Vattenfall urges EU to make green power investments attractive

FRANKFURT (Reuters) - Swedish utility Vattenfall on Monday called on European Union lawmakers to make investments in low carbon electricity production and transport attractive, warning that putting limits on prices and profits could be toxic.

The European Commission is preparing reforms to EU power market rules aimed at cushioning consumers' bills from fossil fuel price spikes like those triggered last year by cuts to Russian gas supply and is expected to make a proposal on March 14.

"Government-set caps on energy prices or utility revenues impair free pricing models and create uncertainty," said Frank van Doorn, head of Vattenfall's wholesale trading arm, ahead of a press conference in Germany, where the company has a big presence.

"That is poison for investments in fossil-free technologies."

Mainly northern European countries and companies have said the system's revamp should be minor, while Spain and France want deeper reform.

The different stances are influenced by the political situation in countries where pressure from low-income households can be high and by countries' individual power generation set-up.

The northern part of the EU bloc needs round-the-clock heating in its cold winters, while the south can already tap into high solar power capacities and France holds on to a unique nuclear-energy focus.

Vattenfall said price signals must remain intact and flexibilities on the demand side were big levers as they could respond better to the increasing intermittency of the market once shares of green power rise.

Power producers should have a choice whether to sell their output through Power Purchase Agreements (PPAs) or participate in state auctions for Contracts for Difference (CfDs), van Doorn said.

CfDs are long-term, fixed-price power contracts that aim to guarantee a revenue stream for renewable energy projects and offer consumers more predictable prices.

(Reporting by Vera Eckert, editing by Miranda Murray and Bernadette Baum)