Over the years, market players have raised numerous issues with access to gas transmission capacity at the borders between the European Union (EU) and the Energy Community, as well as within the Energy Community itself. As a consequence, the EU Agency for the Cooperation of Energy Regulators (ACER) and the Energy Community Secretariat (ECS) jointly held a public consultation to investigate how the market assesses access to capacity in the region, receiving 15 responses. As a follow up of the analysis, ACER and ECS publish today a joint summary note of the responses.

Among others, market users identified obstacles related to transparency, lack of connection between transmission capacity and commodity markets and gas quality standards. They also pointed out possible solutions including:

• full adoption and application of the EU and Energy Community regulatory framework (e.g. Network Codes)

• greater regulatory oversight and

• addressing market dominance.

ACER and ECS call upon the national regulatory authorities (NRAs) and transmission system operators (TSOs) to follow up with the relevant market players on these issues. These actions can take place at regional level through the Gas Regional Initiative South-South East, whereas specific interconnection points may require action from individual NRAs and TSOs.  

Find out more in the Summary Note.

The EU Agency for the Cooperation of Energy Regulators (ACER) and the Council of European Energy Regulators (CEER) publish today the new edition of the Energy Retail and Consumer Protection Volume of the 2020 Market Monitoring Report (MMR) with the support of the Energy Community Secretariat. The volume focuses on retail market competition, retail prices, and consumers, including the importance of consumer engagement in the energy transition.

The Energy Retail Market and Consumer Protection is the last volume published from the MMR, which comprises two other volumes: the Electricity Wholesale Market and the Gas Wholesale Market.

Energy Retail markets monitoring in 2020: what is new?

Important price variations occurred in the course of 2020 and 2021

 First the economic decline of COVID-19 with plummeting gas prices and later the rebound following 2020 with a tight LNG supply caused considerable price variations. The unprecedented market conditions risked businesses and households’ ability to pay their energy bills. The Volume focuses on 2020 and the COVID-19 related market conditions, while the recently published ACER note makes observations in relation to the high energy prices of the last two quarters of 2021.

Market concentration

Besides the limited improvements in this area, the majority of retail energy markets in the EU are highly concentrated, which can limit consumer choice to choose alternative suppliers. 

Retail prices differ

The prices consumers paid for their energy continue to be very different across the EU in 2020. Compared to 2009, when the first comparable research was carried out, average electricity household prices increased faster than inflation. This has corresponded with a significant increase in the penetration of renewable electricity generation within the EU, resulting in a lower dependence on imported fossil fuels for energy consumers within the EU.

Regulated prices still play a role

The existence of regulated prices in some Member States can limit the entry of new suppliers, reduce consumer choice, and form barriers to price formation.

Comparison tools for consumers are key

To be able to shop around for better prices and services, smart meters and reliable comparison tools are essential. Smart meters also enhance market information, but their roll out is not timely. Comparison tools are available to the majority of EU electricity and gas consumers. However, there still remains some consumers who do not have access to these tools. Only one comparison tool for electricity meets the requirements as outlined in Directive (EU) 2019/944 signalling room for improvement for EU energy consumers.

How did retail energy prices perform in 2020?

The report shows that average energy prices in 2020 decreased for households for both electricity and gas. Average industrial prices instead recorded a slight decrease in electricity and a historic low in gas.  

The analysis also shows that the difference between wholesale and retail prices widened again in 2020. Strong correlations between retail and wholesale energy prices are observed when wholesale energy prices increase. However, a weaker correlation is noted with regard to a fall in retail prices following a fall in wholesale energy prices. Such “sticky retail prices" when there are wholesale price declines can result in energy consumers paying higher prices than efficient markets would suggest for their energy consumption.

While it is not expected that retail prices will always decrease at the same rate as wholesale price reductions, empowering energy consumers may assist in placing downward pressure on suppliers to decrease retail prices. Such empowerment will become vital during the energy transition.

How can consumers be further engaged?

The Clean Energy for All Europeans package recognises the important role that European energy consumers will play in achieving decarbonisation goals. At present, consumer engagement in retail energy markets is limited in some EU countries due to the presence of regulated prices. As these countries move to market-based prices, the energy consumer will have a wider choice of retail suppliers.

