Integration of regional electricity markets
Lessons learned from EU experience
Sarin Abado, Austria
Ashgabat International Energy Charter Forum
30-31 May 2017
Overview
 The making of a single EU electricity market
 Lessons Learned
 Conclusions
The making of a single EU electricity market
How it all started
 One of the first core objectives of the European
project was the development of a common market
 Principle of 4 „freedoms“ - free movement of goods,
services, people and capital
 Vision of eliminating barriers between member states
and cross-border cooperation
Timeline
1951 - 1970
Start of European cooperation/integration based on post-war energy needs
1970 - 1986
A number of severe energy crises demand increased European cooperation and common policy measures
1986 - 1992
Single market and liberalisation are discussed
1990s
Creation of the EU
Growing importance of environment/renewables
Gradual liberalisation of energy markets
2000 - today
Three goals:
Sustainability
Security of supply,
competitiveness
Energy policy to become EU
competence
Why integrate markets?
Higher efficiency
•power can be sourced from where it is cheapest to produce
Increased power system security
•larger systems are more robust and can accommodate more
diverse energy mix (renewables)
Enhanced security of supply
•primary energy sources are more diversified
Increased competition
•more choice for consumers / cheaper energy bills
How we are getting there
First Package
(1990s)
- Gradual
introduction of
competition
- First
unbundling
requirements
Second
Package
(2003)
- Further
unbundling
- Third party
access
- Need for
independent
Regulators
- Retail
liberalisation
Third
Package
(2009)
- Further
unbundling
- Definition of
role of
national
regulatory
authorities
- Creation of
ACER
- Network
codes
?
The main pillars of open markets




Liberalization
Unbundling
3rd Party Access
Governing Institutions
Governance
EU Institutions
Florence Forum
National Regulatory Authorities
ERGEG
ACER
TSOs
ENTSO-E
Regional Initiatives
 Launched in 2006 by the European Energy Regulators
 Rationale: create regional markets first before
merging into one single market
 Integration of fragmented national electricity markets
is an interim step on the way to the single market
 Europe is divided into 7 electricity regions and brings
together all relevant market participants of each
region
Regional Initiatives
Baltic Region
Baltic Region
Central West Region
Central-West Region
Central-East
Central East Region
Northern Region
Region
Northern Region
Central-South
Central South Region
South West Region
Region
South-West Region
France, UK and Ireland Region
France, UK and Ireland Region
Tools for linking infrastructure
across regions
 EU-wide Ten Year Network Development Plan (TYNDP)
 Regional Investment Plans
 Identification of Projects of Common Interest (PCIs)
 Interconnection Targets
Making cross border trade a reality
 Legally binding EU-wide network codes to set the
rules of the game
 Market coupling as the central tool to achieve market
integration
 Net Transfer Capactiy versus Flow based market
coupling
 Inter TSO compensation for cross border flows
Lessons Learned
Lessons Learned
Market Liberalization is a prerequisite for market integration
 It doesn‘t happen over night
 Requires appropriate regulatory framework and
strong enforcement
Lessons Learned
Trial and Error is part of the game
 Several waves of reform are needed until it works
 Step-wise approach allowed for „learning by doing“
Lessons Learned
Top-down and Bottom-up Strategies are both needed
 A regional „vision“ helps committing players to the
joint project
 To move towards the fulfillment of common goals,
well designed bottom-up initiatives are also needed
Lessons Learned
A region-wide common regulatory framework is key
 A common market only works if all players adhere to
the same rules of the game
Lessons Learned
It‘s difficult without centralized governance institutions
 Someone needs to set the rules and oversee the
developments centrally
Lessons Learned
Enhanced Security of Supply
is not the only benefit of a regional market
 Open markets and free cross border flows enhance
competition, bring down prices, reduce losses and
offer more choice for consumers
Lessons Learned
Consumers are important to make market integration work
 Active consumers help fostering competitive markets
 Communication and consumers information is key
from early on
Conclusions
Conclusions
 Market integration requires political will
 A top down vision and robust regulatory framework is
needed
 Regional cooperation and governance are key in
building regional markets
 The process takes time
 But customer benefits can be large and security of
supply significantly enhanced
Thank you for your attention
[email protected]