1. Bundesnetzagentur
Regulated versus functional European energy market – The regulator’s perspective on the Clean Energy for All Europeans Package, the IEM and its way forward
Dr. Annegret Groebel,
Head of Department International Relations/Postal Regulation
10th Prague European Energy Forum 2017 – 13 April 2017

2. Agenda The Way towards the Integrated Internal Energy Market
Bundesnetzagentur
Agenda
The Way towards the Integrated Internal Energy Market
Overview of the Clean Energy Package 2016
CEER/ACER Reactions to the Clean Energy Package
German Energy Legislation 2016
Comparison European proposals and Germany‘s latest energy legislation
Conclusions

3. The Way towards the Integrated Internal Energy Market (IEM)

4. Way towards the Integrated IEM
Bundesnetzagentur

5. Overview of the Clean Energy Package 2016

6. Overview on the Clean Energy Package (1)
EMD one of the milestones to achieve European goals 2050
What are the EU goals for 2050? (Paris, 2015)
Creating jobs & Growth, Bringing down Greenhouse gas emissions, Securing energy security
2030: 50% of electricity to come from renewables – 2050: Electricity completely carbon free
Steps to achieve the goals (Clean Energy Package, 2016)
Renewables (Revised Renewable Energy Directive)
Energy Union Governance (New Regulation)
Energy Efficiency (Energy Efficiency Directive, European Performance of Building Directive)
NEW ENERGY MARKET DESIGN Recast
ACER Regulation
Electricity Reg and Dir.
Risk Preparedness Reg.

7. Overview on the Clean Energy Package (2)
EMD Key elements
Source: COM
+ STRENGTHENING RISK PREPAREDNESS

8. Overview on the Clean Energy Package (3)
Clean Energy for all Europeans: Proposal of 30 Nov. 2016
Aim of Proposal
A fully integrated IEM
Develop low carbon energy production
Ensuring the security of supply
Issues of the Proposal
Integration of RES into an integrated IEM
Design a future role of DSOs
Ensure investment for future production capacity and avoid uncoordinated Capacity Mechanisms (CM)
Ensure cross-border coordination to prevent crisis situations
Development of retail markets
Optimize the institutional framework and Governance

9. CEER/ACER Reactions to the Clean Energy Package

10. Clean Energy Package – Reaction (1)
Regulators' Overview Paper of 23 January 2017, published at ACER-CEER conference, broadly welcomed the Clean Energy Package, highlighting issues for consideration

11. Clean Energy Package – Reaction (2)
Core principles:
Core principles:

12. A first feedback on key elements of ACER and CEER
ACER-CEER’s initial reactions to the Clean Energy Proposals (Jan. 2017)
A first feedback on key elements of ACER and CEER
Flexible regulation for a fast evolving market
No inconsistencies between new and old legislations and delays: Implementation of 3rd package should be prioritized
NRAs support to speedier and more agile switching of suppliers to allow consumers access to a wider variety of energy products to meet their needs.
Dynamic pricing is sensible! Ensure that the proposals do not themselves create barriers to entry and higher costs
Recalling the principles for a well functioning Energy Union:
i. Maintaining and enhancing security of supply.
ii. Promoting competition and avoiding cross-subsidies between consumers and between market actors.
iii. Promoting cost efficiency and effectiveness in delivering the appropriate benefits to consumers.
iv. Ensuring that, at European level, legislation is proportionate, allowing flexibility for local, national and regional development and innovation.
v. Delivering coherence and consistency with the ongoing implementation of the 3rd Package, European Network Codes and other measures.
vi. Avoiding over-regulation and overly-prescriptive measures which could stifle markets and overwhelm consumers.
vii. Ensuring that the European regulatory system is underpinned by a reasonable and proper system of checks and balances.

