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EU Power Markets Don’t Need Capacity Mechanism, Vattenfall Says

European power markets would be better off without governments paying power plant operators to guarantee backup supply, Vattenfall Energy Trading GmbH said.

So-called capacity mechanisms, which reward utilities for running backup plants when renewable power is insufficient, are being developed in Germany, France, the U.K. and Belgium.

“A system without capacity mechanism already works well,” Stephen Asplin, head of business unit trading, said yesterday in an interview at a conference in Amsterdam. “We should not be afraid of having high prices for some hours.”

Europe’s growing dependence on intermittent generation from sources including the sun and wind has sparked fears about security of power supply during times of unfavorable weather and high demand. The European Commission said in a strategy paper this month on the internal energy market that a hasty move toward capacity markets risks being counterproductive and an EU-wide approach should be taken.

“We haven’t seen any mechanism that doesn’t limit cross-border trade and that’s not something we want to compromise,” Mark van Stiphout, a member of European Energy Commissioner Guenther Oettinger’s Cabinet, said yesterday at the conference. “We need to look at peak demand and peak supply from renewables across borders.”

Individual countries analyzing their own energy mix is not the right approach, he said.

Politicians have lost faith in the market’s ability to deliver the right signal at the right time, Klaus Schaefer, chief executive officer of EON Energy Trading SE, said at the conference yesterday.

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