June 1, 2015 / 11:18 AM / in 5 years

E.ON calls for 'timely' intervention to fix power market

BERLIN, June 1 (Reuters) - Germany must act swiftly to fix its fundamentally broken energy market and avoid the risk of a power capacity shortage, the chief of top utility E.ON said on Monday.

Utility companies and politicians have clashed over whether compensation payments are needed by power producers, who have been hit hard by a crisis in the sector as coal and gas-fired power plants continue to be displaced by renewable sources.

Utilities have called on the government to follow Britain and create a capacity market - which compensates utilities for keeping loss-making power plants online as backup.

Utility companies say this would enable them to ensure supply and avert blackouts when there is a lull in variable wind or solar energy. The German government is opposed to funding otherwise unprofitable plants.

“The question is should we heal the problem while it’s still cheap, like the British did, or do you run it down the drain and when it’s almost broken then you interfere,” Johannes Teyssen said at the annual Eurelectric conference.

He said the problems in the market risked discouraging investment in the sector.

Britain has become the first country in Europe to set up a backup capacity market and governments pushing for renewable energy production are looking to London to prove it can work for generators as well as consumers.

“I think a timely intervention usually is the cheaper one, more reliable, more consistent for investors than ... waiting until it’s almost dead and then interfering at the last minute,” Teyssen said, pointing to the looming phase-out of all of Germany’s nuclear plants in 2022.

The crisis has forced German utilities to write down nearly 12 billion euros ($13.10 billion) over the past year to reflect the drop in value of their conventional plants, many of them only running at a fraction of the time needed to make money. ($1 = 0.9163 euros)

Reporting by Christoph Steitz and Geert de Clercq; Editing by Susan Fenton

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