EU Electricity Market Research Articles

Safeguarding EU Policy Aims and Requirements in Smart Grid Standardization

The EU electricity market is changing. We are leaving a decade of liberalization and enter a period in which the sustainability of the system and consumer participation play a more significant role. The application of ICT technology, especially by way of smart grids, is presumed to support these roles. Smart grids may change the face of the energy systems in the EU. They potentially contribute to reducing CO2 emissions, empower consumers and make markets more competitive. However, to what extent smart grids will contribute to these aims depends on how their technology is developed. In turn, standardization largely influences the development of their technology. This study investigates the issue of safeguarding policy aims and requirements in the standardization process of smart grids. How can the EU aims and requirements for smart grids be safeguarded in this standardization process? To establish the existing safeguards, this thesis first addresses the current legal framework of EU standardization and its consequences for the standardization process of smart grids. It subsequently investigates the important role of standards in society and shows that additional safeguards are crucial to ensure the incorporation of EU aims and requirements in the standardization process. The thesis first and foremost brings to light the responsibility of the EU Commission to clarify its aims and requirements in the standardization mandate. Secondly, it proposes the application of the EU principles of good governance as procedural safeguards in the process. Finally, it discusses the possibilities and implications of their application to standardization.

Fault‐ride‐through requirements for wind power plants in the ENTSO‐E network code on requirements for generators

The need for European Network Codes (NCs) was identified during the course of developing the third legislative package for an internal EU gas and electricity market. The first NC that was initiated by the European Commission covers ‘Requirements for Generators’ (NC RfG) (ENTSO-E, 2013). After an extensive debate and drafting process across TSOs, DSOs, manufacturers, generation owners, industrial consumers, NRAs and policy makers, ENTSO-E finalised drafting the NC RfG in March 2013 (Further changes, especially with respect to the fault-current injection by wind power plant (WPP) were introduced during the process of transferring NC RfG to a EU Regulation as result of the ongoing discussions between the European Commission and relevant stakeholders. See the remark in Section 3 ‘Outlook and Conclusion’.). European wind turbine manufacturers represented by EWEA participated strongly in the dialog with ENTSO-E and the stakeholder consultation. A delicate exercise in developing the NC RfG was the appropriate balance between those aspects that need to be defined exhaustively at European level, and the non-exhaustive connection requirements where further specifications are needed at regional level to cover local system needs. Although improvements were seen, significant concerns still remain with the current document, largely focused on the uncertainty from the many non-exhaustive requirements and therefore having to wait for the national Grid Code processes for many parameters. This study explores the need for fault-ride-through capability from a power system security point of view. The requirements stated in the NC RfG, capabilities of WPPs and challenges related to the non-exhaustive requirements of the NC RfG are presented and discussed with the intention to provide technical background information, which may support the national implementation of these requirements.

EU competition law on electricity sector liberalisation

This paper aims to study how competition law helps facilitate the process of EU electricity liberalisation and study the use of competition law on the liberalised EU energy market. This paper provides an overview of competition law regarding to purposes of EU competition law and articles 101, 102 and 106 of EC Treaty on the Functioning of the European Union. The paper explores the role of competition law on EU electricity market liberalisation and focuses on the three main directive packages that transform EU electricity market towards competition. It further explores competition law enforcement that facilitates the structural change in EU electricity sector and discusses how the EU Competition Commission utilise the competition law to decrease market barriers in EU electricity sector. Finally the paper focuses on possible issues for competition law on EU electricity sector, especially on merger and acquisition cases. The last part provides conclusion of the paper.

Toward a Fuller Integration of the EU Electricity Market: Physical or Financial Transmission Rights?

Since transmission rights are one of the key tools for furthering competition and market integration, transmission system operators should be required to auction all transmission rights backed by congestion rents. And the instrument of choice should be financial transmission rights.

