EU wishes to decrease its external energy dependency. The reason is that more control of our own energy usage enable more stable prices for you, me as well as for companies in EU. Three important measures to evaluate is Europe’s need to produce more of our own energy, buy energy clever from abroad and reduce our energy consumption to decrease our energy demand. In the centre of this paper a Control Price Mechanism is used that can help us achieve these goals.

1. Jan Softa @ somerco Date: 2014-10-16
Enhance EU member states competiveness
Part 24: External energy dependencies
Abstract
EU wishes to decrease its external energy dependency. The reason is that more control of our own energy usage enable more stable prices for you, me as well as for companies in EU. Three important measures to evaluate is Europe’s need to produce more of our own energy, buy energy clever from abroad and reduce our energy consumption to decrease our energy demand. In the centre of this paper a Control Price Mechanism is used that can help us achieve these goals.
Background
Helping geniuses! Our slogan sums up whom Somerco aims to help. Somerco are a company that target to help researchers and innovators so that these geniuses can create prosperity and jobs in society. In this paper, I discuss the EU country’s dependencies on energy from other countries outside EU. The purpose is to discuss how it could be possible to reduce this dependency and fill our demand by focus on producing energy, buy energy clever and present some measures to reduce our energy consumption.
Introduction
Access to energy at competitive prices is a necessity for a functioning modern society. No matter if it is a society that has much industry production or a society that is more based on providing services. Far from all countries, can achieve this since the energy providers in these countries do not have access to modern and innovative technology or there are not any natural resources that can be exploited. Thereof, there are dependencies to other countries that have this access.
To put in numbers, the EU imports 53% of the energy it consumes, including almost 90% of its crude oil, 66% of its natural gas and 42% of its solid fuels such as coal. In 2013, the bill for external energy amounted to about €400 billion.1 Figures that describes our energy dependency in EU very well.
Dependencies
Dependencies between countries are natural. Some countries have better possibilities to supply specific products and services than others. Not least, this is relevant when it concern access to natural resources that is used in production. In particular, energy resources are in abundance in some countries. So much, these countries will never be able to use all energy by themselves. It is then natural to sell the energy to others.
Besides (a) access to different natural resources there are other dependencies between countries that lays in (b) modern or old infrastructure; (c) different application of environmental policies; (d) size of geographical area in relation to density of population and (e) different climate between north and south of Europe. Even with this diversity in dependencies Europe need a moderate price development when it concern energy. Stability increases Europe’s competitiveness.
Regarding energy dependencies in EU, all countries use more energy than it produces, which means we are net consumers rather than net producers.
1 The EU's energy dependence: facts and figures. http://www.europarl.europa.eu/news/en/news- room/content/20140718STO53032/html/The-EU's-energy- dependence-facts-and-figures

2. Jan Softa @ somerco Date: 2014-10-16
Model for dependencies: Net consumers vs. net producers2
The largest exporters of energy to EU are Russia, Colombia and US when it concern solid fuels, Russia and Norway when it concern crude oil and when it concern natural gas it is again Russia and Norway with Algeria too.3
EU has a wish to decrease the energy dependency on others in order to have more control. It would also be possible to discuss if the energy prices should be a completely deregulated market. It sums up, two somewhat related issues – evaluation of decreased energy dependency on others and a completely deregulated market.
A decreased energy dependency on others in EU will also decrease our vulnerability to supply of energy and enable more steady prices. However, it is not as easy to claim that more control of our own energy production will lower prices for end customers. Perhaps, together with price control mechanisms in place it would be possible to achieve both lower and steadier price on energy. In here, lays a discussion about how far government should interfere on affecting prices on the market. When it concern affecting currencies it is accepted, the same for minimum wages and on the other end ticket prices on flying is set by the market. It should be decided where energy prices should be placed of these two.4 And there are no in-between in this choice. In order to decrease our dependency on energy from abroad I consider three different issues are interesting to improve. Europe need to produce more of our own energy, buy energy clever from abroad and reduce our energy consumption to decrease our energy demand.
Overview Reduce – Produce - Purchase model
2 In the model, all above zero represents net consumers of energy and below zero net producers. The first eight staples represent EU countries that are net consumers and the last two represents net producers of energy from countries outside EU.
3 Main origin of primary energy imports, EU-28, 2002–12. http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/File:Main_origin_of_primary_energy_imports,_EU- 28,_2002%E2%80%9312_(%25_of_extra_EU-28_imports)_YB14.png
4 The Enron case is an in famous example on what can happen on a completely deregulated energy market. No matter choice such a development needs to be avoided. Enron scandal. http://en.wikipedia.org/wiki/Enron_scandal
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Series 2
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Series 8
Produce
Purchase
Reduce

