Market-based Options for Security of Energy Supply

Energy market liberalization and international economic interdependence have affected governments’ ability to react to security of supply challenges. On the other side, whereas in the past security of supply was largely seen as a national responsibility, the frame of reference has increasingly become the EU in which liberation increases security of supply mainly by increasing the number of markets participants and improving the flexibility of energy systems. In this logic, security of supply becomes a risk management strategy with a strong inclination towards cost effectiveness, involving both the supply and the demand side. Security of supply has two major components that interrelate: cost and risk. This paper focus the attention on costs in the attempt to develop a market compatible approach geared towards security of supply.Energy supply, Market-based options

Rethinking the EU Regulatory Strategy for the Internal Energy Market. CEPS Task Force Reports No. 52, 1 April 2004

A key message of this report is that full and effective implementation of proposed legislation will be necessary to ensure a true internal market for energy in the EU, but this alone will not be sufficient. In parallel, more attention must be paid to other, less-prominent fields. The report singles out i) the introduction of incentive-based network regulation and ii) the careful design of principal elements of the wholesale market, i.e. trade of electricity and gas for resale (‘wholesale market design and rules’). Moreover, the internal market needs to be buttressed with the consistent application of competition rules across member states to avoid the creation of national champions. The report also argues that a functioning electricity and gas market depends on market-compatible solutions to security of supply and environmental issues and a rethinking of ‘executive agencies’, whose use to date is inhibited by the Meroni doctrine

Business Consequences of the EU Emissions Trading Scheme. CEPS Task Force Reports No. 53, 1 February 2005

This report examines the effects of the EU Emissions Trading Scheme (ETS) on the business environment. While the main focus is the 2008-12 period with possible incremental improvements, the report also takes a strategic perspective by looking beyond 2012. The analysis begins with the question of whether the EU ETS can be expected to achieve the declared objectives to create the necessary incentives for the power and energy-intensive sector for behavioural changes in the short and medium term and to encourage investment in low-carbon generation technologies in the long term. It then asks whether and how both design and implementation might be adapted to improve the EU ETS

After the EU Elections, Before the Constitution Referenda, Can the EU Communicate Better? CEPS Policy Briefs No. 55, 1 July 2004

[From the Introduction]. The European Union suffers from not only a democratic but also a communication deficit. In the same way as both problems are intertwined, so are the symptoms. The last elections to the European Parliament suffered from a record low turnout and the election campaigns were run mainly on themes relating to domestic politics, resembling small plebiscites on the government’s performance at the national level (Kurpas et al., 2004). Only Eurosceptic parties made strong gains, advocating the withdrawal of their countries or strong downgrading of the EU’s competences. These results highlighted two painful realities. First, they re-confirmed the trend since the first EP elections in 1979 that citizens increasingly see less reason to vote in elections that do not give them ‘a real choice’ such as voting for the Commission president or to express their socio-economic preferences by voting for a party that can deliver on these preferences if it comes to power. Second, voter apathy indicates that the importance of decisions at the Community level, along with the role of the European Parliament and its impact on national policy, is not yet established among citizens. Some of the reasons for this failure are structural, such as the lack of a strong European identity; some are legal or institutional and thus hard to change. For instance, as long as the parties represented in European Parliament do not emancipate themselves from their national counterparts and manage to run an election campaign with candidates for the Commission presidency, campaign dynamics and other turn-out are not likely to change

Market Stimulation of Renewable Electricity in the EU: What degree of harmonisation of support mechanisms is required? CEPS Task Force Reports No. 56, 1 October 2005

Over the last two decades, renewable energy sources (RES) have attracted heightened interest for a number of different reasons. RES promise strategic improvements in the security of supply, reduce the long-term price volatility to which the EU is subjected as a price-taker for fossil fuels and could offer an enhanced competitive edge for the EU RES technology industry. Renewables also reduce air pollution and greenhouse gas emissions. The cumulative effect of these and other benefits makes a robust case for renewables support. The EU aims at having electricity generated from renewable sources (RES-E) reaching 21% of the total in its 25 member states by 2010. This target has been formulated in the EU Renewables Directive, which sets out differentiated targets for each member state and framework conditions for market support for renewable generation. In the background of the European Commission’s autumn 2005 review of member-state support mechanisms for RES penetration, this report of a joint CEPS-ECN Task Force analyses the state of play of the EU’s renewables policy and reviews the support mechanisms to achieve the 2010 target. It develops a medium- to long-term strategy for support and provides a blueprint for a viable framework for beyond 2010

Market-based Options for Security of Energy Supply. Summary and Conclusions. INDES Working Paper #1, 1 March 2004

The INDES project and related working papers focus on market-compatible, cost-effective security of supply responses by the EU. Security of supply is understood as insurance against risks, in which responsibility is shared between the EU, member states, energy companies and customers. Thus security of supply is seen as an economic risk-management strategy. Critical to such an approach is first the minimisation of the insurance ‘premium’ to achieve the degree of security that is politically called for. Second, there is a need to identify the best systemic actor able to ‘hedge’ the risk. This can be governments, companies, consumers or in some cases, the market itself subsequent to careful design. Based on these premises, INDES research has emphasised two areas: i) costs of energy supply disruptions and ii) costs of potential policy responses. Towards this end, robust methodologies to assess costs and a sound empirical basis for cost data have been used in the working paper series as the precondition for informed policy choices reflecting both effectiveness and cost-efficiency