EURELECTRIC Conference
“BUILDING A SECURE AND SUSTAINABLE FUTURE: HOW CAN MARKET INTEGRATION CONTRIBUTE?”
17 March 2010
Hotel Renaissance, Rue du Parnasse 19, 1050 Brussels
Round Table 1
TOWARDS
EFFICIENT ELECTRICITY MARKETS BY 2020:
Challenges, Opportunities and Steps needed
William Webster of RWE, representing the European Federation of Energy Traders (EFET) and
Christian Kjaer, CEO of the European Wind Industry Association (EWEA) joined Session 1 speakers for the round table discussion on efficient electricity markets.When asked to offer his views on how electricity markets should respond to future challenges, and in particular how they should become carbon neutral, William Webster affirmed that the market must be allowed to adjust gradually: solutions such as energy storage or demand-side management cannot be mandated by legislation but need to be left to develop and compete freely, provided that the correct price signals for investments are in place. Coherence between support schemes and various market designs is also vital.
"Integrating markets progressively starting from a core region with a consistent set of rules, with other markets adjoining over time, would be a better approach than pursuing separate regional developments",
he said.
Christian Kjaer supported Mr. Webster’s stance by indicating that investors need to be the ones exposed to investment risks (fuel and carbon risks) and not the consumers. "We need the market to function: it’s about ensuring efficiency and making the least cost for customers". For this to happen, integration of markets via regional developments and investment in both onshore and offshore grid infrastructure is needed. He concluded by calling for a fifth EU freedom - after people, services, goods and capital, notably "freedom of movement of electricity".
Martin Crouch clarified misperceptions about the UK regulator’s "Project Discovery" being somehow against a market driven approach. He explained that if national governments set targets which make it difficult for markets to operate under normal market rules, then it will be necessary for all stakeholders to reconsider what kind of markets will be required to deliver those targets.
Ofgem’s "Project Discovery", he explained sets out options which could establish a more level-playing field for different market players.
When asked by moderator, Stephen Woodhouse of Pöyry Energy Consulting, how ENTSO-E would ensure efficient allocation of capacity, Jean Verseille argued that there will still be a need for cross-border reinforcements for remaining congestions even after markets are integrated. Future ENTSO-E market studies will act as a reference for TSOs to address these issues and to take the right decision on new grid investments, based on the increase in the level of socio-economic welfare they are expected to bring.
There was considerable discussion on the causes of volatile and negative prices and their implications for future market design plans. Whilst more extreme price swings will be experienced as a result of RES integration, their effect on the market will be critical; positive spikes will provide incentives to invest in peak plants, whilst negative spikes will provide incentives to invest in pump storage.
Marcel Cailliau stressed the need for greater acceptance on the side of regulators, governments and consumers that such price spikes are a necessary outcome of market dynamics and should not be capped by regulators, since they provide valuable price signals, which can stimulate active demand-side participation. In the event that these price signals are not sufficient to stimulate the necessary generation investments, the option of introducing capacity remuneration mechanisms could be considered. However, this will require careful risk analysis in order to avoid unforeseen distortions and adverse effects.
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