3. Jan Softa @ somerco Date: 2014-10-16
I present models that help us achieve more control of our energy usage in EU. When it concern purchase of energy I discuss a Control Price Mechanism (CPM hereafter); when it concern production of energy I have developed a reward system that help energy companies by returning money back to them and for reduction of energy usage in the EU-zone I have a discussion about different applicable measures.
Purchase
Energy companies offer their customers to buy energy and these are individuals, the public and private sector where you find large energy consuming companies. The large energy consuming companies need to have the opportunity to buy energy at bulk prices. However, it might also be possible to affect prices for all with a CPM. A CPM can be run on an EU level or if preferred on a national level. Perhaps, it could be voluntarily for governments to decide if an EU body should be a representative for them or if they want to control the CPM on their own. For smaller EU countries it could prove an appealing solution to let an EU-body represent them since it can achieve larger affect on energy prices in their particular country.
The purpose with a CPM function is to achieve more stable prices, not fixed prices. Like a central bank affect the financial market and the banks set a price on their services based on that an EU-body could in a similar way use its CPM to affect the energy market in EU. Perhaps, the agency for the cooperation of energy regulators (ACER) could fit the bill. ACER plays a central role in the development of EU-wide network and market rules with a view to enhance competition. ACER can issue non-binding opinions and recommendations to national energy regulators, transmission system operators, and the EU institutions. ACER can take binding individual decisions in specific cases and under certain conditions on cross-border infrastructure issues.5
ACER could also be assigned to work with the CPM tasks which are:
 monitoring price trends and assessing the risk they pose to price stability.
 helping to ensure energy markets and institutions are adequately supervised by national authorities.
 cooperate with national energy authorities in order to pursue that energy infrastructure are used efficiently nationally and cross-borders in EU.
 managing EUs foreign energy need and
 on assignment for those interested buy, but also sell energy at best negotiated price abroad on the market.
Since ACER develops an EU-wide network and sets market rules to enhance competition they have the capacity to manage a CPM. The countries who want their energy companies to be a part of this CPM can let ACER on assignment represent them.6
When buying energy from abroad EU, ACER could negotiate bulk prices for the energy companies in those countries that are part of the CPM. Thereby, they get the advantages with ACER having larger opportunities to achieve this task. It is a purchase task, but will fund a reward system for production of energy in EU as well. It will enable the reward system to be
5 ACER. How we work. http://www.acer.europa.eu/The_agency/Mission_and_Objectives/Pages/Acts-of-the- agency.aspx
6 I mention three options for how a CPM can be adopted. Countries decide to use a CPM on their own. Countries use ACER to manage their CPM or countries let their countries energy companies decide on their own if they will join the CPM ACER offer.