The Genesis of EU Electricity Market Opening: Liberalization Effects and Obstacles

The paper focuses on the process of liberalization of the electricity market and its functioning in the EU. The European electricity market is in the middle of its transformation from a monopolistic state-owned production and distribution to privatized markets with various competing firms. The basic objective of liberalization of the electricity market has been the optimization of economic performance and the increase in the efficiency of the electricity sector, with the primary purpose of enhancing the competitiveness of EU economy. The speed of liberalization differs widely across European countries and provides dissimilar results in each country separately. These results are seen in the diversity of electricity price and production efficiency, which covers for the lack of competitiveness. This research is based on the thesis that the liberalization of the EU electricity market will succeed in achieving some of the basic goals defined by EU Electricity Directives. Positive shifts have been achieved in raising the level of service quality, increased efficiency of the sector, reduction of the need for construction and maintenance of reserve capacities, and formal market opening. On the other hand, the realization of particular reform objectives did not result in success. Uniform market prices have not been achieved since there are still large variations in the electricity prices among EU countries, especially between old and new EU members. It seems that the EU internal electricity market is neither unified nor uniform, and there is no real convergence towards a single model. This article provides the research of the extent to which these liberalization goals have been achieved and/or are achievable and the degree of success of the shift from a monopolistic structure to a competitive market structure.

Modeling EU Electricity Market Competition Using the Residual Supply Index

An econometric approach to related hourly Residual Supply Index to price-cost margins in the major EU electricity generation markets suggests that market structure, as measured by the RSI, is a significant explanatory factor for markups, even when scarcity and other explanatory variables are included.

Risk adjusted financial costs of photovoltaics

Recent research shows significant differences in the levelised photovoltaics (PV) electricity cost calculations. The present paper points out that no unique or absolute cost figure can be justified, the correct solution is to use a range of cost figures that is determined in a dynamic power portfolio interaction within the financial scheme, support mechanism and industry cost reduction. The paper draws attention to the increasing role of financial investors in the PV segment of the renewable energy market and the importance they attribute to the risks of all options in the power generation portfolio. Based on these trends, a former version of a financing model is adapted to project the energy mix changes in the EU electricity market due to investors behaviour with different risk tolerance/aversion. The dynamic process of translating these risks into the return expectation in the financial appraisal and investment decision making is also introduced. By doing so, the paper sets up a potential electricity market trend with the associated risk perception and classification. The necessary risk mitigation tasks for all stakeholders in the PV market are summarised which aims to avoid the burden of excessive risk premiums in this market segment.

Liberalization of the EU Electricity Market: Enough to Power Real Progress? Analysis of Ownership Unbundling and the Project for Liberalization of the European Union Electricity Market

The recent initiative of the European Commission regarding the unbundling of the vertically integrated electricity sector throughout Europe, together with the controversy and resistance surrounding it, make the issue of ownership unbundling of particular interest. This article discusses the prior attempts to liberalize electricity markets in California and the United Kingdom and the effects of ownership unbundling on consumer welfare, environmental protection, and energy security. Drawing from both the failure of liberalization in California and the relative success in the United Kingdom, this article concludes that, although necessary, ownership unbundling of vertically integrated electricity markets is not sufficient to foster competitive markets. Regulatory oversight, such as present in the United Kingdom and proposed in the third energy package, is also necessary. Ownership unbundling may also facilitate positive outcomes in the areas of consumer welfare, development of renewable energy, and energy security. The article further examines the current proposal put forth by the European Commission in its third energy package. We conclude that the Independent Systems Operator (ISO) compromise, providing for two functionally different regimes, undermines the objectives of a unifi ed European electricity market and the benefits it would provide.

How may CCS technology affect the electricity market in North-Western Europe?

Abstract The EU electricity market is changing. Electricity demand in Europe is on the rise, the power plant fleet is aging, and a large share of the capacity will need to be replaced in the coming decades. An ambitious target has been formulated for the share of renewable energy, and CO 2 prices are anticipated to increase. On top of this, CO 2 Capture and Storage (CCS) has appeared as an important technology in the transition to a long term sustainable energy supply. This paper discusses the implications all of the above developments for the EU electricity market, with an emphasis on the market North Western Europe. On the whole electricity prices in North Western Europe until 2020 are anticipated to increase, but this may only partly be ascribed to the pending introduction of CCS.

