Energy policy: Shaping
the change
Decarbonisation, renewables, internal market: energy has become a top priority in politics and the future market design will be critical to achieve the energy transition. Our goal: to foster market-based solutions to untap the power of price signals.
In 2020, EPEX SPOT has taken an active part in the energy policy debates as European countries take steps to decarbonise their economies. Wherever sensible, EPEX SPOT promoted market-based mechanisms to foster competition, innovation and liquidity.
Fostering flexibility
The Clean Energy Package contains valuable targets for demand-side flexibility. A network code for flexibility should follow the goal to further streamline an effective implementation of the Clean Energy Package and other relevant regulations.
While a certain degree of harmonisation and procedures is helpful, a too narrow regulation through network codes for demand-side flexibility might result in an inefficient solution. The following points should be considered:
- Incentivise market-based flexibility procurement, as detailed in the Clean Energy Package;
- Include the creation of transparent and non-discriminatory flexibility markets;
- Acknowledge the benefits of market operations by neutral third parties;
- Not aim to be all-encompassing so as not to run the risk to hamper development of innovative solutions. This holds especially true for product standardisations.
Only market based mechanisms can unlock the full power of demand-side flexibility, urgently needed for a successful energy transition.
Henrike Sommer
Senior Public & Regulatory Affairs Manager at EPEX SPOTFrench ARENH: Design principles for a market-based solution
The ARENH mechanism is the regulated access to incumbent nuclear electricity in France. In the past years, EPEX SPOT has regularly drawn attention to the negative impact of the current mechanism on the functioning of markets and the relevance of the French and European price signal. EPEX SPOT and EEX, its derivatives equivalent, have now commonly set out design principles for the reform of the ARENH mechanism. The replacement of ARENH with a market-based mechanism is a necessary evolution which should take place as soon as possible. The new proposal would bring a significant and welcome improvement towards market principles.
Renewables in Germany:
Switch to full market integration
In Germany, EPEX SPOT and EEX actively advocate for the further market integration of renewable energies. In particular, the exchanges support the long-term vision of a market based remuneration of renewables without the need for additional support schemes.
Renewables in Austria:
Plan a post-support scheme era
The Austrian Renewable Energies Expansion Act, the so-called EAG Package, is the largest legislative package on the Austrian electricity market for over a decade, and it represents a decisive step towards the full integration of renewables into the Austrian power market.
Both EEX and EPEX SPOT welcomed that the EAG Package largely focuses on the market integration of renewable energies. This includes the introduction of a market premium as an improvement compared to the current feed-in tariff, the increased tendering of funded projects as well as investment grants.
At the same time, EPEX SPOT and EEX urged the Austrian government to already focus on a post support-scheme era. They suggest testing support schemes that incentivise innovation in the energy market, limiting subsidies to a minimum while consequently extending market participation. Only by fully aligning to the market price, the activity of market participants will benefit the overall system. Market participants must have the right incentives to bid on the wholesale market at their real costs, i.e. on the basis of the merit order. As a consequence, the market price signal would remain undistorted, even if the share of renewable energies increases.
A market-based approach is essential to allow for a cost-efficient energy transition. Only full participation in the market allows for the generation of additional revenues while lowering the necessary subsidy schemes, with a direct reduction of costs for the Austrian end-consumer.