13. More work/investigation has to be done in the field of regionalisation
ACER-CEER’s initial reactions to the Clean Energy Proposals (Jan. 2017)
Balancing innovation and regulation
Avoid overly detailed legislation or prescriptive rules as they could adversely inhibit new market developments
Provisions are needed to safeguard the separation between Distribution System Operators (DSO) (who need to be neutral market facilitators) and storage operators
Regional markets
More work/investigation has to be done in the field of regionalisation
For the success of the approach a proper governance and oversight shall be designed

14. ACER-CEER’s initial reactions to the Clean Energy Proposals (Jan. 2017)
Making markets work
The real-time value of energy should be the basis of the price signals that all participants face.
Securing our supplies
Coordination of the resource adequacy assessment is welcomed but greater transparency and regulatory involvement are needed to increase trust in the markets. more refined arrangements on cross border participation of CRMs are needed.
Smarter system operation
Smart solutions are needed as the distinction between transmission and distribution is becoming increasingly blurred: The proposed approach both to TSO cooperation and TSO-DSO cooperation is welcomed.
DSO should be sufficiently unbundled to better perform the tasks assigned to them. Creation of the EU-DSO body is welcomed.
Harmonisation transmission and distribution tariff structures is not merited. Similar policy proposals in other areas, including the use of congestion income, could have costs that outweigh the benefits.

15. A clear and effective framework for regulatory oversight
ACER-CEER’s initial reactions to the Clean Energy Proposals (Jan. 2017)
A clear and effective framework for regulatory oversight
Proposals could alter a carefully conceived system of checks and balances which is in place today.
Roles and responsibilities are clear enough (e.g. ACER oversees ENTSO, NEMO, EU-DSO body)
Independence of ACER shall be ensured
Internal Regulatory Governance: Changing 2/3 majority rule is dispensable
Rethink resource situation of ACER

16. Clean Energy Package – Reactions (3)
Key Regulatory Messages on Clean Energy Package in CEER/ACER Overview Paper:
Flexible Regulation
Regulators must facilitate the entry of new suppliers into the retail market to ensure broader choice for consumers by removing entry barriers.
Securing Supplies
Greater transparency and regulatory involvement is needed to ensure that consumers, industry and politicians can trust that markets are functioning well.
Smarter System Operation
We welcome a proportionate and focused approach to TSO cooperation and to the future cooperation between TSO and DSOs.
Making Markets Work
The real-time value of energy should be the basis of the price signals that all participants face.
Regulatory Oversight
Regulators need to ensure that the roles and responsibilities at national and EU level are clear and proper checks and balances are in place. Regional governance needs robust stress testing.
Balancing Innovation and Regulation
Remove priority dispatch; to bring renewables into the market; and to ensure that all relevant market players are responsible for balancing.

17. Security of Supply Risk Preparedness Regulation
Overview of EU energy market legislation/regulation
Flexible energy system: EOM preferred – price signals, Capacity Mechn. only second best, i.e. no IEM distortion + open to XB participation
Functioning retail markets, consumer empowerment, DSR (flex.+stability)
Security of Supply Risk Preparedness Regulation
Competition rules, State Aid rules, 2015 CM Sector Inq.
More market-oriented RES support, nation. schemes open to XB participation
Clean Energy f. All Europeans
Recast, EMD, ACER-Regulation RES + Efficiency Directive:
Fully integrated IEM and RES integration, energy effi.
Internal Energy Market 3rd IEM Package 2009, XB trade, Market Coupling
TEN-E Reg. 347/ (Proj. of Common Interest) Infrastructure Pack. 2013

18. German Energy Legislation 2016

19. Renewable Energy Act Reform 2014 Reform 2016
Overview of German energy market legislation and regulation (incl. Energy transition laws)
Bundesnetzagentur
interplay
Renewable Energy Act Reform 2014
Reform 2016
Grid Expansion Acceleration Act Reform 2015
Synchronization of RES growth and grid expansion
Conventional power plant legislation, 2011: decision to exit nuclear
Decrease of power exchange prices
TSO/DSOs new roles, smart grids
Internal Energy Market 3rd IEM Package 2009, EC EMD consult Winterpackage
Energy Industry Act 2005; 2011; 2016
2016 Electricity Market Design Act – EOM 2.0, price signals / flexibility
Incentive Regulation Or Adjustments Reform
2016 Digitisation Act DSR, smart meters, “prosumers“, energy efficiency
Transition towards a flexible energy system

20. Comparison EU proposals and Germany‘s energy legislation

21. Migration towards a market based approach, i.e. tendering
Comparison 2016 EU Clean Energy Proposals and Germany energy legislation 2016
2016 Electricity Market Design Act – EOM 2.0, price signals / market based approach flexibility
RES 2017
Migration towards a market based approach, i.e. tendering
Competition a. State Aid rules Capacity ma. sector inquiry
Aim: Integration of an increasing share of RES in markets a. grids with a market based approach Integrated IEM
EMD Consultation 2015 Clean Energy Pack EOM, CRM only second best + IEM-compatible
RES support should be market oriented and IEM compatible

