Delivering the internal market in electricity and making the most of public interventions

Transcription

1 Delivering the internal market in electricity and making the most of public interventions Inge Bernaerts Head of Unit DG Energy Unit B2 Wholesale markets : electricity and gas Brussels, November 28th, 2013

2 The Package: Communication on public intervention RES support schemes Capacity mechanisms Cooperation mechanisms Demand response 2

3 Principles for efficient public interventions 1. Let markets work! 2. Identifying a specific problem and its cause 3. Assessing potential interplay with other policy objectives holistic approach 4. Evaluating alternative instruments promoting market based solutions, including European options 5. Encourage changes in consumer behaviour 6. Minimising impacts on operating of electricity systems 7. Keeping costs low (competition of technologies and of suppliers, potential of other Member States) 8. Considering the impact on costs of consumers 9. Monitoring, evaluation and phasing out

4 Guidance on public interventions to ensure Generation Adequacy

5 Capacity mechanisms On 22 May 2013 the European Council called for guidance on capacity mechanisms. Guidance in the Communication and elaborated in this Staff Working Document Aim to help ensure that capacity mechanisms meet aims of EU energy policy aims (IEM) comply with the common competition rules BUT detailed treatment of capacity mechanism and State aid in forthcoming Energy and Env. SA guidelines

6 Context for today's discussion Ensuring generation adequacy is also one of the main challenges as the Union moves towards a low carbon energy system. SAME time as completion of IEM Mutual interdependence of MS for SoS SHORT TERM (operational) and LONG TERM. SAME time as major technological change SMART GRIDS, Demand side participation in market etc. SAME time as economic crisis shows overinvestment in past impact on incumbents

7 EVIDENCE BASED POLICY MAKING

8 analyse objectively generation adequacy concern Recognize the reality of coupled markets: crossborder assessment is needed Maximize interconnection capacity Include the potential of demand response in generation adequacy assessment Distinguish generation adequacy concerns from profitability concerns (take into account overcapacity and economic crisis)

9 Identify the causes of the concern Regulated wholesale and retail prices: as a general rule further public interventions not proportionate if price caps reduce investment Existing support schemes: are RES support schemes in line with best practices? Support for fossil and nuclear generation? Do effective intraday and balancing markets exist? Can the demand side participate in these markets?

10 Costs, benefits and alternatives The cost of capacity remuneration schemes can be very high (over 10% of wholesale electricity costs) Promote (local) generation or increase interconnection capacity? Promote generation or promote demand response? Impact on electricity bills? Is the cost of intervention not higher than the value of lost load? Impact on CO2 and RES targets: how to avoid lock-in effects?

11 EFFECTIVE AND EFFICIENT INTERVENTION

12 Design of public intervention A strategic reserve is normally less distortionary, less costly and easier to implement; BUT not suitable for every problem One-off tendering could be less distortionary and easier to implement when there is a clearly identified and temporary investment gap must be credibly one off Where market wide capacity remuneration schemes are considered, capacity payments are less desirable and capacity markets are to be preferred

13 Design features Technological neutrality old + new production, demand participates on equal basis Transitional with an exit strategy allow price to fall to zero, address market and regulatory failures Regional schemes least cross-border participation RECOGNISE practical difficulties BUT vital to account for benefits of IEM Minimizing distortions of competition and trade no adverse effect on market coupling; no export restrictions) Financing beneficaries of SoS should pay

14 Guidance for MS Choices Intervention after: careful and objective assessment of needs Addressing regulatory and market failures cost/benefit analysis compared to other solutions and value of lost load Recommendations: chose the right instrument to address the problem identified Design the measure to minimize distortions Ensure mechanism is reviewed as underlying concern addressed

15 Renewable energy support schemes EU guidance on best practice

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17 Market integration: support schemes & market rules Phase in market exposure: Feed-in tariff Premium Quota Competitive allocation mechanisms Mechanism to reflect maturity of technology Competition among RES technology development Minimise impact on production decision Phase in equal treatment: Balancing obligations Bearing of grid costs Dispatching rules Different degrees of harmonisation for all users

18 Cost control Avoidance of overcompensation: bubble Competitive allocation mechanisms Objective cost and revenue calculations (LCOE) Automatic digression Limited time frame

19 Demand Response: A Sustainable Win-Win for All

20 Reduced Consumer Bills Benefits and Potential Individual energy savings/reductions: 2-4% Partial shift to cheaper periods: ca. 10% (HH), 20%+ (I) (Lower system costs) System Efficiency Reduced peak generation: up to 60 GW (controllable load) Reduced grid needs Vicarious benefits More RES possible on the grid Environment/CO2 reductions Consumer engagement/empowerment

21 Demand Response: What is Needed? Market-based & transparent incentives Dynamic pricing and reward structures Data protection and security Opening up the market to DR Equal footing with supply Contractual/technical rules, e.g. network codes Bringing technologies into the retail segment Smart meters Smart appliances

22 Thank you for attention More information available under: