European Commission’s Internal Energy Market Review

ENA understands that the Energy Directorate within the European Commission is making good progress with its review of Europe’s internal energy market. It is expected to publish its findings on 17 October, and they should make for interesting reading.

Third package implementation

Firstly, the Directorate-General for Energy (DG ENER) will report on the implementation (or not) of the Third energy liberalisation package (two Directives, three Regulations) by the various Member States. For the UK we believe the implementation process has been successfully completed. Ofgem has now certified National Grid and the Scottish Transmission System Operators (TSOs) as fully ‘independent’, and derogations from the full ownership unbundling option have been granted to SSE and SP, so the existing arrangements can continue.  

Current market issues

The Commission is also looking at other developments in European markets. For example, approaches taken to the integration of renewables, the development of smart grids and demand side response, and Government interventions e.g. capacity payments under Electricity Market Reform (EMR).

Individual macroeconomic reviews will be provided for each Member State, looking at certain markers e.g.

  • Wholesale markets liquidity.
  • Member State interventions.
  • Interconnector development and bottlenecks/congestion.
  • Regulator independence and staffing.
  • Regulated energy prices.

Retail market design – Commission recommendations

In the context of smart grid development, although there are currently no plans for an EU Smart Grid Directive, the Commission led EU Smart Grids Task Force is looking at possible models for retail market design/demand response frameworks. Stakeholder associations have been actively participating in the process, including GEODE and Eurelectric.

Options for retail market design to facilitate demand response now being considered by the Commission include:

  • The DSO as market facilitator.
  • A data hub operated by a Third Party with Data Sharing.
  • An Access Point Manager.

The Commission is now finalising its retail market ‘recommendations’; it is particularly keen to identify benefits for consumers. 

ENA’s view would be that, since various Member States have already adopted different approaches to the development of retail markets and the role of Distribution Network Operators (DNOs) and suppliers etc, any binding measures are too late, and, in any event, inappropriate. However, if the Commission wants to encourage debate and share best practice then that can only be a good thing.

Earlier this summer ENA and Energy UK launched a discussion paper looking at possible routes for the development of demand response in GB, intended to kick-start discussions.

The ENA report focuses on two possible models are considered:

1. Enhanced supplier hub.
2. Demand response market operator.

The report’s conclusions are that demand response should be a tool and not an objective in itself (the Commission may think otherwise), and that costs versus benefits will be the key, with costs recovery essential. 

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