Mix and fix

Junior Isles, Managing Editor

Although as expected, the main theme at this year’s Power-Gen Europe keynote was market liberalization, there was one sentence which perhaps summed up the challenge facing today’s market. As Mr Dominique Ristori, Director of General Affairs, Directorate General Energy and Transport, European Commission put it: “…the liberalization process should meet our social and environmental objectives…” Ristori added that “the most important of these is the issue of security of supply”.

Many argue that liberalization flies in the face of secure power delivery, and say that what has happened in California could just as easily happen in Europe. Ristori pointed out, however, that there were key differences between California and Europe. He noted that the main contributing factors i.e. “artificially limiting the construction of new generation in a rapidly growing market, liberalizing without creating appropriate arrangements in neighbouring states and creating an obligatory pool – do not exist in Europe”.

Although there will always be liberalization skeptics, few could honestly argue that we are likely to see a repeat of California in Europe. But there are dangers. Like the US, investment is required for interconnections between member states where there are bottlenecks.

However, Ristori’s argument that “there is no conflict between market opening and other policy goals” such as environmental objectives is a bit more difficult to agree with. Ristori briefly mentioned the EU’s commitment to increase the use of renewables and spoke of “further actions on greenhouse gas emissions trading and energy taxation.”

Marc Pallemaerts, Joint Chief of Cabinet at the Belgium Ministry of Energy, had touched on the environmental challenges earlier. And it was particularly interesting to hear his views just one month ahead of the Belgian Chair presidency of the European Union.

Pallemaerts noted: “Most of the energy dossiers to be examined at the next Energy Council on December 4th are related to climate change, an issue which is one of the crucial problems for the years to come…I will not go any further on this theme today but the upcoming ‘COP6’ negotiations in Bonn in July is a big concern.” I am sure he is not alone, especially with Bush’s announcement in late March (see PEi May 2001).

The argument of how to meet environmental challenges under current market conditions was more carefully addressed by Dr Rolf Bierhoff, President of Eurelectric (The Union of the Electricity Industry).

Liberalization promotes generation from the cheapest source. This has a significant impact on the selection of power generation technology which in turn can lead to an over-reliance on one energy source. This not only jeopardises security of supply but limits the mechanisms for reducing emissions.

Bierhoff stressed the importance of a balanced generation portfolio which includes advanced coal and gas technologies; energy efficient chp; nuclear energy and renewable sources. In addition to a look at how market mechanisms could be developed to support renewables, Bierhoff also outlined the “clear long-term advantages of nuclear”. With Bush also seeing a role for nuclear in a power-strapped country, it seems that nuclear could be set for a return. Whether any government has the political will to push through nuclear renaissance remains to be seen.

What Europe needs is a real common energy policy which promtes diversity. The main proposal for the December meeting of the Energy Council will be a directive for the promotion of electricity generated from renewables. This proposed directive is being regarded as the first important step towards a real European market for renewable energy.

Another area in which an EU directive is needed, is cogeneration. DG Tren is not working on a draft this year after it was pulled from the directorate’s 2001 work plan. Member states have been given guidelines to work with but have been left to act individually. The result is that only some governments such as Germany, Denmark, Belgium and the UK have made an effort.

There is no easy fix to the problems of matching liberalization goals with social and environmental objectives. What is required is a mix of policies which incentivise the market players to produce electricity from a mixture of sources.

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