The “Clean Energy for All Europeans” Package and the Future Challenges and Opportunities for the Energy Sector Alberto Pototschnig Director ad interim 1 6 th I AEE European Conference Ljubljana, 2 6 August 2 0 1 9
The Clean Energy Package Beyond the Single Energy Market 3 rd Package 2 nd Package “EU-w ide “Speeding up I nstitutional & “Clean Energy” liberalisation Regulatory Package 1 st Package and m arket Fram ew ork” “Meeting the “First com m on integration” Reinforcing decarbonisation rules for the Full m arket opening; unbundling ( including challenge” internal m arket obligation for MSs ow nership) ; Enhance the and harm onised cross- to establish NRAs electricity m arket liberalisation” independent from border rules; design to prom ote industry; legal & strengthened NRA flexibility and functional independence & enhance supply unbundlin g pow ers; establishm ent security of ACER & ENTSOs 1996 1998 2003 2005 2009 201? 2
The Clean Energy Package Objectives . Aims at: . providing the stable legislative fram ew ork needed to facilitate the clean energy transition , thus . enabling the EU to deliver on its Paris Agreem ent contributing to the Energy Union . Three main goals: com m itm ents . Putting energy efficiency first . Achieving global leadership in renew able energies . Providing a fair deal to consum ers 3
EU Clim ate and Energy Targets 2030 2020 Greenhouse Gas -20% -40% Em issions w .r.t. 1 9 9 0 Renew able energy in 20% 32%* final energy consum ption 20% 32.5% Energy Efficiency * Possible upward revision in 2023 4
Renew able Energy in the Electricity Sector Gross electricity generation by source in the EU: EUCO3232.5 modelling (TWh) 4000 3500 3000 3 6 % 5 6 % 2500 2000 1500 4 1 % 2 3 % 1000 500 2 3 % 2 1 % 0 2015 2020 2025 2030 Nuclear energy Fossil fuels Renewables 5
The Clean Energy Package ( CEP) Electricity Regulation ( RECAST) • Contains the majority of new wholesale market rules Electricity Directive ( RECAST) • Contains the majority of new retail market provisions ACER Regulation ( RECAST) • ACER tasks and procedure Regulation on Risk preparedness ( NEW ) • Member States put in place appropriate tools to prevent, prepare for and manage electricity crisis situations Energy perform ance in buildings Directive ( AMENDED) Energy efficiency Directive ( AMENDED) Energy Union Governance Regulation ( NEW ) Renew able energy Directive ( NEW ) 6
CEP: Electricity Market Design Liquid, integrated Better markets information Flexibility Empowerment Level-playing Protection field Sharing generation adequacy Common principles Cross-border capacity allocation Information Regional sharing & Coordination transparency Centres 7
CEP: Electricity Market Design . Speedier and more agile consumer switching of suppliers at a glance . Enabling consumers to access dynamic pricing . Allowing scarcity pricing . Rewarding flexibility for generation, Demand Response and . Coordinated resource adequacy assessments to identify storage . Explicit cross-border participation in Capacity Remuneration adequacy concerns and avoid overcapacity . Common rules on crisis prevention Mechanisms . Enhanced Bidding Zone review process . Maximisation of cross-border capacity and non . Focus on and reinforcement of regional TSO cooperation discrimination between internal and cross-border exchanges . Stronger TSO-DSO cooperation through Regional Coordination Centres (RCCs) . Creation of the EU DSO Entity 8
Energy Transition 3 Ds Digitalisation Decarbonisation Decentralisation OPPORTUNI TI ES CHALLENGES 9
The EU Energy Sector: trends and challenges Uncertainty over Moving tow ards a Future Gas Dem and Low -Carbon Society New uses I ncreased penetration of of Gas non-program m able Renew able Sources SECTOR Gas used for Flexible Pow er Generation COUPLI NG Adequacy Concerns and greater need for Flexibility More liquid, flexible of the Electricity System and integrated Gas Markets More flexible electricity m arkets and Greater engagem ent consistent adequacy of consum ers assessm ents 10
The Flexibility Challenge ( 1 ) Absolute values of the residual load hourly ramps by country (99.9 percentile = 3 σ ) 11 Source: ENTSO-E, Scenario Outlook and Adequacy Forecast 2015
The Flexibility Challenge ( 2 ) I ncreased FLEXI BLE RES Penetration GENERATI ON ELECTRI CI TY Greater Variability STORAGE of Pow er I njection in the Netw orks ELECTRI C VEHI CLES CHARGI NG Electricity System . Most of these resources are/will be Greater Need for Flexibility in the DEMAND-SI DE RESPONSE connected to distribution grids 12
