Fortum s policy messages. April 2015

Transcription

1 Fortum s policy messages April 2015

2 Content 3. Introduction 4. Fortum s mission, strategy and values 5. Our current geographical presence 6. Our view on the future energy system 7. Our core beliefs 8. Russian power market 9. Russian heat market 10. EU Energy Union outlines the EU energy policy programme 11. EU climate policy 12. European wholesale electricity market 13. European retail electricity market 14. EU heat policy and regulation 15. Renewable energy 16. Hydro power 17. Energy efficiency 18. Nuclear safety and liability 19. Sustainability of biomass 20. Energy taxes 21. Transparent and accountable lobbying 22. Corporate Relations Team 2

3 Introduction Energy issues related to both electricity and heat - are increasingly significant in our society: climate change, security of supply and competitiveness of electricity and heat are key topics in the everyday discussions both on EU and national level. As energy industry experts, we actively engage in a dialogue with authorities, decisionmakers and other stakeholders, disclose our views/positions on policy developments and provide constructive proposals forming the basis of policies, legislation and regulations. This presentation summarises our key messages on the topical energy and climate policy issues in a nutshell. We regularly publish position papers and commentaries on key energy policy issues. You can find them at > Corporation> Corporate Relations > Position papers 3

4 Fortum s mission, strategy and values 4

5 Our current geographical presence Power generation Heat Nordic countries Power generation* Heat sales* 49.2 TWh 10.9 TWh Key figures 2014 Sales EUR 4.8 bn Comparable operating profit EUR 1.4 bn Balance sheet EUR 21 bn Personnel 8,600 Electricity sales Distribution Electricity customers Distribution customers in Sweden 1.3 million 0.9 million Russia* OAO Fortum Power generation Heat sales 23.3 TWh 26.0 TWh * Including Fortum s associated company Fortum Värme; power generation 1.2 TWh and heat sales 7.6 TWh. * In addition, Fortum has a 29.5% share in TGC-1 Poland Power generation 0.7 TWh Heat sales 3.4 TWh Baltic countries Power generation Heat sales 0.7 TWh 1.2 TWh India Power generation 9 GWh 5

6 Low Efficiency High Efficiency Our view on the future energy system Oil Traditional energy production Exhaustible fuels that burden the environment Coal Gas CHP Advanced energy production Energy efficient and/or low-emission production CCS Solar Economy Solar based production with high overall system efficiency Geothermal Nuclear tomorrow Nuclear today Bio Hydro Ocean Sun Storage Demand Response Wind Active Consumer Smart applications Interconnectors High Emissions Emission free 6 Copyright Fortum Corporation All rights reserved by Fortum Corporation and shall be deemed the sole property of Fortum Corporation and nothing in this slide or otherwise shall be construed as granting or conferring any rights, in particular any intellectual property rights

7 Our core beliefs We focus on decarbonised electricity and heating systems on the way to a Solar Economy We favour market-based developments that best enable new cost-effective solutions and technologies to emerge on the energy markets We believe that a geographically integrated and commercially well-functioning energy market is a necessary precondition for meeting energy policy objectives most cost-effectively 7

8 Russian power market Liberalisation of the Russian wholesale electricity market has been completed, but retail prices are still regulated. Electricity price in Russia is largely based on natural gas price development. A functioning natural gas market is therefore a prerequisite for a functioning electricity market. Capacity market should be reformed, because the current model does not provide mechanisms of enabling decommissioning of inefficient generation assets and mechanisms of attracting investment. However, all the capacity market models which are under discussion do not imply cancellation or change in the key principles of the current capacity supply agreement (CSA) mechanism and do not change essentially the expected profitability and terms of projects investment return under CSA. 8

9 Russian heat market Reforming the Russian district heating system is a complex, but necessary step in improving the security of supply and the efficiency. Consumption-based billing through deploying building-specific regulation substations and automated metering should be promoted. In 2014, the Russian Government approved heat market reform and a roadmap for a new market model. Fortum welcomes and fully supports the Heat Roadmap. We highlight the importance of implementing the roadmap as scheduled. The reform should be completed by 2020 in major industrial cities and in cities with functioning combined heat and power (CHP) production. During the transition period, the full liberalisation of prices for the end customers within the heat price-cap defined on the basis of the heat-only boiler principle should be secured. 9

