WHY AND THE HOW Aude Le Tellier
Deputy Director, International Affairs Department, Commission de Régulation de l’Energie, France.
In the field of energy and climate, the European Union has set itself the objective to reduce greenhouse gas emissions by at least 40 per cent compared to 1990 levels by 2030, to reduce its energy consumption by 30 per cent by 2030, and to increase the share of renewable energy sources to at least 27 per cent of its energy consumption by 2030. These objectives are at the heart of the European Union modernisation agenda: accelerating the transition to a more sustainable, lower-carbon economy is seen as an opportunity to sustain economic growth, stimulate investment in innovative technologies and create new employment opportunities, while contributing to enhance the welfare of European citizens.
The transformation of the energy sector, which is one of the main sources of carbon dioxide emissions, is a prerequisite to meet these objectives. In particular, the achievement of the European Union’s renewable energy targets implies a real paradigm shift in the
power sector, in which fossil resources and centralised means of generation remain predominant: according to the estimates of the European Commission, the share of renewable energies could reach half of the electricity mix by 2030. Integrating such levels of variable, decentralised and less predictable generation requires rethinking the system as it was conceived in the second half of the 20th century. New sources of flexibility have to be found and important investments have to be mobilised to preserve the reliability and the security of power supplies. These are all reasons why an important process of revision of the European legislative framework relating to functioning of the internal market in electricity was initiated in 2016.
The proposals currently under negotiation by the European institutions are based on the further harmonisation of the operating rules of European power markets. Much progress has already been made to optimise the use of cross-border infrastructure within the European Union, whereby actors can benefit from the complementary nature of consumption patterns and production fleets in Member States to reduce the cost for supplying their customers. Nevertheless, short term market rules must now be adapted to integrate larger shares of renewable power in a cost-effective and secure way. To do so, the European Commission also suggests that regional cooperation of all players in the sector, be it industry, sectoral regulators or Member States, must be strengthened.
Security of supply, however, remains an area in which Member States are rarely inclined to accept transfers of sovereignty. Finally, it is about encouraging final consumers to participate more actively in the market, including by making sure that they are well informed about their rights and the opportunities available to them to reduce their bills as the system moves to a smarter, more flexible and responsive one.
Indeed, the evolution of the power sector provides multiple means of action for users. Consumers can better control the level of their consumption and decide on the energy sources needed to generate the power they consume by opting for a low carbon/green offer. They can also opt for contracts allowing them to benefit from price fluctuations on the market by opting for time-differentiated dynamic pricing contracts or for contracts with so-called aggregators, which may remotely activate consumption reductions in order to resell volumes thus obtained on the wholesale markets in times of tension between supply and demand. The decrease in renewable technologies’
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costs is further expanding the opportunities available to end consumers, who can now generate electricity to meet their own needs. However, it is clear that a significant part of European energy consumers, which have been able to choose freely their supplier since 2007, has not yet made use of these opportunities.
European energy regulators are committed to make customers’ choice easier and help them engage more actively in the market.
On the supply side, one of the roles of the regulators is to ensure that the regulatory framework enables suppliers to make a range of offers available to customers. In order to promote competition, as well as innovation, European energy regulators advocate for the regulatory framework to allow all players to participate in the market on a level playing field. Discussions about the regulatory treatment of renewable energy self-generation provide a good illustration of issues at stake as technology develops.105 On the demand side, it is important that consumers have access to more reliable and more detailed information on their consumption and its costs. European energy regulators therefore believe that all consumers should be able to access reliable and independent comparison tools. They also consider that all energy consumers should be able to switch energy suppliers free of charge, i.e. without
undue termination fees, and as quickly as possible, if possible within 24 hours.
Within the Council of European Energy Regulators (CEER), energy regulators from the European Union and the European Economic Area are furthermore sharing their experience and know-how on retail market monitoring. For instance, they have developed a handbook106 with a set of indicators to assess the dynamism of their retail market and identify whether progress concerning energy consumers’ protection and empowerment is satisfactory. The means to involve stakeholders in the development of market rules, especially for those - such as consumers’
associations - which have fewer resources than the sector’s incumbents, are also a concern for energy regulators. The CEER issued an advice on this matter to the attention of the European Commission and the Member States as well as energy industry as early as 2015,107 and the Association of Mediterranean Regulators for Electricity and Natural Gas is also promoting exchange of good practice among its members in this area.
All these voluntary initiatives demonstrate the willingness of European energy regulators to contribute to the emergence of innovative practices and services for the benefit of consumers.
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