In order to better integrate their electricity markets, regions must first have confidence that when push comes to shove during times of capacity scarcity, their neighbours will continue work with them, and not against them. That means paying more attention to the rules for security of electricity supply. If you can’t count on your neighbours in times of need, you want to make sure that you have enough steel on the ground in your own jurisdiction. But with this kind of mindset, markets can’t just function properly.
A brief post concerning electricity restructuring that looks back over the last 20 years. Around that time I started giving a talk titled “If electricity restructuring is so great, why does everybody hate it?” Back then, several states like Illinois and Maryland were actively pursuing options to “re-regulate” markets that they had at least partially restructured.
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Traditionally, the distribution charge paid by consumers of electricity connected to a grid is based on the capacity for which they subscribe and the number of kWh withdrawn during a given period. Energy consumption is however actually a poor approximation of the willingness to pay for being connected. Additionally, except for thermal losses, the cost incurred by distribution system operators (DSO) does not depend on the quantity transported. The main raison d’être of the kWh index is that it is indispensable for producers and suppliers. Since it is an existing gauge provided by installed meters, why not use it for distribution? Continue reading »
Changing the rules by which nuclear power stations are judged to be safe or not may sound unpalatable to some, even outright dangerous. But this is what the Office of Nuclear Regulation is considering in order to extend the life of Britain’s ageing reactor fleet. Rest assured, however, such things are done carefully. Continue reading »
Since the beginning of electricity grids, demand has fluctuated and supply has been made to follow along. But for decades, economists and some grid engineers have dreamed of having demand play a more active role in balancing the system. With increasing use of intermittent renewable energy resources, now is the time to make that demand-response dream come true. But we can only get there if we clear up a common misconception in the world of electricity policy.
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“European consumers’ electricity and gas prices have risen and are still rising,” is a good summary of a recent report, Energy Costs & Prices in Europe, released by the European Commission in Brussels. Moreover, whilst almost all Member States have seen a consistent rise in consumer prices of electricity and gas, the differences between national prices remain large: consumers in the highest priced Member States are paying 2.5 to 4 times as much as those in the lowest priced Member States.
The study of five EU regulatory regimes for electricity TSOs (Belgium, Germany, Great-Britain, France and the Netherlands) suggests that their designs encompass strong tensions and trade-offs and that they are significantly heterogeneous. However, this heterogeneity should no longer be valid, as the European Union is pushing more than ever to prompt for wider integration and increasing interactions between power networks and power systems. In any regional EU market, the economic properties of national regulatory regimes must consequently be realigned and harmonized as to deliver more EU common good. Continue reading »
The discussion on whether the EU needs a new renewables target beyond 2020 is gaining traction. The proponents argue that a target for 2030 would give the visibility needed for long-term investments all along the value chain (e.g. into network and storage infrastructure). That is, without a firm political timetable for the roll-out of renewables, the cost of deployment might be much higher. The opponents of firm deployment targets argue that having such targets under an emission trading system is overly costly (e.g., Robert Stavins) and that artificially high demand is creating excess rents in those parts of the value chain where supply is slow to react.
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The European power sector is challenged by a series of developments. These range from planned changes to the institutional environment and the functioning of the market, to unforeseen external shocks like the decline of demand as a result of the economic and financial crisis and the German decision to completely phase out nuclear energy after all. The challenges also include the unexpected results of foreseeable developments, such as the impact of renewable energy sources (RES) on business models terms of profit margins and system requirements.
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France has entered into a national debate about its energy transition to meet its long range target to reduce CO2 emissions by 75 per cent by 2050, while maintaining security of supply and the competitiveness of French industry. It is a muddled debate, because the trigger for it is an electoral commitment by President François Hollande to reduce the nuclear share in the country’s electricity mix from over 70 per cent today to around 50 per cent by 2025, a commitment that few people in France – and maybe not even the president himself – regard as sensible or feasible to carry out to the letter. Indeed the origin of the commitment is almost an accident of electoral politics. And the national debate has done little to clarify the issue. Continue reading »