Annexes to COM(2014)634 - Progress towards completing the Internal Energy Market - Main contents
Please note
This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2014)634 - Progress towards completing the Internal Energy Market. |
|---|---|
| document | COM(2014)634  |
| date | October 13, 2014 |
3.2.3 Smart grids need to be beneficial for the energy system as well as for households and SMEs
Getting the most out of new technologies means breaking down the barriers between wholesale market and retail markets. If consumers of all sizes, including households and SMEs, are to benefit from adjusting consumption and production according to wholesale market price signals, they need to be able to offer their flexibility on the market, directly or indirectly, but always with the freedom of choice.[32] In Sweden this is already a reality, and retail consumers are increasingly opting for dynamically priced electricity contracts.[33]
The job of operating distribution systems will begin to incorporate some of the complexities which only transmission system operators had to face in the past. It means that DSOs would need to invest intelligently, not just in wires, and to deal with local network constraints through markets where flexibility is traded in a transparent way with a level-playing field for all who offer it. It also means that DSOs need to get adequate incentives through tariff Regulation.[34]
Data traffic will increase dramatically in smart grids. Consumers are already legally entitled to decide who has access to their metering data[35], but the NRA or the Member State needs to define clear data management processes to ensure privacy, security and non-discriminatory access. Smart meters will produce detailed and verified consumption data to be used for billing the final consumer. Real-time consumption data from the house, the smart appliance or the electric car do not require verification by the DSO: to create a competitive market for innovative energy services these should be directly accessible to the consumer or any party upon the consumer's agreement.[36]
Different pilot projects give a mixed picture on the interest of consumers in innovative services, and the price reduction of solar panels or batteries is difficult to predict, but it is clear that the integration of renewables and the focus on energy efficiency will transform the way in which electricity is produced, transmitted and consumed. The regulatory framework needs to accommodate the transformation and ensure that it allows consumers to take control over their energy bills in a way that enhances the energy efficiency of the whole system.
4. IMPLEMENTATION AND DEEPER INTEGRATION BASED ON REGIONAL INTEGRATION
Following the agreement by European Heads of State or Government on the importance of completing the internal energy market in 2014, the Commission published an Action Plan for the completion of the internal energy market containing 22 concrete actions to be undertaken, related to the enforcement of existing legislation, the functioning of the retail market and the transition of the energy systems.[37]
4.1 Progress in ensuring enforcement and well-designed public intervention
As to enforcement, the infringement cases for partial transposition of the Third energy package Directives which the Commission pursued since 2011 have borne fruit in urging Member States to put in place the national legislation transposing fully the Directives.[38] The Commission now turns its attention to non-conformity checks in order to verify whether the notified measures by the Member States correctly transpose the Third Package.
Progress has also been made in addressing the threat of uncoordinated and counter-effective national measures damaging the internal market. In the aforementioned Communication on public intervention and in the State aid guidelines for energy and environment the Commission provided guidance to Member States to ensure that their interventions are necessary and proportionate pointing at their pivotal role in making the internal market a success rather than intentionally or unintentionally damaging it. Where justifications for interventions exist, such as for the promotion of renewables, they should be designed to facilitate market integration.
Those Member States who already have capacity mechanism in place (e.g. Greece and Ireland) are now beginning to change them to bring them into line with the Guidance provided by the Commission. Cooperation between the Commission, Member States governments, regulators and transmission system operators will continue to be important on this complex matter particularly in assessing how the gains from an integrated approach can be best achieved. Currently several Member States, including France and Italy, are planning to implement capacity mechanisms, while others, such as Germany, are actively considering developing fall-back mechanisms. Whereas well designed measures can offer a proportionate and effective solution to real generation adequacy shortcomings, badly designed schemes will unnecessarily burden consumer bills and may undermine investments in energy efficiency and new interconnectors and impact our decarbonisation policy.
