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What's new with EU Energy 4th Package?
1. After the World CupAfter the World Cup
What’s new with EU energyWhat’s new with EU energy
44thth
Package?Package?
Dublin, IIEA, 16Dublin, IIEA, 16thth
July 2018July 2018
Jean-Michel GlachantJean-Michel Glachant
Director Florence School of Regulation
European University Institute (Florence, Italy)
3. Overview
• 1/ What’s a Package in the EU?
• 2/ What did first 3 Packages bring to EU? 1996-2009
• 3/ What’s new since 3d EU Package, ~10 years ago ?
• 4/ What did lead to 4th
Package? Juncker Commission’s “Energy Union”
• 5/ The two parts of the 4th Package: *the markets **the policies
3
5. What’s a Package?
5
It is... a Package...
•1.1 It packs various areas…
as: Gas & Elec; Renewables & Energy Efficiency
•1.2 It packs different types of EU laws...
Directives: EU Targets, becoming national rules AFTER being transposed
into each country legal frame
(Ex: Creation of TSOs & Unbundling)
Regulations: EU rules, becoming immediatly applicable in each country,
without any ‘’national Transposition’’
(Ex: EU TSOs ‘’Ten Year Network Development Plan’’; EU Generation
Adequacy Assessment)
6. What’s a Package?
6
•1.3 Are different types of EU law implemented the same?…
Impossible:
EU Laws being transposed > become national laws; implemented by
national administrations, special entities (as TSOs & NRAs), players (as
companies & consumers). Plus National Decrees of application.
EU Laws being not transposed > are ‘only’ EU Laws; having NO EU
administrations, NO EU entities (as TSOs & NRAs), NO EU players (as
companies & consumers). They have to be implemented by same 28
national frames like ‘’national laws’’. NO European decrees of application.
Asymetry of implementation… or…
…’’European Regulatory Gap’’…
7. 2/ What did first 3 Packages bring to EU?
1996-2009 (slides 8-12)
8. Grid Level: Member States or EU?
1996 1st Package: negociated or regulated at MS level
2003 2nd
Package: Regulator at MS level + EU crossborder
2009 3d Package: Indep Regulator at MS + EU EN.TSO & ACER +
Grid Codes & Ten Year Development Plans & Gen. Adequacy
Grid Channel: Regulator or Compet. Authority?
2007 Sector Enquiry + “smoking guns” policy by DG COMP
°Eon, RWE disinvest from grids
°2009 Swedish TSO reviews congestion management scheme
(priority national vis à vis Foreigners)> more bidding zones
EU frame building
8
9. EU frame building
Market Level: Member States or EU?
2003 2nd
Package: open at MS level + EU crossborder ‘fair’ rules
2009 3d Package: more EU EN.TSO + ACER + Codes (Congestion;
Capacity allocation; Balancing energy ) + Regional Initiatives +
‘Market Target Model’ being market coupling with open
balancing
Market Channel: Energy Reg. or Compet. Authority?
°2005 EU Court suppress LT priority access to elec interco
°Basic market rules: free Merchant PX vs reg. Market Coupling
°Loose market monitoring from financial regulation capped by
REMIT 2010 specific energy monitoring (ACER+ NRAs)
9
10. Energy Mix Level: Member States or EU?
°In EU “Energy Mix” sovereign right of Member States (See Nuclear –
prohibited in Austria / 80% in France; coal in Germany vs UK)
°big caveat: RES directives + EU ETS as “voluntarily” constraints for MS’s
Energy Mix
Energy Mix Channel: Energy Regulator or Compet. Authority?
