4 April 2012, Sofia University "Sts. Cyril and Methodius“ Faculty of Electrical Engineering and Information Technology, Skopje REGIONAL ELECTRICITY MARKET IN SEE Are we ready? Vienna Economic Talks – Sofia Meeting Liberalisation of the Energy Market Assoc. Prof. Vesna Borozan, PhD

EU – The 3 rd Energy Package  Promotion of the goal to reduce GHG emissions trough series of measures, popularly named as “ by 2020”  Technical precondition for fulfilment of this goal - high voltage Trans-European Super Grid to transmit amount of intermittent production of electricity from renewables  Backbone of the new energy policy is establishment of functioning integrated Internal Market for energy  The European electricity market design is not based on one single concept, but has rather evolved from different regional designs, all fulfilling the requirements of the energy acquis  To boost integration in a single market, EU is developing 7 Regional Markets for electricity

The Energy Community  Energy Community Treaty signed in 2005, with the main objectives: Short term - Create a single and stable regulatory space coupled with a stable market framework attracting investment Medium term - Integrated regional energy market that increases cross-border trade in energy, guarantees energy supply and takes into consideration climate and social aspects Long term - The regional energy market should be fully integrated in the EU internal energy market  Status of development

Energy Community- The 8 th Region Source: Web-site of the Energy Community Secretariat

According to economic conditions/development: LDC – Low Developed Countries (GDP 3000 ) MDC – Medium Developed Countries HDC – High Developed Countries Populatio n [million] GDP [€/per capita] Electricity consumption [kWh/per capita] Installed GC [kW/per capita] HDC MDC LDC SEE Countries of the SEE and their specific indicators Source: Prof. Kocho Angjushev, PhD, EFT Group

Electricity balances - past trend, breakdown by countries - Countries of the SEE – Electricity balances

 Low utilization of hydro potentials (<45%)  High proven reserves of lignite (over million tons with annual consumption of slightly more than 220 million tons)  Natural gas supply (cost of gas and pipelines to be constructed)  Nuclear option – not viable with existing technology and funds Energy potentials in the Region

 15.3 GW of new TPP: 12.1 GW due to increase in demand 3.2 GW due to decommissioning  3 GW of new HPP  1.4 GW of new RES Generation investment needs

Actual technical import limit Electricity balances forecast Source: Prof. Kocho Angjushev, PhD, EFT Group

Regional Electricity Market Study  Study on the “Integration of South East Europe into the Internal Market for electricity under the specific aspect of the TSO’s role”, July 2011, contracted by SECI, Vienna Office  Study objectives: Addressing the urgent request to clear the way for development of SEE Regional wholesale market for electricity Giving an overview about the actual status and providing essential findings and advises Identifying the main road blockers concerning the technical means of the TSOs’ functions under market conditions

Summary - current state of play  Formal transposition of the ECT acquis in the national legislations without effective implementation measures  Declarative market opening which satisfies legal obligations under the ECT, but in practice minimising the exposure of the customers and the state owned utilities to market conditions  Low economic prospects of the jurisdictions resulting in keeping non cost-reflective tariffs  Resistance to regional initiatives (political conditions and struggle for regional leadership)  Opening of the SEE regional market can only happen through a bottom-up development of the local markets and their phased coupling

Proposed measures  Legal and regulatory requirements  Technical and organisational preconditions for access of competition to the customers  Socio-economic and political measures - besides cost-reflective tariffs, as a basic measure, it would be very helpful to establish : Removal of price distortions Effective social schemes for vulnerable customers EU incentive measures Eased access to the EU funds Human capacity building

A Way Forward Unbundling and transposition of the second package on energy  Implementation of regulatory and other measures to achieve fair competition in electricity supply  Urgent need for investments in energy efficiency and new capacities  Phased coupling of local markets Main challenges still ahead – to be managed only by regional coordination of resources!

Thank you for your attention! Assoc. Prof. Vesna Borozan, PhD Faculty of Electrical Engineering and Information Technology University "Sts. Cyril and Methodius", Skopje