New Rules for a Consumer Centered Clean Energy Transition EURELECTRIC views on the Clean Energy Package

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New Rules for a Consumer Centered Clean Energy Transition EURELECTRIC views on the Clean Energy Package 18 May 2017 Finnish Energy s Spring Seminar Kristian Ruby

The Clean Energy for all Europeans package 8 key legislative proposals 4 regulations Electricity Market Regulation ACER Regulation Governance Regulation Risk Preparedness Regulation 4 directives Electricity Market Directive RES Directive Energy Efficiency Directive Energy Performance for Buildings Directive

EURELECTRIC s priorities to navigate the European power sector through the Clean Energy Package Reveal the value of electricity: ELECTRIFICATION Revise the MARKET DESIGN to attract investments Reinforce the focus on retail with EMPOWERED CUSTOMERS PROMOTE DSOs as technological enablers and market facilitators Ensure a costeffective DECARBONISATION Achieve the ENERGY UNION 3

EURELECTRIC views on the Clean Energy Package A Consumers as key players of the energy transition B A new electricity market design a sustainable proposal? C The new role of DSOs 4

EURELECTRIC views on the Clean Energy Package A Consumers as key players of the energy transition B A new electricity market design a sustainable proposal? C The new role of DSOs 5

The Electricity Directive will generally improve consumers protection & engagement in the market Market-based retail prices Switching Comparison tools Billing Well-functioning markets are best equipped to deliver cost-reflective, fair prices to consumers. Lessons can be learned from the MS where roadmaps to end-regulated pricing have been implemented (e.g. Ireland, GB, Latvia). The clear distinction made in the Directive proposal between switchingrelated fees (forbidden) and early termination fees (allowed) is a positive step forward. A certified comparison tool in each MS will enhance transparency and choice. These tools should compare prices but also service quality & key product features. They should also disclose the fees they possibly get from suppliers in case of a switch. The package is unlikely to improve consumer satisfaction with bills as the key issue of information overload due to regulation is completely overlooked. Regulation should be more principle-based and less prescriptive on what/how information is provided in bills. 6

Billing: do not over-regulate, leave room for suppliers innovation! National regulation on bills in CZ Innovative bill in the UK Billing The package is unlikely to improve consumer satisfaction with bills as the key issue of information overload due to regulation is completely overlooked. Regulation should be more principle-based and less prescriptive on what/how information is provided in bills. 7

Energy poverty: a very diverse situation across Europe

The Directive rightly leaves it up to MS to define criteria and policies on energy poverty whilst strengthening reporting obligations No price regulation National action on energy poverty Efficiency obligations targeted to energy poor consumers Energy efficiency is an effective long-term solution to energy poverty but not through supplier obligations as costs are redistributed on all customers, regardless of their ability to pay. EURELECTRIC solutions to alleviate energy poverty Address rising retail prices due to taxes & levies. EURELECTRIC video. Revise the structure of network charges & levies should to mitigate price increases & avoid crosssubsidisation between consumers. Other solutions than levies should be found: (progressive) general taxation, financial incentives including tax exemptions, public-private partnerships and EU funding. 9

The development to demand response is a key objective of the Clean Energy Package Customers right to a dynamic pricing contract Pass-through of wholesale prices volatility can be not only achieved through real time pricing but also with advanced forms of time-of-use & critical peak pricing. Suppliers obligation to offer such a contract Such an obligation contradicts various parts of the proposed Directive. It is detrimental to competition and innovation: it could create entry barriers for small suppliers. Customers right to a smart meter In case of a selective roll-out, the functions and interoperability shall reflect technical and economic feasibility at the time of installation. Costly updates of IT systems would create higher cost for customers who did not ask for a smart meter. Demand response aggregation DR aggregators should have balance responsibility The energy sold on the market by the aggregator must be bought 10

