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What are the steps forward to foster the European Electricity market design?

May 2012

9th Intl. Conf. on the European Energy Market

This presentation examines the current European market design after more than ten years of reform and extrapolates the feasible key policy options to improve and integrate the Internal Energy Market in the mid term.

To have a better understanding of this challenge, we rely on a construction of an ideal market design where we distinguish schemes on the one hand depending on the considered part of the electric supply chain generation or transmission and on the other hand depending on the timeframe of these schemes, either a short run one for system operation or the long run for investment. We then show that the current European market design is expectedly different to variable degrees from the ideal one. Although the new and third Energy Directive does not tackle the market design issue (as the other Energy Directives), we argue in this presentation that key policy options are achievable and can make the European market design closer to the ideal one at least for some schemes. The European market design can become efficient for day-ahead zonal pricing, for long term contracts for new generators and for indicative generation and transmission planning. The efficiency of real time pricing is globally questionable in Europe but the development of coordination centers for Transmission and System Operators (TSOs) can help real time coordination through information sharing. Lastly, the grid access fees are not efficient at the European scale but no major improvement seems in the agenda of any institutions, either the European Commission, the regulators or the TSOs.

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