16 November 2009 – The economic crisis has cut investment in the European gas and electricity sector by around 15 per cent, threatening energy supply security when consumption resumes, according to Colette Lewiner of energy analyst Capgemini.
“We had not realised last year that the utilities sector would be hit that hard,” Lewiner, head of utilities at Capgemini, told Reuters in an interview for the release of its annual European Energy Markets Observatory.
The drop in investment was especially significant in network infrastructure, the report said.
“The problem is that utilities have invested around 15 per cent less since 2008,” she said, adding the key question was whether there would be enough investment to ensure supply security when consumption rises after the crisis ends.
“We are worried because when a company stops investing, we have observed in the past that it takes time for them to start investing again and because of the EU legislation which will force the closure of 8000 MW in old (coal fired) power plants,” Lewiner said.
Current EU emissions laws force European power stations to fit costly equipment to remove sulphur and nitrogen oxides blamed for acid rain, but older plants can opt out provided that they close after 20 000 hours of running time or by 2015.
The main factors behind the sharper-than-anticipated drop in investment was the fall in European gas and electricity consumption in the first half of 2009 and lower prices.
Electricity consumption was down by around 5 per cent in most European countries while gas consumption fell by 8 per cent in the first half of 2009.
“The price decrease and the consumption drop have reduced revenues, creating a current perception of financial risk and a drop in financial ratios,” the report said.