The State of the European Union 2017

THE STATE OF THE EUROPEAN UNION

the Electricity Directive and the Electricity

Regulation (whose last updates date back to the

Third Energy Package of 2009), intending to

deepen the integration of the European electric-

ity market. Several provisions aim at further link-

ing short-term markets, while others push for

even more regional cooperation of Transmission

System Operators (TSO). The Electricity

Regulation also deals – for the first time in the

European legislation – with capacity mecha-

nisms, notably with the objective of making

cross-border participation mandatory in nation-

al capacity mechanisms. While this is overall go-

ing in the right direction (although many de-

bates could arise on the details of each

provision), the Commission’s approach towards

the electricity market design is arguably closer

to “business as usual” than to a fundamental

rethinking of the electricity market design.

Regarding electricity security of supply, the

Commission is mirroring its recent initiative on

gas security of supply. While here again the ini-

tiative is welcomed, the regulation proposal fo-

cuses on technical cooperation. The essential is

thus elsewhere: political governance.

Precisely, regarding governance, the

Commission is proposing a brand-new regula-

tion. The recognition of the importance of good

governance at all levels (local, national, European)

is very welcome, if the Energy Union is to be suc-

cessful. For sure, improved coordination, moni-

toring and enforcement are keys to investment

security and a fair effort sharing. However, a look

at the details reveals that key decisions have been

spared out. Member states have to submit a draft

national energy and climate plan to the

Commission by 2018 in which they stipulate

their approach to meet the overall union goal (in-

cluding national objectives, targets and contribu-

tions of each of the five dimensions, a description

of the policies they aim to pursue (status quo,

projection, impact assessment) and the envi-

sioned trajectory. The final energy and climates

plans will to be monitored by the 2019 biennial

including Commission recommendations and na-

tional updates.

In general, one can argue that a national

planning procedure is based on voluntary con-

tributions. The Commission in a next step is

asked to evaluate the 28 plans and evaluate if

the overall Union-wide target is met. In case of

a so-called ambition gap the Commission is

asked to adapt to those plans for finalisation. So

far, it is not clear which instruments the

Commission has in order to overcome the ambi-

tion gap of member states, since no mechanism

to define national contributions or targets are

foreseen. More coordination of national energy

policies and regional cooperation are welcomed

and needed to achieve union targets. However,

a coherent and continuous monitoring is the

basis for planning and investment security for

market actors and the needed generation of pri-

vate investment.

Still, the absence of clear national targets or

defined burden sharing bears potential for con-

flict not only in case of contrasting national

policy targets for renewables or the energy mix

as a whole but also for security of supply if sys-

tem imbalances further increase (lack of grid

expansion, lack of interconnectors, increasing

shares of volatility in some regions). This will

very likely materialise in market intervention and

increasing macro-economic costs.

Finally, one can expect debate on a fair bur-

den and cost sharing. A fund at the European

Union level to realise renewable energy projects

and to close the gap is definitely a good idea, but

it is too early to comment on the effectiveness to

boost the installation of renewable capacities

since the design and volume is not fixed yet. In

how far the instrument of stronger regulation in