Explanatory Memorandum to COM(2016)862 - Risk-preparedness in the electricity sector - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2016)862 - Risk-preparedness in the electricity sector. |
|---|---|
| source | COM(2016)862  |
| date | 30-11-2016 |
1. CONTEXT OF THE PROPOSAL
• Reasons for and objectives of the proposal
The purpose of this proposed Regulation is to ensure that all Member States put in place appropriate tools to prevent, prepare for and manage electricity crisis situations. Even where markets and systems function well, the risk of an electricity crisis as a result of a variety of circumstances (e.g. extreme weather circumstances, malicious attacks including cyber-attacks, a fuel shortage) cannot be excluded. In addition, given that electricity systems are integrated, where crisis situations occur, they often have a cross-border effect. Some circumstances (e.g., a prolonged cold spell or heat wave) might affect several Member States at the same time and even incidents that start locally they may rapidly spread across borders.
Currently, Member States behave very differently when it comes to preventing, preparing for and managing crisis situations. National rules and practices tend to focus on the national context only, disregarding what happens across borders. The assessment of the national legal frameworks and current practices across Europe has shown that:
(a)Member States assess different risks;
(b)Member States take different sets of measures to prevent and manage crisis situations, and that such measures are triggered at different moments in time 1 ;
(c)roles and responsibilities differ; and that
(d)there is not common understanding as to what constitutes a crisis situation.
In addition, there is very limited sharing of information and transparency in Member States' preparations for and handling of electricity crisis situations. For instance, when realising that their electricity systems might be under serious stress in the months ahead, Member States often take action in conjunction with their transmission system operators (TSOs), without systematically informing others.
This situation is the result of a regulatory gap. The current EU legal framework (Directives 2005/89/EC 2 and 2009/72/EC 3 ) only sets general objectives for security of supply, leaving Member States to decide how to achieve these. In particular, while the rules allow Member States to take ‘safeguard measures’ in crisis situations, they do not set out how Member States should prepare for and manage such situations.
The current legislation no longer reflects the reality of today’s interconnected electricity market, where the likelihood of crisis situations affecting several Member States at the same time is on the rise.
The problems identified in the impact assessment accompanying this proposal can be summarised as follows:
crisis plans and actions remain solely national in focus;
there is a lack of informationsharing and transparency; and
there is no common approach to identifying and assessing risks.
• Consistency with existing policy provisions in the policy area
The proposed Regulation complements the provisions of the Third Package 4 , which is revised in parallel. The revised Third Package will aim to improve the functioning of the internal electricity market, inter alia by allowing for more flexibility and by limiting the scope for subsidies for generation adequacy, including via a coordinated European long-term resource adequacy assessment. It will also aim to improve system security through better cooperation between TSOs at regional level via the creation of regional operational centres.
The proposed Regulation sets out what Member States should do to prevent and manage crisis situations and how they should cooperate with each other to this end, especially by providing common methods for assessing risks, by bringing more comparability and transparency to the preparation phase and during an electricity crisis, and by ensuring that even in the crisis electricity is delivered where is it needed most. It also provides a framework for a more systematic monitoring of security of supply issues via the Electricity Coordination Group. It contributes to the revised Third Package by ensuring that, even in crisis situations, priority is given to market-based measures and that markets can work as long as possible.
The proposed Regulation replaces Directive 2005/89/EC (the Security of Supply Directive), which offered a very broad framework of objectives to be achieved by Member States in the area of security of supply, but had little operational value. The Directive will therefore be repealed, as will some provisions in the current Third Package that relate to security of supply, notably Article 4 (which requires Member States to monitor security of supply via national reports) and Article 42 (which allows Member States to take ‘safeguard measures’ in the event of a sudden crisis in the electricity sector) of the Electricity Directive 5 .
