More Liberal Voices. A Response to Public Consultation on New Energy Market Design

The EU is aiming to transform the European electricity system and redesign the electricity market to empower the reach of the 2030 climate and energy targets and the leading role of the Union in the field of renewable energy. The changes are claimed to be necessary in order to meet “consumers’ expectations, deliver real benefits from new technology, facilitate investments, and recognise the interdependence of EU Member States when it comes to energy security”. The Commission believes the transformation of electricity system and redesigned electricity market to have an added value to cross-border competition as well as to promote decentralized electricity generation. The Commission’s questions of the consultation are classified into three groups: (i) a new electricity market for the EU; (ii) regional cooperation in an integrated electricity system; and (iii) the European dimension to security of supply.

LFMI’s response in brief

On a new electricity market for the EU:

  • Introducing deregulation which would allow real market price signals, including scarcity, should become the core element of an integrated electricity market;
  • Only flexibility and autonomy of suppliers and consumers in managing price volatility by allowing diversified products and services, based on dynamic pricing, will ensure that the value reflects the actual scarcity. Informative price signals will increase incentives for innovation in entrepreneurial activities and technology, responsiveness to consumer demands, and management of consumption;
  • To prevent Member States from using capacity mechanisms next to the prices reflecting scarcity, there is a need to remove the barriers to cross-border trade and interconnections;
  • It should be noted that the development of interconnections and a full integration of renewable generators might cause overinvestment into infrastructure;
  • The EU shall not force any regulatory measures to the electricity market and its structure. The introduction of mandatory regulatory requirements may prevent innovation and technology from evolving in the market.
  • Renewables shall not be seen as immature; therefore, additional public financial incentives are not necessary. Continuous subsidies are distorting the market, impeding competition, and will affect market signals, reliability of which will be of even greater importance in the integrated European Energy Market.

On regional cooperation in an integrated electricity system:

  • The European Commission should not take for granted that the Integral energy market necessarily implies centralised (at the EU level) decision making and justifies the expanding roles of the EU agencies or harmonizing measures;
  • The European electricity system and electricity markets are under ongoing innovation and sufficient time should be left for the market, as well as national authorities, to adapt and offer solutions.
  • The Commission is overly focused on the EU-level measures that suggest new and stronger functions of EU agencies and bodies; there is a danger that the EU institutional and regulatory frameworks will not evolve along with technology;
  • Voluntary regional and pan-European cooperation shall not be undermined.

On the European dimension to security of supply:

  • According to Article 194(2) of the Treaty on the Functioning of the European Union (TFEU), Member States are entitled to choose the structure of energy supply and energy mix. Therefore, it should be taken into consideration that Member States are responsible for security of supply;

The Commission’s role in the European dimension to security of supply shall focus on the application of the EU Internal Market rules and the competition law, assessing whether national policy measures relevant to security of supply are justified, proportional and in line with the principles of free access to generation and networks, and undistorted competition. Moreover, technical questions should be discussed in cooperation between Member States and market players, including, but not limited to, national regulators and TSOs.