THE ENERGY COMMUNITY Electricity Market Reform update · 2019-10-09 · Ukraine-Moldova market integration. The Energy Community Secretariat . CESEC Electricity Plenary and Working

THE ENERGY COMMUNITYElectricity Market Reform update

Jasmina Trhulj, Energy Community SecretariatCESEC Electricity Plenary and Working Group, Brussels, 9th October 2019

OURMEMBERS

Contracting Parties European Union Observers

The Energy Community Secretariat CESEC Electricity Plenary and Working Group, Brussels, 9th October 2019

International organization established in 2005 by the Treaty establishing the Energy Community;

Extends the EU internal energy market to South East Europe and beyond to create a sustainable pan-European Energy Market;

Instrument to assist countries in the EU’s neighbourhood to reform their energy markets in line with EU law and principles;

Treaty obligations are binding and backed up by a strong institutional setting and dispute settlement mechanism;

THE ENERGY COMMUNITYAT A GLANCE


Establish a stable regulatory and market framework capable of attracting investment in power generation and networks;

Create an integrated energy market allowing for cross-border energy trade and integration with the EU market;

Enhance the security of supply to ensure stable and continuous energy supply that is essential for economic development and social stability;

Improve the environmental situation in relation with energy supply in the region and foster the use of renewable energy and energy efficiency;

Develop competition at regional level and exploit economies of scale.

ENERGY COMMUNITYGOALS


MAIN AREASOF WORK


Energy Community (73 GW) Western Balkan (8.5 GW)

Installed electricity production capacity (2018)


Generation mix of EnC CPs


Western BalkanInstalled capacity change 2014-2018


Energy Community Energy Balance (2014-2018)

TWhNet (import-export)

GWh


Western Balkan 6

Installed capacity from small RES (2018)


Energy Community

Retail market opening (2018)


85% Eligible customersout of which

2,2% Active customerswhich is

20% share of final electricity consumption

Ukrainian electricity wholesale market opening


1 July 2019 – Ukrainian wholesale electricity market was opened Bilateral market Day-ahead market (DAM) Intraday market (ID) Balancing market Ancillary services market (still not operational)

Bilateral wholesale market Freely negotiated bilateral contracts allowed for privately-owned companies only (mostly TPPs) Auctions for bilateral contracts obligatory for all state-owned companies (90% of Energoatom production and 35 % of

Ukrhydroenergo production - PSO) Electricity for universal service supply and for covering TSO and DSO network losses (up to 80%) exclusively bought by

the Guaranteed Buyer through the auction platform Auction platform operated by Ukrainian Energy Exchange (https://www.ueex.com.ua/eng/)

DAM and ID operated by the State Enterprise “Market Operator” (https://www.oree.com.ua/) Compulsory sale of min 10% at DAM for all electricity producers (in the first year of DAM operation) Price caps imposed until March 2020 Two bidding zones (IPS of Ukraine and Burstyn island)

Open issues still to be addressed, in particular excessive public service obligation and price limitations to be phased out

https://www.ueex.com.ua/eng/

https://www.oree.com.ua/

Ukrainian electricity wholesale market opening


DAM prices for September 2019

Ukraine-Moldova market integration


Short term objectives Inter-TSO agreement on settlement of

unintended deviations -TA launched under the EU4Energy

Cross-border capacity calculation and allocation

Mid-term objectives Market coupling Cross-border balancing

Long-term objectives Synchronization with SA CE Market coupling with EU MSs Cross border balancing with EU MSs

EU MSs in CESEC EnC CPs in CESEC

Day-ahead market establishment in WB6 – moving forward

Aug 2017

BELEN established

April 2019

Strategic partner selected

H1 2020

Go-live of DAM

Feb 2018

PSL Amended

Sep 2019

Council of Ministers (CoM) decision on PX adopted

H1 2020

Go-live of DAM

May 2018

Energy Law adopted

Oct 2019

Government decree on organized electricity market

H1 2020

Go-live of DAM MEMO to become operational

Oct 2019

ALBANIA

2018 2019 2020

NORTH MACEDONIA

MONTENEGRO

May 2019

Council of Ministers (CoM) decision on criteria for shareholders in PX

Oct 2019

Government decision on appointing MEMO as PX or to lunch a tender

Q3/Q4 2019

Strategic partnership agreement to be signed

Albanian Power Exchange Establishment – latest development (I)


May 2019 – Council of Ministers Decision on establishing and determining the legal form and the share capital structure of the market operator

OST is responsible for Market Operator registration and financing of initial capital of not less than ALL 250 mill (approx. EUR 2 mill)

