Dr. Oliver Koch gave a presentation on energy policy and the internal energy market in the European Union. He discussed two major trends: the increasing Europeanization of energy markets and the rise of intermittent renewable energy sources. This presents challenges for ensuring generation adequacy and avoiding market distortions. Koch argued that pursuing further integration of the EU energy market is essential for security of supply, infrastructure planning, and lowering energy prices through competition. National policies need to be coordinated to avoid problems like loop flows that fragment the single market.
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. Energy
Outline
- Energy Policy and IEM
- Two trends:
- Europeanisation
- Intermittent Energy
- Spotlight: capacity markets
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. 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. Energie
EU-Energy Policy: Outlook
Main Communications 2013, i.a.
- Commission strategy "2030"
- Guidance on renewables support schemes
- Guidance on capacity mechanisms
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. Energy
High concentration in retail electricity markets
•
• VERY HIGH (ABOVE 5000 HHI)
• HIGH (1800 – 5500 HHI)
• MODERATE (750 – 1800 HHI)
Energy
9. Energy
Independent national energy regulators are central
to ensure truly competitive markets
ENERGY REGULATORS ARE INDEPENDENT
CONCERNS ABOUT INDEPENDENCE
Energy
10. Energy
Interconnections / Reverse Flows in Gas
• No Flows
• Flows only in one direction
•
• Flows in two directions
GAS FLOWS
Energy
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. 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
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
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?
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. 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. Energy
CO2 Policy
/ ETS
RES Support
Schemes
Capacity
Mechanisms
Market
Design
(Flexibility)
Generation
Adequacy
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. 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. 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. 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. 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
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
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. 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. 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