° EU Court ruling: RES support “Environmental Public Policy” not market-
based BUT support to be notified to DG COMP as “State Aid” (14 Billion in
2010) > DG Comp Guidelines 2014
°Support Schemes (Gov. MS) + Dispatch priority (Ener. Reg)
°Regulators involved (Connections; Congestion; Balancing; TSO planning &
incentives; Distribution grid regulation)
EU frame building
10
11. Grids: EU vs US
°much more EU rules; but still enforced by MS regulators (no federal
regulator FERC)
°grid regulation entirely submitted to “market opening”; but still state
operated (no regional RTOs - ISOs)
°EU mutualisation TSOs&Regulators: EN.TSOs &ACER since 3d Package
but NO RTO/FERC proxies
°Independence DG COMP vis-à-vis Energy regulators & TSOs
Markets: EU vs US
°EU general Target Model
+ °Regional Initiatives
+ °ACER + °EN.TSOs
+ °REMIT:
larger frame in the EU; but less depth & strengh
EU frame vs US
11
12. Energy Mix: EU vs US
°EU RES scheme + °EU ETS = more comprehensive scheme in EU
Institutions: EU vs US
°Strong US energy federal regulator in a smaller area;
°No role for US Competition opposite to DG COMP;
°US State regulators independent from federal as opposite to EU
“ruling” MS regulators;
°Strong US Environmental federal Regulator vs EU stronger directives
>> US implementation stronger but Scope smaller (except for
Competition; embedded into US FERC or PUCs)
EU frame vs US
12
13. 3/ What’s new since 3d EU Package
~10 years ago ? (slides 14-26)
14. 3d Package key novelties
• 1- The Third Package creates EU Bodies
>mutualisation of NRAs at EU level (ACER)
>mutualisation of TSOs at EU level (ENTSOs)
• 2- The Third Package gives legal duties to these EU Bodies
>ACER
managing cross-border conflicts between NRAs;
issuing Framework Guidelines for ENTSOs codes rules & methodologies
>ENTSOs
TenYearsNDPlan; Generation Adequacy;
Network Codes rules & methodologies
14
15. 3d Package key novelties
• 3- The Third Package gives Commission power in process of Codes &
Guidelines proposals
>EU will have a common set of European market & network rules IF:
1-ACER defines Framework Guidelines
2-ENTSOs define Codes or Guidelines (i.e plus further metholdologies)
3- ACER agrees ENTSOs compliant Framework Guidelines
4-Commission agrees with results, proposes to Council (Member States)
experts to vote (‘’Comitology’’)
And 5-Parliament does not veto
IF all of this works > Network Codes become “Commission Regulation”
What you & me can call a proper “European regulation” > detailed
rules mandatory in all EU, with no transposition by countries
15
16. 3d Package key novelties
• 4- This Third Package ‘’EU Market & Network Codes & Guidelines’’:
implemented; by whom?
>NO big novelties under the sun:
¤ The National regulators (NRAs) and ¤ The National TSOs
still have the de facto monopoly of implementation of the new EU
regulation (NO EU regulator; no EU or regional TSO)
> ¤ + New small brother: NEMOS – ‘Nominated Electricity Markets
Operators’ (from ComReg2015) to perform Market Coupling (Day
Ahead or Intraday)
16
18. Requirements
for Generators
Comitology Process
(entered 2013)
• Size-dependent, technical requirements for Power Generating Modules
• Common framework of obligations for Network Operators to
appropriately make use of the Power Generating Facilities’ capabilities
Demand
Connection
Comitology Process
(entered 2014)
• European rules on how demand interacts with the transmission system
• Ensure effective contribution to the stability of the power system by all
distribution networks and demand facilities
• Clarify the role that demand response will play in contributing to the
deployment of RES
HVDC
Connection
ACER
recommendation
submitted (2014)
Manage HVDC lines and connections:
•Determine contribution to system security
•Promote coordinated development of the infrastructure
Operational
Security
ACER
recommendation
submitted (2013)
Framework for maintaining a secure interconnected European electricity
transmission system: common, legally binding principles and rules for
operating electricity transmission networks
Operational Security requirements and principles; Data exchange;
provisions for training of System Operator Employees
Network Codes (Content Overview 2015)
18
19. Network Codes (Overview in 2015)
Operational
Planning &
Scheduling
ACER
recommendation
submitted (2013)
Common time horizons, methodologies and principles allowing to carry out
coordinated Operational Security Analysis and Adequacy analysis to maintain
Operational Security and support the efficient functioning of the European
internal electricity market
Load
Frequency
Control &
Reserves
ACER
recommendation
submitted (2013)
• Formalised harmonised system frequency quality targets
• Objective and harmonised requirements regarding Load-Frequency-
Control (LFC) and Reserves
Emergency &
Restoration
Submission to ACER
(2015)
Procedures and remedial actions to be applied in the Emergency, Blackout and
Restoration states
Capacity
Allocation &
Congestion
Management
Definitive adoption
expected in 2015
Rules that will introduce an EU Target Model: single approach to cross-border
electricity trading
•for cross-border capacity allocation in day-ahead and intraday timescales.
