Good morning. News to start: Norway’s premier has urged Brussels to abandon its opposition to drilling in the High North, challenging EU capitals to ponder whether it is safer to rely on the US and the Gulf region for gas supplies than their closest Arctic ally. 

Today, Ireland’s energy minister tells our correspondent that faster electrification is the key priority to tackle the EU’s energy woes and our finance correspondent reports on dissent among finance ministers towards a relaxation of fiscal rules for energy spending.

Have a fantastic weekend.

Power up

Europe should not “pull the shutters” down on new tech such as data centres as it struggles to electrify, Ireland’s energy minister Darragh O’Brien tells Ian Johnston, while calling for “ambitious” EU-wide electrification targets.

Context: Ireland will take over the rotating six-month presidency of the Council of the EU on July 1 and will be responsible for steering negotiations on grids, electrification and data centres. All those issues have gained urgency following recent energy price shocks.

Ireland has the highest electricity prices in Europe, while data centres use up more than a fifth of the country’s electricity. That has made it one of the member states most in need of grid investments and a quicker rollout of renewable energy sources.

The government recently lifted an effective moratorium on new data centres, although any new facilities seeking grid connections must source 80 per cent of their energy from additional renewable electricity sources.

O’Brien said that he did not “see data centres at all as a negative” for a country that is home to many of the world’s largest tech companies.

“ICT is Ireland’s large industrials. Data centres are looked at in Ireland as a drain on our electricity resources but I don’t see it that way,” he said.   

To speed up electrification, Ireland will seek to deliver a reform of grids and advance changes to the emissions trading system, O’Brien added. A new interconnector between the Emerald Isle and France has recently been delayed from 2027 to 2028, adding to project costs.

Ireland will also chair discussions on upcoming plans to ensure electricity is taxed less than gas, according to leaked copies of a draft proposal, while the European Commission will bring forward an electrification target next month. 

“I think the electrification targets have got to be ambitious, they’ve got to be exacting,” he said, after meeting energy commissioner Dan Jørgensen on Tuesday. 

He argued that recent energy shocks linked to the Middle East and the war in Ukraine, and Europe’s “continued dependence” on fossil fuels “should drive us to accelerate electrification”.

Swiss voters head to the polls on Sunday to decide whether it should become the first country to cap its population.

Power off

Relaxing fiscal rules to allow countries to throw money at the energy crisis is not helping, according to several EU countries and the IMF, writes Paola Tamma.

Context: The Commission last week proposed giving member states more fiscal leeway to fund measures aimed at reducing dependence on fossil fuels without breaching EU budget rules.

The flexibility would allow spending of up to 0.3 per cent of GDP a year until 2028, with a cumulative cap of 0.6 per cent. It would mirror a framework agreed last year that permits countries to spend up to 1.5 per cent of GDP on defence to support EU rearmament until 2028.

The proposal, championed by Italian Prime Minister Giorgia Meloni, has already met resistance from countries including France, the Netherlands, Finland and Estonia. Their finance ministers raised concerns during a Eurozone meeting on Thursday, according to people briefed on the discussions.

Critics fear highly indebted countries could use the flexibility to increase borrowing, adding to debt burdens and fuelling inflation. Eurozone inflation rose by 0.2 percentage points to 3.2 per cent in May, compared with the previous month.

Germany’s finance minister Lars Klingbeil argued that the focus should remain on defence spending and financial stability.

The IMF has also urged caution. “We would very much like to see countries being disciplined in how they use this flexibility, especially countries that have high debt and deficit levels,” managing director Kristalina Georgieva said.

The fund has criticised governments’ support schemes to counter rising energy prices, estimating that 80 per cent of such measures are poorly targeted. Many relied on tax cuts or price caps that supported demand and weakened the price signals that would otherwise reduce consumption during an energy shock.

Energy prices could remain elevated while the Strait of Hormuz stays blocked and would stay high even after a sustained ceasefire, Georgieva warned. “To be completely frank, we think we have not seen the worst of this,” she said.

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