Electricity Market Design in the European Union

Chapter 1 Introduction1
Christopher Jones and Florian Ermacora
1. Climate change – need for action 1
2. A new electricity market design for Europe enabling secure and cost e#ective decarbonisation 2
3. An outlook 8

Chapter 2 Renewable energies in the electricity market 11
Jan Papsch
1. Decarbonisation of the electricity market: a political and technological revolution 11
2. From emergent technology to backbone of the system 14
3. A market $t for renewable energies 16
3.1 Non-discrimination principles 18
3.1.1 Article 3 Electricity Regulation 19
3.1.2 Other non-discrimination principles 26
3.2 Flexible markets 27
3.4 Opening up the markets for system services 34
3.5 Smaller products and aggregation 38
3.6 Adapted tari# incentives 40
4. Renewables $t for the market 40
4.1 !e recast Renewable Energies Directive.. 42
4.2 Dispatch, redispatch and compensation 44
4.2.1 Guaranteeing the capability of networks 45
4.2.2 Dispatch 47
4.2.3 Redispatch and compensation 52
4.3 Balance responsibility 57

Chapter 3 The role of consumers and innovation 61
Ivan Pearson
1. Introduction 61
2. Competition, consumer protection, and consumer information 64
2.1 Market opening and retail price regulation 65
2.2 Vulnerable customers and energy poverty 75
2.3 Contractual conditions 2.4 Supplier switching 83
2.5 Comparison tools 86
2.6 Bills 90
2.7 Alternative Dispute Resolution 98
3. Innovation 100
3.1 Demand response 102
3.2 Active customers 110
3.3 Citizen Energy Communities 114
3.4 Smart metering systems 119
3.5 Data management 126
3.6 Distribution System Operators 132
3.7 Energy storage 140
3.8 Electric vehicles 150

Chapter 4 Capacity mechanisms 155
András Hujber and Mathilde Carbonnelle
1. Introduction 155
2. Why should the EU be concerned? 156
3. Rules before the Market Design Initiative 158
3.1 Internal energy market rules 158
3.2 State aid rules 158
4. New approach to Capacity Mechanisms 160
4.1 Market reforms alongside capacity mechanisms 160
4.2 New rules for capacity mechanisms 161
4.2.1 EU & national adequacy assessments 161
4.2.2 Setting of reliability standards162
4.2.3 Cross-border participation163
4.2.4 Design of capacity mechanism 166
4.2.5 CO2 emission limit 168
5. Conclusion 170

Chapter 5 Making electricity flow in Europe – strengthening regional system operation 171
Maria E. Leoz Martin-Casallo and Elaine O’Connell
1. Introduction 171
2. Regional cooperation of TSOs 173
2.1 !e shi% from a voluntary approach to a mandatory cooperation framework 173
2.2 !e new rules on regional coordination centres 176
2.2.1 General framework 176
2.2.2 Geographical scope 177
2.2.3 Tasks 178
2.2.4 Competences and liability arrangements of RCCs 183
2.2.5 Governance 185
2.2.6 Transparency and reporting obligations 187
2.2.7 Timeline for implementation 188
3. Regulatory oversight of RCCs 189
3.1 Joint regulatory oversight of RCCs at regional level 189
3.2 ACER’s role regarding RCCs 190
3.3 Role of ENTSO-E and of Member States regarding RCCs 191
4. Cross-border Electricity Trading 192
4.1 !e shi% from voluntary pilot projects to a mandatory approach 192
4.1.1 !e development of the Target Model 192
4.1.2 Early challenges for the full implementation of the CACM Guideline 194
4.1.3 Electricity market design in the context of the legal treatment of electricity in Union legislation and relevant antitrust investigations 197
4.2 !e new framework for addressing internal congestion 199
4.2.1 Bidding zones – Key principles 199
4.2.2 Options for addressing congestion 200
4.3 Rules for cross-border electricity trading 205
4.3.1 Principles of maximisation and non-discrimination 205
4.3.2 Maximising trade through a new target 205
4.3.3 Cost sharing principles 208
4.3.4 Transparency, operational security and reporting obligations 210

Chapter 6 Risk prepared electricity markets213
Olgerts Viksne and Yolanda Garcia Mezquita
1. Introduction 213
2. Background of the Regulation 213
3. !e negotiations that led to the agreement to set a new framework for risk preparedness 218
3.1 Proposal of the European Commission 218
3.2 Inter-institutional negotiations 218
4. !e new framework for risk preparedness 219
4.1 Common methods for assessing risks related to security of supply 219
4.1.1 Methodology for identifying electricity crisis scenarios at a regional level 219
4.1.2 Methodology for short-term and seasonal adequacy assessments 221
4.2 Common rules on crisis prevention 223
4.2.1 Regional approach 223
4.2.2 Designation of a competent authority 223
4.2.3 Identi$cation of crisis scenarios at regional and at national level 224
4.2.4 Risk-preparedness plan 225
4.2.4.1 Establishment of risk-preparedness plans 225
4.2.4.2 Content of risk-preparedness plans as regards national measures 226
4.2.4.3 Content of risk-preparedness plans as regards regional and bilateral measures 228
4.2.4.4 Assessment of the risk-preparedness plans by the European Commission 229
4.3 Managing electricity crisis 231
4.3.1 Cooperation and assistance 231
4.3.2 Information sharing 232
4.3.3 Observance of market rules 233
4.4 Evaluation and monitoring 234
4.4.1 Ex-post evaluation of electricity crisis 234
4.4.2 Monitoring security of electricity supply at EU level 235

Chapter 7 A reinforced governance of the European electricity market 237
Michael Schütz
1. Introduction 237
2. Associations of grid operators at EU level 240
2.1 New European entity for distribution system operators240
2.2 ACER’s powers to request information 246
2.3 Reinforced oversight over ENTSO-E and other entities 248
3. Developing, adopting and amending Network Codes and Guidelines 251
4. ACER and its arbitration function 256
4.1 Background 256
4.2 Compulsory arbitration 257
4.3 Voluntary arbitration 260

5. ACER’s role in implementing Network Codes and Guidelines 262
5.1 Pan-EU terms and conditions or methodologies 262
5.2 Regional EU terms and conditions or methodologies 263
5.3 Terms and conditions or methodologies under new Delegated Acts265

6. Adoption of acts by ACER 267
6.1 Procedural safeguards in case of individual decisions 267
6.2 Extending the scope of the Board of Regulators 269
6.3 Process for adopting acts 270