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Completing the Internal Energy Market

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Oliver Koch presents at the Vienna Forum on European Energy Law, 2013

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Completing the Internal Energy Market

  1. 1. Energy Dr. Oliver Koch Deputy Head of Unit DG Energy Internal Market – Wholesale, electricity & gas Completing the Internal Energy Market Vienna Forum 8.3.2013
  2. 2. Energy Outline - Energy Policy and IEM - Two trends: - Europeanisation - Intermittent Energy - Spotlight: capacity markets
  3. 3. Energy EU-Energy Policy - Global Trend: Shale-Gas-Revolution, BRIC, etc. => increasing price differentials => relevance for industry & EU Energy Policy - Energy Policy "post 2020" - Targets? If so, which targets? - Future of ETS & relation to support schemes - Calibration Sustainability/Competitiveness/Security of supply - …
  4. 4. Energy EU-Energy Policy Recent Initiatives: - Internal Market Initiative (Council, 2011) - Energy Roadmap 2050 - Energy Efficiency Directive - Communication on Internal Market - Infrastructure Package / Connecting Europe
  5. 5. Energie EU-Energy Policy: Outlook Main Communications 2013, i.a. - Commission strategy "2030" - Guidance on renewables support schemes - Guidance on capacity mechanisms
  6. 6. Energy Internal Energy Market Achievements & Challenges
  7. 7. Energy • Implementing Third energy package • Harmonising market and network rules • Enforcing competition and State aid rules • Enhancing investments in infrastructure • Empowering consumers • Promoting regional initiatives Internal Energy Market
  8. 8. Energy High concentration in retail electricity markets • • VERY HIGH (ABOVE 5000 HHI) • HIGH (1800 – 5500 HHI) • MODERATE (750 – 1800 HHI) Energy
  9. 9. Energy Independent national energy regulators are central to ensure truly competitive markets ENERGY REGULATORS ARE INDEPENDENT CONCERNS ABOUT INDEPENDENCE Energy
  10. 10. Energy Interconnections / Reverse Flows in Gas • No Flows • Flows only in one direction • • Flows in two directions GAS FLOWS Energy
  11. 11. Energy Price regulation fails to activate consumers and suppliers • REGULATED PRICES FOR HOUSEHOLD CONSUMERS AND INDUSTRIAL CONSUMERS, IN GAS AND/OR OF ELECTRICITY • REGULATED PRICES FOR HOUSEHOLD CONSUMERS • NO REGULATED PRICES Member States currently phasing out price regulations: By 2013: Greece, Portugal & Lithuania By 2017: Romania Energy
  12. 12. Energy Infringement procedures for non-transposition of the 3rd package directives • Full transposition notified and • no non-transposition case pending • Full or partial transposition notified • and non-transposition case pending • Energy
  13. 13. Energy Internal Energy Market: Infrastructure
  14. 14. Energy Distrigaz: => no long-term contracts E. O N power E N I => network sale R W E: =>network saleE.ON gas: => capacity release G d F Gas: => capacity release Swedish Interconnectors: => opening interconnectors E d F electricty => no long-term contracts =>network sale => generation sale GAZPROM case => terr. restrictions, price abuse CEZ => access to generation Recent EU Energy Antitrust Cases OPCOM => Foreclosure of foreign companies Internal Energy Market: Competition Enforcement
  15. 15. Energy Internal Energy Market: Competition Enforcement
  16. 16. Energy Two major developments: • Europeanisation • Intermittent energy
  17. 17. Energy 1. Europeanisation EU Electricity Markets are already integrated
  18. 18. Energy Energy grids are not national
  19. 19. Energy Scheerer (2012) Energy grids are not national
  20. 20. Energy EU Energy Community Energy Community Observers EU neighborhood policy Quelle: Europäischen Kommission Internal Energy Market - not only the EU !
  21. 21. Energy Internal Energy Market - not only the EU !
  22. 22. Energy
  23. 23. Energy Market Coupling 2014
  24. 24. Energy 2. Intermittent energy => new challenges
  25. 25. Energy Increasing production from intermittent energy: new challenges •National regulation of european markets: • More complex grid operation => Security of Supply? => Fair cost sharing of transmission costs • National RES support schemes in integrated markets => market distortions to detriment of neighbours; risk of excessive subsidies? • Necessity of reserve capacities => Investment standstill, but: cascade of state interventions?
  26. 26. Energy •Uncoordinated renewables policies: •=> Market distortions
  27. 27. Energy
  28. 28. Energy Example: Loop Flows
  29. 29. Energy
