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Towards a Europeanisation of EU Capacity Mechanisms?
Madrid – OMIE Conference - (15 June 2015)Arthur Henriot &Jean-Michel Glachant Director Florence School of RegulationEUI - Florence
Nota Bene: 1/ This work has been made at Florence School by Arthur and me before Arthur joined the French TSO “RTE”
2/ Arthur is not member of the RTE “Market Design” team
3/ RTE is not involved with or engaged by what Arthur did when working at Florence School under my supervision.
The emergence of national capacity mechanisms
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Different Needs
Different Resources
DifferentObjectives
Source: ACER
The emergence of national capacity mechanisms (2/2)
French « Capacity market »
Obligation on suppliers
Decentralised market
British « Capacity market »
Target administratively
set
Centralised auction
The emergence of national capacity mechanisms (2/2)
Þ Probably no harmonized adequacy policy all over Europe
Yet autarky is costly
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• Costs of national self-security are high (≈20% of IEM benefits): - Uncorrelated demand & RES availability• Impact not limited to “generation adequacy”
Þ National mechanisms must be “Europeanized”
Exports to France from neighboring countries on February 8th 2012,19h00
How much harmonization needed?
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Þ No need for a single productBUT : need to take into account cross-border resources
need to allow cross-border exchanges and remunerate external resources
Þ No need for an identical level of security of supplyBUT : need to measure the efforts made by different countries
need to allocate rights at times of extreme scarcity
Assessing & remunerating cross-border resources :
implicit approach
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• Assessing the overall contribution of cross-border resources (‘implicit approach’)
− Lack of consistent methodology
− Lack of consistent inputs
Þ Avoiding oversupply by taking into account cross-border resources contribution, provided some common methodology and scenarios can be established.
Þ Failing to remunerate external resources
Assessing & remunerating cross-border resources : explicit approach
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Cross-border resource
availability
Interconnectionavailability
Flow in the right direction
Resource operator best able to
manage this risk ?
Interconnection operator best able to manage this risk ?
Þ Who will certify resources availability? Þ Who can handle delivery risk in the absence of a regional system operator?Þ How to remunerate: 1/ cross-border resources & 2/Interconnectors?
Who is importing/exporting when markets are coupled?
• Assessing the contribution of a specific resource (‘explicit approach’)
Defining rights over system resources @times of extreme scarcity (1)
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Þ How to measure heterogeneous efforts made to insure against scarcity and allocate energy at times of scarcity (or to set financial compensation)?
Þ Cannot be solved currently by short-term arrangements : low price-caps /equally shared curtailment
Þ How to build a set of economic incentives compatible with a spirit of solidarity?
Defining rights over system resources @times of extreme scarcity (2)
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Þ Solidarity will be needed anyway!
“Rarity”, “outside […] regular expectations”
“Extreme impact”
Only “retrospective predictability”
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Thank you for your attention
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