Fortum’s policy messages
in a nutshell
November 2014
1
Introduction
• Energy issues are increasingly significant in our society: climate change, security of supply
and the price of electricity are key topics in the mainstream dialogue.
• We engage in an active dialogue with authorities, decision-makers and other stakeholders
about key issues in the energy sector.
• As energy industry experts, we actively disclose our views on policy developments and
provide constructive proposals forming the basis of policies, legislation and regulations.
• This presentation describes 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: http://www.fortum.com/en/corporation/corporate-relations/positionpapers/pages/default.aspx
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Content
4
Fortum’s Mission and Strategy
5
Our geographical presence
6
Energy is an enabler
7
Our core beliefs
8
European wholesale electricity market
9
Retail electricity market
10
Heat policy and regulation
11
EU climate policy
12
Renewable energy
13
Energy efficiency
14
Nuclear safety and liability
15
Sustainability of biomass
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Corporate Relations Team
3
Fortum’s Mission and Strategy
Mission
Fortum’s purpose is to create energy that improves life for present and future
generations. We provide sustainable solutions for society and deliver excellent
value to our shareholders.
Strategy
Build on the strong
Nordic core
Create solid earnings
growth in Russia
Build a platform for
future growth
Strong competence in CO2-free hydro and nuclear, efficient CHP production
and energy markets
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Our geographical presence
Power
generation
Heat
Distribution
Electricity
sales
Nordic countries
Key figures 2013*
Power generation*
46.5 TWh
Heat sales*
13.9 TWh
Distribution customers
in Sweden
0.9 million
Sales
EUR 6.1 bn
Operating profit EUR 1.7 bn
Balance sheet EUR 23 bn
Personnel
9,900
Electricity customers
1.2 million
OAO Fortum
Power generation 20.0 TWh
Heat sales
24.2 TWh
Great Britain (Sold in Oct ‘14)
In addition, ~25% share in TGC-1
Power generation 1.0 TWh
Heat sales
1.8 TWh
Poland
Baltic countries
India
Power generation 0.6 TWh
Heat sales
4.0 TWh
Power generation
Heat sales
Power generation
* incl. Fortum Värme; power generation 1.3 TWh and heat sales 8.2 TWh.
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Russia
0.5 TWh
1.1 TWh
~9 GWh
Solar Economy
Energy is an enabler
High Efficiency
Solar based production with
high overall system efficiency
Hydro
Sun
Wind
Geothermal
CHP
Advanced
energy production
Ocean
Bio
Interconnectors
Energy efficient and/or
low-emission production
Nuclear
tomorrow
Traditional
energy production
Low Efficiency
Storage
Exhaustible fuels that
burden the environment
Oil
Coal
Gas
Smart
applications
CCS
High Emissions
Copyright © Fortum Corporation
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Demand
Response
Active
Consumer
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
Nuclear
today
Emission free
Our core beliefs
We focus on decarbonised energy systems
on the way to a Solar Economy
We favour market-driven solutions
We believe that a geographically integrated and commercially
functioning energy market is a necessary precondition for
meeting energy policy objectives most cost-efficiently
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European wholesale electricity market
•
A well-functioning and properly interconnected internal energy market is key for the
EU’s competitiveness, internal security of supply and environmental sustainability.
•
A commercially functioning electricity market based on harmonised and technologyneutral rules needs to be completed as soon as possible.
•
The EU needs to be internally unified to be able to speak with one voice with external
partners. Market integration should therefore be followed by policy harmonisation.
•
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.
•
An energy-only market is the preferred and most efficient electricity market model.
However, it might not survive in the new energy system that is increasingly based
on intermittent renewable electricity with very low marginal costs.
•
Capacity mechanisms (CRMs) are likely to emerge in Central European countries,
having an direct and indirect impact on electricity flows, prices, and generation and
transmission investments.
•
CRMs should meet common EU criteria, including cross-border participation. CRMs
should also be regional (rather than national) and only with one set of rules in the
same regional market.
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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.
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Heat policy and regulation
• About 45% of the energy consumed in the EU is used for space heating.
European
heating
markets
Towards
liberalised heat
markets
• 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 utilise local solid fuels and improve security of energy supply.
• Effective competition is the most functional platform for developing the heating of buildings, for
customers, suppliers and society.
• Customers should have the freedom of choice between different alternatives in the heat market
and an incentive to influence their heat consumption and cost.
• Competing heat production sources, e.g. waste heat, should enter the heat market on
commercial merits, based on voluntary agreements and transparent access.
Competitive
district heat
pricing for
customers
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• District heat pricing should be value-added – competitive and transparent towards alternatives –
and similar customers must be treated equally. Price adjustments have to reflect real costs.
• Public district heat price regulation should primarily enhance competitiveness of district heat,
system efficiency and sustainability, and promote related investments.
EU climate policy
• Long-term stability and cost-effectiveness are key for the EU climate policy.
• Greenhouse gas reduction and a well-functioning emissions trading system
(ETS) have a central role in the implementation of the EU climate policy.
Targets for renewable energy and energy efficiency should primarily focus
on non-ETS sectors.
• As the first step of ETS structural reforms, the Market Stability Reserve
(MSR) should be introduced by 2017 at the latest.
• The annual linear emission reduction factor of the ETS has to be adjusted
to cope with the economy-wide target of at least 40% reduction in 2030.
• Predictable and harmonised EU-wide carbon leakage provisions for the
industry are needed and the cost of the EU's climate targets to the industry
must be compensated until other countries commit to comparable targets.
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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 marketbased 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.
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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.
•
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 be efficiently put to use by opening up district
heating networks to new business models.
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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.
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Sustainability of biomass
• Use of all types of bioenergy – solid, liquid and gaseous – should be
ecologically, socially and economically sustainable.
• Sustainability criteria should apply to the origin of all bioenergy, regardless
of whether being used in industry, energy production or transportation.
• In addition to biofuels and bioliquids, sustainability criteria are needed
also for solid biomass.
• Sustainability criteria should be legally binding.
• 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.
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Corporate Relations Team
For additional information, please contact us or visit:
www.fortum/com/company/public relations
email: firstname.lastname(at)fortum.com
Pia Lilja, Assistant, Corporate Relations
Tel. +358 10 45 24343
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