  30. 30. Energy • Electricity loop flows caused by internal imbalances • Effects in neighbouring countries • Reduction of cross- border capacity • Risk for grid stability => Fragmentation of the single market => fair cost allocation 30
  31. 31. Energy •Capacity Mechanisms Undeniable need for security of supply, but risk: Vicious circle: badly designed support schemes and capacity mechanisms may destroy internal market => which is needed to solve the problem! Sub-optimal support schemes => distorted investment signals => result in another subsidy (capacity payments)
  32. 32. Energy CO2 Policy / ETS RES Support Schemes Capacity Mechanisms Market Design (Flexibility) Generation Adequacy
  33. 33. Energy -10 -5 0 5 10 15 20 ScenarioA ScenarioB ScenarioEU2020 ScenarioA ScenarioB ScenarioEU2020 ScenarioA ScenarioB ScenarioEU2020 ScenarioA ScenarioB ScenarioEU2020 ScenarioA ScenarioB ScenarioEU2020 ScenarioA ScenarioB ScenarioEU2020 ScenarioA ScenarioB ScenarioEU2020 ScenarioA ScenarioB ScenarioEU2020 ScenarioA ScenarioB ScenarioEU2020 Germany France Great Britain Netherlands Belgium Denmark Norway N. Ireland Rep. of Ireland RemainingCapacity-AdequacyReferenceMargin(GW) Generation adequacy 2020 – NW Europe
  34. 34. Energy 6% 4% 6% 72% 12% Member States Other Public Authorities Academia Energy Industry Consuming Industry Consultation on Capacity Mechanisms
  35. 35. Energy Barriers to market functioning… 0 20 40 60 80 100 RES - Support schemes RES - Priority dispatch Price Caps Other state interventions Lacking Demand Side Repsonse Lacking Interconnecion Capacity …But nearly all respondents emphasised need to complete IEM Consultation on Capacity Mechanisms
  36. 36. Energy Assessing generation adequacy 0 10 20 30 40 50 60 70 80 ENTSO-E Sufficient? More Regional needed? More European needed? Common methodology Common standards Is a revision of the SoS directive needed? Need for adaptation recognised – but how to implement? Consultation on Capacity Mechanisms
  37. 37. Energy Split views on need for CMs Wide support for EU criteria Limited support for EU mechanism 0 20 40 60 80 100 Can energy only market work Blueprint for an EU-wide capacity mechanism Criteria at EU level for compatibility of CRM with IEM Are criteria set out above appropriate? Consultation on Capacity Mechanisms
  38. 38. Energy • Flexible capacity or sufficient capacity • Many argue energy market should deliver flexibility – CM only for sufficient capacity • Strategic reserves • View split – slippery slope or limited and targeted intervention • Very limited support for capacity payments • Support for criteria • MS to demonstrate proportionality Especially on cross border effects • Market based • Transitional •
  39. 39. Energy Capacity Mecanisms - Next steps 8 March Stakeholder forum 14 March Electricity coordination group discussion Internal preparation in Commission 24 April Informal energy council Further reflections plus internal procedure July Commission to set out framework for CRMs
  40. 40. Energy Open issues Electricity: The "target model" - already outdated?
  41. 41. Energy
  42. 42. Energy
  43. 43. Energy Open issues GAS • Future role of gas? • Hub vs long-term • etc.
  44. 44. Energy SovoSvoboda, 31.312013
  45. 45. Energy
  46. 46. Energie Integrated Energy Markets • Indispensible for any national energy policy • Autarchy is no option => need for co-operation • Not too late to catch the train
  47. 47. Energy David Cameron, Maastricht 23 January 2013: "These should be the tasks that get European officials up in the morning – and keep them working late into the night:"
  48. 48. Energy "The first (task): competitiveness. At the core of the European Union must be, as it is now, the single market. But when the single market remains incomplete in services, energy and digital – the very sectors that are the engines of a modern economy – it is only half the success it could be." David Cameron, Maastricht 23 January 2013
  49. 49. Energy Pursuing EU-market integration is without alternative • allows aggregation of generation • allows cross-border use of capacities • Indispensible for security of supply • Allows reasonable infrastructure planning • Results in lower energy prices through markets and competition
  50. 50. Energy Thank you very much for your attention Dr. Oliver Koch Deputy Head of Unit European Commission DG Energy Unit B-2 (Internal Market II: Wholesale; gas & electricity) DM 24 – 6/117 Brussels/Belgium oliver.koch@ec.europa.eu ++32 229 87302

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