Network codes and guidelines adopted pursuant to Article 6 of Regulation (EC) No 714/2009 6 set out harmonised principles for operational planning and scheduling processes required to anticipate realtime operational security difficulties. The draft Regulation complements these technical rules by providing administrative and political mechanisms to help national authorities prevent and manage crisis situations in cooperation with each other, while avoiding undue interference with the market and the tasks of the TSOs.
The proposed Regulation builds in particular on the System operation guidelines 7 and the Network code on emergency and restoration 8 , which offer technical rules for TSOs on how to ensure system security, including in emergency situations. Those rules should allow TSOs to deal effectively with most incidents, but they do not in themselves guarantee that Member States are duly prepared for and can manage larger-scale crisis situations, in particular those that extend beyond borders and often require politically sensitive decisions to be made (e.g. on interruption of electricity supply).
The proposed Regulation is consistent with existing legislation in the field of cybersecurity and critical infrastructure. On cybersecurity, Directive (EU) 2016/1148 (the NIS Directive) 9 lays down general rules, while specific rules will be developed as a matter of priority through a network code as foreseen in the revised Electricity Regulation, which will take account of new risks resulting from the digitalisation of energy systems. The proposed Regulation complements the NIS Directive by ensuring that cyber-incidents are properly identified as a risk and that measures taken to deal with them are properly reflected in the riskpreparedness plans. The proposed Regulation complements also Council Directive 2008/114/EC 10 , which established a common procedure for identifying European critical infrastructures ('ECIs') such as e.g. infrastructures and facilities for generation and transmission and for protecting them against terrorist attacks and other physical risks. The proposed Regulation focuses more broadly on how to secure the resilience of the electricity system as a whole and how to manage crisis situations when they occur.
• Consistency with other Union policies
The proposed Regulation seeks to implement the key objectives of the Energy Union, as defined in the Framework Strategy for a resilient Energy Union with a forward-looking climate change policy.
The proposed Regulation is also consistent with the Union's goal to strengthen the Energy Community. As electricity crisis situations might extend beyond the Union borders and comprise also Energy Community countries, the Union should closely cooperate with the Energy Community Contracting Parties when preventing, preparing for and handling an electricity crisis in order to ensure an efficient crisis management within the larger European territory.
2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
• Legal basis
The proposed Regulation proposes measures to prevent, prepared for and handle electricity crisis situations in the EU. The legal basis for the Regulation is therefore Article 194 of the Treaty on the Functioning of the European Union (TFEU).
• Subsidiarity (for non-exclusive competence)
Article 194 TFEU recognises that a degree of coordination, transparency and cooperation in Member States’ policymaking on security of supply is necessary to ensure the functioning of the energy market and security of supply in the Union.
The need for EU action is based on evidence that national approaches not only lead to suboptimal measures, but actually make the impacts of a crisis more acute. In addition, crisis situations are often not confined to national boundaries and may directly or indirectly affect several Member States. Therefore, national action in terms of preparedness and mitigation should not be determined purely at national level, given the potential impact on security of supply in a neighbouring Member State and/or on the availability of measures to tackle possible shortages.
The increasing interconnection of EU electricity markets requires that security of supply measures are coordinated. In the absence of such coordination, measures taken at national level only are likely to jeopardise security of supply in other Member States or at EU level. Situations such as the prolonged cold spell of 2012 have shown that coordinated action and solidarity are vital to ensure that electricity is available where it is most needed. Action in one country can provoke risks of blackouts in neighbouring countries (for example, one country’s unilateral decision to impose an export ban had serious adverse effects on other countries’ electricity and gas sectors). On the other hand, coordination between Member States may open up a wider range of solutions.
The potential for more efficient and less costly measures as a result of regional coordination has not been fully exploited 11 and this is detrimental to EU consumers.
• Proportionality
The proposed Regulation is designed to achieve an adequate level of preparedness across Europe, enhance trust and co-operation amongst Member States, and mitigate the impact on customers in the event of such a crisis. To meet this objective, it offers common rules and principles to be respected, as well as mechanisms for cross-border co-operation. .
