Electricity Market Development in the Energy Community Janez Kopač, 1 st SEERC Power Conference Portorož, 7 June 2016
The Energy Community Extending the EU internal energy market to South East Europe and beyond Energy Community Contracting Parties: Albania Bosnia and Herzegovina Kosovo* FYR of Macedonia Moldova Montenegro Serbia Ukraine European Union Contracting Parties Candidate Parties Observers
The Energy Community a tool for energy market integration Creating single market framework within a single regulatory space to: increase energy trade, attract investments, enhance security of supply, improve environmental situation and increase competition in the energy market, based on the legally binding framework.
EnC - what makes the difference? Rule of Law Based on Energy Community Treaty Difference to other voluntary regional cooperation Common legal framework Aligned with EU acquis Covering EnC and EU members
Electricity Gas Environment Competition Renewable Energy Energy Efficiency Oil Statistics Infrastructure Energy Community Legal Framework Acquis communautaire adapted and adopted in the Energy Community Energy Community Acquis
3 rd Energy Package implementation - electricity The Energy Community Contracting Parties committed to implement the 3 rd Energy Package: as of 1 January 2015 Transposition of the 3rd Energy Package into national legislation is necessary (no direct applicability) the process is ongoing Primary legislation sets the ground for the development of secondary legislation (network codes, market and balancing rules)
3 rd package implementation status electricity Third Package compliant Law adopted Draft law for 3rd package implementation existing 3rd package related 2ndary legislation under development 7
Network Codes - Keeping Up the Pace With EU EnC Ministerial Council decision on the 3 rd Energy Package implementation includes provision on: Guidelines/Network Codes application in EnC Guidelines/Network Codes are to be adopted by PHLG Decision upon proposal of the European Commission Regulation (EU) 2015/1222 (CACM) implementation in the EnC as a priority
Generation capacities installed in EnC (2014) 72 GW - MD-UA 17 GW Thermalgas; 14% Nuclear; 19% Hydro; 19% Other RES; 1.5% Thermaloil; 0,5% Thermalcoal; 46% Thermalgas; 3,2% Hydro; 48% Thermaloil; 1,8% Other RES; 0,4% Thermalcoal; 46,6%
Generation capacities main characteristics Main characteristics: Dominant coal thermal power plants (lignite) Aged and obsolete power plants last commissioned in 1991 (opt-out for 11 power plants with cca 5.500 MW installed capacity) Non-compliant with environment protection requirements environmental upgrade needed New power plant Stanari (BiH) in the commissioning phase 300 MW
Generation capacities large hydro power plants Installed capacities in large hydro power plants: 13 GW Out of which hydro pump storage power plants: 1,9 GW (2,6%) Bosnia and Herzegovina 420 MW Serbia 614 MW Ukraine 861,5 MW
Generation capacities Renewable Energy Sources Total installed capacity in RES - end 2014 (excluding large hydro)
Cross-border transmission network in the EnC Interconnection capacities exceed 10% target (EU) EnC CPs which are part of ENTSO-E synchronous area Continental Europe (CE): Albania (not a member of ENTSO-E) Bosnia and Herzegovina Kosovo* (not a member of ENTSO-E) FYR of Macedonia Montenegro Serbia EnC CPs which are not part of synchronous area CE and not members of ENTSO-E: Moldova Ukraine (except UA-W, so called Burstyn island) ENTSO-E member Part of ENTSO-E CE synchronous area; not ENTSO-E member Not part of ENTSO-E synchronous area CE; not ENTSO-E member
Production and consumption in EnC (2014) In comparison to 2013: Production: Consumption: 231.5 TWh 233 TWh - MD-UA 65 TWh 71 TWh Production decreased 15% Consumption decreased 2.2% DSO losses; 11% TSO losses; 3% Energy sector; 1% Nonresidential; 55% DSO losses; 15% TSO losses; 3% Energy sector; 2% Nonresidential 42% Residential; 30% Residential 38%
Energy balance in EnC in 2014 In 2014 in the Energy Community: Energy Community net importer! Net exporters: 8.5 TWh Net importers: 14.5 TWh 30 25 24 TWh 20 15 10 5 17,6 8 14 14,5 8,5 Net import Net export 0 2012 2013 2014
Energy Community an emerging electricity market Day-ahead market development Balancing market Regional Capacity Allocation
Regional Capacity Allocation TSO shareholder in SEE CAO TSO not participating in any auction office TSO allocates capacities through JAO TSO allocates capacities through JAO & SEE CAO
Spot Market Development
Regional Balancing Market Under construction SHB Block SMM Block OST/KOSTT cooperation
Regionalization of the electricity market Western Balkans 6 initiative
Western Balkans 6 (WB6) Initiative political support to the process of regional electricity market development The Vienna Summit of the Western Balkans 6 http://www.bmeia.gv.at/fileadmin/user_upload/zentrale/aus senpolitik/chairman_s_conclusions_western_balkans _Summit.pdf The heads of government, foreign and economic ministers of both EU Member States and the WB6 in cooperation with the European Commission decided to take steps to improve energy connectivity in the region and for that: agreed to a short list of four investment projects in the area of energy decided to establish a regional energy market agreed on the priority list of energy soft measures invited the to take the lead
