Changes in electricity market design are necessary if Europe wants to achieve its energy and climate ambitions whilst securing energy supply, EURELECTRIC President Johannes Teyssen (CEO of E.ON), will tell a EURELECTRIC conferencetoday. The conference discusses the implications of Europe’s energy transition on the development of Internal Energy Market (IEM) and on electricity market design.

‘To successfully achieve the energy transition process, policymakers need to see power companies as an ally, not a threat. The European electricity industry remains committed to the EU’s energy policy objectives: sustainability, competitiveness, and security of supply. But these objectives are being compromised: we are witnessing energy policies that increase CO2 emissions, raise customers’ energy bills and cause major asset destruction in our industry. We need to find a path to a sustainable future that allows companies to be active in a market dominated by more intermittent generation – a market that properly remunerates the assets necessary to fulfil customers’ requirements for security of supply,’ Mr Teyssen will say.

Further integrating wholesale electricity markets, enhancing demand-side participation, and developing interconnection capacity is essential for an efficient functioning of the market and valuing flexibility, which – with increasing intermittent generation – will grow in importance and will be needed to ensure short-term system stability.

However, in a growing number of countries even taking all these necessary steps would not be sufficient to guarantee generation adequacy. In these cases, the energy-only market will therefore have to be complemented by a capacity element, which provides signals for investments and operating back-up plants to support a more intermittent electricity system. Such a capacity element will thus be instrumental for long-term system adequacy.

Discussions today will also focus on capacity remuneration mechanisms (CRMs). EURELECTRIC speakers will stress the need to underpin CRMs by a proper regional generation adequacy assessment. Member states should coordinate among themselves and adopt market-based mechanisms (i.e. mechanisms that are non-discriminatory, open to existing and new plants, and open to generation, storage and demand response) that allow cross-border participation. The preferred approach would be to adopt the same model at regional level or at minimum to introduce market-based mechanisms at national level with cross-border participation.

Cross-border participation and a seamless cooperation of transmission system operators (TSOs) will be the cornerstone of any new market design adjustments, EURELECTRIC speakers will highlight. The European Commission should play a prominent role in guiding these changes so that national market design reforms are carried out in a way that is fully compliant with the objective of an Internal Energy Market. In particular, the Commission should help member states coordinate existing and up-coming national CRM, thereby facilitating the emergence of a regional approach.