22. Conclusions

23. Conclusions
Stable and predictable regulatory framework is key to ensure investors‘ confidence, important to implement 3rd IEM package
Renewables require a more flexible energy system, which is best achieved by a more market-based approach with the participation of all players who must adapt their business models to this energy system and react to new incentives
Keep hands-off, i.e. let the market work and abstain from interventions distorting the price signals as well as the incentives to invest in new infrastructure
Clean Energy Package proposals push towards an Integrated IEM to realize cross-border benefits (market coupling) and overall security of supply as well as integrating RES in a flexible market based system – EOM preferred over CRM, which must not distort the IEM and be open to XB participation, DSR to stabilize system
EOM 2.0 is embarking on this approach, at the same time the RES Act is reformed too to ensure a more synchronised expansion of the grid and the renewables: interplay of both is key
Parallel developments on the European and German level

24. Thank you for your attention!
Thank you for your attention!
Contact details:
Dr. Annegret Groebel
Bundesnetzagentur
Head of Department International Relations/Postal Regulation

25.
Back-up

26. Overview on the Clean Energy Package
Clean Energy for all Europeans (1)
Aim of Proposal
A fully integrated IEM
Develop low carbon energy production
Ensuring the security of supply
Issues of the Proposal
Integration of RES into an integrated IEM
Design a future role of DSOs
Ensure investment for future production capacity and avoid uncoordinated Capacity Mechanisms (CM)
Ensure cross-border coordination to prevent crisis situations
Development of retail markets
Optimize the institutional framework and Governance

27. Overview on the Clean Energy Package
Clean Energy for all Europeans (2)
I) RES Integration
Abolish discriminatory market-based dispatch, clear curtailment and re-dispatch rules to replace priority access
Balancing responsibility (exemption possibilities for emerging technologies and/or small installations)
TSOs should use regional platforms for the procurement of balancing reserves; optimization process for allocation of transmission capacity (energy vs. balancing markets); reserves only a day ahead of real time.
Regional Operational Centers (ROCs), centralizing functions at regional level and delineating competences between ROCs and national TSOs
Demand Response (supplier/aggregator)

28. Overview on the Clean Energy Package
Clean Energy for all Europeans (3)
II) DSO-Role
DSOs shall be able to use flexibility (services) by “distributed” energy resources (ensuring neutrality!)
Role of DSOs in specific tasks (data management, ownership and operation storage, e-mobility)
DSO/TSO cooperation on specific areas; creation of European DSO entity.
EU-wide principles on remuneration of DSOs (e.g. flexibility services, efficient grid operation and planning)
Multi-annual development plans for DSOs (coordinate with TSO)
NRAs publish common EU performance indicators (comparison of DSOs performance, distribution tariffs)
Transparency and comparability of distribution tariffs (methodologies)
EU-wide principles on dynamic, time-dependent distribution tariffs (eases RES integration)

29. Overview on the Clean Energy Package
Clean Energy for all Europeans (4)
III) Invest-ments/CM
Enable scarcity pricing (investment signals); Eliminate price caps
Improving CACM Guideline (reviewing bidding zones; enhanced COM and ACER decision-making); avoiding reduction of cross-zonal capacity (resolve internal congestions)
Introduce more concrete principles for transmission charges/transmission tariffs
Pan-European generation adequacy assessments; ENTSO-E carry out single assessment for EU + requiring MS to exclusively rely on it when arguing for CMs
Congestion income spending to increase cross-border capacity
Framework for cross-border participation in capacity mechanisms (when considered necessary)

30. Overview on the Clean Energy Package
Clean Energy for all Europeans (5)
IV) Electricity SoS
Assessment: identify cross-border crisis scenarios caused by rare/extreme risks (regional context/ by ENTSO-E); crisis scenarios discussed in Electricity Coordination Group (ECG); common methodology for short-term risk assessments (ENTSO-E Seasonal Outlooks and week-ahead assessments of the RSCs)
Plan: Mandatory Risk Preparedness Plans (national and regional part); regional part address cross-border issues (agreed by MS within region); consulted with other MS, consultation and recommendation by ECG
Define 'competent authority' responsible for coordination and cross-border cooperation in crisis situations
Network code/guideline addressing cybersecurity
Extension of planning & cooperation obligations
Crisis management: Cooperation and assistance between MS (simultaneous crisis situations; agreements regarding financial compensation; agreements on where to shed load); details described in Risk Preparedness Plans
Monitoring: Monitoring of security of supply; ECG = voluntary information exchange platform