Bidding Behavior When One Bidder and the Auctioneer are Vertically Integrated: Implications for the Partial Deregulation of EU Electricity Markets

When a bidder (referred to as the privileged bidder) is residual claimant to a part of the revenue from an auction with two bidders whose valuations are independently and identically distributed, bidding incentives are changed. Specifically, the privileged bidder will bid more aggressively to increase the auction revenue. Indeed, the privileged bidder is more likely to win the auction and the good is sold for a higher price. However, since the auction is now inefficient, welfare is decreased. These results are of interest for regulators of the EU electricity industry. The extant EU regulatory framework allows for profits from new cross-border transmission lines (socalled interconnectors) to be unregulated and for incumbent Vertically Integrated Utilities (VIUs) to have ownership of generating and transmission activities. When electricity generators have to secure transmission rights in an auction, the VIU, because of its combined ownership of generation and transmission activities, is in the position of a privileged bidder. The VIU will secure a higher profit, while competing electricity generators will earn less because they are less likely to gain transmission rights and, in any case, pay a higher price for it.

Legally Separated Joint Ownership of Bidder and Auctioneer: Illustrated by the Partial Deregulation of the EU Electricity Markets

In the EU electricity industry, many Vertically Integrated Utilities (VIUs) have ownership both of electricity generators and of transmission, hence VIU-owned or allied generators often are bidders in auctions for VIU-owned transmission. In Van Koten (2006) I show that welfare suffers and the holding company benefits - through increased auction revenue - from more aggressive bidding by the allied bidder and that it does not make a difference whether transmission is legally separated from the VIU or not. Here I analyze the regulatory measure of also legally separating the allied generator from the VIU; this measure effectively transforms the VIU into a holding company and prevents the VIU from influencing day-to-day decision-making of the VIU-owned generator and bans cross-subsidization between divisions. I show that such a measure may not improve welfare; the holding company can formulate a simple compensation scheme that does not violate the restrictions imposed by legal separation but induces the manager of the allied generator to bid more aggressively, thereby increasing the profits of the holding company and decreasing welfare, as in Van Koten (2006).

Analysis and Future Prospects for Cross-border Congestion Management Methods for the European Electricity Market

This paper presents an analysis of current and potential cross-border congestion management methods for the EU electricity market. Many currently used techniques are reported and the main aspects of possible future are presented. The main steps of the newly established coordinated auction technique will be reported and an example of a real case for the South European Region will be implemented. Moreover, in order to eliminate loop flows, avoid congestions at the day ahead stage and increase the total transfer capacity of the south UCTE region (countries Greece, Albania and FYROM), it will be shown that Flexible Ac Transmission Systems technology can help market players to get access to more transfer capacity for their transactions, while security margins are being maintained.

Changes in World Electricity: The Eu Electricity Market will be Worth $125 Billion by 1999

Changes in World Electricity: The Eu Electricity Market will be Worth $125 Billion by 1999

Organizing for competition: An economic analysis of electricity policy in the Netherlands

This paper evaluates the developments in the Dutch electricity industry from the economic efficiency perspective from the late 1980s onwards. A reorganization of the sector laid down in the 1989 Electricity Act did not result in the expected efficiency gains. The changes proposed by the government in 1995 and 1996 aiming at reduction of existing inefficiencies are partially inspired by the negative experience but have their origin mainly in the expected liberalization of the EU electricity market. The paper argues that although the reforms prepared by the Dutch government remove part of the current inefficiencies, the benefits of the proposed structure are ambiguous: the ambition to gain a strong position on the European market would lead to a policy that conflicts with a competitive electricity market within the Netherlands as long as international market has not been realized yet.