* Average power price could rise to nearly 200 eur/MWh
* Renewables, nuclear, gas key to lower carbon
By Barbara Lewis and Henning Gloystein
DURBAN/LONDON, Dec 9 The European
Commission is expected to unveil its latest vision on how to
plan for a greener energy future next week and a draft document
seen by Reuters points to a jump in the average capital costs of
the energy system in coming years.
Electricity prices would rise until around 2030 but new
energy systems could lower prices after that, it said.
The EC envisions five scenarios regarding how the energy mix
could look by 2050.
At its cheapest, the average price for electricity is seen
at 146.2 euros per megawatt-hour (MWh), while at the highest,
prices are forecast at 198.9 euros per MWh.
Key to curbing price rises will be increasing energy
efficiency, the draft said.
"Improving energy efficiency is a priority in all
decarbonisation scenarios. Current initiatives need to be
implemented swiftly to achieve change.
"In all our scenarios the share of renewables has to rise
significantly in order to achieve our climate goals, and
renewables will become the core of the energy mix," the EC's
energy commissioner Guenther Oettinger said.
Renewable energy will account for at least 55 percent of
gross final energy consumption in 2050 versus today's roughly 10
The document said that Europe needed "much greater political
ambition and a greater sense of urgency" to make the necessary
transformation in time.
"The European Commission acknowledges that there is
inadequate direction as to what should follow the 2020 agenda,"
This, it said, created uncertainty which could create
disruption and higher costs in the longer term.
NUCLEAR AND GAS
The document also said that nuclear power would remain an
important factor in Europe's decarbonisation process despite
this year's meltdown at Japan's Fukushima reactor.
"Nuclear energy will be needed to provide a significant
contribution in the energy transformation process in those
member states where it is pursued. It remains a key source of
low carbon electricity generation."
The Commission said that natural gas would also be critical
for the transformation of the energy system.
"Substitution of coal (and oil) with gas in the short to
medium term could help to reduce emissions with existing
technologies until at least 2030 or 2035."
The draft argued that long-term gas supply contracts would
be necessary to underwrite investments in gas production and
But it also said that "greater flexibility in price formula,
moving away from pure oil-indexation, will be needed if gas is
to remain a competitive fuel for electricity generation."
Around 40 percent of Europe's gas imports come from Russia
and oil-indexation represents up to 69 percent of the pricing.
That indexing has hurt European gas companies tied into
long-term deals with suppliers linked to oil prices while being
forced to sell gas at lower retail prices linked to the freely
traded spot market.
The EC also said that unconventional gas resources and an
expanded liquefied natural gas (LNG) market could relax concerns
on gas import dependency, but that it was too early to say when
unconventional resources might become significant.
The EC said that carbon capture and storage (CCS) technology
could contribute significantly to Europe's energy roadmap, if it
reached commercial operations.
"If CCS is available and applied at large scale, gas may
become a low-carbon technology, but without CCS, the long term
role of gas may be limited to a flexible back-up and balancing
capacity where renewable energy supplies are variable."
The Commission's draft report also said that its carbon
trading scheme remained the central pillar of European climate
policy, but added that too high carbon prices may harm European
competitiveness and increase the risk of carbon leakage.
"It is important to prevent significant risks of carbon
leakage and take action depending on efforts of third
(Editing by Jason Neely)