DISCUSSION 5: ELECTRICITY - END OF THE MARKET
Reflecting on the current situation at the electricity market in Europe, this session was aimed
at answering the question on whether the market will survive new developments or will be
replaced completely and exclusively by the regulated business. The starting point of
discussion was related to the phenomenon of negative electricity prices. While wholesale
electricity market prices have long been decreasing, the phenomenon of negative electricity
prices is slowly becoming a commonplace, threatening proper functioning of the market.
The panelists were looking for main reasons behind decreasing electricity prices and their
historic bottoms. They identified several reasons for the current developments at the
electricity market - decline of fuel prices and persistently low prices of emission allowances.
Stagnating demand for electricity combined growing production from renewables, however,
are among the most important causes of current market turmoil. The panelists have agreed
that growing production of electricity from renewable sources is crowding-out traditional
sources, pushing the expenses up and prices down. On the other hand, prices for consumers
increase due to subsidies paid by states for production of electricity from renewables. In such
an environment, only regulated business with guaranteed prices receives investments, as
panelists believe.
The discussion also touched upon the capacity payments which should ensure that electricity
supply can match demand in the medium and long term. The question was raised whether
they would ensure sufficient electricity supply without distorting competition and trade.
Several categories of capacity payments were identified - targeted mechanisms, from which
only specific operators benefit (i.e. tenders for new capacity, strategic reserves and targeted
capacity mechanisms), and market-wide mechanisms, which are in principle open to
participation from all categories of capacity providers. Almost two thirds of the capacity
mechanisms identified in the European Union are targeted mechanisms. At the same time,
most of them are market-wide. According to the panelists, these mechanisms can increase
security of electricity supply; however, many member states should rigorously assess whether
they are necessary and ensure that they will be cost-effective.
Another question was aimed at reliability of production from renewables. The panelists
agreed that it was difficult to predict how much energy would be produced from renewable
sources. Nowadays, we are still struggling with technological solution to energy storage issue
in order to use renewables fully.
The panelists have also expressed doubts about the possibility of creating a truly harmonized
electricity market in the European Union. According to them, many countries in the European
Union want to maintain their independence in terms of energy mix in order to guarantee their
own energy security and self-sufficiency regardless of European developments. The panelists
believe that the energy sector is currently undergoing an important transformation and energy
sector actors together with the market will have to find a way to adapt to these new
conditions. In line with these predictions, the panelists concluded that the electricity market
will survive, however not in the form we know and observe at the moment.