In its guidance documents, the Commission has underlined the importance of a thorough and objective analysis looking into all possible causes of and all potential remedies for security of supply concerns. Regional cooperation is crucial in this respect in order not to forget possible cross border solutions which may be more effective and less costly. The Commission notes that neighbouring Member States such as France and Spain, the United Kingdom and Ireland, Belgium and the Netherlands, or the Baltic States often have complementary energy mixes with excess capacity in one country and potential deficits in the other. Integrating such markets better and finding common solutions could be cheaper and benefit all. Political commitment in the countries concerned is however a prerequisite to make such common solutions work.
As a minimum requirement, the Commission asks for capacity mechanisms to be open to capacity abroad which can effectively contribute to meeting the required security of supply standards in the Member State concerned. A second requirement is that the capacity mechanisms must promote and reward demand side solutions to the same extent as generation solutions. Flexibility of production and demand must be encouraged so that capacity mechanisms complement in this respect the incentive stemming from variable electricity prices in the day-ahead, intraday and balancing market.
The Commission is undertaking detailed studies on the development of a European generation and system adequacy assessment. These will help identify the adequacy standards which are appropriate in an effectively functioning internal energy market. This work will involve ENTSO-E, ACER and the Member States' authorities, including through the Electricity Coordination Group. The outcome of these studies will provide an objective evidence base for future work by the Commission.
Similarly there are already indications that better cooperation and data exchange alone may not be sufficient to resolve regional congestions or to respond to wider system disturbances in real time. The voluntary regional TSO initiatives that have emerged in response will be a valuable source of information about the effectiveness of regional control centers with well-defined decision making powers of specific operational matters.
4.2 The need for a regional approach
ACER and the ENTSOs have played a key role in the progress towards a functioning internal energy market. The Commission has recently made an evaluation on the first years of functioning of ACER and has concluded that the agency has become a credible and respected institution playing a prominent role in the EU regulatory arena and focusing on the right priorities.[39] But cooperation of and between ACER and the ENTSOs will have to deepen as the integration of markets goes further and regulatory questions are more often of a cross-border nature. The institutional framework needs to be fit to effectively deal with practical regulatory questions that come up.
For ACER and the ENTSOs to function effectively, the active participation of its members is essential. A large majority of the national regulators take part and lead ACER's working groups. The Commission is concerned about the cutting of staff and budgets of the regulators of several Member States, especially as they have seen their tasks being widened over the past years. Whilst the implementation of budgetary policy recommendations under the Stability and Growth Pact must not be compromised, in some countries the regulators appear to be structurally under-resourced[40]. It is equally worrisome that in a limited number of countries the independence of regulators and the required allocation of powers are still not fully in place.
A regional approach has been and will also in the future be decisive for the integration of the European energy market. It allows for immediate results and can stimulate cross-border exchanges, increase security of supply and facilitate the integration of renewables. Often cooperation in a smaller group than the entire EU can go faster and can be better suited to address the particular challenges of the region concerned.[41]
Regional initiatives provide a solid basis for delivering the internal energy market through concrete results that are directly visible. This can take the form of expansion of cross-border network infrastructure, such as the North Seas Countries' Offshore Grid Initiative, which seeks to develop an interconnected high voltage transmission network in the North Seas that will link markets better and facilitate the integration of off-shore wind parks in a secure manner. Another example is the Baltic Energy Market Interconnection Plan (BEMIP) which seeks to end the isolation of the Baltic Region and to integrate it fully into the EU energy markets thus increasing security of gas supplies. Co-operation in Central and South-East Europe is likewise important to create wider options for sourcing gas in the region and reducing dependence on a single source of supply. Co-operation between Greece, Italy and Albania, supported by the Commission, has for example been effective in putting in place an appropriate regulatory framework for the TAP which will bring additional sources of gas from the Caspian region to the EU market.
Regional initiatives are also proving their concrete value in the (early) implementation of network codes. This is demonstrated by the examples mentioned in paragraph 3.2.1 on the market coupling initiative in electricity and the PRISMA auctioning platform for pipeline capacity in gas. Market integration is thus developing from the North to the South and from the West to the East, based on concrete projects initiated at regional level.
Going forward, regional market integration should continue as a decisive step towards the ultimate consolidation of a single energy market across the EU.[42] Significant attention should therefore be paid to enhance coordination of the different regional processes to ensure its ultimate convergence and integration.
