"The current structure of the pan-European power market is a mess. The ineffective use of the limited cross-border power connections leads to national prices well above marginal cost. This is likely to kill European industries," stated Petter Longva, head of Origination in Hydro Oil & Energy Markets, at the first European Energy Day in Cologne on Wednesday.
According to Longva, an implicit cross-border auction system is needed, organized by the exchanges on a day-to-day basis, with capacity contracts traded financially as well so that capacity is traded along with power.
"This will make prices come down to a realistic level. And they need to – if not for the sake of a more efficient energy business, then for keeping European industry, foremost the energy-intensive one, alive," said Longva.
The Hydro proposal also reflected the EU Commission's intention to remove all trade barriers inside the EU.
"We have to internationalize the power flow to make really efficient use of the main resource for all European business," added Longva.
The first European Energy Day on 28 and 29 April attracted 150 representatives from key players in the energy business. Major issues discussed included regulation and portfolio management, transparency and blackouts, climate aspects and price formation.