Azernews.Az

By Bloomberg

Germany and 11 neighboring states in Europe aim to back a move to improve power security across the continent without recourse to market intervention, according to the Economy Ministry in Berlin.

Germany and partners including France, Austria and Norway will sign a political declaration on June 8 aiming to promote cross-border power trade free of price barriers linked to capacity markets, Deputy Economy Minister Rainer Baake said Thursday.

The political declaration rests on market mechanisms to boost European security rather than capacity markets, which embed price floors and ceilings to pay for back-up electricity, Baake said. The declaration will state that there will be “no intervention in cross-border power trading in times of scarcity,” he said.

The declaration signals the resolve to uphold the free market as the best means to rectify power scarcity. National capacity markets work against optimizing wider European security, and hamper moves to create a single market for power, according to Baake.

Germany’s power market revamp targets “electricity-only” mechanisms, meaning consumers and industry will pay market rates for power and not extra premiums for supplies guaranteed in a capacity market, said Baake.

The declaration may become a “blueprint” for setting up a fully functional interior market for power in the future, he said.

The 12 states signing the declaration on Monday are Germany, France, Sweden, Austria, Poland, Norway, Belgium, the Czech Republic, Denmark, Luxembourg, the Netherlands and Switzerland.