Western Balkans Summit Vienna 2015 Addendum (I) Co-financing investment projects in Western Balkans Western Balkans Summit Addendum http://www.bmeia.gv.at/fileadmin/user_upload/zentrale/aussenpolitik/addendum_western_balkans_s ummit.pdf The Summit endorsed four Projects of Energy Community Interest to be co-financed through the EU s IPA 2015 multi-country programme:
Western Balkans Summit Vienna 2015 Addendum (II) Establishing regional electricity market Regional capacity allocation Vienna 2015 Spot market development Paris 4 July 2016 Cross-border balancing
Western Balkans Summit Vienna 2015 Addendum (III) Energy Soft Measures The Energy Soft Measures Regional strengthening regional cooperation and institutions National removing obstacles at national level Cross-cutting measures eliminating price regulation, granting eligibility to all customers, TSO and DSO unbundling, ensuring independence of NRA and applying for observer status in ACER, increase effectiveness of national administrative authorities, timely implementation of Trans-European Network Regulation Implementation of the energy soft measures within set deadlines to be a condition for co-financing of the infrastructural projects
Western Balkans 6 National measures Removal of legal and regulatory obstacles Regional Capacity Allocation Spot Market Development Cross-border Balancing Production 50 Hz Consumption TSO
The as a facilitator of the WB6 Initiative The to: Facilitate the process Monitor the implementation Report on bi-monthly basis The monitoring reports are published on the ECS website: https://www.energycommunity.org/portal/page/portal/enc_home/areas_of_work/wb6/monitoring
WB6 Monitoring report Overview
Spot market development WB6 Implementation Indicators 100 75 Spot Market Development RS has made a significant step forward by launching the power exchange SEEPEX 50 25 0 AL BA KS MK ME RS In most of the countries the legal & institutional fundamentals are missing for the development of spot markets Heterogenous developments will postpone market coupling in the Western Balkans
TSO Unbundling WB6 Implementation Indicators 100 Transmission System Operator Unbundling 75 50 25 AL and RS Implementation depends on the amendments to the laws governing the control over public enterprises 0 AL BA KS MK ME RS Requirements and deadlines for the TSO unbundling are missing in the Energy Law!
DSO Unbundling WB6 Implementation Indicators 100 75 50 Distribution System Operator Unbundling In KS DSO unbundling process completed; the first compliance report is to be published 25 0 AL BA KS MK ME RS In most of the countries legal requirements are in place, but the implementation is missing! AL, BA, MK, ME and RS Regulators shall use their authorities to enforce legal and functional unbundling
Price Deregulation WB6 Implementation Indicators 100 Price Deregulation 75 50 25 0 AL BA KS MK ME RS AL, BA, KS, MK Regulation of electricity price from (state-owned) generation companies shall be abolished Cross-subsidization among different categories of customers impedes price deregulation
Balancing Market WB6 Implementation Indicators 100 Balancing Market 80 60 40 20 0 AL BA KS MK ME RS BA, ME and RS Progress made towards market-based balancing is good starting point for the cross-border balancing cooperation Balancing markets are still mainly regulated and nationally-oriented
WB6 regional measures implementation through the Memorandum of Understanding Memorandum of Understanding on regional electricity market development and establishing a framework for other future collaboration Signed on the 27 th April 2016! Signatories (WB6*) TSOs, NRAs, PXs and Ministries This MoU is open for signature by additional WB6 and EU neighbouring stakeholders which are willing and expected to assume a role in the market integration projects *The signature of the Memorandum of Understanding by Kosovo* representatives is pending the entry into force of the Connection Agreement between KOSTT and the relevant ENTSO-E members
WB6 regional measures implementation through the Memorandum of Understanding (I) Memorandum of Understanding on regional electricity market development: Topics covered Day-ahead Market Integration November 2016 finalisation of the project implementation agreements between the TSOs, NRAs and PXs July 2018 integration with at least one neighbouring WB6 or EU country Cross-border Balancing Cooperation 31 December 2016 integration roadmap 31 December 2018 cross-border balancing cooperation
WB6 regional measures implementation through the Memorandum of Understanding (II) Next step: Program Steering Committee to be appointed Expected in early June Memorandum of Understanding on regional electricity market development open for: New signatories from neighbouring EU MSs Interest already expressed (Croatia) New topics Security of supply (proposed by Serbia)
Challenges ahead regulatory gap on EU MS and EnC CPs interface Further alignment of the EnC with EU acquis is needed Network Codes Designing a common implementation path Pilot projects Reciprocity is needed Legal certainty Non-discrimination
Key steps to reaching the regional electricity market 1 Creation of an adequate legal and institutional framework compliant with the 3 rd Energy Package 2 Commitments by all key stakeholders in the energy sector (TSOs, NRAs, PXs, Ministries) 3 Establishment of the common legal framework on the EU/EnC borders (support by EC, ENTSO-E, ACER and ECS)
Thank you for your attention! www.energy-community.org