31. Overview on the Clean Energy Package
Clean Energy for all Europeans (6)
V) Retail markets
EU framework to monitor energy poverty; NRAs monitor and report disconnections
Phase out price regulation for households (deadline specified in new EU legislation); price regulation only for vulnerable customers
EU legislation on data handling (definitions); criteria and principles on impartiality, non-discriminatory behavior (data handling); timely and transparent access; standardized data format at national level
Ban of switching fees (exception: fixed-term contracts or fees associated with energy efficiency or bundled energy services or investments); fees must be cost-reflective.
MS has at least one 'certified' comparison tool (pre-specified criteria: reliability and impartiality)
Key information to be included in bills

32. Overview on the Clean Energy Package
Clean Energy for all Europeans (7)
ACER Set- up
Current ACER Reg. 713/2009
What will change in the recast?
ACER decision- making
Limited, through recommendations and opinions
Most regulatory decisions with BoR favourable opinion
ACER Director manages ACER and tables proposals for BoR favourable opinion
ACER decisions with BoR favourable opinion, also replacing Guideline implementing “all NRA” decisions at EU and regional levels
Framework of regional NRA decision- making with ACER oversight (complementary role to safeguard EU interest)
BoR decision- making
2/3 majority for most of ACER decisions
Simple majority for most of ACER decisions
Board of Appeal
Independent body for all appeal cases
Some of its costs are envisaged in the ACER budget
Independent body for all appeal cases with strengthened framework and separate budget line in the ACER budget
ACER Financing
Community/EU-funding (separate budget line)
Possibility for ACER to collect fees for individual decisions
Need for increased financing (possibly through increased EU-funding and possibly co-financing by contributions by market participants and/or national public authorities)
VI)
Institutional Framework

33. Overview on the Clean Energy Package
Clean Energy for all Europeans (8)
Other issues
Current ACER Reg. 713/2009
What will change in the recast?
Network Code development process
Based on ACER’s framework guideline ENTSO-E drafts network code (strong role and influence), ACER provides opinion and recommendation to the Commission.
Based on ACER’s framework guideline ENTSO-E drafts network code guided by a standing stakeholder body and broad general stakeholder involvement, ACER consolidates the network code and submits the final product to the Commission
Oversight of ENTSO-E
Limited ACER oversight of ENTSO-E
Strengthened ACER oversight of ENTSO-E
Oversight of new entities
None or limited regulatory oversight (limited rules in network codes and guidelines)
Strengthened regulatory oversight by NRAs and ACER
ENTSO-E’s mission and transparency
Lack of clear European mission and voluntary transparency rules
Codified clear European mission and transparency obligations on its decision- making
DSO
European DSOs collaborate through the existing DSO associations but without any legal status at EU institutional level. There is no formal participation in drafting or amending of network codes and guidelines
Establishment of an EU DSO entity for electricity with an efficient working structure; European DSOs will provide experts based on calls for proposals issued by the EU-DSO.
VI) Institutional Framework

34. Overview on the Clean Energy Package
Clean Energy for all Europeans (9)
Other issues
Current ACER Reg. 713/2009
What will change in the recast?
Network Code development process
Based on ACER’s framework guideline ENTSO-E drafts network code (strong role and influence), ACER provides opinion and recommendation to the Commission.
Based on ACER’s framework guideline ENTSO-E drafts network code guided by a standing stakeholder body and broad general stakeholder involvement, ACER consolidates the network code and submits the final product to the Commission
Oversight of ENTSO-E
Limited ACER oversight of ENTSO-E
Strengthened ACER oversight of ENTSO-E
Oversight of new entities
None or limited regulatory oversight (limited rules in network codes and guidelines)
Strengthened regulatory oversight by NRAs and ACER
ENTSO-E’s mission and transparency
Lack of clear European mission and voluntary transparency rules
Codified clear European mission and transparency obligations on its decision- making
DSO
European DSOs collaborate through the existing DSO associations but without any legal status at EU institutional level. There is no formal participation in drafting or amending of network codes and guidelines
Establishment of an EU DSO entity for electricity with an efficient working structure; European DSOs will provide experts based on calls for proposals issued by the EU-DSO.
VI) Institutional Framework