4. Jan Softa @ somerco Date: 2014-10-16
funded without tax money. An explanation of what the CPM achieves for the production of energy in EU is discussed below.
Production
When it concern producing energy, I elaborate with a reward system that is a financial mechanism to return money back to energy companies. In order, to get access to this money they will have to (a) produce energy more energy efficient and (b) build out capacity as environmental friendly as possible for that particular energy resource or (c) complement with building green alternatives. Also (d) the energy companies need to be properly managed and (e) agree to rate current production facilities and future investments in these as well as the implementation of R & D projects. Perhaps, an extra bonus criterion could be to look at their contribution to new standardization in the energy sector.
It often happens that energy companies in EU do not have enough access to energy resources in EU to supply the demand on the market. To fill this demand these turn to import energy from energy producers from abroad. However, at these occasions it is possible to let a large European network buy this energy at bulk prices that will fund a system that return money back to energy companies. This money comes from the discrepancy between buying energy for regular prices on the market to buy prices on bulk.7 A percentage, perhaps 15% should be money that goes back into this reward system. The other percentages the energy company can use to offer better services and prices.
This returned money to energy producers is divided into a pot for R & D and a pot into more investments that enable more efficient production of energy. Perhaps, 20 - 30% of these go into R & D that could be conducted in the company or given as grants to scientists that work with the energy company. The other 70-80% is spent on investments on their production facilities.
Reduce
In order to decrease EUs dependency on energy from abroad a major effort is to decrease our energy consumption in society. It could be to build more energy efficient or update current buildings. These are just two examples, but there are countless of more energy efficient measures that can be taken in society.
When it concern measures taken to reduce energy in society there is the option to let the CPM take another 5% out of the discrepancy between buying at regular prices and at bulk prices. This could be transferred to national or regional governmental agencies that can disperse these into projects that fit the regions need to become more energy efficient. It should benefit both the public and private sector. For instance, it would be possible to let landlords apply for implementing measures that enable more energy efficient usage at their houses. Another option is to enable a quick testing and implementation of new technology that reduce energy consumption in society. Such a technology is the MicroPower chip that is a new solid-state semiconductor without moving parts, which converts heat directly into electricity three times more efficiently than previously possible.8 Also, if a city has public transportation it could contribute to more energy efficient buses and trains.
7 To clarify, an energy company has the possibility to buy imported energy at regular prices. A large network managed by ACER who runs the CPM can buy energy at bulk prices that lower the cost. The energy company pays only for the bulk price, but ensures that the discrepancy or difference to the regular prices will be spent as agreed with the ACER cooperation.
8 MicroPower. http://micropower-global.coc

5. Jan Softa @ somerco Date: 2014-10-16
I regard the money that is returned to the governmental authorities in order to reduce our energy consumption more as a contribution to the necessary funding that needs to be provided by governmental agencies to society.
€ 25.2 billion
A fictive scenario for the CPM with its reward system if the whole EU-zone would participate
The negotiations with the energy providers are not done on a daily basis. Instead, contracts are pre-negotiated with energy companies who are willing to supply energy to the EU for a price that is 7% below the daily energy price on the market. A contract could be valid for a year with the possible to break thereafter or carry on as a rolling contract.
The energy need in EU is fairly easy to calculate from year to year, which makes it easier to foresee the need. Occasionally, there is need to buy more energy than expected due to harsh weather and so on. Therefore, ACER should pre-negotiate about 90% of EUs energy that is needed on a daily basis and the other 10% EUs energy companies buy for regular prices. With these conditions in place, it is possible for the energy providers abroad EU to know what volume they should supply. It should make it possible for these energy producers to cover the 7% lower price for the energy they supply.
€400 billion worth of energy is imported yearly into EU to meet the demands on our market. ACER buy 90% of this energy at bulk price which equals to €360 billion. Let’s assume that buying energy with bulk prices in comparison to regular energy prices could lower the prices on average by 7%/year. €360 -7% = €25.2 billion.
It means €25.2 billion has been made available that will be transferred into improvements in the EU energy sector. 15% of these goes into the reward system, which equals to €3,78 billion/year. The other 85% the energy companies will get so their customers can get lower energy prices.
Of the 15% you take 20% and put into R & D projects about energy, which equals to €3,78 billion - 20% that should mean €75.6 million. For upgrades and improvements in the energy company’s production facilities it will be €3.78 - 80% that should mean €3.024 billion.
Besides the 15% taken from the €25,2 billion, you could also take an additional 5% that is transferred to regional or national energy authorities so these can be used in projects they find important in order to improve our energy dependency. It means €25,2 billion - 5%, which equals to €1.26 billion/year.9
These percentages can off course be changed so it gives great effect. Also petrol will most likely not be a part of this reward system, but there are still huge saving in the size of €billions/year to be saved. And it will not cost the taxpayers anything.
Moreover, why not make it possible for energy companies abroad EU to team up with the ones in EU in order to conduct R & D project together based on the money that are made available from the reward system.
As you can see above, I consider it important to include R & D of future energy technology and consumptions patterns into the reward system. By allocating some of this money into projects conducted in EU, a spill-over effect will be that more energy companies from abroad will also conduct more R & D here because of an increased knowledge level.
9 After a little thinking on my own I revised the numbers, but it is the same principle for the reward system.

