Internal Energy Market
Internal Energy Market
Two significant developments have taken place in the last year and are key drivers in the development of the European Internal Energy Market (IEM). The first is the Third Energy Package. The Third Energy Package charges the Regulatory Authorities and the TSOs with the development of framework guidelines and network codes respectively. These guidelines and codes set out the policy framework and the detailed arrangements, respectively, which must prevail for cross border trade across all timeframes. The second development was the decision at the European Energy Council meeting on 4th February 2011 that “the internal market should be completed by 2014 so as to allow gas and electricity to flow freely. This requires in particular that in cooperation with ACER national regulators and transmission systems operators step up their work on market coupling and guidelines on network codes applicable across European networks”.
Third Energy Package
In September 2007, the European Commission made a series of proposals to further open up the gas and electricity markets following its Sector Inquiry. In July 2009 the Third Package for the internal EU gas and electricity market was adopted by the European Parliament and the Council. The Third Package entered into force on 3rd September 2009 giving Member States 18 months to transpose the EU legislation into national law. On 3rd March 2011, the Third Package was transposed into national law by the Member States.
In spring 2006 ERGEG launched the Electricity Regional Initiatives (ERI) following a consultation on the creation of regional electricity markets. The ERI created seven regional electricity markets across Europe as an interim step to creating a single European electricity market, focusing on three priority areas:
- harmonisation and enhancing congestion management on interconnections;
- harmonising regional market transparency; and
- developing balancing market exchanges at borders
The Electricity Regulatory Forum, or Florence Forum, was set up to discuss the creation of a true internal electricity market. It is currently addressing cross-border trade of electricity, in particular the tarification of cross-border electricity exchanges and the management of scarce interconnection capacity.
Participants include national regulatory authorities, Member State governments, the European Commission, transmission system operators, electricity traders, consumers, network users, and power exchanges. Since 1998 the Forum has meet once or twice a year.
The FUI region consists of France, the United Kingdom and Ireland, with Ofgem acting as the lead regulator. There are three distinct electricity markets, the British Electricity Transmission and Trading Arrangements (BETTA) market in Great Britain, the Single Electricity Market (SEM) in the Republic of Ireland and Northern Ireland and the French electricity market.
The Regulatory Authorities have submitted to the European Commission the FUI regions input to the European Energy Work plan 2011-2014. The work plan establishes milestones and commitments for the FUI region to meet the objective set by Member States at the European Council meeting on 4 February 2011 to complete the internal market by 2014.
The development of framework guidelines, network codes and energy infrastructure plan will require significant engagement, coordination and cooperation with all stakeholders in FUI. Binding network codes will place increasing pressures on national Member States to integrate at the regional and European level.
Significant work has been done in FUI in 2011 on the access rules of all FUI interconnections to coordinate on long term auctions. The TSOs will continue to work with the Regulatory Authorities to identify areas where further coordination can take place over the short and medium term.
European Target Model
The Target Model provides a blueprint and roadmap for closer market integration by setting out clear proposals for the coordination and harmonisation of Europe’s electricity markets.
At the European Council meeting on 4th February 2011 it was decided that “the internal market should be completed by 2014 so as to allow gas and electricity to flow freely. This requires in particular that in cooperation with ACER national regulators and transmission systems operators’ step up their work on market coupling and guidelines on network codes applicable across European networks”. This effectively brings forward the timeline for implementation of the Target Model from 2015, the date agreed by the Project Coordination Group (PCG). The Framework Guideline (ACER) and Network Code on CACM (ENTSO-E) are based on the Target Model.
Regulation 714/2009 provides that ACER submit to the European Commission within six months a non-binding framework guideline for the development of network codes. The Framework Guidelines specify detailed areas for network code development. The Framework Guideline deals with the integration, coordination and harmonisation of congestion management methods, insofar as such harmonisation is necessary in order to facilitate electricity cross border trade.
Regulation 714/2009 sets out one of the primary tasks of ENTSO-E in developing network codes in 12 areas identified below:
1. Network security and reliability rules including rules for technical transmission reserve capacity for operational network security;
2. Network connection rules;
3. Third-party access rules;
4. Data exchange and settlement rules;
5. Interoperability rules;
6. Operational procedures in an emergency;
7. Capacity-allocation and congestion-management rules;
8. Rules for trading related to technical and operational provision of network access services and system balancing;
9. Transparency rules;
10. Balancing rules including network-related reserve power rules;
11. Rules regarding harmonised transmission tariff structures including locational signals and inter-transmission System Operator compensation rules; and
12. Energy efficiency regarding electricity networks.