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Opening speech of Andris Piebalgs, EU Energy Commissioner, at the EU-India Business Conference on Energy

| New Dehli (India)
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Honourable Minister, Foreign Secretary, President,
Secretary General, Excellencies, Ladies and Gentlemen,

It gives me a great pleasure to be here today in New Delhi at the opening of our 1st EU - India Business Conference on Energy. This event is a milestone in our cooperation in the field of energy and it has the objective of bringing together the key players in our energy industries as well as high ranking officials from the European Union and India. My conviction is that industry cooperation can bring a crucial contribution in order to address the current challenges of energy security.

Therefore I would like to thank all the participants of the conference. A very specific heartfelt thank to all participants from India, as I know that today India celebrates the birthday of Lord Rama, one of the most important religious holidays for India. And many thanks to European industry representatives who came the long way to take part in this event.

The today’s conference is a visible sign of the increasing practical co-operation in the energy sector between India and the EU. It gives an opportunity for common concerns to be addressed and for experiences and views to be shared. This, I trust, will lead to a greater mutual understanding of the challenges that we all face in the energy sector and of the opportunities that we have for greater co-operation, including industrial and technological co-operation.

At the EU-India Summit in October 2004 when we agreed on the establishment of a strategic partnership between the EU and India, the political decision was taken to strengthen bilateral relations in the field of energy because already at that time it was felt that energy was emerging as one of the main global topics for the next decades. Since then this has certainly turned out to be true. I am therefore very pleased that our concrete bi-lateral energy relations are growing rapidly.

It was decided, that the formal instrument for our relations in this sector should be an India-EU Energy panel, managed on high administrative level. This panel had its constitutive meeting in June 2005 in Brussels. One of the concrete outcomes of this first panel meeting was the idea of today’s business conference, the first one of this kind between India and the European Union.

Tomorrow, the second meeting of the Energy panel will be held here in Delhi and one topic on the agenda will be the outcome of today’s conference and the concrete follow-up measures to be taken. Other topics tomorrow will be the results of the first meetings of three working groups which were created under the panel. I understand that these meetings have been very fruitful and that concrete areas of deepened cooperation were identified. I will mention just some of them:

* energy efficiency, in particular, standard setting for energy using products and integrated approach for energy efficient building standards;
* exploration of possibilities of taking up joint research and development projects in the areas of solar photo-voltaic, solar thermal, biomass combustion and biomass gasification;
* working together in the field of bio-diesel;
* increasing efficiency of coal based power generation;
* joint efforts to develop clean coal technologies and in the area of fusion.

Our cooperation is on the good track in developing in very concrete actions. And this is the right approach to answer the global challenges.

The world is entering into a new energy era. Global energy demand is increasing rapidly despite energy efficiency improvements. Major new oil discoveries are becoming rarer, while investments in recent years have been somewhat less than what is really needed. This underinvestment has led to a tightening of the market and high and volatile prices. This has significant effects throughout our energy systems and on rate of economic growth. At the same, we should see this situation as an opportunity for development of new technologies, new approaches and new cooperation projects.

We are all increasingly interdependent in energy matters and we are all facing similar challenges. There are strong global and regional, as well as domestic, dimensions to our energy policies, especially concerning security of supply and the combat against climate change.

In the last meeting of the Heads of State and of Government of the EU two weeks ago, it was agreed that a new European policy for Energy addressing 3 objectives – security of supply, sustainability and competitiveness, needed to be developed.

Enhancing the security and stability of energy supplies is a complex challenge for us all; a lot of similarities can be found with India.

The world energy market is witnessing a steady rise in energy demand. Secondly, indigenous energy sources in the European Union are limited.

* Oil production in the EU represents less than 5% of the world total production and is significantly more costly to extract than in the Middle East.
* EU production of natural gas represents around 12% of world production and is in decline.
* A significant proportion of European hard coal production is less competitive against internationally-traded coal, at least at the current price level.
* And a huge potential of the renewable energy sources is still not sufficiently used. Nevertheless, the fact that our political leaders at the European summit two weeks ago decided to set even more ambitious targets for 2015, namely 15 % renewables and 8 % biofuels by 2015, is a good sign that there is a political will to do much more in this area.

