Washington state to build an
Others also say energy is a major factor and they are
working on energy savings, through measures such as insulation.
"Energy costs contribute to our variable costs in Europe,
and all around the world. Further increases in energy costs in
Europe can lead to reduced competitiveness and future
investment," said Ian Hudson, president of the Europe, Middle
East and Africa at chemicals company Dupont.
Wholesale gas prices have fallen in Europe, but the European
Commission says industry still pays four times more than its
peers in the United States. Electricity, generated from gas,
coal, renewables or nuclear fuel, can be twice as expensive in
In the United States, shale gas extraction, using hydraulic
fracking, a process that critics say can cause earthquakes, has
delivered low gas prices. U.S. gas prices fell below $2 in early
2012, but are now around $4
Many doubt the shale gas revolution can be repeated in
Europe, where geology and geography are more challenging and
public concern about the environmental implications of
extracting gas from shale rock are higher.
But Europe's utilities say they have no room to cut costs
and have no money for necessary upgrades to the power grid.
Their profits have shrunk as economic crisis and an EU-drive
for more energy efficiency have depressed energy demand.
Many of them also have massive debts from a wave of
consolidation before the 2008 financial crisis, which is forcing
them to sell assets, cut costs and lay off staff. The 20 firms
in the Euro Stoxx Utilities index alone have a combined
debt of some 400 billion euros, ThomsonReuters data show.
Losing energy intensive industry would make matters worse.
It accounts for around 70 percent of energy demand in Europe's
largest economy, Germany, said Peter Terium, CEO of German
company RWE AG who sees a risk of a major shift away
Losing big energy clients might also force them to push up
the cost for domestic consumers, who are already paying more.
Prices vary across the region, but in the biggest economy
Germany, industrial consumers pay around half what households
pay for electricity, according to industry data.
NO MORE SUBSIDIES
Utilities say they need help through a new EU energy policy.
They say the problem with the current policy is that
government subsidies to encourage green power are passed on to
power bills, which push the cost up for industry and households.
Governments can decide individually how much to charge so
the policy is unevenly applied throughout Europe and the
utilities say the subsidies, for example for putting solar
panels on the roof of a house, are often more generous than the
Instead, they want reform of the Emissions Trading Scheme,
the EU's market for carbon permits, to make it a stronger
alternative to subsidies and engineer a market-based shift to
low carbon or green energy.
The European Union has a goal to increase the share of green
energy from around 10 percent of use in 2011 to 20 percent by
2020 as it seeks to cut emissions and curb reliance on imported
fossil fuels, which have a negative impact on the trade balance.
EU Energy Commissioner Antonio Tajani told the Bologna
conference that Europe was committed to cutting energy costs and
developing regional sources of energy, including shale gas.
A draft of his department's action plan for the steel sector
has raised the prospect of lowering taxes and levies on energy.
"We need more industry," Tajani said, referring to an
unofficial goal he shares with some other commissioners to get
20 percent of Europe's gross domestic product from
manufacturing. "Without good energy policy, it's impossible to