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Higher Carbon Is Needed to Spur Clean Energy: Vattenfall

June 4 (Bloomberg) -- European governments need to encourage higher carbon-permit prices in order to spur investment in clean-energy projects, according to Vattenfall AB Chief Executive Officer Oeystein Loeseth.

Higher carbon would probably spur nuclear, natural gas and carbon-capture and storage technology at coal-fired power stations, Loeseth said June 2 in an interview in London. It would also curb losses from investments in gas power plants made around 2008 when utilities assumed carbon permit values would continue to rise, he said.

“At the moment there is a standstill for utilities when it comes to investments because we are not really sure where to invest,” Loeseth said. The bloc’s plans for a 40 percent emissions-reduction target in 2030 from 1990 levels and for the creation of a permanent reserve of carbon permits “gives us potentially a system that will work much better than it has in the past,” he said.

EU carbon has plunged about 80 percent since the beginning of 2008, as government subsidies boosted renewable-energy output, cutting demand for permits. Europe is in danger of running short of power because wholesale electricity prices are too low to encourage spending on new thermal plants, the International Energy Agency said yesterday. EU nations are considering through October the bloc’s plans to restore carbon prices.

In Sweden, two of Stockholm-based Vattenfall’s seven nuclear reactors will need to close by 2025, Loeseth said. The company has begun talks with the government about the policy conditions needed to replace them, he said.

Power Market

An oversupplied power market may reduce the need to replace the reactors as soon as they close, Loeseth said. “With the increasing CO2 price, there will be room for investment in both renewables and nuclear, depending on the framework conditions.”

December EU allowances fell 0.2 percent today to 5.47 euros ($7.44) a metric ton on the ICE Futures Europe exchange in London at 10:12 a.m. They may rise to 30 euros a ton by early next decade, according to Bloomberg New Energy Finance.

Europe needs more than $2 trillion in power-industry investment by 2035 and about 100 gigawatts of new thermal capacity in the decade to 2025, the Paris-based IEA said yesterday in its World Energy Investment Outlook.

To contact the reporter on this story: Mathew Carr in London at m.carr@bloomberg.net

To contact the editors responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net John Deane, Sharon Lindores

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