This context brings me to the challenge of increasing external supply dependency. Indeed, the EU is already the largest importer and second largest consumer of energy in the world. While we are currently dependent on external sources for some 50% of our energy needs, this could rise to 70% by 2030 as a consequence to rising demand and falling domestic production. For oil this could increase to 90% and for gas 80%.

Against this background, I would like to stress the importance of cooperation on energy forecasts. On the same level as consumers ask for a security and predictability of supply, suppliers ask for a security of demand. In order to bring new supplies to the market, heavy investments with a relatively long lead times and payback periods, both in the upstream and downstream are needed. It therefore requires a stable and attractive investment climate with clearly defined, transparent and non-discriminatory rules for exploiting energy resources and, when necessary, for accessing the transportation infrastructure. Both India and the EU have a common interest in promoting the improvement of the investment climate in energy exporting countries.

We should also think about other concerns for energy security, related to ensuring the physical safety and security of the energy infrastructure or risks related to extreme weather conditions.

Nevertheless, important developments are happening already now. A year ago, carbon sequestration was just a dream. Now, we have already 2 concrete projects being developed in Europe:

* a full cycle CO2 sequestration in the gas fired power station, developed by Norway’s Statoil and Dutch company Shell;
* carbon sequestration for coal developed by German company RWE.

In addition, wind energy has witnessed a serious take-off. In Europe, we are developing an important grid project between offshore farms. The 2nd generation bio-fuels are coming to the market.

Energy security can also be enhanced through the increased integration of energy networks. The EU is currently building the most integrated regional energy market in the world. By extending this network beyond the physical boundaries of the EU, the energy security of the EU and neighbouring countries can be enhanced, bottlenecks avoided and the repercussions of a problems on individual lines better handled. A further integration of the electricity networks between the different states in India could likewise enhance its energy security.

Integrated energy markets are crucial for investment attraction. Only an integrated energy market with sufficient level of interconnections and a real unbundling sends the right price signals. In my opinion, the EU – India Energy panel should at some stage also address market organisation issues.

But both India and the EU can do far more domestically to tackle the issue of enhancing security of energy supplies. More emphasis needs to be placed on sustainable development. The third and fourth sessions of this conference address two areas – energy efficiency and renewable energy – where we can share experiences and where we can achieve results. Last year, the Commission adopted a specific Green Paper on energy efficiency which outlined an ambitious programme to achieve cost-effective energy savings equivalent to 20% of the EU’s current energy consumption. The paper sought to identify the bottlenecks which currently prevent cost-effective efficiencies from being achieved. These include the lack of appropriate incentives, lack of information and the lack of available financing mechanisms.

It is important to make energy efficiency a global priority. It is perhaps the most practical way of reconciling improving living conditions with an ever-increasing demand for energy consuming goods and the need to take concrete action on global warming. Energy efficiency is a practical answer both to the challenge of energy security and the challenge of climate change. The EU and India share the same objectives in this respect.

Technology must also be at the core of our policies. It should cover a broad range of issues. The future role of nuclear in the EU has to be closely linked to a solid strategy dealing with the security of nuclear materials, radiological protection, nuclear safety and the reliable disposal of nuclear waste. Clean coal and carbon sequestration technologies in particular are also very important. Coal accounts for approximately 30% of EU electricity generation and is also the backbone of Indian electricity production. All forecasts point to a continued prominent role for coal in our energy supply. Therefore, I very much welcome that India and the EU agreed to launch an Initiative on Clean Development and Climate Change which also figures in the joint Action Plan. The commitment to work together to develop and explore, in India and the EU, advanced, clean coal technology through carbon dioxide capture and storage is a key element in enhancing our energy security, promoting new technologies and address the challenge of climate change.

Ministers, Excellencies, Ladies and Gentlemen,

Enhancing energy security, promoting renewable energy, increasing energy efficiency, strengthening nuclear safety and security, and promoting greater coherence between energy, research and environmental policies are key to ensure a sustainable future for our economies, for our citizens and for our planet. These should therefore continue to be the main issues of our cooperation in the energy field.

The issues chosen for this conference are highly topical and I am convinced that you will all have a mutually rewarding and useful exchange of views.

I therefore would like to wish you all a very successful conference.

Thank you for your attention.

Ref: SPEECH/06/232

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