European Power Trading May Suffer on New Regulation, Fortum Says

Cross-border electricity shipments in Europe may be restricted because of uncoordinated national energy policies, Finland’s biggest utility Fortum Oyj (FUM1V) said.

“Incentives for cross-border power trading will suffer if each country introduces national capacity market designs,” Simon-Erik Ollus, chief economist and vice president of industrial intelligence at Fortum, said yesterday at a seminar in Helsinki.

Countries including Germany, the U.K., France, Italy, Poland and Belgium are considering plans to prevent the premature closing of fossil plants by offsetting low or negative returns caused by high renewable energy penetration, low power demand and depressed prices.

The European Commission, the European Union’s regulator, last month urged governments to avoid introducing uncoordinated mechanisms that reward plant operators for guaranteeing back-up capacity when renewable power falls short.

The regulator should take a “strong role in defining criteria and conditions for the use of capacity mechanisms and their compatibility, since they have a potentially major impact and may distort power trading and the location of plant investments,” Ollus said.

“Countries must prove that the disease is worse than the cure.”

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