As a first major step in implementing the EU Energy Union strategy, the Commission has today published a package of policy papers relating to various aspects of electricity market development.
A separate legislative proposal amending the EU Emission Trading (ETS) Directive to implement the agreed 40% emission reduction target by 2030 is part of the "Summer Package".
The rapid increase of variable and non-market based renewable electricity has put the current energy system and the electricity market under major stress and has given rise to generation adequacy concerns in various countries. Uncoordinated national policy measures to mitigate those concerns have again led to market distortions. Therefore the Commission has today launched a public consultation to collect input from governments, industry and other stakeholders on how to develop the existing EU energy market design.
The vision of the Commission for the transition of the electricity system, as presented in the consultative document, is very much in line with Fortum's thinking. Indeed, the focus should be placed on full implementation of existing legislation (including network codes and other market rules) and further improving the existing market design. Positively, the Commission clearly calls for more market including abolishing price caps, regulated prices and allowing generators to enter and leave the market based on market conditions rather than regulation. Creating level playing field between renewable energy and other technologies is an essential pre-requisite for healthy market development.
As the European Commission Fortum also emphasizes the following focus areas for sustainable development of a competitive electricity market:
- Investments in missing electricity transmission infrastructure, both cross-border and internal
- Full and rapid integration of renewable energy into electricity market (level playing field)
- Proper valuation of the increasingly indispensable flexible generation in the market
- Integration of wholesale and retail electricity market with a view to allow the electricity system to become smarter through active customers and new service offering
- Enhanced regional electricity market cooperation and infrastructure development including the development of regional TSOs and enforced regulatory collaboration
- Developing common EU level standards and rulebook to assess and address generation adequacy challenges at regional level.
We consider the 21 questions presented for public consultation (see link below) as very relevant. We are looking forward to further discussions on the electricity market design as well as the 2016 forthcoming legislative proposals to implement the necessary improvements.
Focus on retail electricity market is also welcome. The Commission points out that even though electricity plays smaller and smaller role in consumers’ bills, consumer prices are still increasing due to various fees and levies used for financing different subsidies as well as taxes. These, together with still existing regulated prices make it difficult to further integrate the wholesale and retail markets and to provide end-consumers signals from the wholesale market that would be needed to promote demand-response, among other things.
Finally, the summer package addresses also recommendations on renewable energy self-consumption. Distributed generation has grown a lot which is positive as such. One of the main reasons behind this development is the growing difference between the wholesale and retail electricity prices. Proper attention should be paid to incorporation of distributed generation into the market as well as equal distribution of network and policy costs and taxes that today form part of the consumers’ bill.
A legislative proposal to amend the ETS Directive as part of the summer package is also very welcome. Following successful finalization of the negotiation on the Market Stability Reserve mechanism the next step is to amend the ETS Directive to implement the necessary changes in line with the 2030 energy and climate deal in October 2014.
For more information, please contact:
Merja Paavola, Vice President, Corporate Relations, Fortum
Tel. +358 1045 29255, firstname.lastname@example.org
For more information on the EU Energy Union "Summer package":