Diese Präsentation wurde erfolgreich gemeldet.
Wir verwenden Ihre LinkedIn Profilangaben und Informationen zu Ihren Aktivitäten, um Anzeigen zu personalisieren und Ihnen relevantere Inhalte anzuzeigen. Sie können Ihre Anzeigeneinstellungen jederzeit ändern.
Market consolidation &
integration in network industries
Electricity Markets
Bert Willems
Department of Economics - Tilbur...
Overview

 Objective
Academic viewpoint on integration
of European electricity generation and transmission markets

 Thr...
Market integration

 In order to integrate the electricity market the Commission mainly
focused on transmission access
♦ ...
Market integration

 Very slow progress on allocation of cross-border capacity
♦ Florence Forum (1998-2012)  design by s...
Market integration

 Mini-fora  Set of regional markets

Acer, 2012
23 October 2013

Market Integration and Consolidatio...
3 EFFECTS

23 October 2013

Market Integration and Consolidation

6
Integration effect: 1. Prices converge

 Caused by transmission investments and market coupling
Price convergence NL-FR-D...
Extra Slide

Integration effect: 1. Prices converge

 Reason for inefficient use of transmission capacity before marketco...
Integration effect: 2. Arbitrage on cost differences

 Network transports energy from low cost to high cost area
= increa...
Integration effect: 3. Increase competition

 Transmission capacity has increased competition
 Example of Netherlands
♦ ...
Integration effect: 3. Increase competition

 Also horizontal market concentration within countries decreased
(especially...
Integration effect: 3. Increase competition

 But competition effects might be partially offset by vertical mergers
(elec...
3 PROBLEMS

23 October 2013

Market Integration and Consolidation

13
Problem 1:
Support schemes for renewable energy are national

 CO2 cap and trade mechanism is broken
♦ Prices are too low...
Problem 1:
Support schemes for renewable energy are national

 Huge benefits for allowing international trade in renewabl...
Problem 2:
Capacity markets are national

 Many existing power plants are not profitable
♦ Low demand due to economic cri...
Problem 2:
Capacity markets are national

 If capacity markets are implemented

♦ Clearly define the product (with specif...
Problem 3:
Transmission Investments

 Investments in one country has benefits/costs in other countries
♦ A good long-term...
Problem 3:
Transmission Investments

Extra Slide

ENTSO-E, 2012
23 October 2013

Market Integration and Consolidation

19
Summary

 Current situation: (international) competition & integration
Time Dimension

Investments

Contracts

Day-ahead
...
Nächste SlideShare
Wird geladen in …5
×

Market Consolidation and Integration in Network Industries: Electricity Markets

517 Aufrufe

Veröffentlicht am

Academic viewpoint on integration of European electricity generation and transmission markets.