The rate of consumers switching suppliers ranges from 1% to 20% across the EU. As regulated prices are phased out, consumer participation will need to increase. However, consumers need to have the right tools, allowing them to make informed decisions. Among them, smart meters providing consumers with real-time information on their energy consumption; and comparison tools, which help consumers find the best offer for their needs  and are still only available in 25 and 19 EU Member States for electricity and gas, respectively. 

Consumers can also become engaged by submitting complaints to their energy supplier. Such engagement can result in improvements in the service provided. The report notes that millions of complaints were filed by consumers to their suppliers (and distribution system operators, DSOs) in 2020, most often regarding invoicing issues to their suppliers and metering-related issues to their DSOs. 
 

Would you like to find out more?

Read the MMR Report – Energy Retail and Consumer Protection.

Market players have no interest in making long term commitments that pay for gas network expansion according to the latest report on the monitoring of incremental capacity published by the EU Agency for the Cooperation of Energy Regulators (ACER).

The report investigates the incremental capacity cycle between July 2019 and July 2021 and focuses on those regulatory decisions approving projects to proceed to the incremental process’ final stage.

What is the incremental capacity process?

The incremental capacity process mandates transmission system operators (TSOs) to investigate whether some degree of non-binding interest for new capacity can be found at EU gas markets’ borders. If TSOs find sufficient demand, they design a project based on the expressed interest and submit a joint project proposal (including the economic parameters to carry out a viability test) to the concerned national regulatory authorities for coordinated approvals.

In the final step of the process, TSOs request binding commitments from the market through an auction of the incremental capacity based on the approved economic parameters. The project is implemented by TSOs only when the market commitments lead to a viable project where revenues exceed the expected costs.  Otherwise, the incremental project is not implemented.

This process of market testing is repeated every odd year on all EU gas markets’ borders.

What is the role of ACER?

ACER monitors the process to ensure it allows for greater interconnectivity and a better functioning of the internal gas market without burdening the existing network users.

What are the report’s main findings?

The analysis showed that, despite TSOs found significant non-binding interest from the market on gas networks expansion (in about one third of the assessed market borders), the market was not willing to convert such interest into any binding contracts that would pay for the capacity increase.  As a consequence, no new capacity was developed by the incremental auctions in the latest cycle (2019-2021).

When comparing the results with the previous cycle (2017-2019), the report finds not a single unit of gas transmission capacity developed on the basis of the incremental process after four years.

This outcome can be explained by:

• the maturity and saturation of the gas transmission capacity’s market

• by market players factoring in the European Union’s and national climate and energy policies in forecasting the evolution of the gas market, or

• the market finding unattractive the current access conditions to incremental capacity.

ACER reminds the importance of having a network expansion based on robust demand indications to ensure the overall efficiency of the incremental process. This is particularly key in the current gas market, and in view of achieving the European Union’s climate and energy policy objectives.

Find out more in the report.

The EU Agency for the Cooperation of Energy Regulators (ACER) and the Council of European Energy Regulators (CEER) publish today the new edition of the Electricity Wholesale Markets Volume of the 2020 Market Monitoring Report (MMR).

The MMR presents the main results of monitoring the European internal electricity and gas markets and recommends further actions to foster their integration. It comprises three ​Volumes, analysing respectively: the Electricity Wholesale Market, the Gas Wholesale Market, and the Energy Retail Market and Consumer Protection. 

Historical highs in European energy prices in 2021

This MMR relates to 2020 data. While energy prices decreased in 2020 (in response to the COVID-19 pandemic), wholesale energy prices increased significantly in Q3 2021 (by around 200% since April 2021). Even though various factors have contributed to the high energy prices in Europe, the main driver for the high rise in wholesale electricity prices is the surge in the price of natural gas, caused mainly by a tight global LNG market.  See the separate ACER Note on High Energy Prices (October 2021) for insights on the drivers, the impact, and certain policy considerations (such as how to protect vulnerable consumers).

Barriers to efficient price formation and easy market entry and participation: room for improvement

For the first time, this Volume of the MMR includes an assessment of barriers to price formation, as well as to entry and participation of new and small market players. ACER analysed eleven potential barriers and found they exist, to varying degrees, in most of the European Member States.

Regarding efficient price formation, a number of issues stand out as barriers, including insufficient cross-zonal capacity and liquidity. The report identifies several main barriers affecting new and small players. These include:

• Lack of a legal framework to enable entry and participation in the various market segments.

