contributing to the discussion on
how to implement Citizens Energy
Communities.
As part of the governance regula-
tion, the national energy and climate
plans should become valuable tools in
assessing collective progress towards
2030 targets and electrication. Eur-
electric is currently analysing the
draft plans and will advise the Com-
mission based on the ndings. For
instance, it is of critical importance
that these plans are clear about how to
increase the level of electrication but
also that they assess the potential im-
pact of other policy tools on the EU
Emissions Trading System, the Euro-
pean CO
2
market.
Beyond the improvements brought
by the CEP, major investment chal-
lenges lie ahead. In a world with
ramping shares of renewables, a low
level of wholesale price, including an
increase of close to zero or negative
prices, there is a need to ensure energy,
exibility and reliability are properly
valued. In several countries, there are
inadequate price signals both for the
closure of plants and for new invest-
ments, including those that are needed
to ensure security of supply and ex-
ibility. It is unlikely that the CEP will
provide the necessary long-term in-
vestment signals for a cost-efcient
energy transition.
Eurelectric will soon publish its
analysis of the investment environ-
ment in the EU power sector and its
diagnosis of the improvements
brought by the CEP. Under the man-
date of the incoming European Com-
mission, Eurelectric will also focus
on the review of the energy and envi-
ronment state aid guidelines, taking
stock of the great achievements of the
power sector, and the challenges and
opportunities lying ahead.
Infrastructure will also be a key is-
sue: which type of infrastructure
should be deployed and where should
structural funds go? An electric, inter-
connected and digital network will be
the backbone of a society where
transport is increasingly electric,
buildings become smarter and ef-
cient, and where industrial sectors
adopt electrication, clean hydrogen
or power-to-X. This topic will be
critical under the next mandate of the
European institutions.
This is the year of revitalisation.
With new policymakers making their
debut in Brussels, we all take stock of
what was achieved and establish for-
ward looking goals. Who will lead the
electrication agenda?
On 20 and 21 May, in Florence,
utility CEOs and industry captains
will come together with thought lead-
ers, disruptors, customers, policy-
makers, consultants and think-tanks
at this year’s Eurelectric Power
Summit to discuss the multi-level as-
pects of “New Leadership”. Climate
change, customers’ proactivity, in-
dustry adaptations, technological in-
novations – all have a say about to-
morrow’s New Leadership.
Blandine Malvault is Advisor Whole-
sale Markets & Network Codes, Eur-
electric; Marion Labatut is Eurelec-
tric’s Director of Policy Issues.
T
he Paris agreement has set clear
objectives to limit the rise of
global temperatures and to pur-
sue efforts to stay below 1.5°C. The
European Union (EU) has so far com-
mitted for 2030 to a reduction of emis-
sions of at least 40 per cent below 1990
levels, while establishing targets for
energy efciency and renewable en-
ergy sources (RES).
In view of dening its trajectory
towards 2050, the European Com-
mission published its ‘Strategic
long-term vision for a prosperous,
modern, competitive and climate-
neutral economy’, last November.
The document outlines six scenarios
for 80 and 90 per cent greenhouse gas
(GHG) emissions reductions and two
scenarios where Europe moves to-
wards carbon-neutrality by 2050.
Change and commitment are also
visible at the level of Member States.
While Sweden has pledged for car-
bon-neutrality, Austria has an-
nounced to have a 100 per cent re-
newable production of electricity by
2030. France has also introduced
legislation to achieve carbon-neutral-
ity by 2050.
The electricity sector is leading
Europe’s energy transition. Today, 60
per cent of the electricity produced in
Europe comes from carbon-neutral
sources and the EU electricity sector
forcefully spearheads the energy
transition. Speeding up its own decar-
bonisation process, the industry has
pledged to become carbon-neutral
well before 2050 and to help other
sectors decarbonise through electri-
cation. This will require massive in-
vestments throughout Europe and
rely on the involvement of govern-
ments and regulators to ensure speedy
implementation of the Clean Energy
Package (CEP). The different starting
points of Member States in terms of
energy mix will also have to be taken
into account to ensure a fair and in-
clusive transition. The commercial
availability of transition-enabling
technologies will also be critical.
Eurelectric’s recent ‘Decarbonisa-
tion Pathways’ study nds that the
electrication of transport, buildings
and industry is the most sensible way
to curb emissions. In practice, this
means that to achieve deep decar-
bonisation of the EU economy, 60 per
cent of all nal energy consumption
has to be electric. To get there, elec-
tricity will massively turn to renew-
ables. By 2045, the electricity gener-
ated from RES is indeed expected to
be over 80 per cent.
Eurelectric’s study shows the mag-
nitude of the investments needed to
deliver on this journey. On average, a
total capital investment of €89-111
billion per year in generation and
storage will be necessary. According
to the European Commission Long
Term Strategy, if Europe moves to-
wards reaching net zero emissions by
2050 additional annual investments
in power grids will amount to around
€90-100 billion.
Over the past few years, there have
been efforts to establish a single Eu-
ropean electricity market that allows
for price signals to trigger invest-
ments. Some headway has certainly
been made. For instance, the 2009
Third Energy Package introduced
network codes to harmonise whole-
sale market rules, improve cross-
border capacity management and
streamline system operation.