6. Jan Softa @ somerco Date: 2014-10-16
Grade system
Lower standard
Lower standard
Medium standard
Medium standard
Prime standard
Clean tech
Future tech
In order to implement upgrades and new technology into the company's infrastructure and energy production facilities in EU it is beneficial with a grade system. For a company, these represent a different starting points when it concern how clean and efficient they can produce energy for that energy resource. By having these infrastructures and production facilities graded it becomes more transparent how big step there are forward before these reach the goal set by EU and its member states. For each technology that is implemented in company's infrastructure and in their energy production these can contribute to a higher grade.
In this scenario, an energy producer has achieved a medium grade with three stars. These decide to during a four year period implement technology in their infrastructure and production facilities in order to produce energy that enables them to produce energy that qualifies them to be graded in the prime standard and clean tech category. Thereby, they have reached their goals year five and have a grade of five and six stars for their company. In the R & D projects they have focused on technology in categories for prime standard and future technology. Besides, this they are informing their customers about consumptions patterns that help them become energy efficient.
Transition path
Goal

7. Jan Softa @ somerco Date: 2014-10-16
Draft proposals
Enhance the competitiveness of EU member states Part 1 - Designated tax to science
Enhance the competitiveness of EU member states Part 2 – Strategy to support the software industry
Enhance the competitiveness of EU member states Part 3 – Actions to support women in ICT
Enhance the competitiveness of EU member states Part 4 – Going abroad–Competitive assets
Enhance the competitiveness of EU member states Part 5 – Business incubators, financial recycling and incentives into reward
Enhance the competitiveness of EU member states Part 6 – Standardization as a tool to increase competitiveness
Enhance the competitiveness of EU member states Part 7 – Different types of innovations
Enhance the competitiveness of EU member states Part 8 – Open source from science to society
Enhance the competitiveness of EU member states Part 9 – Crowd sourcing and crowd funding
Enhance the competitiveness of EU member states Part 10 – Green VAT for business
Enhance the competitiveness of EU member states Part 11 - Keep talent in Europe
Enhance the competitiveness of EU member states Part 12 - Research leftovers
Enhance the competitiveness of EU member states Part 13 - Science Parks-Specializations
Enhance the competitiveness of EU member states Part 14 - Patent trolls
Enhance the competitiveness of EU member states Part 15 – Science e- Parks
Enhance the competitiveness of EU member states Part 16 – Expansion options
Enhance the competitiveness of EU member states Part 17 – The locally developed infrastructure.
Enhance the competitiveness of EU member states Part 18 – Treaty (Knowledge transfer)
Enhance the competitiveness of EU member states Part 19 – Different types of infrastructure
Enhance the competitiveness of EU member states Part 20 – Build infrastructure (In progress)
Enhance the competitiveness of EU member states Part 21 – Energy infrastructure (elsewhere) (In progress)
Enhance the competitiveness of EU member states Part 22 – Quick market entry (Medical)
Enhance the competitiveness of EU member states Part 23 – Innovation, Commercialization, Growth
Enhance the competitiveness of EU member states Part 24 – External energy dependencies
Enhance the competitiveness of EU member states Part 25 – Old innovations
Enhance the competitiveness of EU member states Part 26 – The non-IP Parks
Enhance the competitiveness of EU member states Part 27 – Digital inequality into prosperity (In progress)
Enhance the competitiveness of EU member states Overview – Old and new key areas in order to increase the competitiveness of the industry (In progress)
Input on threats against information society