Electricity security in the European Union—The conflict between national Capacity Mechanisms and the Single Market

Abstract

The European Single Market aims to promote trade and competition in electricity generation across the EU, with investment signals for new generation capacity and interconnection coming from zonal electricity prices reflecting scarcity value. However, a growing number of EU Member States have implemented national Capacity Mechanisms in order to ensure future security of supply within their own borders, which may distort the cross-border trade of energy. This local view of energy security is in response to internal technical and economic constraints and a perceived inability of cross-border electricity flows to be a reliable source of capacity at times of maximum stress, in favour of self-sufficiency. A number of routes are available to resolve this conflict through permitting cross-border participation of generators in local Capacity Mechanisms, but this requires resolution of a number of complicating factors, not least a means for properly allocating transmission capacity without introducing further distortions to the energy market. Alternative solutions could be enacted at an EU-level, such as through the alignment of Capacity Mechanisms to a common model, or the introduction of an EU-wide single Capacity Mechanism, but the current regulatory focus appears to remain on resolution of such issues at a national level.

The Variation in Capacity Remunerations Requirements in European Electricity Markets

“…The research literature on this topic suggests that cross border capacity market participation between interconnected markets has many benefits, including welfare, efficiency and optimising the procurement of suitable capacity (Bhagwat et al, 2017;Cepeda, 2018;Hawker et al, 2017;Höschle et al, 2018;Meyer and Gore, 2015). These studies observe competing market structures and note that harmonisation has the potential to provide these benefits.…”

Cross-border exchange of electricity between Poland and the neighboring countries

“…However, the introduction of the capacity market in Poland will also influence a cross-border exchange. The analysis of this mechanism (Benalcazar and Kamiński 2016;Bhagwat et al 2017;Hawker et al 2017;Komorowska and Kamiński 2019;Michalski and Sołtysik 2016) indicates that it will have long-term consequences for domestic or European trade of electricity or capacity. This should be taken into account in the further analyses in this field.…”

The Alternative Model of Competitive Electric Energy Market of Ukraine (Part 2)

“…Зазвичай оперує РП оператор системи, визначаючи обсяг необхідних потужностей на основі даних прогнозу адекватності їх розвитку [5]. Т ривалий час панувала думка, що РП призводить до фрагментації РЕЕ, спотворює ринкову торгівлю ЕЕ та сприяє розвитку недосконалої конкуренції [7][8][9][10]. Проте практика функціонування найрозвиненіших РЕЕ у світі [11][12][13] доводить необхідність розбудови цього продуктового сегмента.…”