Outlines the way in which capacity will be calculated across the different zones
•for congestion management
19
20. Network Codes (Overview in 2015)
Forward
Capacity
Allocation
ACER
recommendation
submitted (2014)
Design and operation of the markets in which the right to use cross-border
capacity is sold in advance
Electricity
Balancing
Resubmission to
ACER (2014)
Steps for transforming balancing markets to a set of regional markets and later
a pan-European market
20
22. More on Network Codes
>Network “Codes”
[Connection] 3 Codes
>>Network “Guidelines”
[Market] 3 Guidelines > with Methodologies to be added (special process for
methodologies; can be regional, pan-EU; stakeholder consultation + NRAs
approval with ACER if not). Difficulty but flexibility
[Operation] both:
1 Code: Emergency & Restoration
1 GL: System Operation with Regional Security Coordinators
(5 mandatory tasks as security assessment; capacity calculation; links with 10
Capacity Calculation Regions ]
22
23. More on Market GL
Day Ahead & Intraday Markets {CACM GL July 2015}
>[Nemos] Nominated Electricity Market Operators to perform Market
Coupling; can be a private company or a public entity
>[Day Ahead] 2 side blind auction; temporal (def. products) & spatial
granularity (bidding zones); min & max prices
>[Intra Day] continuous trading; regional auctions if approved NRAs; Gate
Closure at least 1h
>[Remedial Actions] within Bidding Zones? Between Bidding Zones?
Preventive or Curative? What Price?
>[LongTerm] Grid investment: within zone? Between Zones? Or Zones
review?
23
24. More on Market GL
Balancing Market {EB GL Nov 2017}
>[Reserves] SO GL defines 4 reserves (FCR / aFFR, mFFR / RR); also defines
reserves sizing
>[Bid Format] duration of Bal. offer; upward / downward joint or separated;
minimum bid volume;
pay-as-bid or marginal price (EB GL) but FFR & RR cannot be regulated price
Standard products; but specific if…
Gate Closure should be harmonized
>[Reactive vs Proactive EB] Reactive: Belgium, German, Austria, in real time
(relying on BRPs); Proactive: France, UK, Nordics before RT, according to
forecast (less incentives to BRPs) – both SO GL & EB GL neutral
24
25. EU Gaps by J. Vasconcelos (April 2017)
> From our FSR research report Spring 2017
‘First-order gap: Lack of Coordination’
• 1- Lack of comprehensive coordination of system planning, further to the
TYNDP
• 2- Lack of comprehensive coordination of cross-border investments
• 3- Lack of comprehensive coordination of system operation
• 4- Lack of a common redispatching approach
• 5- Lack of common reserve contracting and cost allocation
• 6- Lack of intraday cross-border allocation with auction
• 7- Lack of load shedding coordination
• 8- Lack of comprehensive coordination for solidarity
25
26. ‘Second-order gap: Lack of Harmonisation’
• 9- No harmonisation of common congestion rent allocation scheme
•10- No harmonisation of capacity remuneration mechanisms
•11- No harmonisation of transmission tariffs across countries and TSO
zones
•12- No harmonisation of ‘state aid’ to big energy consumers (through
reduced network tariffs)
(From) “Fig. XX The EU regulatory roadblocks”
Florence School research report (April 2017)
26
EU Gaps by J. Vasconcelos (April 2017)
27. 4/ What did push for EU 4th
Package:
Juncker Commission’s “Energy Union”
(slides 28-29)
29. Energy Union is / isn’t…
•Is’nt new Institution for EU energy policy: NO institution created
•is political “novelty” Commission Juncker deal made with new
Council Pdt Donald Tusk (Former PM Poland) & backed by Chairman
Parliament Industry & Energy Committee Jerzy Buzek (Former PM
Poland, former Pdt EU Parliament)
•~ Content unveiled 25th Feb. 2015 Hardly foreseen @Barroso
Commission (2013-14) // EnerUnion = about 25 proposals of action
•~ in touch with EU Council March 2015 EU Council (Heads of State &
Gov.) agreed EC go ahead with EnerUnion
•~ nevertheless a gamble No institution created: Council of ministers
&Parliament have to agree each legislative proposal…
•February 2015 Ener.Union Manifesto don’t strictly tie anybody:
even Commission can change having seen what blocks / what goes
29
30. 5/ The two parts of the 4th Package:
*the markets ** the policies
(slide 31-45)
31. In practice: “EU 4th
Package” is a pack… of packages
Market Design Pack is made of four proposals:
1- Directive for Internal Market (Retail & Consumers)
2- Regulation for Wholesale Market
3- Regulation for ACER
4- Regulation for electricity risk preparedness
1 Directive & 3 Regulations
Energy Policy Pack has four proposals too:
1- Renewables Energy Package incl. Bioenergy (Directive) > Target RES
