* Linked markets allow electricity to flow where it's needed
* Market coupling to cover 75 percent of EU power use
* EU says fragmented European energy markets soon to be
(Adds exchange comments)
By Henning Gloystein
LONDON, Feb 4 Europe took a step towards a
single power market on Tuesday by unifying electricity trading
across 15 countries and creating what has been called the
continent's most important IT system.
Because power markets were designed to be national, a lack
of links between neighbouring countries as well as differing
trading rules make it difficult to tackle regional undersupply
or gluts of electricity.
Through a process called market coupling, the European
Commission together with national governments over the past
decade has pushed grid operators across Europe to link its
electricity markets and introduce harmonised trading rules, with
the goal of creating a pan-European market.
"Fragmented European energy markets will soon be history,
which is certainly good news for European customers," European
Union Energy Commissioner Guenther Oettinger said in a
The integration is mainly aimed at improving security of
supply and reducing price volatility by allowing electricity,
which cannot easily be stored, to flow freely to regions where
it is most needed.
"In time, Europe's power consumers will benefit from the
more efficient use of the power system in the region, resulting
from a more closely connected market," the involved exchanges
APX, Belpex, Nord Pool Spot and Epex Spot said in a joint
statement, although analysts said price reductions for customers
were a less likely outcome.
On Tuesday, the first joint auction for electricity
deliverable the next day took place across a region that
encompasses three quarters of European power demand.
"It (market coupling) will be the most important IT system
in Europe, because it will basically run all power plants. It
will decide who will produce and how much. If it breaks down,
power plants would not know what to produce," said Juka
Ruusunen, chief executive of Finland's power grid Fingrid.
The North-Western Europe (NWE) market coupling initiative
was originally made up of France, Germany/Austria and the
Benelux countries (Belgium, the Netherlands and Luxembourg), but
has been widened to Britain, the Nordic countries (Denmark,
Sweden, Norway and Finland), the Baltics (Lithuania, Latvia and
Estonia), as well as Poland.
A mismatch of regional oversupply and shortage has affected
Europe's electricity markets as the share of volatile renewable
power has soared.
The fast expansion of renewable capacity has clashed with
much slower adaptation by Europe's power grids, threatening
network stability as renewable power supplies rise and fall
quickly, depending on the time and changing weather conditions.
Despite EU efforts to bring national power markets together,
officials have said the initial deadline to complete integration
this year will not be met as many member states are slow to
fully adapt their systems, and some in the industry think the
entire project is still under threat.
The chief executive of Germany's biggest utility, E.ON
, said in Brussels last year the risk was that the
single energy market was on the brink of falling apart rather
than nearing completion.
In an effort to push the project forward, the Commission -
the EU's executive - has introduced legislation to speed up
development of physical links and reduce planning bottlenecks.
(Additional reporting by Barbara Lewis in Brussels, Nerijus
Adomaitis in Oslo and Vera Eckert in Frankfurt; Editing by Dale
Hudson and David Evans)