Briefing on the energy market liberalisation and the current statusUlrich Bang, Director of European Affairs (uba@danskenergi.dk

/ +45 22 75 04 52)

Agenda

1. Facts on the liberalization

2. Market trends

3. Obstacles for the development of a ‘real internal market’

4. The future?

5. Questions

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1. Facts on the liberalization

Driven by the European Commissions single market drive

Member States has always been in “the back seat”

Objective was to introduce competition in the electricity and gas sector that would lead to:

Lower retail prices More innovation and better service New products Free choice for the costumer More optimal allocation of resources and investments

Isolated National Markets Integrated Regional Markets

……to Liberalised Marketto Liberalised MarketFrom monopoly and From monopoly and Regulated Market…Regulated Market…

1. Short historical overview

The 1st liberalisation package (1996) MS to open up national markets

The 2nd liberalisation package (2003) Consumers has right to choose their electricity supplier (2004/2007)

Standards of transparency in managing networks

Creation of organised wholesale markets

Trend (not obligation) to split off ownership of the transport network to a company independent of other agents in the sector

Regulated tariffs for third-party access to the network

Functional separation of the distribution and commercialisation businesses.

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1. Short historical overview

The 3rd liberalisation package (2009) Ownership unbundling separating supply and production from transmission.

Member States to choose among three options: 

full ownership unbundling

the independent system operator (ISO)

the independent transmission operator (ITO)

Improved consumer rights

Right to data about own consumption

Information on bills and what rights they have as consumers.

Energy Ombudsman or consumer council

“Appropriate measures" to address energy poverty

Energy solidarity in emergency situations

Regional solidarity in the event of "severe disruptions" by coordinating national emergency measures or developing and upgrading interconnections

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2. Market trends

Progress has been made since the end of the 90s

Wholesale prices started to converge (mainly North Western Europe)

Volume of gas and electricity traded on the spot market has gone up

But still a long way to go…

Transposition of legislation

3rd package – deadline (3/3-11) missed by all member states (only DK and LUX submitted draft legislation to the Parliament)

Lack of enforcement

Wide gap between letter of the law and reality of the market

Low priority of infringement procedures of the 2nd package by the Commission (but still more than 50 running right now)

Infringement on the way to 18-20 Member States on Third Package

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3. Obstacles for the development of a ‘real internal market’

Infrastructure bottlenecks and missing links between Member States

Market design

Rules for congestion management, capacity allocation and trading remain are designed for national markets – not pan European markets

Lack of consumer benefits

Small benefit for industrial and household customers in general

More than 50 % of households in Europe are still subject to regulated prices > difficult to draw conclusions on the benefits

Unbundling

Market coupling and introduction of price areas like in Nord Pool area

Retail market not even started

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4. The (more or less) certain future?

The European Council Conclusion, February 2011 Finalising the internal electricity ad gas market in 2014 Criteria for success and level of ambition? How low is the bar?

Priorities for the Commission Competition law as a mean of enforcement and the driver Encourage the Industry to use private enforcement

instruments (E.g. the Danish/Swedish case) Legislative proposal on infrastructure Speed up the role out of Smart Grid Harmonising the market design rules and grid codes

(ACER/ENTSO-e) Etc….

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4. The (more or less) uncertain future?

Communication from the Commission in 3Q 2012 on the internal market implementation A 4rd package in the pipeline?

Kick-start of the internal market for energy from An ambitious EED? More ambitious climate goals?

The nationalisation of energy policies – what effect on the market? Germany (Energikoncept), France (new president) and the UK

(Market reform). Common EU policies or independent national policies?

Energy Roadmap and RES communication: Certainty of long term EU policy priorities in 2030 ,2040 and 2050 and impact on market design?

5. Questions

Ulrich Bang

Danish Energy Association

Director of International and EU Affairs

www.danishenergyassociation.com

Credible and stable regulatory framework to attract investors Efficient market infrastructure to enhance liquidity and trade End of price regulation (wholesale and retail) to give correct price signals and

stimulate competition End of import/export fees Non-discriminatory Third Party Access Transparency and customer information

Pre-requisites for creation of a regional market: the Pre-requisites for creation of a regional market: the Liberalisation process Liberalisation process

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Integration at European level

Coordination between regions

Development within regions

Remove barriers to integration (regulated prices, export fees, etc.) and establish market infrastructure

Increase interconnection and generation capacity Regionalisation of all TSO tasks Legally binding European Network Codes Ensure extensive consultation of market stakeholders

How to achieve EU market integration

Complete liberalisation of national markets