• Stringent requirements, e.g. related to prequalification or aggregation, hindering participation in balancing markets.

• Insufficient retail competition or incentives for consumers to participate more actively.

The report concludes that significant room for improvement can be found by removing wholesale price restrictions, reviewing requirements related to prequalification and aggregation, and urgently finalising the transposition of the Electricity Directive.

COVID-19 and market integration: progress despite the pandemic

The report underlines the drop in demand (annual decrease of 4.1 % compared to 2019) related to the pandemic in the first half of 2020, which exacerbated the decrease in electricity prices observed in the preceding year.

For the first time, renewable energy sources generated more electricity than fossil fuels.

In this context, Member States’ efforts towards market integration continued; particularly in the integration of the EU intraday markets (continuous intraday volumes increased by nearly 32% in 2020). As a consequence of the day-ahead markets’ integration, the level of efficiency in the use of cross-zonal capacity (87%) scored the highest across all short-term timeframes in 2020.

Interruptibility schemes: suggestion of a market-based approach

Interruptibility schemes refer to national programmes dedicated to demand-side response, organised by transmission system operators (TSOs) for temporary load interruption or reduction. For the first time, the report includes an assessment on interruptibility schemes services, identifying four of them: adequacy, balancing, congestion management and contingency reserves. ACER promotes a market-based approach in their usage to increase their efficiency in fostering security of the European electricity supply.

Our recommendations: market coupling, 70% target, barriers and adequacy

ACER and CEER reiterate their recommendation to:

• Finalise the implementation of the single day-ahead and single intraday market coupling

• Gradually increase the level of cross-zonal capacity (still far from the 70% binding target)

• Removing all types of wholesale price restrictions, reviewing requirements related to prequalification and aggregation and urgently finalise the transposition of the Electricity Directive.

• Establish an appropriate reliability standard, perform sound adequacy assessments at the EU and national level and only adopt capacity mechanisms where resource adequacy issues are forecasted

Would you like to find out more?

Read the MMR Report – Electricity Wholesale Volume.

The EU Agency for the Cooperation of Energy Regulators (ACER) found improvements in the selection of projects of common interest (PCIs) for trans-European energy infrastructure such as a list of gas projects where sustainability criteria has been considered and a more objective process for selecting electricity projects. However, in both ACER Opinions on the matter published today, one on gas projects and another one on electricity's ones, ACER also notes shortcomings including lack of transparency in the assessment methodologies.

The opinions also include the view of National Regulatory Authorities on specific candidate projects and provide further recommendations for future PCI selection processes.

ACER acknowledges the efforts by the European Commission to enable a smooth selection process, despite the pandemic-related difficulties prevailing at the time of the PCI selection.

Selection of gas projects resulted in shorter PCI list

The path towards decarbonisation shows in the selection of a shorter list of projects in the field of gas, where sustainability criteria has been considered.

In its opinion, ACER also highlights positively the fact the consultation period for PCI candidates was extended and that the indicators used in the infrastructure needs' methodology were simplified and aligned with the projects assessment's methodology. Furthermore, consistency was improved by applying the same threshold value across Regional Groups for project selection.

More objective selection process for electricity projects

In the field of electricity, ACER welcomes the European Commission’s steps towards a more objective selection process. This has been achieved by reducing the number of potentially subjective benefits established by project promoters and by eliminating the enhanced socio-economic welfare approach used in the previous PCI selection round.

Shortcomings for an in-depth analysis

Due to a lack of transparency in the assessment methodologies, ACER was not able to assess fully the consistency of the application of the criteria and the cost-benefit analysis in accordance to the EU Regulation for Trans-European Energy Infrastructure. In addition, while the regulation requires the consideration of multiple scenarios when selecting electricity projects, only one scenario was used.

ACER calls on the Regional Groups, responsible for proposing and reviewing projects of common interest, to continue their work on further improving the transparency of the process and the methodologies for assessing the candidate PCI projects taking into account ACER’s recommendations included in its Opinions.

Access the electricity PCI Opinion (its Annex) and the gas PCI Opinion.

The EU Agency for the Cooperation of Energy Regulators (ACER) has initiated the procedure for requesting further information to Nominated Electricity Market Operators (NEMOs) operating in the Single Intraday Coupling (SIDC) market.