4.3 Stepping up our efforts
As Chapter 3 of this Communication has demonstrated, the progress on the completion of the regulatory framework underpinning the market is significant, but efforts need to be stepped up especially in finalizing the electricity network codes and in overseeing their timely and correct implementation throughout the EU.
Most of the 2012 Action Plan has been implemented or is well on track, taking the EU a long way towards the completion of the internal energy market as envisaged at the time of the adoption of the Third energy package. By no means, however, can we rest on our laurels. Even when all rules will be in place, monitoring and ensuring their enforcement and the respect of the level playing field for all actors will be an ongoing effort for authorities at national and EU-level. A consistent and correct application of the rules applicable to the distribution grid, in particular the Third energy package and the Energy Efficiency Directive, taking into account technological developments, is required to ensure that increased smartness brings benefits to consumers and the energy system as a whole.
Going beyond the 2012 Action Plan, it is the Commission's view that additional benefits could be gained by deepening the integration of the internal energy market. The Commission's proposal for a new climate and energy policy framework until 2030 as well as the European Energy Security Strategy makes it clear that further integration of energy markets will be a prerequisite for meeting our medium- to long-term objectives.
[1] Conclusions of the European Council of 4 February 2011, https://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/trans/119253.pdf
[2] See e.g position papers of IFIEC (http://www.ifieceurope.org/docs/20140225%20IE_Manifesto.pdf), Eurogas (http://www.eurogas.org/uploads/media/Internal_market_13PP011_-_Eurogas_Position_Paper_on_the_Internal_Energy_Market_-_24.01.13.pdf), Eurelectric (http://www.eurelectric.org/news/2012/achieving-the-internal-energy-market-by-2014-must-remain-key-priority,-eurelectric-urges/) and BEUC (http://www.beuc.eu/publications/x2013_091_mgo_memorandum-greek_presidency.pdf)
[3] Conclusions of the European Council of 21 March 2014, http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/141749.pdf
[4] Commission's Communication "Making the internal energy market work" of 15 November 2012, http://ec.europa.eu/energy/gas_electricity/doc/20121115_iem_0663_en.pdf
[5] Competition is an important but not the only factor contributing to this decrease. Increasing renewable sources able to produce at zero marginal costs as well as the economic downturn are also important factors.
[6] Commission's Communication "Energy prices and costs in Europe" of 22 January 2014, http://ec.europa.eu/energy/doc/2030/20140122_communication_energy_prices.pdf.
[7] The Commission has addressed this issue most notably with its November 2013 Package on Public Intervention in the energy sector, C(2013) 7243 final.
[8] Study "Benefits of an Integrated European Energy Market" by Booz & Company Amsterdam, page 21, http://ec.europa.eu/energy/infrastructure/studies/doc/20130902_energy_integration_benefits.pdf.
[9] Commission's Communication "A policy framework for climate and energy in the period from 2020 to 2030" of 22 January 2014,
http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52014DC0015&from=EN.
[10] COM(2014)15 final.
[11] Together with a well-functioning market, the introduction of the EU ETS System and the full Europeanization of the carbon market design in 2013 facilitate the transition towards sustainable, low carbon and efficient energy systems.
[12] Commission's Communication, 'European Energy Security Strategy', of 28 May 2014 http://ec.europa.eu/energy/doc/20140528_energy_security_communication.pdf.
[13] Regulation (EU) No 994/2010 concerning measures to safeguard security of gas supply and repealing Council Directive 2004/67/EC, OJ L 295/1.
[14] This includes rules on state aid, environment and the EU commitment to phase out fossil fuel subsidies.
[15] Commission's Communication "Energy prices and costs in Europe" of 29 January 2014, http://ec.europa.eu/energy/doc/2030/20140122_communication_energy_prices.pdf
[16] Study "Benefits of an Integrated European Energy Market" by Booz & Company Amsterdam, page 21, http://ec.europa.eu/energy/infrastructure/studies/doc/20130902_energy_integration_benefits.pdf
[17] See Figure [26] of the SWD "Trends and developments in European energy markets", as annexed to this Communication, SWD (2014) 310
[18] Where there are concerns about a lack of investment signals in a particular region within a wider price zone (generally corresponding to a Member State) this is either a result of insufficient network strength, or a sign of a fundamental economic divergence between the two parts of the price zone. Once network strength and stability is ensured, the geographical location of generation does not in itself affect security of supply. Indeed this is one of the benefits of the internal electricity market. TSOs should be able to procure system support services for a limited period of time and in a regulatory approved manner while the network is being strengthened; however, a regional capacity mechanism within a single price zone would distort market functioning.
