The reform of European electricity market is the last piece of the Clean Energy Package to be approved. It will have significant impact on wind power producers as well as on their operating environment.
With two more trilogues to go the negotiations are now entering crunch time. But as things stand there are still a number of issues that policymakers need to tackle.
The following recommendations would ensure that the necessary integration of renewables into the market is accompanied by new opportunities to compete on equal footing and the establishment of a framework that accelerates Europe’s transition towards a clean and efficient electricity system.
Maximising renewables contribution to the grid
Wind energy curtailment hit a new record of 5+ TWh last year in Germany (source). Partly because there’s between 23 to 28 GW of inflexible conventional production that keeps generating at all times. 3 to 4.5 GW of that accounts for so-called “must-run” generation that is required for technical network-related reasons. Such arrangements should be disclosed and kept at an absolute minimum. In general, volumes, costs and rationale for all redispatching actions, per technologies, should be reported and made publicly available to inform about the cost of inflexibility of the system. Redispatched units should also be compensated for the service they provide, either via a market or a regulated compensation.
Recommendation (Electricity Regulation):
- Support article 12(2a) in Council’s general approach
- Support European Parliament’s amendment 56
- Support a definition of redispatching that cover both distribution and transmission congestion management in article 2(2z) of Council’s general approach
- Remove reference to “non-firm connection agreements” in article 12(6) of Council’s general approach
Limiting public subsidies to back-up capacities
Today national adequacy assessments are the document used by DG COMP to assess the need for a capacity mechanism. However many fail to acknowledge the contribution of imports/exports to domestic security of supply (source). In an Integrated Energy Market, ENTSOE should be responsible for performing an EU-wide resource adequacy assessment that would become the exclusive basis for introducing a capacity remuneration mechanism (CRMs). The coexistence of national resource adequacy assessments and EU-wide study foreseen by the Council should be limited in time. Otherwise it would maintain the current status quo.
- Support European Parliament’s amendment 97 on Electricity Regulation
EU Member States have spent €32.6 bn in capacity mechanisms since 1998 and 2bn for this year only (source, source). These schemes should be only used as last resort option and temporary. Their design should be reviewed at least every 5 years, and phased out immediately if the latest adequacy assessment demonstrates that the risk for security of supply no longer exists. A maximum contract length of 1 year for existing installations would also avoid the risk of legacy costs to be borne by consumers beyond the mechanism’s lifespan.
Recommendation (Electricity Regulation)
- Support European Parliament’s amendments 97 and 112
Read more: WindEurope position
Incentivising the equal deployment of all flexibility resources
Decentralised demand response and energy storage at commercial and residential level, including electric vehicles, will be essential to integrate large shares of renewables in Europe’s electricity system. To promote the uptake of such business models, it is essential to ensure non-discriminatory access for all decentralised flexibility resources to electricity markets and mechanisms, and foster the emergence of new market players such as aggregators.
- System operators should be incentivised to create a market place and standard products for exchanging flexibility services. It will both ensure the necessary competition to drive down the costs of their provision and send the right investment signals.
- Network tariffs shouldn’t incur double taxation of storage assets for energy intake and feed-in.
- Adequate safeguards should limit the intervention of regulated entities on the storage market with two exceptions: 1) core grid elements, 2) storage assets for congestion management, if they effectively increase the availability of transmission capacity to cross-border trade.
- Expanding and smartening European electricity grids by setting performance targets for network operators and a grid smartness monitoring process led by regulatory authorities and reported into the National Energy & Climate Plans
Recommendation (Electricity Directive)
- Support European Parliament’s amendment 118 and article 31(5d) of Council’s general approach
- Support definition of “fully integrated network components” in article 2 of Council’s general approach
- Support Commission’s proposal to article 59 (1k)
Recommendation (Electricity Regulation)
- Support European Parliament’s amendments 81 and 84
Read more: WindEurope position, Joint statement