ENTSO-E supports the objectives of the European Commission legislative proposals to optimise the current electricity market design for a decarbonised energy system and to improve affordability for consumers. The priorities outlined by the European Commission are generally aligned with those that we identified in our Vision of a Power System for a Carbon Neutral Europe.
- The objective of avoiding a distortion of short-term markets, which ultimately ensures balancing and security of the system,
- The European Commission’s recognition of the role of flexibility needs assessments,
- The provisions to enhance demand response and consumer protection,
- The goal to strengthen long-term investment signals for carbon neutral generation deployment.
However, we believe some key elements are currently missing while others - included without a proper impact assessment - may have detrimental effects on market functioning, system security or costs borne by consumers.
- Market mechanisms to ensure adequacy should be reinforced. In particular, the framework for Capacity Remuneration Mechanisms (CRMs) must be simplified so to allow their quicker and more stable introduction: CRMs, as structural elements of national markets, can be essential to support investments in resources needed to balance and secure the system.
- Implementing Regional Virtual Hubs, a theoretical and still untested approach, would require long implementation times (5-10 years as estimated by ACER) and may lead to significant costs and risks for TSOs, grid users and market participants. More practical solutions can be implemented in shorter lead times to improve current forward markets.
- Using congestion income to support offshore generators in hybrid projects is discriminatory as this implies a non-transparent subsidy paid by consumers to specific producer category. As an alternative solution, we recommend building on already existing support frameworks, such as two-sided capability-based Contracts for Difference (CfDs).
- Shortening of the Intraday cross-zonal gate closure to 30’ ahead of real time by 2028 is inadequate at that stage. This would have severe consequences for many TSOs in Europe, requiring a complete change in how they operate their systems and potentially compromising system security. We strongly warn against the inclusion of specific timings on intraday gate closure time in the Regulation, especially without proper impact assessment.
- The strengthening of the REMIT regulation should be accompanied by a balanced approached that carefully considers the proportionality of the new obligations.
ENTSO-E’s assessment of these elements is ongoing so check our page for further updates next week.
READ THE POSITION PAPER IN DETAIL HERE