EnergyEnergy

Dr. Oliver KochDeputy Head of Unit

DG Energy Unit B.2 – Internal Market IIWholesale markets; electricity & gas

28. April 2014

This presentation replects solely the personal views of the author and does not bind the EU Commission

Market4RES Workshop

Post 2020 framework

-

Can markets and RES coexist?

EnergyEnergy

IEM is at a tipping point

EnergyEnergyScheerer (2012)

Markets are integrated: EU-Power Grid

EnergyEnergy

Markets are integrated:Market Coupling

• Optimised capacity calculation

• EU-wide aggregation of bids and offers

EnergyEnergy

Renewables need aggregation

EnergyEnergy

System costs

Wholesale price

RES Support

Market (EU)

Government (national)

Government (monopolies) (national)

Shrinking role for energy markets

EnergyEnergy

Systemcosts

Wholesale price

RES Support

Market (EU)

Government(national)

Government / monopolies (national)

Shrinking role for energy markets

Systemcosts

Wholesale price

RES Support

Market (EU)

EnergyEnergy

Issue: Coordination of RES and CO2 policies

=> “2030“ Process

• COM consultation – report to EU Council• Decision 2014/2015 ?

EnergyEnergy

Future EU Market Design

•More cross-border•More market-based•Competition between

technologies

"State Interventions" Package: Key messages

EnergyEnergy

Market integration: support schemes

Feed-in tariff PremiumQuota

Phase in market exposure:

Competitive allocation mechanismsMechanism to reflect degree of maturity of technologyCompetition among RES – technology developmentMinimise impact on production decision

Phase in market exposure:

Competitive allocation mechanismsMechanism to reflect degree of maturity of technologyCompetition among RES – technology developmentMinimise impact on production decision

EnergyEnergy

Market Integration: RES and power market rules

Phase in equal treatment:

Balancing obligations

Bearing of grid costs

Dispatching rules

Different degrees of harmonisation for all users

Phase in equal treatment:

Balancing obligations

Bearing of grid costs

Dispatching rules

Different degrees of harmonisation for all users

EnergyEnergy

EnergyEnergy

Security of supply

EnergyEnergy

Source ENTSO-E

Uncoordinated national interventions are a threat to the Internal Energy Market

Cooperation in parallel supply crisis?

?

EnergyEnergy

Wholesale Market DesignIssues

Issue: Will merit curve survive?

EnergyEnergy

Future EU Market Design

- Issues

Future EU Market Design

EnergyEnergy

Future EU Market Design

"Market Design" discussion

Wholesale Target Model

Technical balancing,ancillary service

Generation Adequacy

+Flexibility?

ETS CO2 price

State interventions

RES etc.

State- "designed"

trading?

Link to Gas, Transport,

Heating

EU ? Regional ? National?

Self regulation/legislation

Demand Side

participation

EnergyEnergy

2014 Target Model: Outdated?

Future EU Market Design

2014 Target Model: MODERN!

EnergyEnergy

Need for new Market Design?

1. Preserve market path – give ongoing harmonisation a chance !

EnergyEnergy

Need for new Market Design?

2. Scope for finetuning?

- Flexibility – demand response - hedging- Will flexibility markets evolve?- Will DRS kick off?- Need to finetune target model (options markets, etc.)

- Adequacy: guidance needed?- Adequacy assessment- C/B-openness - Protection levels / solidarity

EnergyEnergy

Need for new Market Design?

2. Scope for finetuning?

- System operation – IEM with fragmented TSOs?- Fragmented system operation – capacity calculation- CASC/CAO – CORESO - SSC - TSC = enough?- EU ISO needed?

- Governance: - Role of ENTSO-E – EU or national perspective?- Role of ACER : EU or national perspective? - 3rd package "bottom up" approach – suffient?

EnergyEnergy

Making the Internal Energy Market Work

The Heads of State of Government recognized the importance of having an internal energy market in place and set a clear deadline for its completion by 2014

Report "Making the Internal Energy Market work" published by the European Commission assessing the state of the internal energy market

European Commission will report on the progress reached in completing the internal energy market

2011

2012

June 2014

EnergyEnergy

Thank you very much for your attention

Dr. Oliver KochDeputy Head of Unit

European CommissionDG Energy

Unit B-2 (Internal Market II: Wholesale; gas & electricity)DM 24 – 6/117

Brussels/Belgiumoliver.koch@ec.europa.eu

++32 229 87302

EnergyEnergy

TFEUArt 28?

Procurement?…

3rd Package"PSO?

Art 3 E-Reg…

COMP LawGBEREEAG

Art 102/106?

Advocacy(e.g. communication on state interventions)

Commission Toolbox:

Long-term: new legislation?"2030" discussion – revised targets ?

EnergyEnergy

Outlook…but: decisions need to be taken at one stage!

Next years = decisive

- Will “consensus approach” work?

- More COM intervention / harmonisation needed?

EnergyEnergy

• Central adequacy decision/estimation? (most got it wrong, even in more stable times…)

• Decentral or fully market-based decision on

what is needed possible?(e.g. BDEW approach?)

Wholesale Market DesignIssues

Perceived security of supply concerns

Issue: who decides about the “gap”?

EnergyEnergy

• Technical dimension • Political dimension

Wholesale Market DesignIssues

(Key) issue in EU: How to avoid fragmented solutions?

How to organise cross-border co-operation on security of supply?

EnergyEnergy

Technical dimension

•C/B adequacy planning - in practice?

•C/B capacity/capability/flexibility ‘markets’

• Common definitions (products)

• Common procedures (tender, auction, cap ticket,…)

• Physical long-term reservations/PTRs needed?

Wholesale Market DesignIssues

How to organise cross-border co-operation in security of supply matters ?

EnergyEnergy

Political dimension

•Parallel supply crisis: what happens?

•Upfront agreement on load shedding rules?

=> Can Member States rely on neighbours?

Wholesale Market DesignIssues

How to organise cross-border co-operation in security of supply matters ?

EnergyEnergy

• Fair balancing responsibility for RES ? How?

• Additional "backup" responsibility needed?

Wholesale Market DesignIssues

Issue: Allocation of "flexibility risk"

EnergyEnergy

•Is model neutral to supply and demand solutions?

•Does it maximise potential flexibility, storage, DSR, energy efficiency ?

•Fair balance between DSOs/TSOs

Wholesale Market DesignIssues

Issue: Fair demand side participation