Internal Energy Market: Stronger leadership is needed to make market integration work

News Article

The completion of the IEM is a clear no-regret option for Europe’s future energy system. Well-functioning energy markets supported by a meaningful CO2 price will underpin Europe’s transition to a low-carbon economy while ensuring a secure electricity supply at the lowest possible cost. EURELECTRIC has therefore consistently pushed for the swift implementation of the 3rd Energy Package and the integration of wholesale markets across all timeframes.

However, slow implementation of existing energy market legislation and continued market distortions have caused serious delays in the market integration process. Today’s Communication from the European Commission recognises this, but underplays the scope of the challenge and does not go further in tackling the root causes of the implementations problems.

EURELECTRIC calls for stronger leadership from the European Commission to put Europe back on track in completing the IEM. It is time for action: the delay in market integration is an important cause for the difficult situation the market is in right now.

EURELECTRIC sees four main areas for concern:

  • EURELECTRIC believes that market integration should focus in particular on developing robust cross-border intraday and balancing markets, to ensure that the system remains balanced as the share of renewables continues to grow. Yet the network code on electricity balancing is currently not ambitious enough and the planned European cross-border intraday platform is facing continuous, unacceptable delays. To avoid further delay, we suggest implementing certain ‘quick-wins’ on some NWE borders where poorly implemented and unworkable intraday markets exist or clear improvements are possible by end 2014.
  • More generally, we see the need to discuss and possibly review the governance process for developing the network codes, to strengthen stakeholder involvement and ensure convergence across Europe. The implementation of the network codes is the backbone of the market integration process. We remain strongly concerned that ENTSO-E is given extensive power in elaborating the network codes, despite being an interested party.
  • Building more interconnectors is absolutely critical for the furthering of the IEM, in particular as the growth in RES leads to more cross-border trading. EURELECTRIC is thus overall pleased to see the push made by the European Commission in this respect. Yet, we believe that the need for new transmission lines should be decided on a case-by-case basis following a positive cost-benefit analysis.
  • Energy-only markets remain the reference for the completion of the IEM. However, the growth of renewables, which is necessary to pursue the European decarbonisation agenda, brings a new reality to power systems. In many markets the introduction of a capacity element is becoming increasingly important. In this context, EURELECTRIC recognises that properly designed centralised or decentralised capacity markets are an integral part of a future market design. EURELECTRIC supports capacity markets that ensure a level playing field for all market participants (conventional and RES generation, demand, storage). Our recent proposals for capacity market design are available here