1. Ashgabat International Energy Charter Forum
Integration of regional electricity markets Lessons learned from EU experience
Sarin Abado, Austria
Ashgabat International Energy Charter Forum
30-31 May 2017

2. Overview The making of a single EU electricity market Lessons Learned
Conclusions

3. The making of a single EU electricity market

4. How it all started
One of the first core objectives of the European project was the development of a common market
Principle of 4 „freedoms“ - free movement of goods, services, people and capital
Vision of eliminating barriers between member states and cross-border cooperation

5. Timeline Security of supply, competitiveness
today
Three goals:
1990s
Creation of the EU
Growing importance of environment/renewables
Gradual liberalisation of energy markets
Single market and liberalisation are discussed
A number of severe energy crises demand increased European cooperation and common policy measures
Start of European cooperation/integration based on post-war energy needs
Security of supply, competitiveness
Energy policy to become EU competence
Sustainability

6. Why integrate markets? Higher efficiency
power can be sourced from where it is cheapest to produce
Higher efficiency
larger systems are more robust and can accommodate more diverse energy mix (renewables)
Increased power system security
primary energy sources are more diversified
Enhanced security of supply
more choice for consumers / cheaper energy bills
Increased competition

7. How we are getting there
First Package (1990s)
- Gradual introduction of competition
- First unbundling requirements
Second Package
(2003)
- Further unbundling
- Third party access
- Need for independent Regulators
- Retail liberalisation
Third Package
(2009)
- Definition of role of national regulatory authorities
- Creation of ACER
- Network codes ?

8. The main pillars of open markets
Liberalization
Unbundling
3rd Party Access
Governing Institutions

9. Governance EU Institutions Florence Forum
National Regulatory Authorities
ERGEG
ACER
TSOs
ENTSO-E

10. Regional Initiatives
Launched in 2006 by the European Energy Regulators
Rationale: create regional markets first before merging into one single market
Integration of fragmented national electricity markets is an interim step on the way to the single market
Europe is divided into 7 electricity regions and brings together all relevant market participants of each region

11. Regional Initiatives

12. Tools for linking infrastructure across regions
EU-wide Ten Year Network Development Plan (TYNDP)
Regional Investment Plans
Identification of Projects of Common Interest (PCIs)
Interconnection Targets

13. Making cross border trade a reality
Legally binding EU-wide network codes to set the rules of the game
Market coupling as the central tool to achieve market integration
Net Transfer Capactiy versus Flow based market coupling
Inter TSO compensation for cross border flows

14. Lessons Learned

15. Lessons Learned
Market Liberalization is a prerequisite for market integration
It doesn‘t happen over night
Requires appropriate regulatory framework and strong enforcement

16. Lessons Learned Trial and Error is part of the game
Several waves of reform are needed until it works
Step-wise approach allowed for „learning by doing“

17. Lessons Learned Top-down and Bottom-up Strategies are both needed
A regional „vision“ helps committing players to the joint project
To move towards the fulfillment of common goals, well designed bottom-up initiatives are also needed

18. Lessons Learned A region-wide common regulatory framework is key
A common market only works if all players adhere to the same rules of the game

19. Lessons Learned
It‘s difficult without centralized governance institutions
Someone needs to set the rules and oversee the developments centrally

20. Lessons Learned
Enhanced Security of Supply is not the only benefit of a regional market
Open markets and free cross border flows enhance competition, bring down prices, reduce losses and offer more choice for consumers

21. Consumers are important to make market integration work
Lessons Learned
Consumers are important to make market integration work
Active consumers help fostering competitive markets
Communication and consumers information is key from early on

22. Conclusions

23. Conclusions Market integration requires political will
A top down vision and robust regulatory framework is needed
Regional cooperation and governance are key in building regional markets
The process takes time
But customer benefits can be large and security of supply significantly enhanced

24. Thank you for your attention sarin.abado@e-control.at