Securing Electricity Supply: What is the Potential of National Measures in the European Market?

Transcription

1 Securing Electricity Supply: What is the Potential of National Measures in the European Market? Hamilcar Knops International Institute of Energy Law, Leiden University Faculty of TPM, Delft University of Technology The Hague, 26 September 2003

2 Securing Electricity Supply: What is the Potential of National Measures in the European Market? Hamilcar Knops International Institute of Energy Law, Leiden University Faculty of TPM, Delft University of Technology The Hague, 26 September 2003

3 Not: Would a market provide a secure supply? Which measure would be most effective? But: How well do possible (national) measures comply with the European legal framework? Why bother? intervention in a free market national measures vs. European integration

4 Outline I. The European legal framework II. III. IV. Are national measures allowed? Assessment of the mechanisms Conclusion

5 In theory: one internal power market EC EFTA

6 In practice: several national markets...in particular security-of-supply measures are national

7 I. The European legal framework (1) EC Treaty economic freedoms: - free movement of goods - free movement of workers - freedom of establishment and provision of services - free movement of capital ~ how does a measure affect trade between Member States?

8 I. The European legal framework (1) EC Treaty economic freedoms competition law: - no anti-competitive agreements - no abuse of dominant position - merger control

9 I. The European legal framework (1) EC Treaty economic freedoms competition law state aids: in principle prohibited, but can be cleared by the European Commission

10 I. The European legal framework (2) EC Treaty and Directives Public Service Obligations: (i) obligation imposed upon an undertaking (ii) with a view to a service of general economic interest (iii) by the competent authority

11 I. The European legal framework (2) EC Treaty and Directives Public Service Obligations: (i) obligation imposed upon an undertaking (ii) with a view to a service of general economic interest (iii) by the competent authority Importance: allows derogation of EC-rules; and compensation is not State Aid (Altmark)

12 I. The European legal framework (3) Electricity Directive 2003/54/EC Generation: authorisation procedure Security of Supply: must be monitored by MS (Art. 4) possible measure: tendering procedure or equivalent procedure (Art. 7) public service obligations (Art. 3)

13 I. The European legal framework (3) Electricity Directive 2003/54/EC, Article 7(1): Member States shall ensure the possibility, in the interests of security of supply, of providing for new or energyefficiency/demand-side management measures through a tendering procedure or any procedure equivalent in terms of transparency and non-discrimination, on the basis of published criteria. These procedures can, however, only be launched if on the basis of the authorisation procedure the generating being built or the energy-efficiency/ demand-side measures being taken are not sufficient to ensure security of supply.

14 II. Are national measures allowed? Yes, Member States shall implement appropriate measures to achieve the objective of [ ] security of supply (Art. 3(7) Directive 2003/54/EC) Such measures may include the provision of adequate economic incentives (Art. 3(7) Directive 2003/54/EC) Member States shall ensure sufficient generation (Art. 7(1) Directive 2003/54/EC) And, in general, public service obligations are within the competence of Member States

15 III. Mechanisms amount of DECENTRAL CENTRAL

16 III. Mechanisms amount of DECENTRAL CENTRAL DECENTRAL price of CENTRAL

17 A. Tender procedure, and moth ball reserve amount of DECENTRAL CENTRAL DECENTRAL price of moth ball reserve CENTRAL

18 A. Tender procedure, and moth ball reserve Tender: can be launched if too little investment without subsidy: probably not effective with subsidy, without conditions: probably prohibited state aid with subsidy, with conditions: ~ moth ball reserve

19 A. Tender procedure, and moth ball reserve Tender: can be launched if too little investment Moth ball reserve: strategic reserve of generation operation centrally controlled (government) only to be used in emergencies financed by government/public at large

20 A. Tender procedure, and moth ball reserve Tender: can be launched if too little investment Moth ball reserve: strategic reserve of generation operation centrally controlled (government) only to be used in emergencies financed by government/public at large Assessment Tender explicitly mentioned in Directive Moth ball reserve might be accepted under European Law as Public Service Obligation but measures appear not to be very effective, since they discourage investments

21 B. Capacity requirements amount of DECENTRAL CENTRAL DECENTRAL price of moth ball reserve requirements CENTRAL

22 B. Capacity requirements obligation to maintain certain reserve (amount is centrally determined) either on generators, or on suppliers/consumers with generally a market to determine price

23 B. Capacity requirements obligation to maintain certain reserve (amount is centrally determined) either on generators, or on suppliers/consumers with generally a market to determine price Assessment as a Public Service Obligation it might be accepted under European Law (cf. Renewables Obligation) but special attention must be paid to cross-border effects

24 C. Reliability contracts (call options) amount of DECENTRAL CENTRAL DECENTRAL price of moth ball reserve call options requirements CENTRAL

25 C. Reliability contracts (call options) problem with requirements: - value of is artificial - not always as effective as desired price strike price time

26 C. Reliability contracts (call options) central determination of desired exchange of uncertain, volatile (generator) income for more stable revenues general public is hedged against price spikes incentive to have reserve available when most needed

27 C. Reliability contracts (call options) central determination of desired exchange of uncertain, volatile (generator) income for more stable revenues general public is hedged against price spikes incentive to have reserve available when most needed Assessment shift of investment risk, neutral to the market: no legal problems at first sight; but, again, beware of cross-border effects

28 D. Capacity payments payments amount of DECENTRAL CENTRAL DECENTRAL price of moth ball reserve call options requirements CENTRAL

29 D. Capacity payments fixed/dynamic payments for availability of actual amount of available is then determined by the market

30 D. Capacity payments fixed/dynamic payments for availability of actual amount of available is then determined by the market Assessment as this measure was applied in some MS, it is apparently not prohibited by European law, but cross-border effects must be considered

31 E. Capacity subscriptions amount of DECENTRAL payments subscriptions CENTRAL DECENTRAL price of moth ball reserve call options requirements CENTRAL

32 E. Capacity subscriptions completely market-based solution decentral determination of desired (peak) decentral determination of price for generation

33 E. Capacity subscriptions completely market-based solution decentral determination of desired (peak) decentral determination of price for generation Assessment technically not feasible yet...(?), but legally OK! however, again: beware of cross-border effects

34 IV. Conclusion National measures are (still) possible Beware of State Aid: - e.g. subsidised without conditions - but also imaginable with other measures Public Service Obligations: - useful tool : allows derogation from EC-law - e.g. requirements Consider cross-border problems : - does a measure distort trade/competition? - in particular if benefits are restricted to that MS Market-based solutions pose the least legal problems - e.g. call options and subscriptions

35 Securing Electricity Supply: Is it Time for a European Solution? The End