Thoughts on electric pricing in Europe


Interview with Mats Nilsson, Ph.D, Economist, Vattenfall Strategic Analysis, Sweden

Mats Nilsson is a keynote speaker for the opening session of the Transmission and Distribution program at European Utility Week 2013. In his talk he will be sharing his expert thoughts on the future of wholesale and retail nodal pricing. He took a few minutes out of his day to offer his views on the trajectory of European energy market development in terms of drivers and what important changes need still to occur. Here is what he had to say…

What do you see as the main driver(s) for overhauling the European energy industry? Is it something driven mainly by policy or by other forces?

I would identify three main drivers that will shape developments of the energy industry over the next ten years.

Firstly, we must see whether subsidies will drive out the market and spot prices collapse.

Secondly, it is important to see if SoS will lead to less trade as capacity markets distorts real time prices, something that is highly likely to affect trade negatively.

The third factor depends on the will and capacity of policy makers in Europe to try and ensure that Europe does not jeopardize the existence of its economic base – the key question being, “will energy-intensive industry stay in Europe if we get an electricity system that is far costlier than the rest of the world?”

As you know “pulling in one direction” is the theme which underpins European Utility Week 2013. How important a factor would you say greater inter-industry cooperation and collaboration is to achieving the desired changes, and are there other important issues to consider?

Cooperation is clearly very important, but I would say that inter-industry cooperation will naturally occur anyway if there are gains to be made from this. The most important cooperation from top-down is the issue on how to govern the regulated parts of the electricity markets, i.e. the grids and networks and how to increase cooperation across control areas. I think an important component part to achieving this could be to look at the creation of regional ISOs.

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