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First results of the Electricity #MarketDesign consultation

As part of the European Energy Union project, the EU Commission held a public consultation on a new electricity market design (15 July 2015 to 9 October 2015). The first results are now in.

The Commission received 320 replies to the consultation.

  • 49 % of submissions come from national or EU-wide industry associations
  • 26% of answers stem from the energy sector (suppliers, intermediaries, customers)
  • 9% from network operators
  • 17 national governments and several national regulatory authorities submitted a reply
  • a significant number of individual citizens and academic institutes participated

The detailed analysis of the numerous comprehensive replies is ongoing, but the EU Commission made a first assessment on 5 key ideas of the planned market design initiative:

  1. Electricity market adaptations
  2. Generation adequacy
  3. Retail issues
  4. Regulatory framework / Governance
  5. Regionalisation of System Operation

Comments*

EU Commission is basically saying that some stakeholders think we should carry on the current reform agenda and some think we shouldn’t reform at all. More progressive ideas – that the current reform agenda for regionalisation and demand-side flexibility isn’t transformative enough; that we need divestment (or dis-investment) from surplus, high-carbon resources – did not register at all.

Placing consumers at the heart of the market demands a policy response that goes way beyond the current agenda which will essentially restrict participation to large or very well-informed consumers. Whilst the current reform agenda will deliver some improvements in market efficiency through scarcity pricing and dynamic pricing, it will fall far short of maximising the system benefits from demand side engagement and deliver the wider economic and social benefits associated with a smart, IT-enabled society.

Now is the right time for the EU to initiate a fundamental review of consumer-facing markets. This needs to reconsider the consumer choice framework so that it becomes easier for consumers to reduce costs and improve lifestyles. The right approach will inevitably vary widely from region to region and city to city, particularly as heat and transport sectors begin to converge with electricity. The EU must create a new framework that ensures consistency with the IEM, encourages sharing of best practice and allows innovation and diversity of approach at the local level.

No amount of changes to market rules will matter unless the underlying political conditions are addressed that deliver policy coherence. One issue of paramount importance for instance is that Member States should be prepared to establish clear national delivery plans and submit these to an independent body for scrutiny; and to establish an institutional structure that makes it easy for Member States to share resources at the wholesale electricity level, should they wish to take advantage of these opportunities.

The goal of the new market design is to accomplish a transition to a future-oriented electricity system. However, a key issue that is insufficiently highlighted is divestment (or dis-investment) from surplus, high-carbon resources. All the talk about new renewables investment being driven by the market is useless unless the divestment issue is tackled head on. A market that doesn’t need new capacity investment (because of oversupply) won’t drive new investment in anything – renewables or otherwise. Considering how much new renewables investment is needed to reach EU’s 2020 and 2030 climate and energy targets, it is unclear how the market will drive that level of investment without a deliberate program of (early) retirement of existing resources, targeting those that do not add to the flexibility of the system or are incompatible with established environmental objectives. Perhaps the German ‘climate levy’ for old lignite-fired power plants can serve as an example of how to address the divestment issue.

* Many thanks for some input: E3G & others.

Document

You can find the document here. If you want to use the document for a blog, paper, article, or if you want to share it on social media and if this blog is the first place you saw it, then please use its original source, that is: this blog. Many thanks!

climateconsumersdemand-sidedivestmentenergyEU Energy Unioninnovationrenewablesstranded assets

@StollmeyerEU • 3rd December 2015


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