Europe Needs Common Power-Capacity Market to Fill Gaps, EON Says

France and Germany should start to develop a common European market for power capacity to prevent shortages and the threat of a breakdown in the electricity system, EON SE Chief Executive Officer Johannes Teyssen said.

“Reliability is reaching an all-time low,” Teyssen told an energy conference. “We see an ever growing number of power stations being retired because they are unprofitable.”

A unified market would pay generators for reserve capacity to ensure sufficient regional production during periods of high demand like cold spells, according to consulting firm Cap Gemini SA. (CAP) Companies such as EON and GDF Suez SA (GSZ) are pushing governments and the European Commission to help the industry by restricting renewables subsidies, volatility in energy prices and rising consumer bills.

“We need coordinated national initiatives to reform the European power market,” Teyssen, who is also president of the Eurelectric power-industry lobby, told the conference today in Paris. “In some central regions an aligned system of capacity reward could be created, and later on other people could follow.” France and Germany are closely connected, he said.

Carbon emissions rules need to change, Teyssen said.

Heads of 10 of the region’s biggest utilities this month called on the European Union to shift energy and climate policy and curb subsidies. Representing half of Europe’s capacity, the companies including EON, RWE AG (RWE) and GDF Suez said the policies discourage investors and risk an energy crisis in the region.

France is developing a market that would force utilities to maintain spare capacity by about the third quarter of 2016, according to Pierre-Marie Abadie, head of energy at France’s environment and energy ministry. Talks have begun between French and German authorities on capacity markets, he said.

Estimates suggest the planned system may require additional production capacity by the time it comes into effect because of the retirement of outdated coal-fired plants, Abadie said.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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