1. Briefing on the energy market liberalisation and the current status Ulrich Bang, Director of European Affairs (uba@danskenergi.dk / +45 22 75 04 52)uba@danskenergi.dk

2. Agenda  1. Facts on the liberalization  2. Market trends  3. Obstacles for the development of a ‘real internal market’  4. The future?  5. Questions 18-11-2015

3. 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

4. Isolated National MarketsIntegrated Regional Markets …to Liberalised Market From monopoly and Regulated Market…

5. 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. 18-11-2015

6. 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 18-11-2015

7. 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

8. 18-11-2015 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

9. 18-11-2015 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….

10. 18-11-2015 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?

11. 5. Questions

12. Ulrich Bang Danish Energy Association Director of International and EU Affairs www.danishenergyassociation.com

13.  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 Liberalisation process

14. Towards a Pan-European market 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