European utilities CEOs urge end to renewables subsidies

The CEOs of 10 utilities companies, which together own half of Europe's electricity generating capacity, are calling for an end to subsidies for wind and solar energy, which they say add too much power to a market already struggling with overcapacity.

The CEOs in the so-called Magritte Group also call for a Europe-wide capacity mechanism that would pay utilities for keeping electric power generating capacity on standby and want the EU to boost its carbon emissions scheme, whose low prices have failed to boost low-carbon fuels like natural gas and nuclear energy.

First gathered this spring in the Brussels museum of Belgian surrealist artist Rene Magritte, the informal group has lobbied the European Commission and national governments to change EU energy policy, which they say has failed to achieve its triple goal of lowering prices, reducing carbon emissions and securing energy supply.

The group - which includes top utilities such as France's GDF Suez, Germany's E.ON, Spain's Iberdrola and Italy's Enel - has made an impact, as several countries, including Spain, Germany and France, have reviewed or are reviewing support schemes for renewable energy.

With an unprecedented joint press conference of 10 CEOs in Brussels on Friday, the Magritte group hopes to put pressure on EU policy makers ahead of an energy summit early next year, and wants to press its case for considering wind and solar as a mature industry that no longer requires subsidies.

"European energy policy has run into the wall," GDF Suez CEO Gerard Mestrallet said.

With power demand falling due to the economic crisis and the EU's energy efficiency drive, wholesale power prices have dropped by about half since 2008, but retail prices for consumers have remained near record levels.

The group said that in the past four years energy bills for domestic consumers have risen 17 percent, while bills for industrial users have gone up 21 percent.

Utilities say that in a European power market already struggling with overcapacity, overly generous subsidies for renewables led to a wave of investment in solar and wind, which enjoys priority grid access at fixed, above-market prices and which is making existing thermal capacity uneconomical to run.

"In sectors like steel, cars and refining, when there was overcapacity, capacity was closed. But in the energy sector, we have massively subsidised additional capacity in solar and wind, which has led us to the absurd situation in which we find ourselves today," Mestrallet said.

RISK OF BLACKOUTS

Critics say the traditional utilities industry has ignored solar and wind for too long, with the result that these new power sources are mainly owned by non-utility players: solar panels by private citizens and wind turbines by smaller energy companies, municipalities and citizens' cooperatives.

The power generation overcapacity has been aggravated by the U.S. shale gas boom, which has led to a flood of cheap U.S. coal to Europe as U.S. utilities switched to gas-fired plants.

That has forced European utilities to close 51 gigawatt of modern gas-fired power plants - the equivalent of the combined capacity of Belgium, the Czech Republic and Portugal.

The closing of these flexible gas plants is jeopardising Europe's energy security, Mestrallet said, as these plants are essential back-up for intermittent wind and solar.

Mestrallet said that while Europe can deal with long and cold winters like in 2012-13, a two-week stretch of very cold weather with temperatures below minus 10 Celsius could lead to blackouts because of lack of standby capacity.

The group - which also includes Germany's RWE, Italy's Eni, Spain's Gas Natural, Sweden's Vattenfall, Czech CEZ and Dutch GasTerra - calls on the EU to set up capacity remuneration systems that would pay utilities for standby capacity.

Efforts towards an EU-wide capacity mechanism have had little success so far but there has been a variety of national efforts to build standby systems.