Albanian Power Exchange Establishment – latest development (II)


September 2019 – Council of Ministers Decision on the definition of the criteria and the procedures of the participant selection in the market operator capital The Minister responsible for energy shall initiate a competitive selection procedure of the legal entities

participating in the share capital of Market Operator The deadline for the Minister to initiate a procedure is not defined

Special Commission appointment

Publication of the notice for Expression of

Interest

Submission of proposals by the interested participants

Evaluation and summary report by the Special Commission

Negotiations for the signing of Shareholders

Agreement and the Statute

Signing of the Shareholders Agreement

Montenegrin Power Exchange establishment


April 2019 – BELEN, a company established by the Government of Montenegro to lead the establishment of a national day-ahead market, has selected Nord Pool as its strategic partner for setting up a power exchange in Montenegro cooperation will include support in establishing processes and procedures required to operate a national

day-ahead market in Montenegro, market coupling with neighbouring countries and day-ahead clearing and settlement processes

The two companies also intend to extend the cooperation to include NordPool as a shareholder of BELEN. Negotiations on the Shareholders Agreement are ongoing Operationalisation of a day-ahead market awaits finalization of negotiations Launch of a day-ahead market is expected in H1 2020

The selection process was supported by the project “Technical Assistance to Connectivity in the Western Balkans - Component 2: Regional Energy Market”, which is funded by the European Union and implemented by the Energy Community Secretariat

July 2019 - Technical assistance to drafting amendments to the VAT Law in Montenegro was provided by the Energy Community Secretariat Operation of a power exchange and market coupling will require changes to the VAT law Necessary amendments to the VAT Law were drafted and submitted to the Ministry of finance Adoption of amendments is still pending

Macedonian Electricity Market Operator (MEMO) establishment


1 October 2019 – Macedonian Electricity Market Operator started operation Company was established by the transmission system operator in October 2018 Assets and human resources necessary for its operation were span out of TSO License was issued by the Regulator in September 2019

Next steps – expected in November 2019 Government’s decree on organized electricity market Government’s decision on the designation of an Organised Electricity Market Operator

⇒ Document is drafted in line with the ECRB recommendation for NEMO designation

The set-up of the organised day-ahead market was supported by the project “Technical assistance to North Macedonia for operation and function of the Organised Day-ahead market”, financed under the Grant Contract to Connectivity in the Western Balkans - Component 2: Regional Energy Market”, which is funded by the European Union and implemented by the Energy Community Secretariat

⇒ the detailed set of rules, procedures and template contracts for day-ahead market operation in North Macedonia were developed

EU MSs-EnC CPs market coupling pilot projects

Pilot projects :

Bulgaria – North Macedonia (BG-NM)

A roadmap adopted, market coupling planned for 2020

Depends on the development of day-ahead market in North Macedonia

legal gap analysis drafted in February 2019

cost sharing agreement was drafted in February 2019

VAT issues

Albania-Italy-Montenegro-Serbia (AIMS)

A roadmap for coupling has not yet been adopted, work in progress

Bulgaria-Serbia-Croatia

Announced in February 2019

Feasibility study, no concrete results reported

Is early EU-EnCMC possible?

Early CACM implementation

NEMO designation

Implementation of NEMO designation on the way in:

North Macedonia and

Montenegro

Capacity calculation methodology in Shadow CCR 10 to be adopted

Legal framework for market coupling is not yet in place CACM adoption for EnC is linked to the Energy Community Treaty changes Early CACM implementation ongoing

Western Balkans 6 Initiative

Berlin process Political

commitment to improve

connectivity in Western Balkans

WB6 MoU on regional

electricity market

development WB6 and 15

EU MSs signatories

Grant Contract EU-ECSFinancial support to

connectivity EUR 1 mill.

Grant Contract extended

6 June-6 Dec 2019

Energy Community Secretariat has just published:

Study on direct and selected hidden subsidies to coal electricity production in the Contracting Parties*

EUR 2.4 billion of direct and certain types of indirect subsidies annually

EUR 1.2 billion of direct subsidies 2015-2017 (EUR 400 million annually

on average)

Indirect subsidies: Non-payment of CO2 emissions Operation at a low or negative level of profitability

EnC CPs TPPs charging less than 40 EUR/MWh would likely incur

operational losses in a competitive environment

Without direct and indirect subsidization of electricity generated from

coal and other market distortions, and in particular cross-subsidization

between industry and households, the price of electricity to supply

households and industry would need to be increased by some 15% to

52%* https://www.energy-community.org/dam/jcr:23503de3-fccd-48f8-a469-c633e9ac5232/EnC_Coal_Study_062019.pdf