35. Key elements (6) ACER Set-up Current ACER Reg. 713/2009
What will change in the recast?
ACER decision- making
Limited, through recommendations and opinions
Most regulatory decisions with BoR favourable opinion, but only those explicitly listed
ACER Director manages ACER and tables proposals for BoR favourable opinion
ACER decisions with BoR favourable opinion, also replacing Guideline implementing “all NRA” decisions at EU and regional levels
BoR favourable opinion requirement broadened (Art. 23 and Art. 25 refer to Art. 14 containing ACER tasks)
Framework of regional NRA decision-making with ACER oversight (complementary role to safeguard EU interest)
BoR decision- making
2/3 majority for most of ACER decisions
Simple majority for most of ACER decisions
Board of Appeal
Independent body for all appeal cases
Some of its costs are envisaged in the ACER budget
Independent body for all appeal cases with strengthened framework and separate budget line in the ACER budget
ACER Financing
Community/EU-funding (separate budget line)
Possibility for ACER to collect fees for individual decisions
Need for increased financing (possibly through increased EU-funding and possibly co-financing by contributions by market participants and/or national public authorities)

36. Key elements (6a) Other issues Current ACER Reg. 713/2009
What will change in the recast?
Network Code development process
Based on ACER’s framework guideline ENTSO- E drafts network code (strong role and influence), ACER provides opinion and recommendation to the Commission.
Based on ACER’s framework guideline ENTSO-E drafts network code guided by a standing stakeholder body and broad general stakeholder involvement, ACER consolidates the network code and submits the final product to the Commission
Oversight of ENTSO-E
Limited ACER oversight of ENTSO-E
Strengthened ACER oversight of ENTSO-E
Oversight of new entities
None or limited regulatory oversight (limited rules in network codes and guidelines)
Strengthened regulatory oversight by NRAs and ACER
ENTSO-E’s mission and transparency
Lack of clear European mission and voluntary transparency rules
Codified clear European mission and transparency obligations on its decision-making
DSOs
European DSOs collaborate through the existing DSO associations but without any legal status at EU institutional level. There is no formal participation in drafting or amending of network codes and guidelines
Establishment of an EU DSO entity for electricity with an efficient working structure; European DSOs will provide experts based on calls for proposals issued by the EU-DSO.
Formal Network Development Plan process also for DSOs

37. Energy Security of Supply Trust and Solidarity
The 5 dimensions of the Energy Union (1)
Energy Security of Supply Trust and Solidarity
Diversification of sources/pipelines, reduced dependency, reverse flows, EU energy and climate diplomacy
Research, Innovation and Competitiveness
Energy Efficiency (moderation of demand, Energy Efficiency Dir.)
Energy Union Package
Communication 2015(80)fin., Communi. „The Road to Paris“, Communic. on 10% interconnectivity target
Decarbonising the Economy (RES, 40% GHG emission target) Sustainability
Internal Energy Market (a fully integrated European energy market)

38. Security of Supply Electricity Security of Supply Directive (2016);
Overview of EU energy market legislation/regulation
Security of Supply Electricity Security of Supply Directive (2016);
Gas SoS Regulation (994/2010)
REMIT 1227/2011 (Market Integrity and Transparency)
CEF (1316/2013) / EFSI (2014, 315bn €) (Funding)
Energy Union Package
(Communication 2015(80)fin.)
Summer package (15/07/15)
(Electricity Market Design cons. + Retail Market Commun.)
Internal Energy Market 3rd IEM Package 2009, XB trade, Market Coupling
TEN-E Reg. 347/ (Proj. of Common Interest) Infrastructure Pack. 2013

39. National RES support schemes and capacity mechanisms
Overview of EU energy market legislation/regulat.
Competition rules
(Art. 101/102 TFEU)
State Aid rules
(Art. 107/108 TFEU) EEAG 2014 /
Sector inquiry 2015
National RES support schemes and capacity mechanisms
(national laws)
Public Interventions Package 2013 (Guidance doc.)
Energy Union Package
(Communication 2015(80)fin.) Summer package (15/07/15)
Electricity Market Design cons.
Internal Energy Market (Art. 114 TFEU)
3rd IEM Package 2009
Energy mix up to MS
(Art. 194 TFEU)