The proposal does not involve full harmonisation, with all measures being prescribed at EU level however.
Regional cooperation across Member States is necessary to address the deficiencies of the current system, in which voluntary cooperation is limited to TSOs, and allow for problems to be solved at regional level.
• Choice of the instrument
The evaluation of the Security of Electricity Supply Directive (the main legal act in this area) has established that the implementation by Member States of principles established at EU level has resulted in a patchwork of national rules and practices that differ across the EU.
A Regulation is a more appropriate instrument for ensuring a coherent and transparent implementation of measures to prevent, prepare for and handle electricity crises.
3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS
• Ex-post evaluations/fitness checks of existing legislation
The Commission has evaluated the Security of Electricity Supply Directive by examining its performance against five criteria: relevance, effectiveness, efficiency, coherence and EU added value. The results of the evaluation are reflected in the problem identification in the impact assessment. The main conclusions can be summarised as follows:
– the Directive has been ineffective in achieving its objectives, in particular that of contributing to better security of supply in Europe. Some of its provisions have been overtaken by subsequent legislation (notably the Third Package and the TEN-E Regulation 12 ); on the other hand there are still regulatory gaps, notably when it comes to preventing and managing crisis situations;
– intervention under the Directive is no longer relevant, as its provisions are no longer in tune with the challenges relating to security of supply we face today. As electricity systems are increasingly interlinked, purely national approaches can no longer be considered appropriate; and
– the added value of the Directive has been very limited, as it created a general framework, but by and large left Member States to determine their own security of supply standards.
• Stakeholder consultations
A public consultation on risk preparedness in the area of security of electricity supply (15 July to 9 October 2015) elicited 75 responses, inter alia from public authorities, international organisations (the International Energy Agency), European bodies (the Agency for the Cooperation of Energy Regulators (ACER) and the European Network of Transmission System Operators for Electricity (ENTSO-E)) and most relevant stakeholders (companies and associations). The aim was to have stakeholders’ views, in particular on how Member States should prepare and cooperate with others, with a view to identifying and managing risks relating to security of electricity supply. The main results of the consultation and the responses received are summarised below and are also available on the Commission’s website 13 . The various opinions were reflected in the impact assessment.
The consultation showed that the majority of respondents (companies, associations and governments) are of the view that the current legal framework (the Security of Supply Directive) is not sufficient to address the interdependencies of an integrated European electricity market.
• Collection and use of expertise
The proposed Regulation and the impact assessment were prepared on the basis of a large body of material (see footnote references in the impact assessment). A review of current national rules and practices relating to risk preparedness in the area of security of electricity supply 14 was also conducted specifically for the impact assessment.
During the drafting process, various aspects of this proposal were discussed with Member States and relevant stakeholders in the framework of the European Electricity Regulatory Forum (3-4 March 2016) and the Electricity Coordination Group (16 November 2015 and 3 May 2016).
• Impact assessment
All proposed measures were supported by the impact assessment.
The Regulatory Scrutiny Board issued a positive opinion on 4 November 2016.
The impact assessment looked at four policy options:
0+ improved implementation/enforcement (non-regulatory approach);
1. minimum rules to be implemented by Member States;
Contents
Option 0+ was not taken up, because better implementation and enforcement would be to no avail, as the current legislative framework sets general principles only and gives very broad discretion to Member States as to how to implement them.
Option 1 seeks to establish a greater comparability and transparency across Member States in the area of risk preparedness, but does not cater for the need to enhance cross-border co-operation.
Option 2 addresses many of the shortcomings of option 1 and provides a more effective package of solutions. In particular, regionally coordinated plans ensure that risks are identified at regional level and that consistent measures are adopted to prevent and manage crisis situations.
Option 3 represents a highly intrusive approach that seeks to address possible risks by resorting to a full harmonisation of principles and prescribing specific solutions.
The preferred option is option 2.
