Last updated: February 23, 2014 1:58 pm

Shell hits out at Brussels energy policy

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Royal Dutch Shell has launched a broadside against what it says is a “European energy crisis” that could drive a raft of new coal power plants across the continent at the expense of cleaner alternatives such as gas.

Policy confusion in Brussels means as much as 11 gigawatts of coal-fired generating capacity could come on line in Europe over the next four years, according to the company, one of the world’s largest natural gas producers.

That would be equal to around a dozen coal plants and it could lead to a situation where coal was locked in as an energy source even though gas is much cleaner to burn, said Dick Benschop, Shell’s head of gas market development.

This would imperil the EU’s efforts to cut its greenhouse gas emissions at the same time as state support for wind, solar and other renewable energy schemes has been amounting to as much as €30bn a year, with energy consumers bearing the costs, he said.

“Europe is following a coal-plus-renewables pathway and that is a very unappealing scenario with rather high costs and low results,” he said in an interview with the FT after speaking at a London energy conference.

“At Shell, we call this the European energy paradox,” he told the conference. “But maybe that’s an understatement. It’s a European energy crisis.”

Mr Benschop’s comments underline the growing pressure on EU leaders as they prepare to meet next month to discuss the shape of the bloc’s energy and climate policies as far ahead as 2030.

The US shale boom has made natural gas cheaper in that country, triggering an influx of cheap American coal to Europe that has helped make gas plants less economically viable.

Shell says Germany’s coal imports rose more than 7 per cent to nearly 44m tonnes in 2013 from a year earlier and the UK saw a similar rise, while carbon dioxide emissions in both countries increased in 2012.

At the same time, large EU utilities estimate at least 30 gigawatts of gas-fired power generating capacity has been mothballed around Europe.

Some analysts believe the situation is temporary because rising US natural gas prices will eventually make coal more attractive there and stem the flow of exports to Europe.

However, Mr Benschop said this was unlikely.

“Some people say, ‘Oh it’s just a blip, it’s not structural, it will come back’,” he said. “This is incorrect,” he added, arguing a higher price of carbon was needed to pare back coal use in Europe.

This is unlikely any time soon, however, because the economic downturn and other factors have seen carbon prices plummet in the EU emissions trading system, the bloc’s flagship policy to combat climate change.

Moves to bolster the scheme, the world’s largest carbon market, are due to be considered by EU leaders at next month’s European Council meeting, which is scheduled to discuss the bloc’s climate and energy targets to 2030.

The EU’s current policies last until 2020 and require a 20 per cent cut in greenhouse gas emissions from 1990 levels and 20 per cent of energy to be derived from renewable sources such as wind farms and solar plants.

A new plan proposed in January would require emissions to be cut by 40 per cent by 2030 – a move Shell and many other large industry groups support.

However it also says there should be a 27 per cent renewable energy target that would be binding for the EU as a whole but not for individual member states.

Industry and green groups alike have criticised the confusing nature of this target and Mr Benschop said leaders should be brave enough to “take the word ‘binding’ out” because even without it, the EU’s carbon emissions reduction target would be the most far-reaching in the world.

However, renewables industries say this would be a big mistake.

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