Conditions for electricity and natural gas market development in the Internal Energy Market issues f

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Conditions for electricity and natural gas market
development in the Internal Energy Market -
issues for the Baltic area Kyriakos Gialoglou,
Centre for European Policy Studies Baltic
Economic Forum, Riga, Latvia 19.05.2005
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Focus

• Present research by CEPS Task Force Rethinking
  the EU Regulatory Strategy for the Internal
  Energy Market
• Define and highlight conditions necessary for the
  completion of the electricity and gas market in
  the EU.
• Identify specific issues for the Baltic area.

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Outline

• What is CEPS?
• What is a Task Force?
• What was this Task Force about?
• Main findings, priorities and recommendations
• Issues for the Baltic states
• A little extra

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I. CEPS the Energy, Climate Change and
Environment Programme

• Independent, non-partisan, not-for-profit, policy
  research institute.
• 21 year presence in Brussels, focus on European
  integration
• Privately funded research projects, corporate
  inst. members
• Programme focus
• - Energy Internal Market, Security of Supply,
  present policies for RES market integration
• - Climate Change Emissions Trading and business
  consequences, post-2012 Kyoto regime,
  Transatlantic Dialogue

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II. Task Force, relevance and function

• CEPS initiative, grouping together stakeholders
  (policy makers, private sector, regulators,
  consumers, NGOs)
• Focus on policy relevant research
• - Report with clear-cut policy recommendations
  on issues identified ex ante by CEPS.
• Report based on broad consensus, executive
  summary responsibility of CEPS, common view among
  participants

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III. Energy Task Force, focus function

• From Jan. 2003 to end 2004
• Priority actions to achieve IEM also considering
  EU objectives sust. development, secure supply
• Gas electricity sector, essentials for
  functioning markets
• Proposal for an institutional framework for el.
  gas market regulation

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IV. Key messages, findings recommendations,

• Vital to continue efforts on production,
  unbundling, network access, cross-border trade
  despite considerable progress
• Proper implementation of 2003 Directives, 2005-06
  crucial about future structures
• Implementation of legislation necessary but not
  sufficient
• more attention must be paid to other, less
  prominent fields

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V. Key messages, findings recommendations cont.

• Immediate priority for incentive-based network
  regulation, incentives to system operators for
  network cost reduction (but benefits to
  consumers)
• Focus on grid access, level of access charges,
  publication of network tariffs, legal unbundling
  proper implementation
• Regulatory fora and mini fora
• Avoidance of creative implementation by member
  states

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VI. Key messages, findings recommendations cont.

• Wholesale market design and rules
• Power exchanges, OTC and gas hubs, efficiency and
  trading
• Within-day balancing, access to storage for gas
• Non-discriminatory access for market participants
• Transparency data on load, cross-border flows,
  balancing costs, market sensitive information
• Look nearby for Best Practice (NordPool)
• Consistent application of Competition rules in
  par with regulation

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VII. Key messages, findings recommendations
cont.

• EU approach on market concentration needed
• Common definition of concentration and market
  power (relevant products and markets)
• Crucial areas Full unbundling, improved TPA,
  regulators monitoring retail prices to avoid
  cross-subsidisation by excessive pricing
• Consumer empowerment, choice, supplier switch
  through transparency based on regulation

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VIII. Key messages, findings recommendations
cont.

• Regional markets, a realistic but transitional
  step
• Tailor-made solutions to regional matters but
  boundary conditions e.g. general rules on
  congestion management, transmission pricing,
  balancing EC set
• Finally, common criteria definitions on market
  monitoring and assessment mechanism agreed by
  Community, member states, regulators

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IX. Issues for the Baltic states - relevance of
Report findings

• Findings recommendations immediately relevant
  or of strategic significance
• Present priorities
• - proper implementation, incl. legal unbundling
• - competition in production and network access
• - strong regulators to oversee the process
• - efficient transmission distribution network
  utilisation for cost reduction and infrastructure
  construction
• Result Supplier and source diversification,
  cost efficiency, construction of essential
  interconnection infrastructure

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X. Issues for the Baltic states - relevance of
Report findings cont.

• Mid- and long-term priorities
• Wholesale market design
• Development of regional power exchanges with
  specialised markets and non-discriminative data
  availability (transparency)
• Result mid and long-term efficiency gains in
  price and load allocation. Savings channelled to
  interconnection with other systems and
  efficiency.
• Effective TPA will attract foreign market
  participants (as is the case with Finlands
  investment). Potential for merchant line
  construction.

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XI. Issues for the Baltic states - relevance of
Report findings cont.

• Regional Mini Forum and closer cooperation among
  regulators, relevant stakeholders and
  policy-makers across national borders
• Tailor-made regional agreements on transmission,
  congestion management and priority access
  integrating markets
• Pooling of resources on issues that matter across
  borders and creating a common framework to deal
  with them

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XII. How is Greece coping with energy
liberalisation?

• Not a market based on competition
• Incumbent (PPC) dominates but also specific
  issues related to geographical location and PSOs
• Some unbundling but no wholesale market, no
  trading
• Policies to reverse the status quo
• EC-funded interconnection with Italy
• EC push for the creation of a South Eastern
  regional electricity market future integration
  of regional markets, diversification of fuels and
  newcomers with better prices
• SE market is under construction, the Baltic
  market exists!

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• Thank you for your attention!
• www.ceps.be
• Kyriakos.gialoglou_at_ceps.be