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Electricity market 2030 presentation short

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Page 1: Electricity market 2030 presentation short
Page 2: Electricity market 2030 presentation short

VISION FOR EUROPEAN ELECTRICITY MARKETS IN 2030

– Vision for the market model of integrated European electricity markets –

Page 3: Electricity market 2030 presentation short

Vision for European Electricity Markets in 2030 – research project

- Carried out between April 2010 and April 2011 at Lappeenranta University of Technology

- Commissioned by the Finnish Energy Industries (ET), the Finnish Electricity Research Pool, Suomen ElFi Oy, the Finnish Forest Industries Federation, the Federation of Finnish Technology Industries and Nord Pool Spot AS

- Target of the project:- To provide a vision of the European

electricity markets in 2030

Page 4: Electricity market 2030 presentation short

Electricity markets – initial situation

− In the European thought, the main target has been to make the functions of the electricity sector more efficient and guarantee the free choice for consumers Competition encourages efficiency

− Physical electricity system as an enabler:

− Electricity generation has been traditionally built there where primary energy has been best available, and transmission for customers has required strong network connections

Transmission capacity of the networks has been able to sufficiently respond to the needs also in the new market situation

− Outside Europe, an increase in the efficiency has also been the main target; however, the free choice for customers has not been emphasised Competition encourages efficiency

− Limitations of physical electricity systems:

− Electricity generation has traditionally been built close to consumption, and transmission networks have mainly been in the role of back-up connections

Transmission capacity of the networks has not responded to the needs in the new market situation, and there have been no fast ways to fix the situation

Page 5: Electricity market 2030 presentation short

Electricity markets – competition

− In the European model, competition implies that

− Market areas in the wholesale electricity markets are large enough to guarantee competition (market integration)

− Sufficiency of generators and generation capacity

− Sufficient transmission connections

− Competition in the wholesale markets enables competition also in the retail markets (functioning of the market model)

− Free choice of consumers− Price elastic demand

− Outside Europe, the physical limitations of the transmission networks often decide the type of competition – free or regulated

− Because of the bottlenecks, large price areas cannot be formed

− To mitigate local market power abuse, price control is needed

− For active participation of the demand side, there are often no strong incentives, neither even possibilities

Page 6: Electricity market 2030 presentation short

Vision for European Electricity Markets in 2030

Vision for the European Electricity Markets in 2030 is based on the European thought and emphasises the influence of consumers (in addition, the other requirements of competition are met)Large price areas from the viewpoint of competition and transmission networks; this

supports the formation of price areasGenerators and customers benefit from free competitionDemand side takes an active role, which is part of free competitionThe EU’s target for the common European electricity markets can be reachedGeneration investments are built market-basedThere are no structural entry barriers for renewable generation

Generator surplus

Consumer surplus

Supply

Demand

Volume

Price

A

B

Equilibrium price

Page 7: Electricity market 2030 presentation short

Fundamentals of the vision

Vision for the European electricity markets in 2030 supports free competition, enables the EU’s targets of the internal markets and does not make renewable electricity generation a support addict. Electricity price is determined based on demand and supplyEnough transmission capacity and active demand side are needed

If sufficient transmission capacity cannot be built and the demand side cannot be activated, the markets drift toward regulated competitionDynamic development of the markets is hampered

Unlike in the free competition, there are no in-built incentives for efficient operations in the regulated competition Separate incentive system is needed to imitate free competitionRegulated competition hinders the dynamic development of the marketsRegulation systems usually drift into a spiral of complexity, and the

systems are heavy

Page 8: Electricity market 2030 presentation short

Reasearch methodologyTo compile the vision, the prospects of the electricity markets were scanned in different interest group

meetings and workshops Scenario work

Objective: to recognise and identify factors that direct the development of the electricity markets, and to assess their significance in the market model applied in the market

A group of experts in the electricity markets GDSS (Group Decision Support System) workshop

The key target was to identify tools and actions to promote competition in the electricity markets and to assess the effects of these actions and the time required

For a selected group of Finnish electricity market specialists with in-depth knowledge about the Nordic and European electricity markets

Delphi surveyIn the Delphi method, the objectives are to forecast the future development, to determine the

desirable development trends and to find out how the future development can be influencedRespondents of the survey presented European electricity market professionals The Delphi survey was conducted in two rounds

The main result of the first round was a review of the essential elements influencing competition and future development of the European electricity market

The target of the second round was to find opportunities to influence certain factors that play a role in establishing a competitive environment in the electricity markets