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Volume 8 Issue 3/4, July 2019 (#28#29) : click the title for intro and/or more info about the article

Editorial - Johannes Reichl
Johannes Reichl (Project Manager, Energy Institute, the Johannes Kepler University Linz)
Alex Wilson (Policy Analist, European Parliament)

The Austrian Presidency of the Council of the EU (July-December 2018) concluded with several achievements in the energy field. Revised EU directives on the promotion of renewable energy sources and on energy efficiency, as well as a new regulation on governance of energy union, were all endorsed by the Parliament and the Council, becoming part of European law after their publication in the Official Journal of the EU on 21 December 2018. In that same month, four trilogue agreements on electricity market design were concluded between the European Commission, the European Parliament and the Council of the EU. The agreed texts on electricity markets were endorsed by the Parliament and the Council in early 2019, completing the adoption of the Clean Energy package (originally proposed by the Commission in November 2016), which broadly sets the framework for the EU’s energy and climate policies over the 2021-2030 period.

A notable achievement of the Romanian Presidency of the Council of the EU (January-June 2019) was to have secured a trilogue agreement in February 2019 on a targeted revision of the 2009 Gas Directive, that extends its legal jurisdiction to encompass pipelines between the EU and third countries. Originally proposed by the Commission in November 2017, the Council only adopted its negotiating position (known as ‘general approach’) in February 2019, due to strong resistance from some member states. The Council’s general approach was swiftly followed by a single round of trilogue negotiations that concluded positively. The agreed text was endorsed by the Parliament on 4 April 2018 and now needs to be endorsed by the Council before it can become part of European law.

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Tackling the energiewende one energy community at a time - Wolfgang Urbantschitsch & Harald Proidl
Wolfgang Urbantschitsch (Executive Director, E-Control)
Harald Proidl (Head of Renewable Energy and Energy Efficiency, E-Control)

Promoting the development of renewable energy sources (RES) is one of the main goals of the European Union. It is often surrounded by buzzwords like smart meters, smart grids, prosumers, decentralisation, etc. All of these stand for new technologies and solutions that are meant to optimise integration of RES into the market and to provide local generation and demand. The idea behind taking the local approach is to increase consumer visibility and acceptance of RES. In the past, local energy solutions could not grow beyond individual projects, mainly because the market models for electricity offered suponly limited options for local energy distribution. The European Commission decided to amend this situation and to set up new rules that boost local energy systems. Both the new Renewables Directive (RED II) and the recast Electricity Directive provide a new framework for energy communities; while the RED II talks about “renewable energy communities” (RECs), the recast Electricity Directive defines the term “citizen energy communities” (CECs). In this article, we discuss the idea of energy communities as part of the electricity market from a regulator’s perspective.

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Josh Roberts (Advocacy Officer, REScoop.eu)

The clean energy transition poses many challenges and opportunities for society. At the higher political levels in Europe, political paralysis prevents appropriate ambition from materializing. Increasingly, therefore, citizens are taking matters into their own hands. Together, technological advances and decreasing costs of uptake are allowing citizens to becoming active participants in the energy transition – both individually and together through communities.

Community energy initiatives, often using co-operative and other social-enterprise legal forms that integrate open, democratic, and non-commercial ownership and governance principles, have grown steadily over the past 30 years. Such initiatives, particularly in the area of renewable energy production, have operated at national level without targeted policy support from the European Union (EU). However, due to increasing market integration of renewables and other clean energy technologies, community initiatives risk being locked out of the market.

With the conclusion of the Clean Energy for All Europeans Legislative Package (CEP), these ‘non-commercial’ market actors, officially defined as ‘citizen energy communities’ (CECs) and ‘renewable energy communities’ (RECs), are now guaranteed a place in Europe’s Internal Energy Market (IEM). Nevertheless, energy communities are a brand new concept in many countries. As member states begin to revise their laws and regulations in order to comply with the CEP, many details will be left to national decision makers. This paper aims to provide recommendations on how national regulations must support the development of energy communities so that they can realize their potential and contribute towards social innovation in Europe’s energy transition.

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Implementation of the target model: regulatory reforms and obstacles for the regional market coupling - Prof. Dr. Antonis Metaxas, Michalis Mathioulakis, Dr. Maria Lykidi
Prof. Dr. Antonis Metaxas (National & Kapodistrian University of Athens, Vis. Professor, EU Energy, Law and Regulation, TU Berlin, Chairman, Hellenic Energy Regulation Institute)
Michalis Mathioulakis (Energy Strategy Analyst - University of Macedonia, Research Director - Hellenic Energy Regulation Institute)
Dr. Maria Lykidi (Energy Expert - Hellenic Energy Regulation Institute)

When aspiring to identify the origins of the Target Model, we need to look into the very core of the European integration process and the expansion of the common internal market concept into the European energy sector. The term “Target Model” essentially describes the process under which the EU’s Third Energy Package is designed around a benchmarking model, thus a “Target Model”. It is the result of a long period of work involving the European Commission, ACER, TSOs, national regulators and stakeholders to develop a single market model for Europe/EU.

