Post-2020 framework for a liberalised electricity market with a large share of renewable energy sources
HARMONISATION AND INTEGRATION OF EUROPEAN ELECTRICITY MARKETS
In 2008, the European Electricity Regulatory Forum decided to develop a European Union-wide Target Model (TM) and a roadmap for the integration of electricity markets. The TM encompasses the harmonisation of market rules in order to facilitate cross-border trading across all periods (day-ahead, intra-day, balancing and forward markets). This harmonization brings opportunities and challenges to make high penetration of renewable energy in the power system compatible with the satisfactory functioning of electricity markets in Europe.
INCREASING SHARE OF RES-GENERATION AND THE NEED FOR FURTHER MARKET REFORMS
Today, roughly a third of power generation in Europe comes from renewable energy sources. This is, to a large degree, a result of support to renewable power generation. Support mechanisms such as feed-in-tariffs (FIT) have provided a fixed income per MWh produced and priority dispatch has significantly reduced the risk for curtailment of RES generation. These instruments were designed to meet the intended policy objectives, in particular reducing CO2 emissions from fossil-fuel generation.
However, a current challenge is that power producers are finding it increasingly difficult to recover their investment costs without additional support instruments due to low wholesale electricity prices. This has raised concerns about the development of security of supply. Low prices are caused by several factors, including an increasing penetration rate of renewable generation with low marginal costs, and low CO2 prices. Another challenge is that electricity prices have become more volatile, and some existing support schemes incentivise generation even at times when electricity prices are negative.
A European discussion has emerged on how to improve electricity market design further. A key point in these discussions is how to reform support instruments for renewables in order to reduce interference with shortterm market signals and limit public support to new generation assets.
In the final report, the project presents its results on four main areas of analysis:
- Integration of short term markets
- Support schemes for renewables
- Demand side management
- Long term capacity markets
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