A report on EU electricity market rules, which must reflect the energy generation mix of the future and help usher in a flexible power system with a large-scale uptake of wind power and other renewable energy sources. The report recommends: 1- Creating a level playing field for renewable energy sources by tackling structural market deficits. 2-Creating functioning markets covering larger geographical regions within Europe so as to reduce the need to balance variable renewables like wind and solar 3- Developing intraday and balancing markets at national and cross-border levels 4- Creating new markets for 'grid support services', supporting the functioning of the grid to ensure a secure supply of electricity, instead of introducing market distorting capacity payments.

1. Creating the internal Energy
Market in Europe

2. Key findings
• Structural market distortions remain
the main obstacle for the IEM and
wind energy integration
– Large incumbents, high market
concentration, regulated prices
• Support mechanisms for wind and
RES should be seen in the context of
unfinished liberalisation
• Exposure of wind generators to
market risks require a level playing
field

3. Key findings (…continued)
• Integration of large amounts of wind
in a cost efficient manner requires
changing current market
arrangements

4. Key findings (…continued)
• The EU Target Model (TM) does not
effectively enable optimal wind
energy integration
– No emphasis on wind integration to
the extent of NREAPs
– No provisions for more competition
– Lack of emphasis on intraday and
balancing markets liquidity,
harmonisation and interactions.
These are wind energy integration
cornerstones!

5. Key findings (…continued)
• Flexibility is the main feature of
tomorrow’s power system
– Low marginal costs
– Fast ramping power plants
– Investment recovery over fewer
running hours
• Wind energy is able to contribute
significantly to system operation and
flexibility
– Grid support services
– System adequacy

6. Policy recommendations
1. Creating a level playing field
2. Implementing the EU-wide Target
Model with large share of wind
power
3. Assessing system adequacy
properly in a renewable EU
integrated power system
4. Ensuring cost-effectiveness of the
future power system: a market-
based approach for ancillary
services

7. Policy recommendations
1. Creating a level playing field
• Tackle market distortions rather than
only focus on RES provisions
– Implement and transpose properly
liberalisation packages
– Provide incentives for extensive use
of commercial power exchanges
• Design market rules that recognise
the intrinsic characteristics of wind
energy
– Large control zones for smoothing
output variability
– Shorter trading time horizons for
improved forecast accuracy and

8. Policy recommendations
2. Implementing the EU-wide Target
Model with large share of wind
power
• Implement the EU-wide Target Model
as a minimum
– Provide integrated intraday and
balancing markets
– Make the best use of available
transmission capacity
• TSOs must be encouraged to
analyse all aspects of firm capacity
from wind power and other RES in an
integrated system at EU level
– Challenge for capacity payments

9. Policy recommendations
3. Assessing system adequacy
properly in a renewable EU
integrated power system
• TSOs must be encouraged to
analyse all aspects of firm capacity
from wind power and other RES in
an integrated system at EU level
• Challenge for capacity payments

10. Policy recommendations
4. Ensuring cost-effectiveness of the
future power system: a market-
based approach for ancillary
services
• Grid codes in Europe should first
consider market options for ancillary
services instead of compulsory
requirements
• Establish grid support services
markets to create additional non-
discriminatory revenue streams for all
generators

11. Electricity volume traded day-ahead in power
exchanges (PX) vs. forward bilateral contracts (OTC).
[MW as percentage of national gross electricity
production],
2009 data Poland
Great Britain
Czech Republic
Slovak Republic
Austria
France
Belgium
Romania
The Netherlands
Germany
Lithuania
Finland*
Italy
Sweden*
Portugal
Spain*
Denmark*
Northern Ireland*
Greece
0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% 100.00%
OTC PX
Sources: European Parliament , Cornwall, N (2006)

12. How wind power influences the power spot price at
different times of the day through the so-called
“Merit order effect”
Source: Risø DTU

13. Increasing wind forecast error (Root Mean Square
Error) as time horizon increases. Results from
regional wind power production from Germany
7.00%
6.00%
RMSE [% of installed power]
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
Intraday Day ahead 2 days ahead
Source: IEA Wind Task 25

14. Intraday Markets in the EU (2011)
Source: EWEA

15. Volume of electricity traded in intraday
markets, 2011 and 2010* data
Sources: EPEXSPOT, CREG, NordPool, OMIE

16. Balancing services
Sources: ETSO and EWEA

17. Relevant EU directives and regulations in
electricity
Source: Adapted from REKK & KEMA (10), EC, DG Energy

18. Number of countries with regulated electricity
prices (2009) EU-27
Household Industrial
Sources: European Commission 2011

19. Degree of market concentration in the EU power
sector
Source: European Commission 2011

20. The EU Target Model (TM) for electricity trading
ATC – Available Transmission Capacity NTC – Net Transfer Capacity GCT – Gate Closure
Time
Source: Florence Forum, Project Coordination Group
(PGC), 2009

21. Roadmap for day-ahead market coupling as per TM

22. Market coupling effects on volatility of energy
prices
40 6.00
5.21
35
5.00
30 4.05
Standard deviation (€)
4.00
25
20 3.00
1.99
15
2.00
10
0.74
1.00
5
0.00
BE DE FR NL
Explicit Implicit Explicit-Implicit difference
Source: CWE

23. Decrease of forecast error prediction for
aggregated wind power production due to spatial
smoothing effects. Error reduction = ratio of RMSE
regional and RMSE of a single site. Results based
on 40 German wind farms
1.0
0.8
Error reduction
0.6
0.4
0.2
0.0
0 500 1000 1500 2000
Source: Energy and Meteo Systems in IEA Wind Task 25

24. Market coupling mechanisms used in the EU.
*Ongoing initiative

25. Market coupling mechanisms used in the EU.
*Ongoing initiative

26. Market coupling mechanisms used in the EU.
*Ongoing initiative

27. Level of accuracy of wind power predictions for
larger areas and shorter time scales
Source: Rorhig, K. in IEA Wind Task 25

28. Opposite imbalance exchange of two countries
Source: Andersen & Detlefsen, 2011

29. Market integration and wind power deployment
benefits

30. Increase in capacity credit in Europe due to wind
exchange between countries in 2020
16%
Relative Capacity Credit, percentage of installed
14%
12%
10%
capacity
8%
6%
4%
2%
0%
No wind energy exchange Smoothing effect
ENTOS-E continental Europe Top ten wind countries All European countries
Source: TradeWind project

31. Increase in capacity credit in Europe due to wind
exchange between countries in 2020
30
25
Capacity Credt [GW]
20
15
10
5
0
No wind energy exchange Smoothing effect
ENTOS-E continental Europe Top ten wind countries All European countries
Source: TradeWind project

35. About the European Wind Energy Association
EWEA is the voice of the wind industry, actively
promoting wind power in Europe and worldwide. It has
over 700 members from almost 60 countries making
EWEA the world's largest and most powerful wind energy
network.
Rue d'Arlon 80
B-1040 Brussels
Belgium
www.ewea.org

36. To download the pdf version click here
To download the Ipad (Ibooks) version click here
If you want to see more statistics, reports, news and
information about wind energy event please visit EWEA’s
website www.ewea.org or contact us at
communication@ewea.org