EURELECTRIC supports the overall Commission s proposal on E-mobility Without infrastructure no Electro-mobility Residential buildings Non-Residential buildings Mixed use buildings Pre-cabling or pre-tubing is cost-efficient Charging stations can be installed easily, when needed No right to install a charging point for citizens No requirement for pre-cabling Visibility and accessibility of charging points No right to install a charging point for citizens Not covered by the Directive 11

EURELECTRIC views on the Clean Energy Package A Consumers as key players of the energy transition B A new electricity market design a sustainable proposal? C The new role of DSOs 12

EURELECTRIC supports the proposed improvements to short-term markets but overall market design proposal lacks consistency Well-functioning market design should value three key products Energy Flexibility Capacity (availability) KWh Adjusting to short-term variations Firm capacity for security of supply Markets: Forward, day-ahead, intraday markets Day-ahead, intraday, balancing markets, ancillary services Market-based capacity mechanisms where relevant 13

Integration of renewable energies in the electricity market requires a level-playing field with other technologies The Clean Energy Package calls for equal conditions of RES/CHP with other market participants Priority Dispatch Priority Access Balancing responsibilities Dispatching of power generation facilities and demand response shall be non-discriminatory and market based New exemptions (for small RES/CHP and demonstration projects) Non-retroactivity Article 11 The resources ( ) shall be selected amongst ( ) facilities submitting offers ( ) using market-based mechanisms and be financially compensated Article 12 Proposal should state that nonmarket based mechanisms should be an exception In non-market based decisions, there should be full financial payment for lost revenues/costs All market participants shall aim for system balance and shall be financially responsible for imbalances they cause in the system New exemptions (for small RES/CHP and demonstration projects) Article 4 Non-retroactivity & Mechanism for voluntary acceptance against appropriate compensation 14

The CEP should rather provide high-level design and implementation criteria to end the uncoordinated development of capacity mechanisms Features of well-designed capacity mechanisms Clean Energy Package Market-based Technology-neutral Open to new and existing assets Cross-border participation Open to generation, demand & storage Contracts Valued in competitive markets All technologies able to participate without discrimination Level playing field between new and existing capacity To drive regional cooperation and take into account interdependencies All forms of capacity should be able to participate The outcome should be a contract and not a regulatory commitment Market-based Environmental Performance Standard Open to new and existing assets Cross-border acknowledged, allows multi-participation Yes; generation is discriminated due to EPS Not mentioned 15

EURELECTRIC views on the Clean Energy Package A Consumers as key players of the energy transition B A new electricity market design a sustainable proposal? C The new role of DSOs 16

The role of DSOs evolves fast Power Power plant plant Transmission Transmission Distribution Distribution Wind Wind integration integration PV PV integration integration Power Power plant plant Transmission Transmission Distribution Distribution Active network management Active network management Electricity storage Electricity storage EV charging EV charging Demand side participation Demand side participation 17

Flexibility is a vital service to facilitate distribution network management in the future EURELECTRIC s call for a regulatory framework encouraging the procurement of flexibility services and allowing regulated businesses to established these in case of market failure A market-oriented, yet pragmatic approach to specific DSO needs and the procurement of flexibility services by exploring the option for a non mandatory tender Defining standardised market products Procuring services from the market Accounting for use in network plans Storage assets are a tool for flexibility Owned and operated by markets participants. MS may allow DSOs to own, operate and manage storage only under certain circumstances. NRA assess the interest of markets parties at regular intervals. 18

The increasing role of DSOs in the energy transition is being recognised a European DSO entity EC proposed the creation of a European DSO entity Institutionalise DSO cooperation All unbundled DSOs can be members Funded by participating DSOs, who in turn recover cost via national tariffs 1 2 3 4 5 6 with limited scope Planning of distribution networks Integration of distributed generation Demand side response Smart grids Data Management and Cyber Security Network Code drafting EURELECTRIC s views on the EU DSO entity The EU DSO entity must permit the participation by all types of DSOs. Its tasks should be carefully selected and rules only adopted when supported by an evidence base. The EU DSO entity should be focused on technical domains (network codes) only, and not engage in lobbying. Governance and voting rights ensure the fair representation of all members. EURELECTRIC will take a key role in establishing this entity. 19

