Activity Report 2012 - Eurelectric

Wholesale markets: Getting the market design right
The wholesale market agenda in 2012 was strongly shaped
by the development of key network codes for electricity and
gas, slow progress in the emergence of a core integrated
region in north Western Europe (nWE), as well as essential
market design issues such as increasingly negative
operating margins in flexible back-up plants and the steps
needed to bring RES technologies in line with market rules.
Close liaison with market stakeholders throughout the year
resulted in a good degree of consensus on the development
of the network code on capacity allocation and congestion
management. EURELECTRIC nevertheless feels that TSOs
could be more transparent on issues of vital importance
for the market (e.g. bidding zone configuration, capacity
calculation, cross-border redispatch). They should also
establish clear liability rules and fall-back mechanisms in
case of operational deficiencies in the price-coupled spot
markets and the cross-border intra-day platform – both of
which are essential to establish the integrated pilot region
in north Western Europe.
Despite intense activities between the TSOs and power
exchanges involved in the nWE project, progress has been
limited in the region in 2012. The price coupling of spot
markets is expected to go live in the second quarter of
2013 while the establishment of an intra-day platform has
been further delayed, with great uncertainty as to when the
platform will be up and running. This delay, together with
the lack of willingness to ‘market-proof’ these integration
projects by sharing information and allowing feedback,
has negatively affected market confidence and trust in
project leaders to deliver a suitable mechanism.
Greater focus was placed this year on market design
aspects linked to the growth of renewables. The possible
introduction of capacity remuneration mechanisms across
some member states raised new issues regarding a
possible evolution of the electricity market design and
the achievement of an internal electricity market.
As a firm supporter of liberalised and integrated energy
markets, EURELECTRIC holds that integrated electricity
markets are the best way to achieve a smooth transition
towards a decarbonised economy. In order to deliver
generation adequacy, energy markets should be allowed
to function properly, eliminating distortions such as
regulated end-user prices, restrictions on plant operations,
and price caps. Enabling demand to participate in
wholesale market spot price formation is also fundamental.
When generation adequacy is nevertheless endangered
capacity remuneration mechanisms should be considered,
ideally at a regional level or at least in coordination with
neighbouring markets and, in any case, consistent with
the process of EU market integration.
Given the far-reaching effects of intermittent generation
on electricity markets, EURELECTRIC also recalled the
importance of bringing renewables into electricity markets,
thereby ensuring a level playing field among all generating
technologies with respect to connection, scheduling, and
balancing requirements.
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