The following effects were considered when examining option 2:
The analysis concludes that option 2 will lead to better preparedness for crisis situations at a lower cost through enhanced regional coordination. The results of simulations 15 show that wellintegrated markets and regional coordination during periods of extreme weather conditions are crucial in addressing the hours of system stress (high demand) and minimising the probability of interruption of electricity supply.
Most importantly, a nationallevel approach disregards the contribution of neighbouring countries in a crisis situation, while a regional approach results in better utilisation of power plants and more likely avoidance of loss of load. This is measured through the security of supply indicator 'expected energy non-served' (EENS) which is the electricity non-supplied to consumers due to a black out expressed as percentage of annual demand. When cooperation takes places among Member States the percentage of electricity non-served significantly decreases (EENS goes from a value of 0.36% in a scenario of non-cooperation to 0.02% when regional cooperation takes place).
Enhanced coordination would reduce the overall cost of the system and this could have a positive impact on prices for consumers. In contrast, a lack of coordination on how to prevent and manage crisis situations would entail significant opportunity costs. A recent study showed that the integration of the European electricity market could deliver significant benefits (EUR 12.540 billion in the period to 2030). However, this amount would be reduced by EUR 37.5 billion if Member States ‘go alone’ in pursuing security of electricity supply objectives 16 .
Option 2 will have a positive effect on society at large and on electricity consumers in particular, since it helps prevent crisis situations and unnecessary and disproportionate cut-offs. Crisis prevention and management will be made even more effective by requiring Member States to cooperate effectively and putting in place tools to monitor security of supply via the Electricity Coordination Group.
The measures will also have a positive effect on the business community, as there will be much more transparency and comparability as regards how Member States prepare for and intend to manage crisis situations. This will increase legal certainty for investors, power generators and power exchanges, but also for TSOs managing short-term crisis situations.
Among the stakeholders most affected will be the competent authorities (e.g. ministries, NRAs) as actors responsible for the preparation of the riskpreparedness plans (see the assessment of impacts on public authorities below).
• Regulatory fitness and simplification
The proposal might increase administrative burdens, but only to a limited extent. In particular, national authorities will have to pre-agree on part of their riskpreparedness plans at regional level. However, experience shows that a more regional approach to risk assessment and preparedness is technically and legally feasible, and has important benefits for consumers and the economy as a whole. Since the regional parts of the plans would in practice be prepared by regional coordination centres between TSOs, the overall extra burden for Member States’ administrations would be limited and clearly offset by the practical benefits of such cooperation 17 .
More regional cooperation will also allow Member States to create synergies, learn from each other and jointly develop best practices. Over time, this should lead to a reduction in administrative impacts.
European actors such as the Commission and ENTSO-E will provide guidance and facilitate the process of risk preparation and management. This will also help reduce impacts on Member States.
No new body is being created and existing obligations are being streamlined. For example, the Electricity Coordination Group is an existing body that already meets regularly; the intention is to make it more effective by giving it specific tasks. Furthermore, national reporting obligations will be reduced (e.g. through the repeal of the obligation under Article 4 of the Electricity Directive) and EU-level reporting will take place in the context of existing reports and reporting obligations (e.g. ACER’s annual report monitoring the internal electricity and natural gas markets).
4. BUDGETARY IMPLICATIONS
The only budgetary impact associated to this proposal concerns the resources of the Agency for the Cooperation of Energy Regulators (ACER). This impact is described in the Legislative Financial Statement accompanying the parallel Commission proposal for a recast of the Regulation establishing ACER.
5. OTHER ELEMENTS
• Implementation plans and monitoring, evaluation and reporting arrangements
The Commission will monitor Member States’ implementation of the measures in the proposed Regulation. Where necessary, it will offer to help them make the requisite changes in their national legislation and hold workshops with all Member States (e.g. via the Electricity Coordination Group) or bilateral meetings on the drafting of riskpreparedness plans. If necessary, the Commission will follow the procedure set out in Article 258 TFEU should any Member State fail in its duty to implement Union law.
