Dr. Oliver Koch Deputy Head of Unit DG Energy Unit B.2 – Internal Market II

1. Market4RES Workshop Post 2020 framework - Can markets and RES coexist? Dr. Oliver KochDeputy Head of Unit DG Energy Unit B.2 – Internal Market II Wholesale markets; electricity & gas 28. April 2014 This presentationreplectssolely the personalviews of the author and does not bind the EU Commission

2. IEM is at a tipping point

3. Markets are integrated: EU-Power Grid Scheerer (2012)

4. Markets are integrated:Market Coupling • Optimised capacity calculation • EU-wide aggregation of bids and offers

5. Renewables need aggregation

6. Shrinking role for energy markets RES Support Government (national) Wholesale price Market (EU) System costs Government (monopolies) (national)

7. Shrinking role for energy markets Government(national) RES Support RES Support Wholesale price Wholesale price Market (EU) Market (EU) System costs System costs Government / monopolies (national)

8. Issue: Coordination of RES and CO2 policies => “2030“ Process • COM consultation – reportto EU Council • Decision 2014/2015 ?

9. Future EU Market Design "State Interventions" Package: Key messages • More cross-border • More market-based • Competitionbetweentechnologies

10. Market integration: support schemes • Phase in market exposure: • Competitive allocation mechanisms • Mechanism to reflect degree of maturity of technology • Competition among RES – technology development • Minimise impact on production decision Feed-in tariff Premium Quota

11. Market Integration: RES and power market rules • Phase in equal treatment: • Balancing obligations • Bearing of grid costs • Dispatching rules • Different degrees of harmonisation for all users

13. Security of supply

14. Uncoordinated national interventions are a threat to the Internal Energy Market Source ENTSO-E

15. Cooperation in parallel supply crisis? ?

16. Wholesale Market Design Issues • Issue: Will merit curve survive?

17. Future EU Market Design - Issues Future EU Market Design

18. Future EU Market Design Wholesale Target Model Technical balancing, ancillary service ETS CO2 price State interventions RES etc. Generation Adequacy +Flexibility? "Market Design" discussion EU ? Regional ? National? State- "designed" trading? Self regulation/ legislation Demand Side participation Link to Gas, Transport, Heating

19. Future EU Market Design 2014 Target Model: MODERN! 2014 Target Model: Outdated?

20. Need for new Market Design? 1. Preserve market path – give ongoing harmonisation a chance !

21. Need for new Market Design? 2. Scope for finetuning? Flexibility – demand response - hedging Will flexibility markets evolve? Will DRS kick off? Need tofinetunetargetmodel (optionsmarkets, etc.) Adequacy: guidance needed? Adequacy assessment C/B-openness Protection levels / solidarity

22. Need for new Market Design? 2. Scope for finetuning? System operation – IEM with fragmented TSOs? Fragmented system operation – capacity calculation CASC/CAO – CORESO - SSC - TSC = enough? EU ISO needed? Governance: Role of ENTSO-E – EU or national perspective? Role of ACER : EU or national perspective? 3rdpackage "bottomup" approach – suffient?

23. Making the Internal Energy Market Work 2011 The Heads of State of Government recognized the importance of having an internal energy market in place and set a clear deadline for its completion by 2014 2012 Report "Making the Internal Energy Market work" published by the European Commission assessing the state of the internal energy market June 2014 European Commission will report on the progress reached in completing the internal energy market

24. Thank you very much for your attention Dr. Oliver Koch Deputy Head of Unit European Commission DG Energy Unit B-2 (Internal Market II: Wholesale; gas & electricity) DM 24 – 6/117 Brussels/Belgium oliver.koch@ec.europa.eu ++32 229 87302

25. Commission Toolbox: Advocacy (e.g. communication on state interventions) TFEU Art 28? Procurement? … 3rd Package "PSO? Art 3 E-Reg … COMP Law GBER EEAG Art 102/106? Long-term: new legislation? "2030" discussion – revised targets ?

26. Outlook …but: decisions need to be taken at one stage! Next years = decisive - Will “consensus approach” work? - More COM intervention / harmonisation needed?

27. Central adequacy decision/estimation? (most got it wrong, even in more stable times…) Decentral or fully market-based decision on what is needed possible?(e.g. BDEW approach?) Wholesale Market Design Issues Perceived security of supply concerns • Issue: who decides about the “gap”?

28. Technical dimension Political dimension Wholesale Market Design Issues • (Key) issue in EU: How to avoid fragmented solutions? • How to organise cross-border • co-operation on security of supply?

29. Technical dimension C/B adequacy planning - in practice? C/B capacity/capability/flexibility ‘markets’ Common definitions (products) Common procedures (tender, auction, cap ticket,…) Physical long-term reservations/PTRs needed? Wholesale Market Design Issues • Howtoorganisecross-border • co-operation in securityofsupplymatters ?

30. Political dimension Parallel supply crisis: what happens? Upfront agreement on load shedding rules? => Can Member States rely on neighbours? Wholesale Market Design Issues • Howtoorganisecross-border • co-operation in securityofsupplymatters ?

31. Fair balancing responsibility for RES ? How? Additional "backup" responsibility needed? Wholesale Market Design Issues • Issue: Allocation of "flexibility risk"

32. Is model neutral to supply and demand solutions? Does it maximise potential flexibility, storage, DSR, energy efficiency ? Fair balance between DSOs/TSOs Wholesale Market Design Issues • Issue: Fair demand side participation