schoenherr eu public-intervention-in-the-electricity-market
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EU: Public Intervention in the Electricity Market On 5 November 2013, the EU Commission published its long-awaited Guidance to Member States on state intervention in electricity markets. The Guidance is structured as a Communication on delivering the internal electricity market, accompanied by four staff working documents on:
the design and reform of national support schemes for renewable energy; the design of adequate generation capacities to ensure the continuous
supply of electricity when generation fluctuates; the enhancement of the role of the consumer; i.e. demand-side response,
and the use of renewable energy cooperation mechanisms.
Although the guidelines are not legally binding for the Member States, they are meant to make state intervention in the electricity market more effective, to offer the principles which the Commission will apply when assessing future enforcement of the EU state aid rules, and also to serve as the basis for a future proposal for EU energy legislation. Key principles for support schemes for renewable energy
Investors’ legitimate expectations should not be frustrated by retroactive changes to existing support schemes, as such changes have altered inves-tors’ confidence and reduced investments in the sector.
As technologies mature, support should be adjusted downwards or phased out. Any additional support that is necessary should only supplement the market price, not replace it. The Commission proposes replacing the feed-in tariffs with feed-in premiums and quota obligations, which will eventually force producers to respond to market prices.
Introducing a tendering process for developing new capacities. The tendering will reveal the costs of different technologies, stimulate competition, and steer the development of new capacities where they make sense geograph-ically and where they are needed.
The support scheme should focus more on R&D. Expose the renewable energy generators to the rules of the balancing mar-
ket, use of interconnectors and grid connections charges and grid use rules so that the costs can be passed to all electricity producers, including renew-able energy generators.
Key principles for the design of adequate generation capacities
The Commission takes a conservative approach with regard to additional generation capacities. It recommends that market forces should first deter-mine whether there is a need for investments in additional generation capac-ities. Only if there are doubts as to the market delivering generation adequa-cy and security, then an objective, facts-based and comprehensive assess-ment of generation adequacy is recommended. The assessment should also address the impact on the Internal Energy Market and has to be consistent with ENTSO-E generation adequacy assessment.
In November 2012, the Electricity Coordination Group was set up with the view of assessing the need of generation adequacy and intensifying coopera-tion among the Member States. Based on the work of the Electricity Coordi-nation Group, the Commission may propose new legislation.
If generation adequacy issues are identified, the next steps should be to look at alternative measures that can address this issue, such as demand re-sponse (smart meters and smart grids), the removal of regulatory failures (regulated wholesale and retail prices, subsidies for fossil fuels and nuclear), as well as effective intraday and balancing rules.
Contact Bernd Rajal
T: +43 1 534 37 50203 E: [email protected]
Contact Raluca Dîrjan
T: +32 2 743 40 41 E: [email protected]
THE INFORMATION IN THIS DOCUMENT IS INCLUDED WITH THE UNDERSTANDING AND AGREEMENT THAT SCHOENHERR IS NOT ENGAGED IN RENDERING LEGAL OR
OTHER PROFESSIONAL SERVICES BY POSTING SAID MATERIAL. THE INFORMATION AND OPINIONS CONTAINED IN THIS DOCUMENT ARE FOR GENERAL
INFORMATION PURPOSES ONLY, ARE NOT INTENDED TO CONSTITUTE LEGAL OR OTHER PROFESSIONAL ADVICE, AND SHOULD NOT BE RELIED ON OR TREATED AS A
SUBSTITUTE FOR SPECIFIC ADVICE RELEVANT TO PARTICULAR CIRCUMSTANCES. SCHOENHERR DOES NOT ACCEPT ANY RESPONSIBILITY FOR ANY LOSS WHICH MAY
ARISE FROM RELIANCE ON INFORMATION OR OPINIONS PUBLISHED IN THIS DOCUMENT.
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If these alternative measures fail to solve the problem, a credible one-off tendering procedure or a market-wide capacity mechanism could be further considered. The Commission prefers the tendering procedure that would also include demand-side response technologies.
The mechanism to ensure generation adequacy should be open to all capaci-ties and include those from other Member States, not only the national ca-pacities of any one individual Member State.
Key principles for demand response measures
The retail market needs to be reorganised in a way that consumers can ben-efit from and are incentivised to participate in the energy market, so that the consumers can be billed based on wholesale market price signals and not on consumption profiles.
The first step is to remove the regulated prices for end consumers to allow the development of dynamic pricing.
The Commission is currently analysing the cost-benefit analyses and smart metering roll-out plans received from the Member States and will present a Benchmarking Report by the end of 2013.
The Communication and the Staff Working Documents can be accessed here http://ec.europa.eu/energy/gas_electricity/internal_market_en.htm