A Changing Paradigm ( 1 ) From a centralised pow er system … Power Transmission Distribution plant 13
A Changing Paradigm ( 2 ) … to a decentralised one. THE CHALLENGE Wind PV integration integration Power Distribution Transmission plant Demand side participation Energy EV storage charging THE OPPORTUNI TI ES 14
A new Role for DSOs . Greater need to operate the distribution grid in an active way to balance more variable injections with flexibility resources Wind PV integration integration Power Distribution Transmission plant Demand side participation Active network Energy EV management storage charging W hich m odel of cooperation? 15
TSO-DSO and TSO-TSO Cooperation Regional and Cross-Regional TSO Cooperation ( Regional Security Cooperation) TSO TSO TSO TSO-DSO Cooperation at Control-Area level DSO DSO DSO 16
Sector Coupling . Closer electricity and gas market and system integration . Power-to-gas technologies allow the use of the gas . Store infrastructure economically to: . Transport over longer distances . This may lead to competition between electricity and power (produced from renewable energy sources) gas infrastructure and their operators 17
Beyond Sector Coupling . More generally, grid and non-grid solutions may compete . e.g. demand response vs grid development to manage in supporting system development and operation local congestion Moreover: . What is the future role of gas ? . What is the role of hydrogen in the decarbonisation path? 18
Regulatory I m plications . Can TSOs and DSOs still act as neutral market facilitators? . Regulatory enabling of Smart Technologies . Demand aggregation: . Regulatory framework (compensation) . Business model (independent aggregators) . Reserve and balancing markets: . Technological neutrality . Market Design (upward/downward reserve, duration of commitment, etc.) to enable wider participation, subject to . Framework of TSO-DSO cooperation minimum performance requirements 19
RES and the I EM: it is so obvious! . A well-integrated and well-functioning Internal Electricity Market is essential for accommodating a greater share of . A well-integrated and well-functioning Internal Electricity RES . Does NOT require full price convergence at all times Market: . BUT must be based on: across the whole EU . Optimal geographical structure (bidding-zone . Optimal network development (optimal sizing of configuration) . Optimal use of the available capacities: intra-zonal and cross-zonal capacities) . How much is made available to the market . How capacity is allocated 20
The EU I nternal Electricity Market The EU internal electricity day-ahead m arket Today: 8 0 % of borders coupled 4 6 borders coupled in a single coupling 3 borders coupled separately 1 2 borders still waiting to be coupled Final goal: EU-wide day-ahead market coupling with implicit auctions 4 M MC = 4 M Market Coupling PCR = Price Coupling of Regions Not coupled yet 21
Price convergence in the I EM A w ell-integrated and w ell-functioning I nternal Electricity Market does NOT require full price convergence at all tim es across the w hole EU … Day-ahead price convergence in Europe, 2014–2018 (% of hours) Source: ENTSO-E and ACER calculations. 22
Price differentials in the I EM … but average price differentials > 1 0 € / MW h beg the question of w hether capacities are optim ally sized, used and allocated! Average and absolute average price differentials on some borders in the EU 2016 – 2018 (€/MWh) Source: ENTSO-E and ACER calculations. 23
I ncreasing cross-border capacities Cross-border capacities m ade available to the m arket increased over the last years Net Transfer Capability averages of both directions on cross-zonal borders, aggregated by CCR – 2014–2018 (MW) Source: ENTSO-E, NRAs, Nord Pool and ACER calculations. 24
Cross-border capacity utilisation ( 1 ) Significant im provem ents in the efficiency of the use of cross-border capacity in the day-ahead tim efram e Share of the available capacity (NTC) used in the ‘right direction’ in the presence of a significant price differential (>1 €/MWh ) on 37 European electricity borders (%) Estim ated Annual Benefits More efficient use of cross-border € 1 billion capacity through “m arket coupling” Source: ACER (2019). 25
Cross-border capacity utilisation ( 2 ) … but there is still scope for im provem ent Estimated social welfare gains still to be obtained from further extending DA market coupling per border – 2017-2018 (million euros) Source: ACER (2019). 26
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