Market development in recent years has pushed Europe’s electricity sector into turmoil. Since 2010, the players in the sector have lost an average of about one fifth of their market value, and the companies focusing solely on power generation have lost even more.
Driving the change has been the weakened industrial demand for electricity caused by the economic downturn, the strong increase in subsidised renewable energy that has replaced market-driven production, and the increased uncertainty and inconsistency in energy policy regulation both at the national and EU level. The market price of electricity has decreased, and energy companies are struggling to manage the debt burdens stemming from capital-intensive investments. And the influx of shale gas into the market has weakened the competitive position of European industry, particularly compared to that of the United States.
The turmoil continued in the energy sector in 2013, and the state of the European economy did not ease the situation for companies in the sector. Economic growth estimates were further lowered, which in turn has reflected on electricity demand estimates in Europe and in Russia. The growth
outlook in the sector is generally flat and, for example, Fortum’s estimate on annual growth of electricity consumption in the Nordic countries has hovered around the 0.5% level for a long time.
The turmoil continued in the energy sector in 2013, and the state of the European economy didn’t ease the situation for companies in the sector.
At the same time, the increase of electricity production from subsidised renewable energy sources was strong in Europe in 2013, in line with policy targets set for renewable energy. Overall, energy market development moved towards national and more regulated solutions rather than European and market-driven solutions. Against this background, it was not
a surprise that the structural reform of the emissions trading scheme and renewable energy support schemes were actively debated. The Commission gave its proposal on reforming the emissions trading scheme in January 2014, but the related decisions will be deferred to the term of the new Commission and Parliament. At the same time, the Commission is in a process to revise the State aid guidelines for energy and the environment advocating more market-oriented and harmonised subsidies for renewable energy sources in order to improve their efficiency and save cost.