The EU’s next energy chief has a money problem

Dan Jørgensen knows he has to lower energy prices — he just doesn’t know where the money’s coming from to do it.
That won’t stop the former Danish climate minister from making a bunch of pledges on Tuesday, when he faces a grilling from the European Parliament that will determine whether he gets to run the EU’s energy policy. He’ll tout plans to build more energy grid infrastructure and better connect it across countries. He’ll vow to accelerate permitting for new, lower-cost energy sources. And he’ll promise to advocate nuclear energy expansion, despite his past reluctance. 
Yet all these things require money. And that’s one thing Jørgensen can’t promise, even as high energy bills erode Europe’s competitiveness and drive discontent. Europe is in a belt-tightening, empower-the-private-sector era, and there’s scant momentum to grow the EU’s largesse.
“Energy prices are going to be a big focus,” said Sigrid Friis, a Danish MEP with the centrist Renew Europe group, who sits on one of the committees questioning the would-be energy chief. “But where the money comes from for reforms will be one of the biggest questions.”
Further complicating Jørgensen’s mission is a dual directive to finally sever the EU from all Russian energy, which remains cheaper than its alternatives. That presents a quandary: success expelling Russia makes lowering prices harder.
So while the EU’s price-slashing needs may be urgent, the road to getting there will be long and paved with bitter arguments.
“There’s all of this talk about affordable power, affordable gas, but at the end of the day, I’m not really sure we can flick a switch and make that happen,” said Antoine Vagneur-Jones, a senior analyst at BloombergNEF specialized in supply chains. 
European Commission President Ursula von der Leyen, Jørgensen’s boss if he’s confirmed, has staked her upcoming term on a major argument: What is good for the planet will also be good for the EU economy. 
The best way to lower energy bills and stay competitive globally, she insists, is to aggressively build more renewable power sources and reshape the EU’s infrastructure and economy to accommodate them. 
MEPs preparing to question Jørgensen say that the EU has to show concrete progress, though, if it wants to restore faith in green policies. 
“If you want to go through the energy transition while remaining competitive, and you want to have the support of normal citizens going through this transition, you need to make sure that industry and consumers can pay their bills,” said Tom Berendsen, a Dutch MEP from the center-right European People’s Party, who previously inked a report on boosting EU industry.
Berendsen wants a massive increase in EU work to connect energy networks across countries — “a TEN-E on steroids,” he said, referencing the jargony name for an EU law aiding this effort.
That’s where the problems arise.
The briefing notes prepared for Jørgensen ahead of Tuesday’s hearing, seen by POLITICO, show the Danish official repeatedly promoting grid building as a way to get cheaper renewable energy where it is needed. 
But Jørgensen also concedes that “the current budget of the Connecting Europe Facility,” which would help fund this infrastructure, “looks rather small in comparison with the needs.” 
Vagneur-Jones, the BloombergNEF analyst, argued that while accelerating the renewable power rollout could deliver some much-needed price relief, “generally speaking, the structure of it’s looking quite tough,” he said. “A lot of steel producers, heavy industry, when you talk to them about their outlook for Europe, they’re just worried because they don’t really see any scenario where energy prices go down to what they are in the U.S.”
For carbon-spewing manufacturers, electricity from wind and solar has so-far proved ineffective at replacing fossil fuels. Instead, these businesses are exploring “green hydrogen” — a gas made using renewable energy. There’s hope that the alternative fuel could help where wind and solar have failed.
Jørgensen will have a fundamental role to play in developing the green hydrogen industry, said Raphael Hanoteaux, an energy policy expert at the E3G think tank.
“When you look at decarbonizing heavy industry, you’re talking about green hydrogen mainly — at least in the Commission’s strategy — and the price of green hydrogen is still quite high, and the volumes so far are way lower than we thought,” he said. 
Helping industry switch to the alternative fuel, or to green electricity, will be a key challenge for the coming years and, Hanoteaux added, “if it’s poorly done, that will also have a huge impact on prices.”
Again, however, developing green hydrogen will require money Jørgensen can’t promise. As a red note in his briefing book tellingly stresses: “no Commissioner-designate to commit to anything during the hearings” on finding cash to meet energy efficiency and infrastructure spending targets.
To its advocates, nuclear energy is another cost-saving option for Europe.
Having previously pushed to block nuclear technologies from EU green programs, citing waste and safety problems, Jørgensen faces an uphill battle to convince pro-atomic energy MEPs he will toe the increasingly pro-atomic Brussels line.
“The anti-nuclear leadership of green portfolios was not to the liking of nuclear states,” said one EU diplomat, granted anonymity to speak frankly. “I think that if he manages to iron that out, I think we can count on a lot more progress.”
Perhaps Jørgensen’s bigger nuclear challenge, however, is appeasing an EU deeply split over von der Leyen’s plan to focus on expanding so-called mini-nukes, the small modular reactors that can, in theory, be built at lower costs more swiftly.
“Some countries are going to continue to build nuclear, and some are going to invest in small modular reactors,” the diplomat said. “But a lot of countries don’t want European money to be invested in those assets.”
Then there’s the Russia problem. If confirmed as energy commissioner, Jørgensen is vowing to “propose a roadmap to phase out Russian energy supplies once and for all.”
That effort would inevitably target Moscow’s liquified natural gas (LNG), one of the last remaining sources of Russian energy still coming into the bloc — a source of controversy for more hawkish members. But Moscow’s LNG remains financially attractive to several EU members who are loath to give it up. 
“It’s all very well and good commissioners saying we want LNG prices to come down but there’s not much they can do to introduce that, no piece of paper will change the market fundamentals,” said Tom Marzec-Manser, head of gas analytics at intelligence firm ICIS.
“There’s a steady flow of Russian LNG still coming in, largely under long-term contracts with Eastern European buyers,” he said. “If you’re going to be removing that from your mix, you’ll have to replace it by competing for supplies elsewhere and that will be more costly. Cutting supply from Russia while saying you’re going to make prices cheaper doesn’t logically make sense.”
Previous attempts to squeeze the flow of Russian LNG through sanctions have also found opposition from member states, including Hungary, and previous sanctions packages have only focused on restricting the EU’s re-export of the gas. Budapest maintains its energy security is best served with continued access to cheap fossil fuels.
Despite all these binds and conundrums for Jørgensen, MEPs won’t go easy on him over the financing question, said Friis, the Danish MEP.
“We need to see political action and see the resources mobilized to get the job done,” she said. “Jørgensen has some very important tasks ahead, and it’s a headache to find the right funding and funding mechanisms to fulfill these ambitions.”