Transcript Document

How to define and implement an
energy policy in light of new EU
guidelines for the year 2030?
Charlotte RENAUD
Market advisor – EURELECTRIC
23rd Forum – Energy Day in Croatia
Zagreb, 28 November 2014
EURELECTRIC – a pan-European association with
partners around the globe
EURELECTRIC represents the EU electricity
industry –
all across the electricity value chain
ENERGY POLICY
& GENERATION
ENVIRONMENT
& SUSTAINABLE
DEVELOPMENT
MARKETS
DISTRIBUTION
NETWORKS
RETAIL
CUSTOMERS
What our industry stands for
– our 5 guiding principles
We believe in:
1) A European, integrated approach to the entire power system
2) An affordable energy transition thanks to competitiveness and
cost-efficiency oriented policies
3) Electricity as a major contribution to the decarbonisation of
Europe’s economy
4) Active and empowered customers as the core of our business and
the centre of our innovation policies
5) A market design and regulatory conditions that ensure sufficient
generation and infrastructure investments
ENERGY MARKET INTEGRATION
AND (MORE) PREDICTABLE
POLICIES
MARKETS ARE FRAGMENTED AND
POLICIES ARE START/STOP
Today: internal energy market or x28 chaos?
ETS as the key driver
Strong innovation policy
UK
carbon
price
NL coal
tax
floor
National RES and EE schemes
National carbon price floors/taxes
National capacity mechanisms
What ambition, when?
Early, economy-wide, high ambition
•
Climate is a lower political priority than before the economic crisis, BUT
there is still some priority and therefore some policy ambition
•
The power sector is always the first (easy) target for climate policy
•
Therefore we face a choice:
No ambition
(Not a realistic option
for the power sector)
Low ambition
= few sectors (power)
= stop/start policies
Costs the power
sector investment in
low-carbon
technologies and loss
of market share from
energy saving
High ambition
= whole-economy
= stable policies
Gains the power
sector new market
share through
electrification of
additional sectors;
new markets via
services
EU Council Decision on 2030 climate
and energy policy framework
-
2020: 20/20/20: ETS / national binding / national
-
2030: 40/27/27: ETS / EU binding / indicative
-
2030: 43/45/27: for electricity sector
 EURELECTRIC welcomed the adoption of this ambitious framework
• Lessons learned from 2020 package
• EU ETS as key driver to deliver this objective - clear proposal to
consolidate
• EE and RES targets to be delivered through market-based and costefficient policies
The road to a 2030 framework
It’s not over until the lady sings…
Step 1:
22 Jan 2014: Commission proposals on goals
These are only preliminary recommendations
Step 2:
March 2014: European Council political decision on goals
Politicians can ignore recommendations – postponed decision to
autumn
Step 3:
2015: Commission drafts legislation to implement goals, spread
burdens
The devil is in the details
And new Commissioners might have new ideas
Step 4:
2016-17: Parliament and Council Co-Decision on legislation
The EP definitely has its own ideas
Elections in Member States can mean changes of government
Step 5:
2018-19: National transposition where necessary
More details
The growth of RES, which is necessary to pursue the European
decarbonisation agenda, brings a new reality to power systems
Decarbonisation targets
Breakdown per sector
The necessary growth of RES to decarbonise the power sector implies market adaptations that
have to meet two fundamental requirements of electricity customers across Europe:
• To maximise customers’ value for their money, RES should be developed through
integrated electricity markets while keeping their costs down
• Customers expect that their lights stay on – security of supply is key and should also be
guaranteed in a cost-effective way
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EURELECTRIC’s proposals for a cost-efficient,
market-based transition towards decarbonisation
• Enhancing market
functioning as a “no
regret” option
• Making RES fit for the
market
• Making market fit for
RES
Thanks for your attention!
Charlotte Renaud
Market Unit – Advisor
[email protected]
+32 2 515 10 55
Back-up slides
What does a 40% GHG target mean?
40% across the whole economy
30% compared to 2005
43% compared to 2005
ETS sectors
Effort-sharing sectors
= power and energy intensive industry
= transport, buildings… agriculture etc
?%
electrification signal
power sector decarbonisation signal
CO2 cars
Linear factor
Stability reserve
Transport in
ETS?c
Energy
efficiency
Energy labelling
EPBD
Eco-design
ETS reforms
Done:
Proposed:
Under consideration:
•
•
Market stability
reserve (2021)
•
•
Linear factor
increase (2021)
•
Global aviation ETS
(2016)
Back-loading
(2014)
Include maritime
transport, other
transport fuels (tbc)
Our view: ETS problems and reforms
3 different problems, 3 different solutions
1. Short term: Surplus of 2bn-2.5bn allowances
Solution: Permanent set-aside
2. Medium term: Fixed supply and demand shocks result in
price volatility
Solution: Supply adjustment mechanism
3. Long term: The ETS cap is not coherent with the EU 2050
goal
Solution: Revise the linear factor
Market Stability reserve
Commission has identified the inflexible supply of allowances as
the key item for the allowance surplus
Positive:
- Can support the ETS market balance in case of future economic
shock
- Slowly addresses the surplus
- Built on simple, transparent, robust design
But:
- Commences 2021
- Too slow to address surplus
 2030 ETS reforms are too little too late – we need action
sooner!
The RES increase challenge
21% of electricity mix today to 45% by 2030
EU RES 2013 – approx.
21%
7% biomass
7% hydro
7% biomass
7% hydro
7% intermittent
EU RES 2030 – approx.
45%
a x4.5 increase in intermittent
generation ?
