EON Urges EU Policy Revamp as Power Markets Face Crisis

The chief executive officer of Germany’s biggest utility urged the European Union to improve its energy and climate policies, saying poor design has exacerbated a deep crisis in power markets and the industry.

“The European electricity industry remains committed to the EU’s energy-policy objectives: sustainability, competitiveness and security of supply,” Johannes Teyssen, CEO of Dusseldorf-based EON SE, said today in Brussels. “But we see these objectives being compromised. We’re witnessing energy policy that increased CO2 emissions, raised customers’ energy bills, and caused major destruction in our industry.”

Teyssen’s comments come after the EU’s 28 nations started a discussion earlier this year on the shape of energy and climate rules for 2030. The bloc’s energy and environment ministers are next scheduled to discuss the future framework at their informal meetings in Athens from May 14 to May 16.

Europe needs to overhaul its policies to ensure that its energy becomes cleaner while prices remain affordable and energy supply stays reliable, said Teyssen, who is also president of the European power lobby Eurelectric. Energy companies can’t fulfill their potential as a much needed source of growth and jobs and many of them have experienced “severe value destruction,” he said.

EU leaders urged member states at a summit in March to speed up integration of electricity and gas markets in order to help reduce costs. Energy prices in some areas of Europe are double those in the U.S., where shale-gas production has brought the world’s biggest economy toward energy independence. The cost of power in the EU has been boosted by taxes, network costs and levies, according to analyses by the European Commission.

‘New Normal’

“The system reliability is reaching an all-time low since the Second World War; we see several thousand interventions annually by transmission system operators and regulators into markets,” Teyssen told a conference in the Belgian capital. “We have never experienced anything like that before. Markets are not any longer allowed to function and intervention is becoming the new normal.”

The EU has to draw a lesson from its failures and design a coherent climate and energy framework for the future, Teyssen said. Under the current design, demand for emission permits in the EU cap-and-trade program is being undermined by overlapping renewables and energy-efficiency measures, according to industry lobbies including Eurelectric.

“Lost years of effective climate protection, growing risk for Europe’s competitiveness, skyrocketing renewable subsidies - - and the European energy industry, once a reliable pillar of Europe’s economic strength, is in a deep recession,” Teyssen told the conference.

Economic Crisis

The EU emissions trading system, the bloc’s key tool to reduce greenhouse gases, can no longer serve as a role model for other nations, according to Teyssen. The cap-and-trade program had an excess of about 2.2 billion allowances at the end of last year, according to commission estimates. Coupled with an economic crisis and inflows of cheaper imported emission credits, it helped drive the price of EU carbon allowances to a record low of 2.46 euros a ton in April.

The permits rose 2.3 percent to 5.39 euros on the ICE Futures Europe exchange as of 2:36 p.m. in London today. To alleviate the glut of permits and avoid imbalances in the cap-and-trade program, the commission, the EU’s regulatory arm, proposed automatic supply curbs or injections of allowances starting in 2021.

“Structural problems of the current EU ETS need to be fixed now,” Teyssen said. “We can’t wait until 2021 to get rid of the structural overhang.”