Local energy communities are designed to facilitate local RES electricity generation and consumption New realities Consumers have the right to generate and sell their electricity, individually and collectively via energy communities DSOs play a crucial role A fair system for all DSOs facilitate the energy transition by connecting ever more distributed generation All market actors should participate in the market on a level playing field Costs should be covered by those who cause them Network and policy charges must be paid by all consumers Market distortions should be avoided which drive up costs for all stakeholders Self consumption also includes a commitment to pay all regulated charges Net-metering should be explicitly excluded 20

Back-up 22

Defining a common EU data format without prior CBA could be very costly and irrelevant No specific data management model There is no one size fits all model for the management of meter data. Key principles should be set to ensure neutral, transparent, nondiscriminatory, secure and cost efficient data handling. Stricter provisions on customer consent Common EU data format DSOs and suppliers need access to their customers consumption data to guarantee secure network management and basic supply services, as per their contractual obligations. For any other additional service, access to consumption data should only be possible after customers explicit consent. A EU data format risks creating high costs in MS where a data hub is already implemented as market actors would need to upgrade all core IT systems such as billing. No action before positive CBAs both at national and EU level. 23

Understanding the benefits of electrification of transport Energy efficiency gains Electric motors are around 4 times more energy efficient than internal combustion engines with the same amount of energy, you can propel 4 electric vehicles or 1 internal combustion vehicle Emission savings As emissions in the electricity sector are capped by the ETS, electrification of any sector results in a defacto decarbonisation of this sector In well-to-wheel calculations and with the current European electricity mix, electric vehicles emit 50% less CO2 than an average internal combustion engine vehicle Sector coupling and contribution to an integrated system With dynamic pricing and a charging station equipped with a smart metering and communication devices, EVs can charge at time of high renewables feed-in generating savings for the driver s electricity bill and at the same time providing valuable flexibility for the electricity system 24

What is needed for the electrification of transport sector and where the Clean Energy Package provides impulses Without infrastructure no Electro-mobility Residential buildings Non- Residential buildings Mixed use buildings Member States shall ensure that newly built residential buildings and those undergoing major renovations, with more than ten parking spaces, include the pre-cabling to enable the installation of recharging points for electric vehicles for every parking space. Pre-cabling or pre-tubing is cost-efficient Charging stations can be installed easily, when needed No right to install a charging point for citizens Member States shall ensure that in all new non-residential buildings and in all existing non-residential buildings undergoing major renovation with more than ten parking spaces, at least one of every ten is equipped with a recharging point [...] No requirement for pre-cabling Visibility and accessibility of charging points No right to install a charging point for citizens Nothing proposed Not covered by the Directive 25

Why are the provisions in the EPBD important for the electrification of transport? The EPBD proposal and the AFI Directive (2014) complement each other Alternative Fuels Infrastructure Directive Energy Performance of Buildings Directive Scope: location Publically accessible charging points (mainly on-street) Private buildings Scope: type of charging Both fast charging and normal power charging Normal power charging Focus: timeframe Short-term deployment (2020) Longer term readiness for charging points 26

Network charges - towards a more homogeneous grid tariff structure Overarching principles Harmonisation Overarching principles (transparency, cost reflectiveness, fair cost allocation) enable level playing field and minimize market distortion Grid tariffs should provide adequate incentives to grid users for an efficient use of the grid Distribution should not be distance related (with the exception of connection charges) Further harmonization of transmission tariffs at European level is needed to ensure a level playing field. A NC on transmission tariffs structure is welcome Distribution tariffs should remain a matter of national regulation as they are closely linked to local specificities and their impact on cross border trade is low. 27