February 2023
Introductory comment by EREF on the whole questionnaire
EREF is deeply concerned that the questions asked point to a very limited view of the European Commission on a reform of the Electricity Market Directive.
It seems that the consultation and its guidance missed the boat. We need urgently a reform which acknowledges that the roll-out of renewable energies is of the highest priority and of an overriding public interest as has been laid down under the so-called SOS Emergency Regulation of the Council and is at present a non-disputed part of the Trilogue negotiations concerning the REDIII and RED IV amendment process.
It is no longer adequate or correct to try to enable the decentralised renewable, storage and balancing energy system to adjust to the centralised electricity market rules form decades ago but rather to change the market structures to adhere to the new world of renewable energies as main source. Europe urgently needs a holistic transformation from the outdated conventional to the renewable energy system.
A true reform of the electricity market would need to review the supply side, the grid management under decentralised system services, trade, and generation as one system reform approach. The European Commission in its own analyses is aware that soon one third of energy supply will be generated, stored, and used locally. In this system, generation capacity, flexibility, complexity reduction and resilience of the power system will be provided by on-site supply. The incumbent paradigm of avoiding grid congestion only through expansion without first including flexibility and storage potential e.g. on the local level including correct and up to date smart systems is of clear importance and needs to gain priority attention.
Smart markets and energy-storage facilities must be encouraged to develop the trade of electricity as flexible and regionalised link between production and consumption. Unfortunately, the first energy market reforms and strict unbundling lead to the phenomenon that often e.g. TSOs are blocking storage capacity since this might endanger the – outdated- business models of many TSOs. TSOs are often private companies which manage a natural monopoly. Their cost structure is not often clear enough, especially when it comes to flexibility. Together with long-time disregarded electric mobility these can be seen as major stumble blocks for the market reform welcoming renewables as main source.
Hardly any of these major needs and aspects are included in this questionnaire. Rather, the questions would more suit to manage a still centralised system facing some renewables and more suited to oligopolistic and market dominant structures, as can be found in some Member States.
We do need to achieve a lot in only seven years until 2030 to reach the new renewable energy target, and to lower drastically thus the level of dependence from fossil sources, as coal, oil, gas, and uranium. A hesitant reform proposal by the European Commission would make the European Union loose an important momentum for acceleration and leave investors in renewable energies, storage and flexibility in an uncertain position.
EREF would also like to underline its support for the answers submitted by RESCOOP for this consultation: their main findings do match our view:
• Local communities, including citizens, local authorities, cooperatives and other small and medium enterprises (SMEs), are uniquely impacted by the ongoing energy crisis. And yet, they also have a large role to play in providing solutions as active participants in the energy transition. Nevertheless, their ability to take ownership and play a meaningful role in removing Europe’s reliance on imported fossil energy and building up renewable energy production relies heavily on the design of the internal energy market.
• It is, therefore, unfortunate that the Electricity Market Design has been primarily framed around interventions in the wholesale market. Defining the scope of the problem and the potential solutions around centralised exchanges of energy ignores the role that alternative ways of exchanging electricity through local ownership of production and supply can play in hedging consumers against volatility during the crisis and as we move to a 100% renewables future.
• Even if the Electricity Market cannot create more decentralised, local energy markets overnight, the building blocks must be put in place now to make longterm changes easier in the future. The EU’s ambition to move away from imported fossil fuels and to rid the energy market of gas will require a further unprecedented rollout of renewable energy production in the next few years. This installation of new projects and grid infrastructure will most certainly have significant impacts on local communities. If rolled out without participation and chance for local communities to take ownership, trust in the energy transition could falter, and public acceptance will become an even bigger problem than it already is today. On the other hand, if local ownership is prioritised, communities can spend the next few years mobilising capital and resources to prepare for, and influence, more decentralised energy markets of the future.
• At the very least, the Electricity Market Design reform should be anchored around the principle of prioritising local ownership of production and supply of renewable energy. Local communities themselves, including citizens, public authorities and SMEs, should be empowered to invest and take ownership in such resources’ this consultation as they mirror our view on the urgency for reform in order to enable community energies , energy cooperatives and in genal citizens renewable energy.
EREEF will answer most of the following questions but appeals to the European Commission to be more courageous. The full paper is avaliable in atteached PDF.