Europe keeps wary eye on security of supply

After the chaos caused by the fuel blockades, it is not surprising that energy is climbing up the European agenda.

After the chaos caused by the fuel blockades, the spiralling in the price of oil, and the business anger caused by the climate change levy, it is not surprising that energy is climbing up the European agenda.

The European Commission has just produced a green paper on security of supply, believing that energy is one area which may not be best left entirely to market forces.Among its early thoughts are allowing subsidies to the coal industry to continue beyond the current 2002 cut-off point. Aid may be allowed for countries who fear that a reduction in their collieries will threaten the security of their energy sources.

Such a move may be viewed as merely a way of propping up an old and environmentally dirty industry, and not of great consequence to anyone outside coal mining.

But the Commission’s plans offer the opportunity for some kind of energy policy, something which the UK has largely resisted.

The UK’s current energy mix is widely regarded as about optimum, with no over-dependence on one type of fuel.

But that will not remain the case now that the moratorium on new gas-fired power stations has been lifted. The chances are that an increase in gas power stations will reduce the market share of coal to a level where it could lose critical mass.

The government, although it recently awarded a subsidy package to the coal industry, has consistently said that coal must go on to fight for its own survival. This is a bigger challenge for coal than for most other industries.

Deep-mine production costs in the mature coalfields of the UK are far higher than those in newer and often opencast coal areas in countries, such as Australia, the US and Colombia.

The danger of decline in the coal industry is that the UK will drift towards an over-dependence on gas, and then will be highly exposed to fluctuations in world prices.A coal mine, once closed, is not easily or economically reopened.. flooding and underground collapses are quick.

Mining skills and associated equipment manufacturers will also suffer in a reduced coal industry.

Business puts much time and expense into trying to buy power — one of its biggest costs — at the cheapest price possible. Armies of utilities buyers haggle regularly with power companies, as well as lobbying the government and regulators over trading methods.But they have little influence over prices on the world market and the mix of energy sources.

Possibly, the moves by the Commission will help to give energy policy the focus it deserves.

Christine Buckley is industry editor of The Times