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07 June 2017

The organisation of the future electricity market at the heart of the Clean Energy Package


Discussions on the “Clean Energy Package” are currently in full swing in Brussels and Strasbourg: in the European Parliament, the rapporteurs for the renewable nergy directive and for the regulation on the Governance of the Energy Union already released their first draft reports, and the remaining texts should follow in the coming weeks. This is the opportunity for UFE to re-examine the issues related to the Directive and the Regulation on the electricity market, for which Krisjanis Karins (PPE) is in charge of drafting the report on behalf of the ITRE Committee.

These directive and regulation are at the heart of the regulatory organisation of the European electricity sector and its value chain: their provisions range from wholesale to retail markets, transmission and distribution. Their evolutions are therefore not only crucial for the future of the sector, but also for the whole energy transition.

A framework tailored for long-term investments is needed

The market design should firstly address the lack of medium- and long-term price signals in order to keep developing renewable and conventional means of production. The European Commission’s goal to improve the functioning of short-term markets, in the continuation of the implementation of network codes, is well-intentioned. However, this alone will not be sufficient to tackle the major issue of long-term investment signals. Further thinking on the energy market design is therefore needed. The European Commission’s proposal recognises capacity mechanisms, but contains unnecessary restrictions, which are likely to make them at best less efficient, and at worst inoperative. A European approach that would introduce key principles for the functioning capacity mechanisms (market approach, non-discriminatory, technology neutral and open to cross-border participation) is much needed. Here is a key issue that could be addressed by Members of the European Parliament.

Clarifications are needed to enable the development of aggregation and demand response

The participation of demand and aggregators in the various market mechanisms is a second major issue. The European Commission is willing to support the emergence of independent aggregators, but the rules proposed will not allow the development of a stable model, since they forget to outline that, for all actors, electricity must be produced or paid in the first place, in order to be sold! The experience of European countries that succeeded in implementing a model for the emergence of independent aggregators, such as France, could help providing best practices at European level so as to adjust the proposed framework.

Regarding security of supply, operational and political responsibilities cannot be dissociated

To improve market integration, UFE supports the initiatives for a better cooperation at regional level. In the light of the increasing development of decentralised means of production and the subsequent importance of issues related to distribution networks, UFE welcomes the creation of a European entity that will allow all Distribution System Operators to participate in drafting rules for the internal market of electricity.
However, harmonisation should be driven by collective economic gains, and cannot be an end in itself. In this regard, the European Commission’s proposals related to the Regional Operational Centers, which would be assigned several functions currently carried out by Transmission System Operators, deserve further discussions: UFE considers that the dissociation between operational and political responsibilities is not desirable to ensure the security of supply, the risk being that no one will bear the responsibility!
There are many issues to be debated in the Clean Energy Package, and parliamentary debates on the electricity market directive and regulation to be held soon will reflect this density!

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The Union of the French Electricity Industry is the trade association of the French electricity sector. We bring together companies from the whole value chain of the electricity industry.

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