Recommendations for the Electricity Market Design Improvement

Industry News – December 20, 2022

The EU is currently facing an energy resilience and energy affordability crisis. Short-term solutions put forward by both EU institutions and Member States in the last months aimed at addressing these urgent challenges, but some emergency measures have undermined the cost-effective transition towards climate neutrality.

The revision of the Electricity Market Design (EMD) should address in a structural way the current energy resilience and energy affordability crises with a long-term horizon, while supporting – instead of undermining – the clean energy transition with end-users of all types in the lead (from households to energy intensive industries, acting individually or collectively).

The current EMD can already deliver significant benefits to both consumers/prosumers and the energy system: Member States should accelerate the implementation of pending market rules and regulations to activate demand-side flexibility (DSF).

In the ongoing reflections to improve the EMD, it is important not to question existing rules targeting DSF, but rather to implement that swiftly and transform the emergency measure on the peak electricity demand reduction introduced this winter into a permanent, structural obligation of the new market design.

These existing EU rules should be complemented with additional provisions to address three major upcoming disruptions caused by an increase in renewable electrification of the energy system:

  • Location: significant amounts of new load and electricity generation in places where they were not previously present, notably at the edge of the system;
  • Energy balancing: increased need for flexibility and stability, over different time-frames (from instantaneous, to intra-day, to seasonal), as variable generation displaces fossil fuel generation;
  • Commercial and investment disruptions: new investment requirements due to price and volume volatility for renewables and other flexibility resources, including at demand-side.

This position paper, developed by smartEn – Smart Energy Europe with the support of Afry, aims to inspire this debate and is framed around five sets of recommendations which should be evaluated in a thorough Impact Assessment by the European Commission before the official legislative proposal:

  1. Strengthen consumer empowerment
  2. Maximise district self-balancing
  3. Unlock the value of demand-side resources in wholesale energy and ancillary services markets
  4. Support investments with capacity remuneration arrangements
  5. Combine renewables support schemes with distributed flexibility

Read more

Source: smartEn

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