10 EU Energy Union outlines the EU energy policy programme The EU Energy Union initiative outlines the EU energy policy programme for near future, built around five dimensions The comprehensive approach welcomed and an important step forward in developing a common, better coordinated and more harmonised energy policy for Europe The five pillars are very much interlinked and a proper coordination between different policy areas is required The strong focus on the development of the internal energy policy and market highly appreciated Only internally united EU can speak with one voice externally Well functioning and properly integrated energy market is the best way to improve EU s internal security of supply New focus on enhanced regional cooperation positive Market development should be followed by policy harmonisation Stronger EU energy policy needs stronger regulatory framework: Enforced cooperation of national energy regulators (ACER) Enforced regional cooperation of transmission operators to improve network planning Decarbonisation through ambitious climate policy, energy efficiency and renewable energy is an essential part of the Energy Union initiative A large amount of legislative and policy measures for the next couple of years ( ) expected - the Commission should give first concrete proposals as soon as possible 10

11 EU climate policy Long-term stability and cost-effectiveness are key for the EU climate policy Greenhouse gas reduction as the main target of the EU climate policy. Targets for renewable energy and energy efficiency to primarily focus on non-ets sectors. A well-functioning emissions trading system (ETS) as the main tool in the implementation of the EU climate policy. The existing ETS to be revitalised in order to incentivise the decarbonisation of the economy Starting the Market Stability Reserve (MSR) as early as possible and transferring of the backloaded and unallocated allowances directly into the reserve. MSR to be followed by a revision of the ETS Directive. Later it has to be considered whether an extension of the scope of the ETS is feasible, including sectors like heating and cooling and transport. Revision of the ETS Directive The annual linear emission reduction factor of the ETS has to be adjusted to 2.2% to cope with the economy-wide target of at least 40% reduction in Predictable and harmonised EU-wide post-2020 carbon leakage provisions for the industry to be established. The cost of the EU's climate targets to the industry has to be compensated using EU-wide rules until other countries have comparable carbon constraints. 11

12 European wholesale electricity market Development of the internal energy market needs to be in the centre of the EU energy policy Larger markets enforce competition, more stable and competitive prices and a better service level for the benefit of customers. Investments in transmission infrastructure are key to improving the market efficiency and security of supply The development of regional energy markets as a stepping stone towards a common European energy market Regulatory framework should be enforced accordingly The current energy only market model should be enhanced to cope in the new energy system that is increasingly based on intermittent renewable electricity with very low marginal costs. Energy only market model is the preferred model for Europe also in the future Clear EU framework needed for situations where a member states have a need to implement capacity mechanisms, including rules for cross-border participation Renewable energy needs to be properly integrated in the energy market 12

13 European retail electricity market Integration of the wholesale market should be followed by retail market development, both at the national level and across Europe. Customers must be able to influence their energy consumption and cost. Signals from the wholesale market should therefore be passed on to retail prices. Smart grids enable customers to become active players in the energy market. This development should be encouraged by developing a competitive market for new energy service innovations. Smart meters and hourly pricing promote market-based energy-efficiency products and services as well as distributed generation. Energy poverty is an important topic to be addressed as part of social policy, not as an energy policy issue. Demand response tools, energy storage and various service innovations are needed in the future energy system based on an increasing share of intermittent renewable electricity. A new energy system requires also clarification of the roles of various market participants. Distribution system operators should be considered as neutral market facilitators. 13

14 EU heat policy and regulation Heating in Europe Towards competitive heat markets Competitive district heat for customers Roughly 50 % of the primary energy consumed in the EU is used for heating. Renewable and efficient district heating is a vital contributor to Europe s climate and resource-efficiency targets. Combined heat and power (CHP) is the most energy-efficient way of producing both heat and electricity and a way to utilize local solid fuels and improve security of energy supply. Customers should have the freedom of choice between different alternatives in the heat market and an incentive to influence their heat consumption and cost. Effective and equal competition between space heating alternatives is the most functional platform to develop the heating of buildings for the customers, suppliers and society. Competing heat production sources, e.g. surplus heat from industry, should enter the heat market on commercial merits, based on voluntary agreements and transparent access. District heat pricing should be value-added competitive and transparent towards alternatives and similar customers must be treated equally. Price levels have to reflect real DH system costs and competitiveness against alternatives. Mandatory district heat price regulation should primarily enhance competitiveness of district heat, incentivize DH system efficiency and sustainability, and promote investments. 14

15 Renewable energy Renewable energy is an important tool to combat climate change, to provide jobs and growth, and to contribute to security of supply. Renewable energy has to be integrated into the electricity market with the same rights and responsibilities in terms of grid connection, balancing, etc. The EU should move towards harmonised support schemes and market-based trading of renewable energy. Financial support for mature, economically feasible renewable energy should be phased out. Instead, it should be focused on research, development and deployment. The penetration of intermittent renewables into the European electricity system highlights the importance of hydro power in balancing the subsequent peaks. Hydro power also contributes to emission reduction and better energy security. 15

