According to EurObserv'ER, in 2013, the share of direct and indirect renewable energy related employment in total employment of the economy in Luxembourg was at about 0.29%, below the EU average of 0.53%. However, in absolute terms, employment in the energy sector has increased by 29% from 2005 to 2013.

The macro-economic importance of the energy sector is very low in Luxembourg compared to the EU as a whole, as reflected by the sector's low shares in total value added and employment. Interestingly, the shares in value added and employment have decreased sharply between 2005 and 2012, whereas for the EU as a whole they have increased or remained constant during this period.

TRADE BALANCE OF ENERGY PRODUCTS The energy trade balance deficit of Luxembourg represents 3.3% of GDP in 2014, which is higher than the EU average, and is virtually fully driven by oil, which can be linked to the importance of the transport fuel market (i.e. cross-country fuel purchase) for Luxembourg's economy.

Source: EUROSTAT Note: Current account balance for EU28 from European Commission (AMECO)

1. Energy Security, solidarity and trust

ENERGY MIX The energy mix of Luxembourg differs broadly from the one of the EU-28, with the notable difference of a much higher share of petroleum and products. Compared to 1995, the share of petroleum and products sharply increased (from 55% to 71% of gross inland energy consumption), while the share of solid fuels decreased sharply as well (by 14 percentage points). The share of gases increased from 18 to 23% of the energy mix.

Gross inland energy consumption in 2013 Source: European Commission, based on EUROSTAT

IMPORT DEPENDENCY Luxembourg has a very high import dependency on fossil fuels, particularly on gas and petroleum and products. Luxembourg imports gas from Norway, Russia and other countries, which translates into a relatively balanced range of import sources. Luxembourg experiences a significant energy trade deficit, expressed in percentage of GDP.

Source: European Commission, based on EUROSTAT





2. A fully-integrated internal energy market

INTERCONNECTIONS

Source: European Commission based on ENTSO-E scenario outlook and adequacy forecast 2014 Note: Reference to 2030 target is based on October 2014 European Council conclusions stating that "the Commission will also report regularly to the European Council with the objective of arriving at a 15% target by 2030" Due to its location, the interconnection capacity of Luxembourg is the highest among the EU Member States. However, further developments are needed in certain areas given that Luxembourg is dependent on imports for almost all its energy needs. For electricity, Projects of Common Interest (PCIs) have been identified in order to increase the capacity at the Belgian/Luxembourg border.

ELECTRICITY AND GAS MARKETS

Market concentration index for power generation (left) and gas supply (right) (2013) (Herfindahl index – 10000 means monopoly) Sources: European Commission based on ESTAT, CEER and Platts Power Vision The concentration of the power generation market is above EU average while it is below for gas. Regarding electricity markets, the relevant wholesale price zone encompasses Luxembourg, Germany and Austria. The absence of congestion on interconnectors means wholesale operators can participate on other power exchanges. Regarding gas markets, the relevant wholesale prices applied in Luxembourg are those of the Zeebrugge Trading Point (ZTP) in Belgium. Furthermore, an initiative was launched in May 2014 by the Belgian and Luxembourg gas transmission system operators (TSO) to integrate the Belgian and the Luxembourg gas markets. The gas market integration, starting in October 2015, will offer new opportunities to market participants. At retail level, electricity and gas markets are highly concentrated. The supplier switching rate in 2012 was 0.22% by customer number and 9.7% by consumption volumes, demonstrating that industrial users were more active in switching suppliers. The opening of the gas sector remained very low with supplier switching rates less than 0.1% (customer numbers). Consumers report high level of satisfaction for both the electricity and gas retail markets. Household electricity and gas prices are below EU average.

Sources:ESTAT and European Commission Calculations

VULNERABLE CONSUMERS





Source: European Commission, based on on EUROSTAT SILC survey Based on a EUROSTAT survey on income and living conditions, three proxy indicators are used to assess fuel poverty. They indicate that while relevant, the problem is rather limited in Luxembourg. Social offices organised by the municipalities apply criteria established to define vulnerable consumers in Luxembourg. Both, the laws concerning the electricity market and the gas market, as well as the law concerning social welfare, have set a procedure to define the way how to treat vulnerable consumers.

ENERGY EFFICIENCY TARGET 2020

(4.5 Mtoe primary energy and 4.2 Mtoe final energy)

Source: European Commission, based on EUROSTAT and on national energy efficiency targets as declared by the MS under the EED Luxembourg’s 2020 energy efficiency target is 4.5 Mtoe expressed in primary energy consumption (4.2 Mtoe expressed in final energy consumption). When comparing the trend of primary energy consumption with the GDP development over the past decades, there is evidence of a decoupling of both since 2005. Even if Luxembourg’s current primary energy consumption (4.3 Mtoe in 2013) is below its 2020 target, Luxembourg should continue its current efforts to keep the primary energy consumption at this level or increase it only slightly so that it will reach its 2020 target even if the economy continues to grow in the next five years.

ENERGY INTENSITY Primary energy intensity in Luxembourg has decreased since 2005, and remains below EU average, even though the country has substantial ‘heavy industry’ and a sizeable amount of transport fuel sales, also due to a high level of fuel exports. Regarding industry, energy intensity is above EU average, but decreasing at a faster pace. The energy consumption of the industry decreased by 36% between 2010 and 2013.

Primary energy intensity of the economy Source: European Commission based on EUROSTAT Final energy intensity in industry Source: European Commission based on EUROSTAT and European Commission/AMECO