When electricity market design meets innovation from ENTSO-E
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When electricity market design meets innovation from ENTSO-E
- 1. MARKETS AND INNOVATION DELIVER THE ENERGY UNION Ben Voorhorst Vice-Chair of the Board 20 November 2015 ENTSO-E Annual Conference Brussels
- 2. Moving towards a flexible power system Page 2
- 3. Source: EEX Balancing responsibility and scarcity pricing required Page 3 Imbalance prices need to better reflect scarcity Scarcity-pricing for system scarcities • Unconstrained price- formation • (Capacity, flexibility, system services) • Risk-hedging tools • Balancing responsibility • Retail participation
- 4. Efficient price signals for a future-proof market design Page 4 Value energy, flexibility and system services Integrate renewables into the market Let risk-hedging products develop Create a regional and European framework for RES support mechanisms
- 5. Empowering consumers Page 5 Consumers choose their level of flexibility Smart metering and phasing out load profiles Consumers need to be present in all markets Remove barriers for distributed flexibility Europe wide
- 6. Our recommendations for 2016 Page 6 Prices reflecting scarcity as part of the Electricity Directive Reduce price-blunting effects of taxes and levies Let customers choose among contract types, by valuing flexibility Remove barriers on distributed flexibility Europe wide Markets and customer empowerment contribute to security of supply
- 7. Ben Voorhorst Vice Chair of the Board Thank you for your attention
Editor's Notes
- By 2030, we expect more than 45% RES; The more RES we have in the system, the more the system has to be sophisticated, flexible, and responsive as illustrated in this chart This requires generation and demand flexibility it is fundamental that the market design – and price signals in particular - enhance system flexibility via new investments and market actors’ behaviours
- Already today we experience situations with economic incentives against the needs of the system. This graph illustrates first a fairly high imbalance price which incentivizes BRPs to get balanced. But then (red circle) the imbalance price is much lower than the ID price. This incentivizes BRPs not to balance. We therefore need to strengthen scarcity pricing and balancing responsibility. We need to integrate RES into the market, face-out priority dispatch/ FITs and make RES balancing responsible. Hedging products (e.g. intraday cap futures) can monetize flexibility and translate it into a more predictable and "bankable" revenue stream compared to the underlying commodity; this will further stimulate investments.
- Our proposals for adjustments to the market design center around the idea of strengthening price signals, so that prices reflect system scarcities. For this purpose the market needs to reflect the value of energy/capacity, flexibility and system services. RES need to be integrated into the market (as described earlier and risk-hedging products need to develop to protect smaller market players who cannot provide these services at any moment in time. Should RES support schemes be still necessary in the future, they need to be market based and regionally coordinated to allow cross-border participation.
- To keep the system in balance, demand needs to become more responsive. With ICT innovation (smart grids; smart homes) consumers can choose their level of flexibility: either continuously manage their consumption or set parameters once in a while and leave the continuous management to a service provider Even if consumers have smart meters, most household consumption is still settled based on static consumption profiles; consumers cannot shift their consumption to off-peak hours and are thus not reactive to system needs and market signals Demand response needs to access all markets( Forward, DA, ID, balancimg and system services). Barrieres related to the relationship between independent aggregators and suppliers need removal. Europe wide rules on distributed flexibility (no matter whether in the form of a regulation, guideline or network code) will allow maximising benefits of Demand Side Response, storage, distributed generation and smart grids to the benefit of the customer. There would be significant benefits and advantages for a single representation of DSOs in Brussels
- The proposed market design adjustments and consumer empowerment will in a number of cases challenge the need for capacity markets