Is Europe heading towards a seamless transmission system for electricity?
by Nicolò Rossetto (FSR)
The internal market for electricity: not just a story of market coupling
The EU claims to have an internal market for electricity already in place. Nowadays, most of the national power markets in Europe are coupled for the day-ahead transactions.
Nonetheless, are we sure that the European set of grids and power plants is operated as a single seamless system?Are national borders disappeared for market operators? Are all plants in all countries of the continent not discriminated when the market’s merit order is defined? Is operation of the European interconnected grid for electricity promoting the efficient use of all available resources, included the renewables installed in the last few years?And finally, are we sure that extreme events like the cold spell of January 2017 are already addressed with the highest levels of service reliability?
These questions must be taken into account because an electric market of European size can work well only if:
- the system is coordinated well enough across borders;
- there is a clear enough framework for the allocation of the costs and benefits of a European-wide coordination;
- there is a real spirit of solidarity expanding beyond day-to-day cost and benefit responsibility.
To prepare your mind to these fascinating topics, you could take a look back at our previous report on the future of the European TSOs published in 2015. There you can find answers to the questions:
- What are the main forces driving the deepest changes in the power transmission industry?
- What are the alternative futures the European TSOs will face in the coming decades?
Missing pillars and roadblocks on the path towards an integrated and decarbonised electricity system in Europe
The establishment of a seamless electricity transmission system and the completion of a single market for power in Europe are currently hindered by the lack of adequate answers to several, often basic, questions concerning the coordination of actions and decisions, the sharing of costs and benefits, and solidarity beyond costs and benefits.
The absence of these three core ‘pillars’ explains, at least partially, why the European electricity system is affected by numerous critical issues. In some cases, the EU is gradually developing solutions and moving forward. Unfortunately, in others it is not. Diverging prices for electricity and ancillary services, on the one hand, and a slow and expensive transition to a low-carbon energy system, on the other, are the consequences.
In at least two cases, the EU is facing ‘roadblocks’ that have become more and more apparent in recent years. They are:
- Redispatching actions;
- Capacity adequacy and power crisis management.
Intervention in these two areas is imperative and urgent if the EU is serious about the completion of the internal market and its long-term climate targets.
By thinking in terms of coordination mechanisms, sharing principles and solidarity rules, it is possible to suggest a set of recommendations, identifying key roles, tasks and responsibilities both at national and supranational level.
In the new Policy Brief of the Florence School of Regulation, we propose seven of such recommendations. They must be considered as preliminary to any detailed decision that technical and regulatory bodies can take at a later stage.
Member States, industry stakeholders and society at large can have alternative and even opposing views of these suggestions. Depending on their understanding of the problems, their vision and interests, they can push for different ways to successfully confront the two roadblocks represented by redispatching actions and capacity adequacy and crisis management. However, while developing their proposals and discussing the Winter Package of the European Commission, they should all acknowledge the necessity to deal with the missing pillars and provide explicit and coherent answers to the long overdue issues of coordination, sharing and solidarity.