Chapter 1 - Security of Supply
- New factors in many of today’s markets may put security of supply at risk. Variable generation is having a significant impact on market outcomes. Consequently, many markets today face a paradox: they need back-up capacity to secure electricity supply for customers, but do not provide the right market incentives to ensure that such capacity remains online or that the necessary investments take place. More flexibility is also needed in the power system to respond to increasingly sharp, short-term variations in the market.
- Energy-only markets remain the reference for the completion of the internal energy market (IEM). However, since in many markets the introduction of a capacity element is becoming increasingly important, EURELECTRIC recognises that properly designed, centralised and decentralised capacity markets are an integral part of future market design. Conventional generation, renewables, demand response and storage should participate in energy and capacity markets on an equal footing and be remunerated in the same way for the energy, capacity and flexibility they provide.
Chapter 2 – Internal Energy Market
- The cornerstone to all market developments in Europe is the completion of the internal electricity market to optimise the use of assets across Europe. Significant progress has been achieved with the day-ahead market coupling, but further progress is needed regarding the development of robust cross-border intraday and balancing markets to ensure that the system remains balanced as the share of renewables continues to grow.
- A more efficient operation of existing interconnections and an increase in interconnection capacity is needed in order to integrate the power markets, to facilitate the integration of renewables, and to enhance security of supply. The need for new transmission lines should be decided on a case-by-case basis following a positive cost-benefit analysis. Special attention should be paid to the least connected regions.
- Wholesale prices continue to linger on a low level compared to the levelised costs of technologies, leading to investment dilemma as well as mothballing and decommissioning of existing capacity. The following actions should be prioritised to improve the business environment:
- completion of the internal electricity market;
- review of the market design;
- completion of the internal electricity market;
- Further steps should be taken to provide more transparency and to communicate to national governments and regulators the need to free the power bill from unrelated taxes and levies.
Chapter 3 – Energy efficiency
- EU electricity consumption has decreased steadily from 2008 to 2013, which can be attributed to the economic recession, structural changes in the economy and improvements in energy efficiency.
- Electricity is on track to becoming a carbon neutral energy carrier and if used more widely to replace fossil fuels in transport and heating, more electricity can actually mean more energy efficiency, and above all, reductions in greenhouse gas emissions.
Chapter 4 – Decarbonisation
- Changes in the power mix and decrease in demand are contributing to a decline in CO2 emissions reductions in the power sector.
- EU ETS reform measures such as the implementation of a Market Stability Reserve and the revision of the EU ETS Directive are expected to have a bullish effect on the price of ETS allowances and lead to further fuel-switching to low carbon sources in the future.
- The success of the reformed EU ETS will depend on ensuring consistency between the other elements and targets of the 2030 Energy and Climate Framework, as well as developing an adequate governance framework to support the progress towards the agreed 2030 targets. Investments in renewables should be driven by market signals and renewables should be fully integrated into the market.
- Progress in electrification would enable decarbonisation in Europe. While the penetration of electricity-powered vehicles (EV) is on the rise, the increase is focused on only four markets that account for more than 80% of all EV registrations in the EU in 2014. Stronger commitment to electrification by the European Commission and the Member States is needed in order to ensure that not only the electricity mix, but also important sectors such as heating, cooling and transport, will be decarbonised.
Chapter 5 – Innovation
- There is significant potential value in power sector innovation. Accelerated innovation in power supply technologies and business models for energy efficiency could be worth €70 billion to the EU economy in 2030. Additional benefits are also expected in energy security, lower system costs, and consumer convenience.
- The ongoing transition requires significant contribution from the utilities to R&D and innovation. An enabling policy framework and funding possibilities at the EU level are therefore crucial. Innovation being recognised as one of the key pillars of the Energy Union should accelerate the process.
- The current evolution of European smart grid projects shows that there is room for further investment. In this respect, R&D and innovation funding in the EU will play an important role to bring innovation to the market. In order for European utilities to fund innovative projects closer to the end user, innovation funding should be rationalised (both throughout the EU and within Member States), while national regulatory authorities must specify better innovation reward schemes in order for network companies to keep up the pace in terms of innovative solutions.