Interconnecting electricity for
Europe’s sustainable growth!
TSO/DSO Workshop Meeting
Panel #3: Markets and Regulatory Framework
Pierre Bernard, CEO Friends of the Supergrid
San Francisco, 13 April 2016
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Friends of the Supergrid
Europe’s largest industrial alliance for
interconnections
FOSG promotes the policy & regulatory framework
required to enable an European Supergrid
Representing the entire supply chain
We are present in sectors that develop, install, own,
operate and deliver Supergrid infrastructure &
related technology.
 1 million jobs
 > €200Billion annual turn-over
Interconnecting electricity for Europe’s sustainable growth!
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What is the Supergrid?
What is the Supergrid?
•
SUPERGRID:
Offshore wind
Solar
Hydro
• key enabler of SOS
• link between European cities,
• move large amounts of
including RES across Europe
c
power,
What are the benefits?

Integration of RES
 Secure electricity supply
 Efficient electricity market
 Export opportunities for European technology
3
Agenda
● 2 parts
A. Let’s discuss this “Future Market Design”…
B. (Future) New EC Market Design
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Agenda
A. Let’s discuss this “Future Market Design”…
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TODAY: RES target + 27% of final energy
consumption in the EU as a whole < 2030,
BUT: …
ENGIE: - 4.6B€
(-50%)
RWE: - 170M€
(-75%)
E-ON: -7.0B€
(- 65%)
(source: Les Echos)
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WHERE DO WE GO NOW …?
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CHANGES…
Reward
flexibility
RES
revolution
Storage
technologies
Smart cities
Decentralised
generation
Prosumers
Decarbonisation
targets
Europe needs to be
energy independent
EVERY market actor wants something different and NOW
8
But when it comes to change…
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Let’s have a break and go backwards…
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Do you remember the cost of…?
Flat Screen
1999
$15,000
1995 AOL:
5h Base: $9.95, then $2,95/h
NY => Rome:
Coach $
1955
3.046
2016
705
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Cost of RES…
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Facts
-
Cannot do without it…
Climate change
Security of supply
> 60% dependent on NON-EU sources
Permits 7 years ()
Weak Economy  cost of equity…
Difficult political consensus : 28 countries and more…
Fast technological changes
A lot of players  1 VIU
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Smart Market Design…
...Food for thought (I)
TELL PEOPLE THE TRUTH => no cheap transition
TRANSITION DOES NOT MEAN REVOLUTION (even
though…) => transition we can afford
MAJOR STRUCTURAL CHANGES => +/- 50 Y
DIFFERENT POLITICAL CHOICES => Québec vs Europe
DEFINE PRIORITIES => clean, sos, cost, comfort, other…?
ACCEPT MISTAKES => Denmark
NEW PLAYERS => “our” energy landscape is past...!!!!
COOPERATION => cannot do it all
NEW ASSETS => faster depreciation
 IMPOSSIBLE IS NOT IMPOSSIBLE...
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Smart Market Design…
...Food for thought (II)
RETHINK PLANNING
- LT vision / where & how get there
- T&D
- generation
(for now) NO LONG TERM DESIGN => integrate impact
of new techs
NEW REGULATION:
- no regret investments
- new remuneration:
- assets, but also services
- what about full unbundling
- reduce risk of legal challenges
15
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Agenda
B. (Future) New EC Market Design
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The current market design
(20 years from 1st Energy Package)
Significant progress has been made but still…
National
Approaches
•
•
•
The energy mix remains a national competence
Some parts of Europe remain electricity islands
Some Member States have capacity payments
Consumers
•
•
Consumers cannot participate
High Energy prices
Centralised
Generation
•
•
•
Market based on centralised generation
Power market focused on day-ahead market coupling
No real integration of RES
Security of
Supply
•
Strong external dependency
Climate
change
•
Increased CO2 emissions
This power market does not correspond to the current reality!
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Market Design: what to expect?
Position of the European Commission
1
Market Rules
• Urgent need for integrated Intraday & Balancing Markets
• Price signals:
Scarcity pricing: no price caps
Locational signals: New bidding zones
Exit signals
2
Governance
• Establishment of Regional Operation Centers (ROC) with
decision making powers
• Strengthen ENTSOE to ensure stronger TSO cooperation
• Enhanced ACER: more decision making powers to supervise
Internal Energy Market and ensure cross-border cooperation
3
Interconnections
• Strong benefits
• New strategy to achieve 15% Interconnection Target
19
Market Design: what to expect?
Position of the European Commission
4
Renewables
• RES integration:
Balancing responsibility
No priority dispatch
Market based & cost-efficient RES support schemes
• Regional approach for RES development: cross-border
participation in RES support schemes
5
Regional Cooperation
&
Security of Supply
• Increased coordination and cooperation at EU level needed
• Member States to coordinate with neighbors when developing
energy plans
• Need for regional generation adequacy assessments
• Consistent adequacy standards
• Capacity Remuneration Mechanisms:
Based on regional system adequacy assessment
Harmonised design
Open to cross-border participation
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Market Design: conclusions
Key upcoming changes
Markets
- Integrated Intraday & Balancing Markets accelerated
- Removal of price caps to allow for scarcity pricing
- New bidding zones: reflect physical limitations in grid rather than political borders
Governance
Grids
RES
SoS
- TSO cooperation and ENTSOE: Establishment of ROC with increased powers
- ACER: More resources and possibly some extra decision making powers
- 15% Target to be revised
- RES integrated in market: balancing responsibility, priority dispatch, long term hedging products
- Coordinated support schemes
- EU framework for CRMs: Demand response & cross-border participation, avoid dominant positions in concentrated
markets
- Common approach to assess system adequacy: More cooperation but difficult as SoS has a strong national dimension
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New Electricity Market Design
Timeline
25 Feb 2015
15 Jul – 8 Oct 2015
Energy Union Framework Strategy
Consultation on the NEW MARKET DESIGN
18 February 2016
IEA Market Design Report
July 2016
EC Impact Assessment
July 2016
EP Final Report
End 2016: New EC legislative proposals
•
•
•
Electricity Directive/Electricity Regulation
ACER Regulation
Infrastructure Regulation
•
•
•
Electricity Security of Supply Directive
Energy Efficiency Directive
RES Directive
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