Yet, there is still a patchwork of
nationally regulated energy systems,
which hinders the prospect of a real
level playing eld at European level.
National solutions are mostly a real-
ity for what concerns support
schemes for RES, capacity mecha-
nisms, generation taxes and retail
price regulation.
The recently adopted Clean Energy
Package continues to improve the
level of integration in the European
electricity market. Miguel Arias Ca-
ñete, EU Commissioner for Climate
Action and Energy, celebrated the
agreement, saying: “The agreement
on the future electricity market design
is a vital part of the package. The new
market will be more exible and fa-
cilitate the integration of a greater
share of renewable energy. An inte-
grated EU energy market is the most
cost-effective way to ensure secure
and affordable supplies to all EU citi-
zens. The new rules will create more
competition and will allow consum-
ers to participate more actively in the
market and play their part in the clean
energy transition.”
The functioning of short-term mar-
kets is also signicantly improved by
the CEP. It notably: ensures the non-
discriminatory access to balancing
markets; requires participants to
manage all imbalances; and offers the
possibility to act in the market either
individually or through aggregation.
These changes are key in a system
where variable RES play an increas-
ing role. Market players and consum-
ers must get the right signals to pro-
vide exibility and be remunerated
for this service. Moreover, the CEP
establishes a clear framework for the
implementation of capacity mecha-
nisms, which requires adequacy as-
sessments (analysis of the security of
supply situation) being made at both
national and European level.
Nevertheless, a number of provi-
sions in the CEP need further clari-
cation. This is particularly the case
with those related to capacity alloca-
tion and congestion management. It
has been emphasized in the two last
editions of ‘ACER Market Monitor-
ing Report’ that interconnectors have
not been utilised to their full potential.
Therefore, the electricity regulation
of the CEP introduced an obligation
on Transmission System Operators to
allocate a minimum of 70 per cent of
interconnector capacity to the market
to maximise the benets of market
integration. Yet, Eurelectric and other
stakeholders cautioned against such
an approach throughout the legisla-
tive process, arguing that cross-border
capacities should be maximised in a
cost-effective manner. It is unsure
if this ‘one-size-ts-all’ approach will
ensure the most efcient use of inter-
connection capacity.
The CEP recognises the central role
of distribution system operators
(DSOs) in the energy transition. With
90 per cent of new renewables being
connected to distribution networks
and the planned development of
electric vehicles, DSOs will be the
ones enabling decarbonisation and
electrication of the economy. The
recent EY report developed in coop-
eration with Eurelectric outlines dif-
ferent stages of the DSO evolution
towards new business models sup-
porting the transition. The integration
of decentralised and new sources, the
access to exibility through new
platforms and the full digitalisation of
the grid are the new frontiers of distri-
bution system operation.
A clear sign of this is the creation of
the EU DSO entity. This novel Euro-
pean organisation for distribution
system operators will contribute to
the drafting of new network codes,
especially in the area of exibility and
cyber security.
With the CEP, consumers are also
put at the centre of the clean energy
transition. The right to self-produce
and self-consume is enshrined in the
new legislation, together with the
customer’s access to a range of tools
to value their exibility. For instance,
the Electricity Directive allows the
development of innovative demand
response services, giving consumers
control over their electricity con-
sumption. Moreover, it provides a
clear framework for demand response
aggregators to operate in the electric-
ity market, making them responsible
for the imbalances they might cause.
This last provision allows for an ef-
cient overall framework.
The CEP also introduces the concept
of “Citizen Energy Communities”
and “Renewable Energy Communi-
ties”. These Communities will,
among other things, give consumers
the opportunity to organise them-
selves and invest in their own means
of generation. Eurelectric welcomes
the new framework set up by the CEP
in this regard, as it elaborates key
provisions for an efcient develop-
ment of Energy Communities.
While acknowledging the participa-
tion of a new category of actors in the
market, the text also requires that they
are put on a full level playing eld
with other actors. Energy Communi-
ties are therefore subject to fair, pro-
portionate and transparent procedures
and to balancing responsibility.
Moreover, they shall be subject to an
appropriate network tariff reective
of any use of the distribution grid.
The text also requires that consum-
ers who are part of such structures
should be entitled to maintaining their
rights and obligations as nal con-
sumers. Some clarications will still
be required when it comes to the im-
plementation of these new provisions,
especially when many Member States
already have some communities in
place. Eurelectric is actively engag-
ing in this assessment and will soon
publish its analysis.
The actual implementation of the
CEP is now critical. The European
Commission is working on the re-
quired implementing/ delegated acts,
and Member States and national regu-
lators must also follow suit. Eurelec-
tric will monitor the implementation,
for example we are currently actively
THE ENERGY INDUSTRY TIMES - MAY 2019
Energy Outlook
14
Europe’s electricity
sector has identied
its priorities
and key policy
recommendations
with regard to the
different elements
of the Clean
Energy Package
(CEP). Eurelectric
elaborates on the
key CEP objectives
and outlines what
it sees as the main
drivers and enablers
to achieve these
objectives.
Blandine Malvault
and Marion Labatut
Bringing electricity
markets closer together