Europe creates single power market covering 70 pct of consumers

By Nerijus Adomaitis

OSLO, May 13 (Reuters) - Southern (Berlin: SOT.BE - news) and north-western European power grids and exchanges linked markets on Tuesday covering about 70 percent of Europe's consumers, bringing it closer to integrated electricity pricing and reducing risks to supply.

The physical and financial integration of the two regions creates a common day-ahead power market stretching from Portugal to Finland. The connection is likely to benefit consumers by enabling power to flow from cheaper to more expensive areas most of the time.

"In a landmark move towards an integrated European power market, the full coupling of the south-western Europe (SWE) day-ahead markets was successfully launched today," grid operators and power exchanges said in a combined statement.

In a unified market, a rise in solar or wind power in one area may help balance a drop in hydropower from another, or a country may fire up its stand-by gas plants to help cover for a nuclear plant shutdown across the border.

"This will bring a benefit for end-consumers derived from a more efficient use of the power system and cross-border infrastructures as a consequence of a stronger coordination between energy markets," the grid operators said.

On Tuesday for the first time, a connection was enabled across the French-Spanish border, with day-ahead transmission capacity allocated by calculating power flows and prices at the same time.

North-western European power markets including Germany, Austria, France, Britain, Belgium, the Netherlands, as well as Nordic (SES: MR7.SI - news) and Baltic states were already integrated on Feb. 4.

Since then, the daily cleared power volume for next-day delivery in the north-western region has amounted to 3.2 terawatt-hours (TWh (Shenzhen: 002512.SZ - news) ), with an average value of 200 million euros ($275.1 million).

The two combined regions - southwestern and northwestern Europe - account for about 2,400 TWh of annual consumption or about 70 percent of the European total, excluding Turkey.

In the next step, power markets in the Czech Republic, Slovakia, Hungary and Romania are expected to link up in the same way and then connect to the rest of Europe.

Poland is already partly integrated with north-western Europe via a subsea cable to Sweden, while Italy's integration depends on Switzerland's talks with the European Union on linking power systems. ($1 = 0.7270 Euros) (editing by Jane Baird)