31% intermittent
Europe is on track to reach the 20% RES target, BUT is facing
two important challenges on the road
Costs 
Competitivene
ss
Intermittency
 Security of
Supply
Source: Eurostat
Different non-coherent purely national answers from MS to these challenges
risk further fragmenting the market, endangering the construction of the
internal energy market
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How to strike back the balance between the 3 objectives of
the EU Climate and Energy policy?
Opportunity with 2030
Framework
1. A strong ETS as key driver for RES investments
Environment & Energy State Aid
Guidelines 2014 - 2020
2. Operational integration of RES into the market
3. Cost-effective RES support schemes that
maximize market orientation and minimize
market distortion
Opportunity with 2030
Framework
4. Further Europeanisation and cooperation on
RES development
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Operational integration of RES is necessary, both in the
market and grid aspects
EURELECTRI
C of generators for:
• Responsibility
-
Selling in the market (directly or via
aggregators)
-
Nominating / Scheduling (towards
TSO)
-
Balancing (costs of imbalances)
• Same
obligation
generators for:
for
State Aid Guidelines
•
Aid granted as premium on top of
market price (selling in the market)
•
Standard balancing responsibilities,
unless no liquid intra-day markets exist
•
Not Applicable
•
No
retroactive
measures:
only
obligations for projects under schemes
notified as from 1 July 2014
all
-
Grid connection / usage (fees)
-
Dispatch / Grid access (no priority)
• For existing plants there will
have to be a transition
depending
on
national
circumstances and incentives/
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RES support: Increase cost-efficiency and avoid market
distortions
State Aid Guidelines
EURELECTRIC
A. Increase cost-efficiency by avoiding
overcompensation
–
•
Tenders for investment or operating aid, with
multiannual planning of volumes for investor
visibility
–
Technology-neutral tenders for technologies
that are mature
–
When no tender, apply degression rates if
transparent to investors
B. Avoid market distortions
–
In operating aid schemes, eliminate
payments that distort operational/dispatch
decisions
–
Limit remunerated hours for operating aid
–
Introduction of investment aid (€/MW)
minimizes distortion, can be technologyneutral and facilitates transition towards full
market integration of RES
C. Link support schemes with their stage in
•
Competitive bidding process, but
•
Not for small
wind<6MW)
•
Not if demonstrated less successful
•
Not necessarily technology neutral
scale
RES
(solar<1MW,
When no tender, premium, but
•
Not necessary for solar < 500kW, wind <3MW
•
Premium + “measures to ensure that
generators have no incentive to
generate under negative prices”
•
Investment aid mentioned (but not
explicitly favoured)
•
Differentiation on the basis of capacity
not on maturity (apart from demonstration 22
Before 2020, RES remuneration should thus undergo an
evolutionary process
• Balancing obligations
• Technology neutrality
• Reducing market
distortions
• Tendering of support
Investmen
t aid
FIP /
Green
Certificate
s
FIT
The Environment & Energy State Aid Guidelines provide a solid basis
and set direction for a market based approach of RES technology
development, but allow potential harmful exemptions
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Energy, flexibility and capacity are all needed and should be
properly valued in a future-proof wholesale market design
Energy
Flexibility
Capacity
Short term system
adequacy
Long term system
adequacy
What it does
Delivers energy in the
most cost-efficient way
by having the market
define the system’s
merit order
Enables the system to
respond to short-term
variations in the
supply/demand balance
Ensures long-term
system adequacy e.g., in
the case of extreme
load peaks or backup
intermittent renewable
generation
Market
instruments
Forward, day-ahead and
intraday markets
Day ahead, intraday and
balancing markets,
ancillary services
Market-based capacity
remuneration
mechanisms
Where we are
today
Ongoing energy market
integration with market
coupling and cross
border intra-day markets
(although taking too
long)
Energy market
integration and crossborder balancing
ongoing, grid related
services to be
developed
Rather separate CRM
national initiatives, with
an increasing discussion
on cross-border
participation
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Goal
Efficient dispatch
To maximise cost-efficiency and market orientation, any
capacity market should follow a set of fundamental design
features
Description
Goal
• Overarching goal must be generation adequacy (i.e., firm
capacity without any other political targets)
Product
• Remunerate plant availability/firm capacity
Design
features
•
•
•
•
Geograph
y
Market-based
Technology neutral
Open to new/existing plants
Open to generation/demand response/storage
• Open to cross-border participation, while not distorting the
energy market
The completion of the IEM and coordination of the key elements of market
design are crucial for EU energy policy
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Summary of recommendations
•
Enhance market
functioning as a
“no regrets”
option
Make RES fit for
the market
•
•
•
•
•
•
•
Make the market
fit for RES
•
•
•
•
Fully implement a European energy market through integrated forward, intraday,
day-ahead and balancing markets to ensure incentives for flexibility, including
demand response
Set up more interconnections between national markets
Remove wholesale price caps and regulated end-user tariffs and other distortions in
wholesale and retail electricity markets
Introduce a universal balancing requirement as a first step
Use market procedures such as auctions to make new investments cost-efficient
Adapt existing support schemes and introduce new mechanisms to minimise market
distortion
Post-2020, the ETS should be the main driver for RES investments
Capacity markets, where necessary, should be market-based, technology-neutral,
open to existing plants and new investments, and equally open to generation,
demand and storage
Decentralised capacity certificates or centralised auctions for capacity are the
preferred types of capacity markets
Adopt a regional instead of national approach to capacity markets
All capacity markets must be open to cross-border participation
Evolve towards a market design that delivers a level playing field for all market
participants and properly values energy, flexibility and capacity
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