Europe Risks Energy Crisis From Green Subsidies, Ceos Say
Indian IT outsourcers want a bigger byte out of Europe
How can we dream of an industrial renaissance with such a differential? Enel SpA (ENEL) Chief Executive Officer Fulvio Conti called for an end to Robin Hood taxes and aid. Id rather see the Sheriff of Nottingham for most of the legislation. Lets restore normal and eliminate state intervention and subsidies. The EU started a debate in March on a new set of climate and energy rules as the 28-nation bloc seeks to ensure security of supply and cut greenhouse gases. A framework for the decade to 2030 is needed to give investors legal certainty, spur innovation and prepare for a global climate deal, the European Commission said in a consultation paper at the time. At the same time, the EU is considering options to overhaul the 53 billion-euro ($72 billion) carbon market after emission-permit prices slumped to a low of 2.46 euros in April amid a record glut of permits. In addition to broader reforms in coming years, the emissions-trading system needs a short-term fix, GDF CEO Gerard Mestrallet said. Without a carbon signal, we will not have any visibility, and we will not be in a position to invest. Carbon Collapse The collapse of the carbon price has made coal, the dirtiest source of power, also one of the cheapest. The switch to coal and requirements to buy renewable power have sapped the profitability of natural-gas-fired plants, leading to the widespread shutdown of combined-cycle gas turbine plants, which are among the cleanest. Fifty-one gigawatts of the blocs electricity capacity is mothballed, equivalent to the combined capacity of Belgium , the Czech Republic and Portugal , the utilities said in a brochure given to reporters today. Energy consumers should be billed only for energy, said EON CEO Johannes Teyssen who also is president of the Eurelectric industry lobby. At present European consumers help pay for subsidies to promote renewable-power generation through larger energy bills.
“The customers are conservative in starting the initiative, but once they do, these are the customers that don’t just go back and forth or drop it, so what we’ve seen is that there is a lot more stability in the European customer,” he said. For European companies, many of them battered by a prolonged economic slowdown, Indian IT firms offer cost advantages to using local vendors or doing the work in-house. Global rivals such as IBM and Capgemini also have big operations in India that can take advantage of lower costs. Indian vendors are also taking on increasingly complex work. “To a certain extent, the skills shortage in continental Europe is driving the growth for offshore openness,” said Katharina Grimme, a principal consultant with outsourcing advisory Pierre Audoin Consultants (PAC) in Cologne, Germany. LOCAL CHALLENGES Indian IT’s progress in Europe comes at the expense of local vendors, which according to NelsonHall are seeing flat sales. In 2009, India’s TCS ranked just 21st in IT services revenue from Europe, the Middle East and Africa, but rose to 11th at the end of 2012, according to PAC. Indian rivals Wipro and Infosys ranked 18 and 23, respectively, in 2012, after not cracking the top 25 in 2009. To address labour issues and speed growth in Europe, Indian companies have been acquiring local firms. To win client trust, they hire locally for senior client-facing roles, but most of the grunt work can be done from India. Jef Loos, head of sourcing research at Whitelane Research in Brussels, said Indian vendors moving into Germany, France, Spain and Italy will use acquisitions given language barriers, a “limited” outsourcing culture, and stronger unions.
Energy leaders warn of blackouts across Europe
“Too many subsidies are being given on intermittent renewables, too many to local coal and all of these are [leading to] a disaster. ) The end result, Conti noted, was that the environment was not seeing any benefit to subsidies meant to encourage the development of greener energy anyway a moot point for the EU which has carbon emission targets for energy companies in the EU as it aims to get 20 percent of its energy from renewable resources by 2020. The shale gas revolution in the U.S. has further upset European energy companies’ competitiveness and their profits, however. While energy prices have fallen in the U.S. due to the abundance of the cheap natural gas, in Europe, energy especially natural gas prices from Russia — have risen. Europe has subsequently turned to importing cheaper U.S. coal in a bid to offset higher energy prices that have caused controversy among consumers. Gerard Mestrallet, the chairman and chief executive officer of French utility GDF Suez, said the EU was now in a “paradoxical situation” as it turned to coal against a backdrop of greenhouse gas emissions targets. “The cheap gas in the U.S. is used to produce electricity and U.S. gas is eliminating coal. So the cheap coal from the U.S. is arriving in Europe and it’s eliminating natural gas in Europe. As you know, gas is much cleaner than coal.