Experts grapple with EU’s ‘labyrinthine’ electricity network codes

Network codes govern how electricity is traded across power grids operators on the continent. [Douglas M Paine / Flickr]

Europe already has its “new electricity market design” – it’s just a little behind schedule… and about as complicated as EU legislation gets, has learned.

Plans for a new electricity market design, unveiled last November, are a cornerstone of the European Commission’s Energy Union project that promises to put consumers in the driving seat.

The goal is to create a pan-European electricity market fit for a growing share of power from intermittent renewable sources – chiefly wind and solar – and allow consumers to react in real-time to price fluctuations.

The nuts and bolts behind those plans are so-called “network codes” which govern how electricity is traded across the numerous power grids operators scattered on the continent.

And legislation there is in fact almost complete.

“We already have one market design,” said Klaus-Dieter Borchardt, the European Commission’s director for internal energy markets. “The network codes and guidelines…are creating the foundations for the development of the market design that is now on the table,” Borchardt told EURACTIV on the sidelines of a conference held last week.

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Sheer complexity

Regulators and grid operators tasked with implementing the “Network Codes” met in Brussels last Thursday (4 May) to discuss getting Europe’s single internal market for electricity up and running by the end of 2018.

But even Brussels regulators admit they are puzzled by the sheer complexity of the legislation.

“People like me do not understand these codes in detail,” Borchardt quipped. He said he had just seen the first drafts of materials aimed at guiding users through the legislative fog surrounding the network codes.

“It’s a first step and we have to build on that… when we say we want to develop guidance materials, that’s what we mean,” Borchardt said.

And with the trend towards increasing decentralisation, away from monolithic power stations to citizen power in the form of individual “prosumers” or community renewable energy projects, it appears there will be an increasing number of people who will need to know where they stand in the new regulatory landscape.

Josh Roberts, an environmental lawyer advocating on behalf of, which supports citizens initiatives to generate green power locally, admits he has difficulty digesting the legislation himself.

“Local groups, which nine times out of ten are just trying to get their first community project off the ground…don’t have time to dig down into labyrinthine EU codes,” Roberts told EURACTIV.

“Even for myself, who eats, sleeps and breathes EU energy policy, the network codes are hard to wrap my head around, especially given all the other things I need to deal with. For them, it’s virtually a non-starter,” he said.

Unlike incumbent energy firms, renewables cooperatives were not involved in the development of the network codes. “So at the very least, any issues they might potentially face have not been considered in the drafting. So now we must engage in the implementation, and if we see a problem, we need to raise it,” Roberts said.

Eight network codes

There are eight electricity network codes that now need to be fully implemented. The first to enter into force, in August 2015, was the guideline on Capacity Allocation and Congestion Management (CACM), which sets the rules on the use of cross-border power lines. This set of rules lay behind a dispute over the dysfunctional Germany-Austria-Luxembourg wholesale power market.

Border dispute lays bare Germany's fragile electricity infrastructure

An appeals board is expected to rule later this month on a dispute at the German-Austrian border. What is at stake is the future of Europe’s largest area of uniform electricity prices – an issue that raises questions about the fundamental design of the EU’s internal energy market.

It is not only new players in the generation game who have misgivings about the level of detail in the rulebooks for Europe’s future electricity system. The head of the Council of European Energy Regulators, Lord John Mogg, said his time as chairman of UK regulator Ofgem had taught him how hard it can be to bend legislation to meet changing circumstances. And rather than set out general principles for regulators to follow, the EU prefers to “tie things down” in detailed rules.

“It is one hell of a job to get rid of them, and to update them,” Mogg told the audience at the conference, identifying what he saw as a big gap in the framework currently being erected in Europe. “We don’t have the possibility of modifying [the rules] at any speed because of the complexity of the process in the EU,” he warned.

“Having just the guiding principles would not have been sufficient to…develop an integrated European market because the differences between the member states are too big,” Borchardt told EURACTIV. “There are two different approaches, but one has to acknowledge that it has been decided at the beginning of the process that we are going for more detailed rules.”

MEPs and national governments will have to keep these detailed rules in mind as they debate the EU executive’s fresh proposals for a revised directive and regulation on the functioning of Europe’s electricity markets.

The Commission itself is pushing to get the Network Codes implemented before this next batch of legislation is finalised.  This means completing the single European market for electricity that was supposed to be in place by 2014.

The inevitable question then is when the “new electricity market design” will see the light of day.

“We still have three years before the new development of the market design enters into force, and…this reform also foresees a couple of years of implementation time,” Borchardt said. “So if everything goes according to plan, this will smoothly fit into the process.”

EU unveils Winter Package of power market reforms

EU regulators will unveil reforms on Wednesday (30 November) to promote a greater share of renewables in Europe’s grid by 2030, with plans to cut energy use by 30%, phase out subsidies for coal-fired plants and enforce greater cross-border trade.

A European Commission proposal for a new EU electricity market design was unveiled on 30 November as part of a Winter Package of Energy Union legislation that promises to put consumers in the driving seat.

The European Commission promised a “new deal for consumers” saying the new market design would do away with all forms of price regulation. Consumers will be exposed to price fluctuations, but also empowered to react to them, for example by moderating consumption during peak times and buying kilowatt-hours when demand, and prices, are low.

The goal is to create a market fit for a growing share of power from intermittent renewable sources, chiefly wind and solar.

One area that looks set for rapid growth on the back of these changes is battery storage, which could enable consumers to buy electricity when it is going cheap, and use it later when peak demand pushes prices up. Storage capacity may also come in the guise of electric vehicles connected to the grid.

European power grid on cusp of storage revolution

An electricity market revamp could see battery storage go mainstream. But questions remain over who will put the infrastructure in place.

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