1. International Conference
“Russian Energy Market: the Present and the Future”
Internal electricity market for EU – lessons learned and future challenges
Pekka Salomaa
Director, Finnish Energy Industries; Member of EURELECTRIC Markets Committee
Moscow, December 5, 2012

2. Background - market liberalisation
National energy policies and electricity legislations
many countries: nationalized, vertically integrated electricity giants (EdF, ENEL, EdP etc.)
Liberalization started slowly in some member states:
UK 1990 (big customers) / 1998 (households)
(Norway 1991/1995)
Finland 1995/1998
Sweden 1996/1998
Creating Nord Pool Spot in the late 1990’s
first cross-border exchange
EU internal energy market legislation (electricity & gas)
1996
2003
2009
Pekka Salomaa

3. Pre-requisites for creation of a regional market: the Liberalization process
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 within the market area
Non-discriminatory Third Party Access
Transparency and customer information
you could refer here to our report which by this date we should publish shortly

4. Key issues on EU electricity market design
27 nations, 27 electric sector histories
Large price areas, often based on national borders
single area price for each (1/2) hour (no nodal system)
Energy-only as main rule
several countries have introduced national capacity mechanisms
Independent national regulators & ACER
Unbundled Transmission System Operators (TSO’s)
typically own and always manage the grid
Regional/national physical power exchanges for day-ahead market
co-operation to manage cross-border congestion
Financial (derivatives) exchanges for hedging purposes
On-going market integration, “Project 2014”

5. How to achieve EU market integration
Towards a Pan-European market
How to achieve EU market integration
Integration at European level
Coordination between regions
Development within regions
Complete liberalisation of national markets
Plan published by Eurelectric in 2005

6. What is market integration?
IT IS MUCH MORE THAN BUILDING LINES ACROSS BORDERS! -
Integrated market = reinforced network + harmonised energy policies
Which policies to harmonise? All major ones affecting electricity: renewables, transmission lines, electricity trading, CO2 etc.
Benefits for consumers and citizens:
More choice: supplier/ contract types…
More competitive prices
Security of supply better guaranteed

9. Member States have taken the lead to address generation adequacy
Can’t we use Pekka’s slide ? It looks more complex but this is actually a quality : it shows that many discussions are currently taking place in Europe in an uncoordinated fashion.

11. Electricity price in some European countries, 2nd half of 2010: energy, distribution (grid service) and taxes
Taxes Network Energy sales
consumer’s (annual consumption 2500 – 5000 kWh) price of electricity
Source: Eurostat

12. Baltic Energy Market Inter-connection Plan (electricity & gas)
BEMIP
Baltic Energy Market Inter-connection Plan
(electricity & gas)

13. Plan for BEMIP implementation

14. BEMIP integrates Nordic and Baltic markets into Baltic Sea marketF
SE2
SE1 FI
SE3
SE4
NO4
NO2
NO1 EE LT DE NL
34,60 €
30,00 €
30,10 €
30,90 €
33,60 €
38,40 €
50,00 €
29,40 €
28,20 €
46,60 €
42,77 €
27,90 €
DK1
36,20 €
BEMIP integrates Nordic and Baltic markets into Baltic Sea market
Nord Pool Spot
new interconnectors from Baltics to
Finland 2014
Poland 2015
Sweden 2016
common EU rules
reduced price differences
Elspot prices [EUR/MWh]

15. Finnish Energy Industries
Thank you
Pekka Salomaa
Finnish Energy Industries

16. Challenges between Russian and EU power markets
Different market designs
EU: energy-only market, zonal pricing (self-scheduled system), ETS, support for renewables
RUS: energy + capacity markets, nodal pricing (central dispatch system), no carbon market
different gate closure times
Different regime in exports/imports
EU: open access to cross-border capacity through power exchange
RUS: de facto monopoly importer/exporter
Different division of roles in cross-border trade
EU: TSOs set rules and facilitate markets, under framework given by regulators
RUS: SO technical operator, exporter in charge of e.g. balancing, rules by Market Council, administrative procedures (customs authorities etc.)

17. Footer Congestion disturbs frequently market functioning
Transmission capacity inadequate in a new market situation
Scarcity in generation capacity, market concentration
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