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National energy policies could undermine 2014 target - EU

15 Nov 2012 20:12:07 | edem

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The European Commission has warned that Europe could fall short of the 2014 market integration target, blaming "nationally inspired policies" in a communication published on Thursday. It also called for more flexible market-based policies.

In February 2011, the EU heads of state declared the need to complete the internal energy market by 2014.

However, the 2014 deadline is appearing increasingly delayed (see EDEM 25 September 2012).

National policy

The Commission called for national capacity mechanisms - which support producers to keep flexible generation on line to compensate for more volatile renewable sources - to be designed in a more flexible way by member states, or they risked fragmenting the market and hindering investment.

Germany and France are among member states considering capacity mechanisms to support more flexible generation. "Capacity mechanisms distort the EU-wide price signal and are also likely to favour fossil-fuel generation sources over more variable renewable sources," the Commission warned.

Finnish utility Fortum focused on market functionality, calling for capacity mechanisms to be coordinated in its response to the Commission's communication.

"We urge the Commission to launch a process to develop clear EU-level compatibility criteria for capacity mechanisms. National capacity mechanisms should be allowed only if a member state can prove that its security of supply is seriously threatened and cannot be alleviated by cross-border electricity trade. The Commission should have a clear mandate in ensuring that possible capacity remuneration mechanisms do not distort the cross-border electricity trade or influence the location of investments", the statement read.

Market integration

Further integration of the markets was a priority, pushing forward EU-wide network codes (see EDEM 26 January 2012).

Ahead of the communication on Thursday morning, electricity industry lobby group Eurelectric urged the Commission to keep the completion of the energy market by 2014 as a key priority. Eurelectric also called for a "system approach to renewables and for stronger coordination of national market design changes". The European wind energy association (EWEA) said that the key actions identified by the Commission on Thursday did not go far enough to develop the energy market by 2014.

"Regulated prices, fossil fuel and nuclear subsidies, market concentration and lack of market transparency are the main problems that need to be tackled urgently. The communication focuses too much on renewable energy support mechanisms and not enough on the most critical distortions," said EWEA senior regulatory affairs advisor Paul Wilczek.

EWEA also highlighted that the Commission's proposal lacked scenarios to further development of the internal energy market beyond 2014, excluding intra-day and balancing markets across Europe.

Third package and competition

The Commission called for internal market law to be fully transposed, which has still not been implemented in a number of states and enforcement of competition rules. Last month, the EU referred Poland and Slovenia to the EU court of justice for failure to transpose the third-party energy directive (see EDEM 24 October 2012).

"Not only are member states slow in adjusting their national legislation and creating fully competitive markets with consumers' involvement, they also need to move away from, and resist the calls for, inward-looking or nationally inspired policies," the Commission warned.

The Commission also warned that competition rules would be actively enforced, for example, on concessions for hydropower generation or storage facilities. "The most appropriate way should be to put these concessions out to tender on a nondiscriminatory basis, using open instruments such as auctions," the statement read.

Price transparency, enhancing infrastructure investment, implementation of smart meters and phasing out regulated retail energy prices were also key actions identified by the Commission. MM

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