Electricity market design: Some like it hot!

By: Aurelie Beauvais, Policy Director

After a year of negotiation, the current Estonian presidency of the Council of the European Union has been pushing hard to reach a final agreement on the Electricity market design, at the Energy Council to be held on 18th of December.

If 'slow and steady wins the race', the fast-tracked approach taken by the Estonian Presidency might lead to a sub-optimal compromise. The current proposals on the table confirms these concerns, watering down key aspects of the future market design framework, and failing to improve significant provisions, such as the framework for small-scale renewable installations and active consumers.

Notably, negotiations are still raging on the future framework for Capacity Mechanisms. Member States diverge significantly on the implementation of a 550g/tCO2 limit in capacity mechanisms, which would make sure that the EU's most polluting plants, aka those above 550g/tCO2, will not benefit from public subsidies in the future. The 550g criterion is controversial, but must be defended as it will be crucial to lower CO2 emissions to lead the global fight against climate change. Recent initiatives such as the One Planet Summit and the Power Past Coal Alliance launched at the last COP23 in Bonn, have demonstrated the need for the EU to show leadership on this issue, as it did for the Paris Agreement back in 2015.

On the other hand, the fast pace imposed for the adoption of both the Directive and Regulation has forced Member States to focus on the most controversial issues, missing the opportunity of building consensus on a renewables-based and consumer-powered energy transition.

SolarPower Europe has been very active in delivering a 'future proof' electricity market design - more flexible, renewables-based, and open to the participation of new players such as small-scale producers or aggregators. However, this process must be well thought through, as the solar sector remains fragile in Europe and must be supported to become a strong industrial success for Europe.

One key provision of the current electricity market regulations relies on the future framework for small-scale renewable installations. On the 9th of November, a strong coalition of trade and renewable associations urged Member States to consider the specificity of small renewable scale producers, and acknowledge the substantial benefits that such installations bring to the social and economic dynamism of local territories. Signatories urged policy makers to maintain priority dispatch and balancing responsibilities exemptions for small-scale renewable installations, pointing out the disproportionate burdens that would emerge from a 'savage' market integration. To this date, the European Council has failed to develop a tailor-made approach, leaving small producers fully exposed to whatever mood their Member States happen to be in. Is this really the consumer-powered energy transition that the Energy Union promised its citizens?