Coal Subsidies in EnC


https://www.energy-community.org/dam/jcr:23503de3-fccd-48f8-a469-c633e9ac5232/EnC_Coal_Study_062019.pdf

Subsidies for electricity from coal and RES in 2017 end-user prices


Carbon pricing in EnCImplementation of EU ETS mechanism in the Energy Community is not realistic at this stage

EnC CPs have no carbon pricing mechanism except: Ukraine, coal tax UAH 10/tCO2e (around

€0,35/tCO2e); Montenegro imposed an excise tax on the

burning of coal at €0.15/GJ (to be doubled as of 1.1.2020)

To ensure a level playing field with markets where a carbon price is paid, a carbon pricing mechanism will have to be introducedCarbon pricing mechanism that would be fit for the Energy Community is to be proposed


Feed-in tariffs in EnCContracting

Party PV Wind Biomass Hydro Biogas Waste Geothermal PPA Links

Albania5,99

Auction results

7,6 - 5,63 - - - 15 yrs.http://www.ere.gov.al/doc/Tarifate_e_miratuara_nga_ERE_Prill_-_Dhjetor2017.pdf; http://www.ere.gov.al/doc/VENDIM_NR.120_2017.pdf

BiH- FBiH 27,2 - 15,78 17,86 - 7,1 16,1 - 11,61 14,84 - 6,33 36,37 - 14,26 - - 12 yrs. http://www.ferk.ba/_ba/images/stories/2017/prilog_1_odluka_gc_bs.pdf

BIH-RS

FiT 15,06 - 10,3 8,45 21,53 - 11,55 7,87 - 6,36 12,28 - -15 yrs. http://www.reers.ba/sites/default/files/FeedI

nPrices_RES_290616.pdfFiP 11,07 - 6,32 4,21 8,1 - 7,32 3,63 - 2,12 - - -

Kosovo* 13,64 8,5 7,13 6,747 - - -12 yrs. except

hydro 10 yrs.

http://ero-ks.org/2016/Vendimet/V_810_2016_eng.pdf

FYR of Macedonia 16 - 12 8,9 15 12 - 4,5 18 - -

15 yrs. - PV, biomass, biogas;

20 yrs. –wind, hydro

http://shpp.moepp.gov.mk/Upload/Document/EN/uredba-za-povlasteni-tarifi.pdf

Montenegro Market price 9,61 13,71 - 12,31 10,44 - 6,8 15 9 - 12 yrs. http://www.oie-res.me/index.php?page=uredbe-i-pravilnici

Serbia 14,6 - 9 9,2 13,26 - 8,22 12,6 - 7,5 18,33 - 15 8,57 8,2 12 yrs.http://www.mre.gov.rs/doc/efikasnost-izvori/Uredba%20o%20podsticajnim%20merama%20ENG20092016.PDF

Highest FIT value of RES technologyLowest FIT value of RES technology


http://www.ere.gov.al/doc/Tarifate_e_miratuara_nga_ERE_Prill_-_Dhjetor2017.pdf

http://www.ere.gov.al/doc/VENDIM_NR.120_2017.pdf

http://www.ferk.ba/_ba/images/stories/2017/prilog_1_odluka_gc_bs.pdf

http://www.reers.ba/sites/default/files/FeedInPrices_RES_290616.pdf

http://ero-ks.org/2016/Vendimet/V_810_2016_eng.pdf

http://shpp.moepp.gov.mk/Upload/Document/EN/uredba-za-povlasteni-tarifi.pdf

http://www.oie-res.me/index.php?page=uredbe-i-pravilnici

http://www.mre.gov.rs/doc/efikasnost-izvori/Uredba%20o%20podsticajnim%20merama%20ENG20092016.PDF

Coal Regions in Transition and the Energy Community

High-level Policy Talk on Coal Regions in Transition and the Energy Community held in Natolin, Warsaw in 13th September 2019

Event co-organised by:- Energy Community Secretariat- European Commission- World Bank- College of Europe, - under the auspices of the COP24 Polish

Presidency

More than 80 participants including:- Ministers and Deputy Ministers, mayors and

other representatives of local governments from coal regions, industry, NGOs, social partners and academia from the Energy Community and the European Union


THANK YOUFOR YOUR [email protected]

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THE ENERGY COMMUNITY Electricity Market Reform update · 2019-10-09 · Ukraine-Moldova market integration. The Energy Community Secretariat . CESEC Electricity Plenary and Working