The Target Model derives from EU’s Third Energy Package, a legislative initiative aiming to open up and regulate the internal gas and electricity markets in the European Union[01]. Adopted by the European Parliament and the Council of the European Union in July 2009, the relevant legislation entered into force early in September of the same year. Corresponding legislation includes one Directive and four Regulations regulating both the natural gas and electricity markets.[02] Out of these, Directive 2009/72/EC contains common rules for the internal market in electricity, Regulation (EC) No 714/2009 contains conditions for access to the network for cross-border exchanges in electricity, Regulation (EC) No 713/2009 foresees the establishment of the Agency for the Cooperation of Energy Regulators (ACER), Commission Regulation (EU) 2015/1222 establishing a guideline on capacity allocation and congestion management (CACM)[03] and Commission Regulation (EU) 2016/1719 establishing a guideline on forward capacity allocation (FCA)[04]. Both CACM and FAC can overall be considered the cornerstone of a European single market for electricity[05]. For the FCA Regulation the main points of attention are the harmonisation of the Long-Term Transmission Rights rules and the regulatory authorities’ decisions on cross-zonal risk hedging opportunities. For the CACM Regulation the main points of attention are the methodologies related to capacity calculation and to redispatching and countertrading, the bidding zone configuration, the Market Coupling Operator (‘MCO’) Function, and the design of the Intra-Day coupling. The Target Model proposes a market design for each timeframe (i.e. Forward, Day-Ahead, Intra-Day and Balancing Markets) and a coordinated approach to capacity calculation.

Essentially the Electricity Target Model aims at the coupling of the different national markets into one European electricity market, ensuring optimal use of cross-border transmission capacity while utilizing a set of proposals and network codes to achieve its goals. However, successful integration requires that electricity markets across Europe share a set of common features and are linked by efficient organisation of interconnection capacities. To this end, several issues still need to be addressed in order to effectively improve the electricity markets’ design and functioning.

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Susanne Nies (Managing Director Strategy & Communication, ENTSO-E)

This overview provides the reader with a broad perspective on institutional development: What are the different phases of energy policy development on a European level? How will the various stakeholder forae from Florence to Madrid and Dublin evolve in the future? What is the role of institutions on standardization, like CEN CENELEC and how do they interface with the Internatu? Of the new and important structures resulting from the engagement of local communities, like the Covenant of Mayors? What will be the institutional Impact of Brexit, but also of an electricity agreement between the EU and Switzerland? How to frame the energy relations with neighbors like Ukraine, but also the Mediterranean? Should the incoming Commission reconsider the current breakdown of Directorates General into DG ENER, DG Clima, DG Move, DG Research, Technology and Development (RTD), DG Connect, as to address, in a matrix structure, the most burning energy questions of our time? How will sector coupling and digitalization translate institutionally? And how, finally, are the EU institutions and structures interacting in the broader international context, with the UN led climate agenda called COP, the IEA, IRENA, the Clean Energy Ministerial and Mission Innovation

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Dirk Buschle (Professor and Holder of the Iberdrola Manuel Marin Chair for European Energy Policy, the College of Europe)
Kirsten Westphal (Senior Associate, the German Institute for International and Security Affairs (SWP))

Traditionally in the EU, energy security and decarbonization have been rather antagonistic principles and objectives pursued in separation. Under the impact of climate change as fundamental challenge for the survival of mankind on the planet, these objectives and their policy designs and implementation need to be reconciled. Reconciling decarbonization with energy security becomes a matter of governance, on a local, regional and global level. An appropriate governance system will have to be in place not only to ensure that decarbonization actually takes place but also to mitigate any potential security risks associated with the transition. The European Union and subsequently the Energy Community have been laboratories in adapting energy sector governance over the last twenty years. The new European energy and climate governance is part of the Clean Energy Package. While the governance mechanism contains quantitative targets for energy efficiency, renewables and for the reduction of greenhouse gas emissions, the targets for energy security are qualitative ones. The decarbonization commitment took center stage in the European Commission 2015-2019 under the label of the Energy Union, which initially was dedicated to traditional energy security issues. The governance mechanism of the Clean Energy Package responds to the need to streamline energy policy in view or the overarching decarbonization goal. The whole package aims at promoting new transactional models and technology, reinforces

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Richard Vidlicka (Board of Directors member, E.DSO - European Distribution System Operators and Manager of EU Projects and Innovations, CEZ a.s.)