16 Hydro power Hydro power is CO 2 -free source of energy and important in meeting the EU 2030 climate and energy policy targets. Due to its excellent balancing power features hydro power enables further increase of intermittent renewable energy production (wind and solar). Hydro power contributes to better energy security. Environmental legislation concerning hydro power tends to focus on local biodiversity. A broader perspective is necessary: global warming as a significant threat to biological diversity and the potential of hydro power in the mitigation of climate change. Ameliorating the living conditions of migratory fish is important and one should strive for supporting the natural reproduction of migratory fish. However, all the measures have to be designed on a case-by-case basis. Regarding ecological compensation as well as restoring and creating new habitats, trap and transport of migrating species is a proven solution. 16

17 Energy efficiency Completion of a market-driven energy market is the most cost-efficient way to promote energy efficiency in the EU. Customers should be able to influence their energy consumption based on prices reflecting the real cost, so regulated prices need to be removed. The main focus in the development of the EU Energy Efficiency policy should be on streamlining and implementing the existing legislation and regulation, including standardisation. The effective use of labelling is a good tool to increase awareness towards energy efficiency and consumption among consumers. In some sectors, like building and transportation, more demand-side management may be necessary to correct market failures. Electrification of the transport sector is an efficient way to gain efficiency. Voluntary agreements are appropriate tools for promoting energy efficiency in companies. Space heating offers great potential to improve energy efficiency by introducing market principles into the heating sector. Society s excess heat can efficiently be used by opening up the district heating networks with new business models. 17

18 Nuclear safety and liability Fortum supports maintaining a high level of nuclear safety in the EU and considers strengthening of the nuclear liability regime important. From the common European electricity market point of view, responsibilities and liabilities should be clear, equal and understandable for all. The incoherence of the EU nuclear liability arrangements could in the short term be reduced by fully utilising the existing international nuclear liability framework largely based on the Paris and Vienna Conventions. Euratom s eventual accedence to the relevant international nuclear liability conventions would be welcomed. In the longer term, feasibility of a European nuclear insurance pool could be assessed based on the US nuclear liability system. Such an investigation should be carried out in close collaboration between the Commission, Member States and nuclear operators. 18

19 Sustainability of biomass Bioenergy has a significant greenhouse gas (GHG) reduction potential up to 80-90% compared to the fossil energy. It is the only renewable source that can replace fossil fuels in all energy markets in the production of heat, electricity, and fuels for transport. Use of all types of bioenergy solid, liquid and gaseous should be ecologically, socially and economically sustainable. Sustainability criteria should be legally binding and apply to all types of biomass and to the origin of all bioenergy, regardless of whether being used in industry, energy production or transportation. The target should be global sustainability criteria, but at least common EU requirements. Mutual recognition is needed to facilitate the market of biomass-based products. Sustainable forest management and generally recognised agricultural practices establish the basis for the sustainable production of biomass. A key issue is to retain carbon neutrality of biomass as set out in the ETS Directive. 19

20 Energy taxes Energy taxation, like all taxation, should be predictable and consistent with general energy and climate policy targets. Contradictory taxes like windfall and other special taxes on emissions free generation should be avoided. Energy taxation should not overlap with other policy measures either. CO 2 taxes on activities covered by the EU Emission Trading Scheme (EU ETS) should be abolished. Electricity should be taxed when and where delivered for consumption. Taxation of fuels or electricity generation is double taxation distorting competition in the internal EU electricity market and should be avoided. Taxes should treat different energy generation methods equally regardless their age. Equal treatment is particularly important in sectors like heating and transportation, where a part of the sector is included in the EU ETS while another part is excluded. 20

21 Transparent and accountable lobbying Fortum s Code of Conduct establishes the foundation for our business activities, including lobbying, in all our operating countries. Fortum is registered in the EU Transparency Register (ID ) that provides information on what interests are being pursued, by whom and with what budgets. We follow the Code of Conduct of the Transparency Register in all our lobbying activities. We publish transparently our position papers and commentaries on our web pages. Fortum does not use third parties for lobbying purposes. Fortum as a company does not support, directly or indirectly, any political parties or other political organisations. Nor does it participate in the financing of the election campaign of any single candidate. 21

22 Corporate Relations Team For additional information, please contact us or visit > Corporation> Corporate Relations Pia Lilja, Assistant, Corporate Relations Tel firstname.lastname(at)fortum.com

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