International conference on investing in european electricity markets today: challenges and opportunities
Date
24 novembre 2014Lieu
University Paris Dauphine-PSLDescription
The conference was held in English.
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Summary
High demand and price volatility, average prices below costs and high regulatory risk – since the inception of liberalised electricity markets in Europe, investing in power generation has never been so challenging. While many renewable technologies have constituted attractive investment options due to stable fee-in tariffs, recent experiences with ex post tariff adjustments or large off-shore wind projects show that market price may not be the only risk factor holding back investors. At the same time, since 2009 low carbon prices are not providing investors with the incentives to invest in low-carbon technologies.
These developments are taking place in the context of changing legal and institutional frameworks. While the declared objective of the European Commission is still the completion of the internal energy market by the end of 2014 or early 2015, there are signs that the current framework might be adapted significantly. The Communication on state aid for energy of July 2014 foreshadows a move away from feed-in-tariffs in the area of renewables. In parallel, individual countries aim at introducing measures to support investment in dispatchable capacity such contracts-for-difference for nuclear or capacity mechanisms aimed at gas power stations and demand response. In classic manner these important developments signal new risks as well as new opportunities to investors.
This half-day conference which is organized jointly by the Chaire European Electricity Markets (CEEM) of Université Paris-Dauphine and the HEC Energy & Finance Chair sponsored by Deloitte and Société Générale brings together academics, energy industry experts and investors to gain better insight of the magnitude of current investment challenges as well as to assess the nature of current and emerging opportunities. The two sessions of the conference, on financing production, emerging opportunities and regulatory risk also aim at achieving a better understanding of the needs and constraints of different investment communities in terms of timeframes, aversion towards different types of risk and hedging opportunities. Portfolio investors, project developers or bank lenders have different skills, opportunities and priorities.
The conference aims at confronting their views with those of academics and electricity producers. Two cross-cutting questions will introduce the proceedings:
1. Are current pressures on returns forcing a change in the capital structure of electricity producers, a process which may include an adaptation of the business model of the vertically integrated utility that has dominated European electricity markets in past decades?
2. Are current low levels of investment a result of exogenous, structural forces (e.g. increasing efficiency, low economic growth) or of the institutional particularities of the current European market design? Which regulatory changes may improve the investment climate?