The longest-awaited event in the European energy sector, since the Third Energy Package came into effect in 2009, is the adoption of a new set of Regulations and Directives, publicly known as the Clean Energy Package (CEP). It sets binding targets, ambitions, market rules and active energy market players’ roles for the next decade. The implementation process has not been accomplished for all related legal acts yet (at the time this article was written), but the political agreement has been achieved and the content of the new provisions is already known. Due to the necessary fight against climate change, the European energy sector is going to adopt more ambitious environmental targets.

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Leigh Hancher (Special Counsel, Baker Botts L.L.P. Brussels)
Prof. Dr. Antonis Metaxas (National & Kapodistrian University of Athens, Vis. Professor, EU Energy Law and Regulation, TU Berlin, Chairman, Hellenic Energy Regulation Institute)
Review by Antonios Bouchagiar

This publication is an extremely useful tool for all those interested in the challenges that energy networks face in the area of the Eastern Mediterranean. The book addresses three aspects: (i) the formation of the current EU regulatory framework in the field of energy and its implementation in the Eastern Mediterranean, (ii) geopolitical considerations regarding the connection of the EU’s energy networks in that area, and (iii) the future transformation of those networks through digitalisation that is expected to render consumers more proactive.

This collective work is a follow-up to the discussions that took place in September 2017 during the Athens Conference on European Energy Law, a prestigious event organised jointly by the Energy Union Law Area of the Florence School of Regulation (European University Institute) and the Hellenic Energy Regulation Institute. It includes six chapters written by practitioners and academics with a profound knowledge of energy networks in the Eastern Mediterranean.

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Ann-Katrin Lenz, Christoph Riechmann, Dan Roberts (Florence School of Regulation/BNetzA-Forum, Berlin)

About half the EU member states apply capacity remuneration mechanisms (CRM) in their national power markets. These publicly administered schemes provide that qualified market participants not only receive payment for the energy (MWh) delivered, but also for the capacity provided (irrespective of whether the capacity is used). Before implementation the schemes need to be vetted by the European Commission (EC) for compliance with EU State Aid rules. One particular concern is that member states could misuse CRMs to favour incumbent power producers and give them a competitive advantage over foreign rivals. One cornerstone of the EC’s approach has therefore been to open CRMs to participation by foreign generators (i.e. generators from other member states). Practice however shows that various complications arise in a cross-border CRM. This paper explores the economics and State Aid principles of cross-border participation in CRMs and considers initial practical experience drawing on Great Britain (GB) and Germany. We note that this analysis necessarily rests on experiences gained before the adoption of the EU’s “Clean Energy Package” with revised Electricity Directive and Electricity Regulation.

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Stela Nenova (Policy Senior Specialist, ENTSO-E)

Ten years after the entry into force of the Third Energy Package, the EU is embarking on an even faster journey once the key electricity market design legislation under ‘The Clean Energy Package for all Europeans’ (CEP) enters into force in the summer of 2019. As proposed by the European Commission in November 2016 and adopted by the Council in May 2019 after lengthy negotiations, the CEP overhauls the existing internal energy market framework for electricity and security of supply and aims to lift up Europe on a much higher gear for this journey to 2030 and beyond, on both speed, depth, and ambition. The CEP framework is a big bold step forward for Europe on its path toward completing the integration of the internal energy market, decarbonizing its economy and successfully integrating a large share of variable renewables while keeping the costs of the energy system transformation as low as possible, providing secure access to electricity and ensuring that no one is left behind in this evolution. The CEP provides a clear direction and trajectory for the EU on its clean energy transition and transformation journey for the next decade and for achieving its ambitious energy and climate targets. The new regulations and directives aim at addressing the five key dimensions of the Energy Union, including energy security, energy efficiency, decarbonization of the economy, full integration of the Internal Energy Market, and research innovation and competitiveness. The European TSOs have a key role to play to support and enable further the clean energy transition, and to ensure a secure, sustainable and competitive energy system to meet the future challenges. The ambitious RES integration target of 32% by 2030, energy efficiency target of 32.5% and interconnection targets of 15% by 2030 put Europe on the path to pursue these objectives by bringing together all actors in the energy system to cooperate and coordinate closer and even help each other in various capacities and levels, and by empowering customers to contribute to the energy transition in the next decade. How will this new policy framework impact the European TSOs? What will be the new challenges for them and how can they best take up on the additional responsibilities to enable and facilitate the European energy transition while preserving both secure, sustainable and affordable energy supply and solve tomorrow’s challenges?

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© Claeys & Casteels 2019