Bloomberg News

Inter-EU Power Trade Hurt by National Policy, Energy Norway Says

February 18, 2013

The European Union may fail to integrate power markets as intended, since national policies undermine incentives to lay new cables and ship electricity across borders, Norway’s power industry association said.

Rising output from plants reliant on intermittent sun and wind has prompted countries such as Spain and France to subsidize operators of gas- and coal-fired plants to ensure enough supply when the wind doesn’t blow or the sun doesn’t shine.

“We fear that these national measures will hinder a well integrated European power market, since they may push down power prices and make the construction of new cross-border electricity cables unviable,” Andrea Stengel, adviser at Energy Norway, said today in an e-mailed statement.

The European Commission, the bloc’s regulator, urged governments in November to avoid implementing mechanisms that reward utilities for guaranteeing back-up supply when renewable power falls short, known as capacity markets. Such systems are under consideration in Germany and the U.K.

“Capacity remuneration mechanisms will harm cross-border integration if introduced nationally and uncoordinated as is currently the case,” Einar Westre, executive director of networks and markets at Energy Norway, wrote in a response to a consultation by the commission, dated Feb. 7 and posted today on the association’s website. “Demand flexibility is a cheaper and more efficient solution than having generation capacity standing by at all times to run only a few hours when needed.”

The bloc needs to step up efforts to boost power links between countries, to facilitate import and export and offset variable demand and supply, the commission said on Nov. 15.

Instead of subsidizing power plants to stand by for operation during slumps in solar and wind power production, electricity users should take an active part by limiting demand to offset lower supply, Energy Norway wrote in its letter to the commission.

“Introduction of capacity remuneration mechanisms should only be considered as a last resort, when all other measures have failed,” it said.

To contact the reporter on this story: Torsten Fagerholm in Helsinki at tfagerholm@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net


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