Presentation at CERRE Expert Group on 24 October 2013

Veröffentlicht in: Bildung, Technologie, Business
  • Als Erste(r) kommentieren

Market Consolidation and Integration in Network Industries: Electricity Markets

  1. 1. Market consolidation & integration in network industries Electricity Markets Bert Willems Department of Economics - Tilburg University CERRE Expert Workshop, Brussels, October 24, 2013 23 October 2013 1
  2. 2. Overview  Objective Academic viewpoint on integration of European electricity generation and transmission markets  Three positive effects ♦ Price convergence ♦ Cost reductions ♦ Increased competition  Three problem areas ♦ National support schemes for renewable energy ♦ National capacity markets ♦ Future investments in transmission 23 October 2013 Market Integration and Consolidation 2
  3. 3. Market integration  In order to integrate the electricity market the Commission mainly focused on transmission access ♦ Energy directives (1996-) imposed unbundling of transmission networks to ensure non-discriminatory network access  Commission relied on subsidiarity principle and directives  Practical implementation was left mainly to member states ♦ Goal ≠ full integration of markets as e.g. in PJM, USA • Harmonization of market rules / products traded • Single network operator • Price zones determined by congestion ♦ Some bottom-up harmonization (e.g. Nordic countries) 23 October 2013 Market Integration and Consolidation 3
  4. 4. Market integration  Very slow progress on allocation of cross-border capacity ♦ Florence Forum (1998-2012)  design by stakeholders ♦ Mini-fora (2004-2005)  regional cooperation ♦ Creation of ACER (2011)  Agency for cooperation of regulators  Progress nonetheless 1. Market-based allocations instead of rationing Firms can buy transmission capacity in auction Owners decide using capacity before electricity prices are known  Inefficient use of capacity (wrong direction, not at full capacity) 2. Market-coupling Regional power exchanges and network operator cooperate Arbitrage is ‘institutionalized’  Network is used more efficiently 23 October 2013 Market Integration and Consolidation 4
  5. 5. Market integration  Mini-fora  Set of regional markets Acer, 2012 23 October 2013 Market Integration and Consolidation 5
  6. 6. 3 EFFECTS 23 October 2013 Market Integration and Consolidation 6
  7. 7. Integration effect: 1. Prices converge  Caused by transmission investments and market coupling Price convergence NL-FR-DE Yearly averages €/MWh Price convergence NL-BE-FR Hourly price difference €/MWh 75 Netherlands France Germany 70 65 60 55 50 45 40 35 2005 2006 2007 2008 2009 2010 2011 Source: APX, 2010 Source: ACER, 2013  Spot market ≈ 1 price / region 23 October 2013 Market Integration and Consolidation 7
  8. 8. Extra Slide Integration effect: 1. Prices converge  Reason for inefficient use of transmission capacity before marketcoupling ♦ Badly designed markets (timing, uncertainty, information) ♦ Firms leave money on table • Mainly larger firms? Bunn, D., Zachmann, G., 2010. J Regul Econ • Lack of information does not explain all? Gebhardt, G., Hoeffler, F., 2013. Energy Journal 23 October 2013 Market Integration and Consolidation 8
  9. 9. Integration effect: 2. Arbitrage on cost differences  Network transports energy from low cost to high cost area = increase in total surplus  Reasons ♦ Different generation technologies (gas / coal / nuclear) ♦ Natural storage possibilities (hydro) ♦ Weather (heating, wind input, snow melting)  Short-term arbitrage benefits of full market coupling ♦ Relatively easy to estimate (price data available) ♦ 2.5bn-6bn EUR/year ♦ 60% of which is achieved already now Source: Booz & Company, et al. 2013. Report for EC. 23 October 2013 Market Integration and Consolidation 9
  10. 10. Integration effect: 3. Increase competition  Transmission capacity has increased competition  Example of Netherlands ♦ Import capacity grew from 3.9 GW (2006) to 5.6 GW (2011) ♦ Market coupling (2006) Reduced pivotality of firms (which is correlated with Lerner Index). Mulder, M., Schoonbeek, L., 2013. Energy Economics But, hard to pinpoint competition effect of integration econometrically (economic crisis, many changes in market)  Competition ♦ Increases production efficiency (Short Run) ♦ Gives better investment incentives (Long Run)  likely largest effect 23 October 2013 Market Integration and Consolidation 10
  11. 11. Integration effect: 3. Increase competition  Also horizontal market concentration within countries decreased (especially in Italy, Spain) 1/HHI (eq. # of equally sized firms) # firms, installed capacity >5% 12 12 11 11 France 10 France 10 9 9 Germany Germany 8 United Kingdom 4 8 United Kingdom 7 Italy 6 Spain 5 4 Belgium 3 3 Netherlands 2 2 1 1 7 6 5 Italy Spain Belgium Netherlands 0 0 2004 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Benchmarking reports 2004-2010, Energy markets in the European Union 2011 23 October 2013 Market Integration and Consolidation 11
