Florence Forum Follow-up

The annual European Electricity Regulatory Forum hosted in Rome this week (although conspicuously called the “Florence Forum”) welcomed a broad range of stakeholders in the European electricity market to discuss today’s hottest issues. It should come as no surprise, then, that the discussion focused on the organisation of electricity markets and facilitating greater integration of renewable electricity.

As Eurelectric is a natural stakeholder in the European electricity market, three delegates were present on our behalf: Juan José Alba Rios (Issue Manager Market Design Project), Alfred Hoffmann (Chair of Markets and Investments Committee), and Cillian O’Donoghue (Policy Director). Over the two days, they engaged in sessions related to energy prices, capacity allocation and congestion management (CACM) and network tariffs. As a follow-up to Eurelectric’s presence at the Forum, this week’s Eurelectric Feature provides the details and key takeaways from those sessions.

Energy prices, electricity markets and REPowerEU

On day one, Alfred Hoffmann took to the stage to highlight Eurelectric positions on energy prices, electricity markets, and the Commission’s REPowerEU plan.

By and large, he reiterated ACER’s key takeaway in their report on the EU wholesale electricity market: that the electricity market design works well and that we should limit interventions so as to avoid distorting the market. However, there are still points to address to manage the ongoing price crisis sweeping across Europe.

In the short-term we need to:

• Prioritise faster electrification & energy efficiency measures by fast-tracking permitting
• Guard investor confidence by avoiding market distortions & unnecessary market interventions
• Take necessary action to protect customers by prioritising targeted financial support

In the long-term, price signals need to be clear to investors so that they:

• Encourage the needed investment
• Enhance the liquidity of forward markets to hedge against price peaks
• Enable long-term supply contracts with balanced hedging requirements

CACM 2.0

This morning again, Mr Hoffmann took to the stage, this time to discuss ACER’s recommendations on CACM and again highlight Eurelectric’s positions.

What we suggest is that a CACM 2.0 fill gaps in current regulation. It could be used to improve efficiency and promote liquidity in day-ahead and intraday trading. Beyond that, it’s also an opportunity to provide transparency, consolidate consultation requirements and improve stakeholder involvement. However, we emphasise that it should not introduce any disruptive changes to the current market function. In view of this, our asks to ACER included:

• Improving the efficiency of continuous intraday trading as the primary tool for Single Intraday Coupling (SIDC)
• Tailoring day-ahead & intraday products to market needs and ensuring resilience in algorithms
• Providing a framework to improve consideration of borders with third countries
• Updating bidding zone review (BZR) criteria list
• Maximising cross-zonal capacities available for trade and limiting reductions of cross-zonal capacity for operational security
• Avoiding any disruptive change in MCO governance which might jeopardise and delay ongoing implementation

Network Tariffs

To round out the day, Juan José Alba Rios stepped up to discuss network tariffs.

In Eurlectric’s view, the energy transition has necessitated a review and modification of network tariffs. Specifically, they should be cost-reflective, such as Time-of-Use (ToU) tariffs to help facilitate and encourage electrification.

This outcome would metastasise through network tariffs that actively encourage consumers to use the grid when it’s cheaper. Further, it would incentivise them to find ways to store that cheap electricity, and/or sell it back to the grid when demand, and therefore prices, are high. This would benefit not only the customer but also the efficiency of the grid.

For more on the logic of this, these points are all directly from our report The missing piece: Powering the energy transition with efficient network tariffs.

Crises management always requires that cooler heads prevail. That’s why we are honoured to have had the opportunity to present our meticulous research at this year’s Florence Forum. We strongly believe that clear-headed, data-driven dialogue like this - rather than knee-jerk reactions - is what is needed to get us through the price crisis while driving forward the Electric Decade.