E.ON CEO and President of Eurelectric Johannes Teyssen has told a gathering of European Union electricity industry executives and EU policy makers that Europe’s power industry faces a deeper crisis due to poorly conceived energy market designs.

Mr Teyssen made his comments at a Eurelectric conference in Brussels on Tuesday, entitled “Power Market in Transition- Why do we need a new market design?”
Johannes Teyssen
“The EU’s power sector is facing a deeper crisis, partly due to badly designed policies; the EU Emission Trading Scheme (ETS) is no longer a role model” Mr Teyssen said.

The conference focused on what more the industry had to do to adapt to Europe’s evolving energy policy framework, especially the growing proportion of renewables in the grid.

Addressing the notion of what the value of the electricity market is, Teyssen quipped “do the test, withdraw the capacity and see its value”, before highlighting the characteristics that have made the market in Europe dysfunctional.

“Our fuel gets dirtier while consumers pay more than ever for cleaner electricity. We have sky rocketing renewable subsidies. It has caused major destruction in our industry. Some analysts call the industry pretty much uninvestable.”

Teyssen took issue with the comparison made between utilities and ‘bad banks’ telling the audience that utilities create value in society but had been mistreated by the system.

Referring to the recent 2030 proposal by the European Commission, the E.ON (FWB: EOAN) chief said the corrections were positive and there was evidence the bloc is going again in the right direction,

However he also warned that the structural flaws inherent in the EU ETS would have to be fixed sooner rather than later.

“With the domination of intermittent generation, we need the market remunerating the assets properly, also in terms of energy security”, he said.

Taking up that aspect of remuneration, Hakan Feuk, Vice President of Political and Regulatory Affairs at E.ON said establishing regional capacity remuneration markets (CRM) “presents many political challenges to be overcome.”

Feuk warned that it is imperative that energy, flexibility and capacity elements of the market work together.

“Lack of regulatory stability in markets has placed investments at risk, which has made life even more difficult for the generator. A properly designed CRM should minimise the impact on the Internal Energy Market.

Christophe Gence-Creux of ACER was not in agreement with the other speakers and expressed the view that Europe does not need a new market design nor a CRM scheme, but did concede that transmission system operator (TSO’s) needed ‘more carrots and more sticks to make the process move faster.’

“It is more important to support the Commission to get this code adopted as soon as possible. We must persevere because I believe it is the only way forward. We don’t need a new market design –we just need to implement the model we have, it’s robust and future proofed enough- we need to remove the existing barriers to market.”

Gence-Creux added that he had spoken to a high official at Commission level, who had told him of a ‘new atmosphere’ in Europe, with consensus growing of the need to work together towards Europeanisation of the energy market, which he hoped will help to address the many challenges ahead.

Professor Jean-Michel Glachant, Director of Florence School of Regulation predicted that the value of cross-border participation will increase as intermittent sources continue to grow.

He emphasised the role smart regulation must play in delivering new grid services, technological innovation and grid user participation.

Conference chairman Ruud Otter was in agreement, stating that with more market integration, energy policies from individual countries will have more effect on surrounding countries.

“Common vision and political will is essential for the next steps of market integration, Mr Otter concluded.

Juan Jose Alba Rios of Endesa said he believed it was wrong to say the market wasn’t working. “If we don’t like the price signal, it is not the market that is wrong, but rather policies and physical reality.”

Jean-Francois Conil-Lacoste concurred saying that the industry had to “get used to not being on the Autobahns for now and had to get used to driving on the B-roads.”

“It’s too late to argue if capacity mechanisms are neutral or desirable. Let’s try and prevent a flawed market design. We are in the middle of the river and must continue.

Tuesday’s conference was a follow up to a similar event held in December.

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