Fortum Calls For Strong Leadership From European Commission For EU Energy Market Development

Fortum said Thursday it welcomes the strong commitment of the European Commission to remove the remaining obstacles to a fully integrated and well-functioning internal energy market, as stated in the Internal Energy Market Communication published today.

The EU energy market will not materialise by 2014 without enforced commitment and effort. In order to complete the internal energy market, the EU should concentrate on the implementation of existing decisions and measures and improve their functionality, Fortum said.

For example, the rapid increase of subsidy-based, intermittent renewable energy has totally challenged the functioning of the energy market. According to Fortum as a consequence, some member states are in the process of introducing national capacity remuneration mechanisms to support fossil balancing and reserve capacity, adding yet another subsidy layer that will further deteriorate the market functioning.

“Fortum shares the Commission’s view that without proper EU-level coordination such capacity remuneration mechanisms will seriously hinder market integration. This is a very expensive solution for energy consumers”, says Esa Hyvärinen, Vice President, Corporate Relations at Fortum.

“We urge the Commission to launch a process to develop clear EU-level compatibility criteria for capacity mechanisms. National capacity mechanisms should be allowed only if a member state can prove that its security of supply is seriously threatened and cannot be alleviated by cross-border electricity trade. The Commission should have a clear mandate in ensuring that possible capacity remuneration mechanisms do not distort the cross-border electricity trade or influence the location of investments”, Hyvärinen continues.

Fortum said it believes that capacity remuneration mechanisms, when considered necessary and adopted, should treat all capacities equally, regardless of the technology or the age of the generation unit. They should also be regional rather than national, taking full advantage of cross-border trade.

In general, the EU and its member states should put a stronger focus on developing cross-border transmission capacities. Fortum is of the opinion that the EU Emissions Trading Scheme should also be enforced so that it would again start driving power system development. The renewable energy support system should be developed towards a more market-based and harmonised system. Moreover, renewable energy producers should start taking full responsibility for balancing, similarly to other producers.