[19] Data between 2008 and 2012 show an increase in taxes and levies.
[20] According to Member States' intelligent metering system roll-out plans, based on the obligation of Annex I.2 of Directive 2009/72/EC, by 2020 72% of all electricity consumers will have a smart meter. Solar panels on roofs currently account for around 11,5% in Germany, 5% in Italy of total installed generation capacity; Sources: KEMA (2014) “Integration of Renewable Energy in Europe”, EPIA, pvgrid.eu, Commission.
[21] Staff Working Document on the Implementation of TEN-E, EEPR and PCI Projects, as annexed to this Communication, SWD (2014) 314 and Staff Working Document on Investment Projects in Energy Infrastructure as annexed to this Communication, SWD (2014) 313..
[22] The most popular unbundling model is the model of full ownership unbundling. The ITO-model is applied by approximately one third of the gas TSOs. In electricity, the ITO model is applied by only six TSOs. The effectiveness of the ITO-model is assessed in a Staff Working Document annexed to this Communication, SWD (2014) 312.
[23] See footnote 12.
[24] Staff Working Document on the Implementation of TEN-E, EEPR and PCI Projects, as annexed to this Communication, SWD (2014) 314.
[25] The European Regional Development Fund can also support investments, mainly in less developed regions.
[26] Belgium, Denmark, Estonia, Finland, France, Germany, Austria, UK, Latvia, Lithuania, Luxembourg, the Netherlands, Poland and Sweden. Norway also joined as non-EU Member State.
[27] Commission's Press Release entitled "Progress towards the Internal Energy Market 2014: Pilot project for EU wide electricity trade starts today" of 4 February 2014, http://europa.eu/rapid/press-release_MEX-14-0204_en.htm
[28] Other examples of early implementation of the gas network code on capacity allocation are the Polish GSA-platform and the Hungarian-Romanian RBP.
[29] Regulation (EU) No 1227/2011 on wholesale energy market integrity and transparency, OJ L 326/1.
[30] As defined in Commission Regulation (EU) No 543/2013.
[31] Ofgem's Press Release of 27 March 2014.
[32] Article 15.8 of the Energy Efficiency Directive requires that demand response service providers have access to organised markets at equal terms to suppliers.
[33] According to the Swedish NRA the number of variable price contracts has increased from 4% to 38% between 2004 and 2014. Source: EI, 17 April 2014.
[34] As defined in Article 37.8 of Directive 2009/72/EC.
[35] As defined in Annex I.1(h) of Directive 2009/72/EC.
[36] Article 4.12 of Directive 2014/94/EU on the Deployment of Alternative Fuels Infrastructure requires that consumers are able to contract electricity for an electric car separately. This enables new business models to sell cars with an electricity 'subscription'. When it is possible for a car it is also possible for any appliance in the house.
[37] This was part of the November 2012 IEM Communication. Nine of these actions were specifically targeted at making the retail market work in the various Member States.
[38] As of 22 September 2014 such infringement cases for partial transposition remain pending only against 2 Member States, one of which has recently adopted further legislation, under assessment by the Commission.
[39] http://ec.europa.eu/energy/gas_electricity/acer/doc/20140122_acer_com_evaluation.pdf
[40] See country reports attached to this Communication.
[41] Regional integration has been successful so far. The Nordic countries have shown the way in the electricity sector with an early integration of their markets into NordPool. Likewise, the Pentalateral Forum in the West has initiated ground breaking integration projects in both the electricity and the gas sector.
[42] The EU promotes regional integration in energy also in the context of its Macro-Regional Strategies as well as in the framework of the European Territorial Cooperation ('ETC').