  12. 12. Integration effect: 3. Increase competition  But competition effects might be partially offset by vertical mergers (electricity & gas) and international mergers Number of mergers International Large EU energy mergers  Important vertical effects National  ♦ ♦ ♦ ♦ EDP/ENI/GDP (P/I) 2004 E.ON/MOL (D/H) 2005 DONG/ELSAM/E2(DK) 2006 GDF/Suez (F/B) 2006 Mainly horizontal effects ♦ RWE/Essent (D/NL) 2009 ♦ Vattenfall/Nuon (S/NL) 2009 ♦ EDF/Segebel(F/B) 2009 Petz, M. 2012 (PhD thesis). Federico, G., 2011. J of Comp. L&E  Economic assessment of consolidation strategies requires evaluation of economies of scope & scale 23 October 2013 Market Integration and Consolidation 12
  13. 13. 3 PROBLEMS 23 October 2013 Market Integration and Consolidation 13
  14. 14. Problem 1: Support schemes for renewable energy are national  CO2 cap and trade mechanism is broken ♦ Prices are too low and unpredictable ♦ No incentives for renewable energy / energy savings ♦ Coal-fired power plants are cheaper than gas  National renewable energy support schemes ♦ Feed-in tariffs or certificate systems ♦ Large role of government • Risk taken up by government • Technology specific • Priority access for renewable energy: sometimes hidden subsidies ♦ Large fraction of production does no longer participate in market ♦ No trade of support schemes across borders by firms 23 October 2013 Market Integration and Consolidation 14
  15. 15. Problem 1: Support schemes for renewable energy are national  Huge benefits for allowing international trade in renewable energy support schemes ♦ 40%-70% savings Fürsch, M. et al. 2010, Aune at al. 2012 ♦ 15-30 bn €/yr Booz & Company, et al. 2013  We could also rely more on Cap-and-trade system ♦ Increase government revenue with 43 bn€/yr Tasios, N. 2013 + own estimate  But results have been criticized Ragwitz, et.al.,2011 (Re-shaping) ♦ ♦ ♦ ♦ Non-economic barriers Learning by doing requires technology specificity Directive 2009/28/EC already allows trade among member states Redistributive aspects (rents for producers)  Harmonization & coordination on EU level might be necessary ♦ Use right instrument for each externality ♦ E.g. Learning by doing is international  International instrument 23 October 2013 Market Integration and Consolidation 15
  16. 16. Problem 2: Capacity markets are national  Many existing power plants are not profitable ♦ Low demand due to economic crisis ♦ Too low CO2 prices (gas-fired power plants close) ♦ Additional supply by renewable energy  Governments use capacity markets to support firms, ensure sufficient flexible generation ♦ Often national in scope (only national generation / different products) ♦ Distorting investment decisions (long term) ♦ Distorts trade patterns ♦ Might create hold-up problems (waiting for subsidies)  Long run cost of national security targets 3-7.5 bn/yr (Booz & Company, et al. 2013 ) 23 October 2013 Market Integration and Consolidation 16
  17. 17. Problem 2: Capacity markets are national  If capacity markets are implemented ♦ Clearly define the product (with specified obligations for bidders) ♦ Allow international trade ♦ Combination of financial and physical incentives  Harmonization necessary at EU-level ♦ Minimal requirements? ♦ Standardization of products? ♦ Cooperation on transmission capacity? 23 October 2013 Market Integration and Consolidation 17
  18. 18. Problem 3: Transmission Investments  Investments in one country has benefits/costs in other countries ♦ A good long-term compensation scheme does not exist ♦ Investment needs = 5 bn €/yr (ENTSO-E, 2012, Development plan) ♦ If only 50% invested: total system cost increase 3-5 bn €/yr (Booz & Company, et al. 2013 ) ♦ High return  Coordination of transmission and generation investment is a problem ♦ Future investments will be situated further from demand centers (e.g. renewable energy)  Requires closer cooperation of network operators and power exchanges and further integration ♦ Long run benefit of full market integration 12.5-40 bn€/yr (Booz & Company, et al. 2013 )  Long term financial transmission rights & more price regions 23 October 2013 Market Integration and Consolidation 18
  19. 19. Problem 3: Transmission Investments Extra Slide ENTSO-E, 2012 23 October 2013 Market Integration and Consolidation 19
  20. 20. Summary  Current situation: (international) competition & integration Time Dimension Investments Contracts Day-ahead market Balancing & Reserve markets RES • Technology specific subsidies • Connection guarantee National Feed-InTariffs No participation No participation NonRES • Policy uncertainty transmission • Wrong CO2 price • Technology specific capacity markets? National capacity market + Private contracts Market Coupling Still national, but changing Regional  Pan European 20

×