2- Energy Union Governance (Regulation)
3- Energy Efficiency (Directive) Performance Buildings (Directive)> Target EE
4- ETS revision 2021-2030 (Directive) > Target GHG Emissions
4 Directives & 1 Regulation
31
32. More on Market Design proposals
Market Pack is made of 1 Directive & 3 Regulations
1- Directive for Internal Market (Retail & Consumers)
2- Regulation for Wholesale Market
3- Regulation for ACER
4- Regulation for electricity risk preparedness
32
33. More on Market Proposals
>[Technologies level-playing field] End of ‘must-run’ & ‘dispatch priority’;
balancing responsibility for all; entry for ‘demand response’
>[More on short horizon] markets closer to real time; harmonization of
balancing reserves & larger balancing zones
>[LT Capacity Markets] framed by EU-Wide or regional ENTSO-e assessment;
coordinated among neighbors; with harmonised X-B cooperation
>[Crisis Preparation] National & Regional plans for elec. Crisis; Crisis
scenarios defined by Regional Centers ROCs
>[old Retail] Phase out retail price regulation; EU definition of energy poverty
>[new Retail] Role for aggregators; right to dynamic pricing; to demand
response; to self-generation & self-consumption; + legal framework for
Energy Communities;
33
34. More on Grids & Acer Proposals
>[DSOs]
new roles for DSOs as hosting key generation resources & demand response
>[TSOs]
°New entity for Tr.S.op: the ROCS;
°Harmonisation of tariff methodology & rent congestion use
>>[ACER]
°Final role (before Commission) vis-à-vis ENTSO for Network Codes &
Guidelines
°Say on regionalisation of NRAs decisions
°Coordination of ROCs
°Supervision of NEMOs
°°°BUT NRAs keep full control of ACER decisions (voting rules among NRAs
can change)
34
35. But ONLY proposals from Commission
1- Commission has no majority at Parliament, at Council; even within
Commissionners.. All to come from deals & opportunity
2- However PPE is strong: Juncker, Spizenkandidat (Head of list), Canete
Commissioner, Tusk Pdt Council, Tajani Pdt Parliament, J. Buzek (former
Pdt) current Ind Comm + Secretary-General Commission Martin Selmayr
3- At Parliament (Coalition parties: PPE – ALDE- SD – Greens) do common
deals avoiding votes in plenary >> Common Position Parliament
4- Similar deals at higher EU level
After first vote (Parliament – Council); if both in opposition
It goes to ‘’Trilogue’’: a tripartite Deal (Commission – Council – Parliament)
35
36. More on the Four Energy Policy Blocks
1- Renewables Energy Package incl. Bioenergy (Directive) -14th June 2018
Target 2030 RES 32% (Revision 2023)
2- Energy Union Governance (Regulation) – 20th June
National E&C Plans 2021-2030 –5D - Comments EC
3- Performance Buildings (Directive) – 14th May
Energy Efficiency (Directive) – 18th June
Target 2030 EE 32.5% (revision 2023)
4- ETS revision 2021-2030 (Directive) 2021-30 with annual reduction -28 Feb
Target 2030 GHG Emissions 40% [Covered 43% - non covered 30%]
(21 June: ~45%)
4 Directives & 1 Regulation
36
39. Whom shaking hands to whom?
• Jerzy Buzek
(Chairman Industry & Energy
EU Parliament; PPE;
Poland)
> Bulgarian Presidency (of the
Council)
• Miguel Canete
(Commissioner; PPE; Spain)
> Claude Turmes (Green;
Parliament)
39
41. Whom made the deal possible?
• Pepe Blanco
S-D Spanish
• Bas Eickhout
Green Belgian
• Federley
ALDE Danish
• Sean Kelley
PPE Irish
• Tamburrano
5 Star italian
41
42. What’s in the deal?
• 32% RES at EU level
At country level?
• Right to self-consume
RES
What trade rules? What
grid access & tariff
rules?
• Ban on palm oil
Whom to pay for?
42
44. Five general conclusions
1# Union Governance
EU has 32% RES target; but no ‘burden sharing’ among Member States…
2# Regionalization of TSOs tasks
How to get a really ‘European’ market if each TSO does what if wants with
‘remedial actions’ within its borders, & for ‘borders capacity’ investments?
3# DSOs Europeanization
How to get a really ‘European’ market if most generation investments are
at DSO level, but the thousands of DSOs free to define connection rules,
tariffs, congestion management, etc.?
44
45. Four conclusions as questions
4# ACER governance
What to do if national regulators (NRAs), national TSOs, & DSOs do not
agree on same rules or same implementation of rules?
5# Regionalization for ‘’More Advanced Market Digitalization’’
(more realistic to go ahead? Closer reality; higher willigness)
But: which ‘regulatory oversight’? What regional regulatory decision
making & monitoring?
45
47. www.florence-school.eu 47
Thank you for your attention
Email contact: jean-michel.glachant@eui.eu
Follow me on Twitter: @JMGlachant already 42 000+ tweets
My web site: http://www.florence-school.eu