The Commission will also monitor security of supply in the EU on an ongoing basis in cooperation with the Electricity Coordination Group.
• Detailed explanation of the specific provisions of the proposal
The proposed Regulation contains the following elements:
1. Common rules on crisis prevention and tools to ensure cross-border cooperation:
• Member States should designate a competent authority to be in charge of carrying out the tasks set out in the Regulation, in particular drafting the riskpreparedness plan;
• Member States must draw up risk-preparedness plans, after consulting stakeholders, in order to ensure maximum preparedness for electricity crisis situations and an effective management of such situations should they occur. The plans should be developed on the basis of electricity crisis scenarios identified by ENTSOE and Member States, respectively, and set out the measures planned or taken to prevent and mitigate the scenarios;
• Before adopting a plan, the competent authority should submit a draft to the competent authorities in the region and to the Electricity Coordination Group for consultation. After consultation, the final plan should be sent to the Commission, made public and updated every three years, unless circumstances warrant more frequent updates;
• Plans should consist of two parts, setting out national measures and coordinated measures agreed between the Member States in each region. They should take account of the specific characteristics of each Member State and set out clearly the roles and responsibilities of the competent authorities;
• All measures contained in the plans should be clearly set out, transparent, proportionate, non-discriminatory and verifiable. They should not endanger the security of electricity supply of other Member States or of the Union as a whole; and
• The plans should include measures to ensure that simultaneous crisis situations are properly prevented and managed. They must be agreed in a regional context and include at least:
(a)the designation a regional crisis manager or team;
(b)mechanisms to share, inform and cooperate within a region;
(c)measures to mitigate the impact of a crisis, including a simultaneous crisis situation(e.g. regional load-shedding plans or other mutual assistance arrangements);
(d)any cost compensation schemes linked to the assistance arrangements; and
(e)procedures to carry out annual tests of the plans.
2. Managing electricity crisis situations:
• The Regulation requires Member States to inform neighbouring Member States and the Commission without delay in the event of an electricity crisis situation. They must also provide information on the causes of the crisis, measures taken and planned to mitigate it and the possible need for assistance from other Member States;
• Member States are required to inform the Commission and the Electricity Coordination Group if they have specific, serious and reliable information that an event may occur that is likely to result in a significant deterioration of electricity supply;
• Member States are to cooperate in a spirit of solidarity to prepare for and manage electricity crisis situations, with a view to ensuring that electricity is delivered where it is most needed, in return for compensation; and
• In the event of an electricity crisis, Member States must act in full compliance with internal electricity market rules. Nonmarketbased measures can be used only as a last resort and must be necessary, proportionate, non-discriminatory and temporary.
3. Security of supply indicators and risk assessments:
• The proposal requires ENTSO-E to develop a methodology for identifying electricity crisis scenarios at regional level, considering at least the following risks:
(a)rare and extreme natural hazards;
(b)accidental hazards going beyond N-1 security criterion 18 ;
(c)consequential hazards such as fuel shortages; and
(d)malicious attacks;
• For the preparation of the riskpreparedness plan, ENTSO-E and Member States should use this methodology to identify the most relevant crisis scenarios; and
• ENTSO-E should also develop a methodology for assessing short-term adequacy, namely seasonal adequacy as well as week-ahead to intraday generation adequacy forecasts. Once this has been approved by ACER, it should be used by Member States and ENTSOE in their short-term assessments. The short-term adequacy assessment proposed complements the long-term resource adequacy assessment proposed in the revised Electricity Regulation, which ensures a coordinated European adequacy assessment to assess the need for capacity mechanisms.
4. Evaluation and monitoring:
• In order to ensure transparency following an electricity crisis, Member States affected should carry out an ex-post evaluation of the crisis and its impacts;
• The proposal involves systematic monitoring via the Electricity Coordination Group, of security of supply in the EU.