The information is needed for reconstructing the trading dynamic and the local view of the Shared Order Book in the SIDC market and thus for allowing ACER to fully comply with its mandate of monitoring the wholesale energy markets pursuant Article 7 of REMIT.

What are the next steps?

ACER intends to reach a decision by the end of January 2022. To take an informed decision, ACER will consult involved parties in the course of November 2021.

What are the benefits?

Providing ACER with the relevant information allows the Agency to monitor effectively the European wholesale market’s integrity and transparency, particularly the Single Intraday market, according to REMIT.  

Deterring market participants from manipulating the market, ensuring trust in the functioning of the markets and fostering market integration have the ultimate goal of protecting the interest of companies and consumers.

Access the Public Notice.

On Monday 18th October 2021, the EU Agency for the Cooperation of Energy Regulators (ACER) appointed its new Board of Appeal (BoA).

The Board of Appeal plays an important role dealing with complaints lodged against ACER decisions.

The BoA is composed by six members and six alternates. They have a mandate of 5 years, which can be renewed. Members and alternates are selected among senior staff of the national regulatory authorities, competition authorities or other national or EU institutions with relevant experience in the energy sector.​

Following its appointment, the BoA designated Dr Miro Prek as Chairperson, as well as Dr Andrea Biondi and Dr Piet Eeckhout as Vice-Chairpersons.

Dr Prek is an international legal expert and sustainability specialist and coach. Among the others, Dr Prek worked as judge (2006-2019) at the General Court of the European Union.

Dr Biondi is Professor of European Union Law and Director of the Centre of European Law at King’s College London.

Dr Eeckhout is Professor of EU Law, Dean of the University College London (UCL)’s Faculty of Laws, and Academic Director of the European Institute.

ACER also expresses its gratitude for the hard work of the past BoA’s members and alternates who completed their mandate this month. Their integrity, contributions and multidisciplinary expertise have been key in a period where the Agency’s decision-making powers have increased and market integration issues were at stake.

Find out more about the new members and alternates of ACER’s Board of Appeal.

On 24 July 2021 at 16:36 CET, due to a major incident in France, the transmission systems of Portugal and Spain, together with a small part of the French transmission system, were disconnected from the synchronous area Continental Europe for just over 30 minutes.

Based on preliminary data of transmission system operators (TSOs), the system separation is classified as a scale 2 or “extensive” incident as per ENTSO-E’s Incident Classification Scale (ICS).

According to the ICS Methodology, for scale 2 incidents, a final report shall be prepared by an Expert Panel, where relevant National Regulatory Authorities (NRAs) and the European Agency for the Cooperation of Energy Regulators (ACER) may be involved upon their request.

ENTSO-E has therefore set up an Expert Panel and has invited ACER and relevant NRAs to join it. The Expert Panel will first meet today, on 22 October.

The investigation of the Expert Panel will be based on the Interim Report that ENTSO-E is currently finalizing.  This Interim Report, which will be published on 12 November 2021, will contain the data, initial findings on the sequence of events and timeframes related to the incident. 

Expert Panel’s Final Report will have recommendations

The Expert Panel will prepare a Final Report, which shall describe the sequence of events and details of the transmission outages. It will also explain the causes and contain recommendations to prevent such incidents in the future.  The Expert Panel’s Final Report shall be published in first quarter of 2022.

ACER and ENTSO-E are committed to fulfilling their legal obligations specified in the System Operations Guideline and ICS Methodology. In line with the provisions of those documents, the Expert Panel will be chaired by a representative of a TSO not affected by the incident whilst all the members will contribute to the deliverables assigned on equal basis in order to ensure high quality and consistency of the final report.

ACER and ENTSO-E will continue together to provide timely information about the incident.

Access ACER-ENTSO-E Press Release.

Energy commodity prices have reached unprecedented high levels across Europe. Gas prices in October 2021 are 400% more expensive than in April 2021. Power prices have increased by 200% (driven mainly by the increase in gas prices). Governments are interested in identifying the key drivers and in determining if it is a temporary shock or a permanent shift. The answers to these issues will help inform their policy response.

Today, the EU Agency for the Cooperation of Energy Regulators (ACER) publishes a note providing data and insights on the recent high energy prices in Europe. ACER’s note on high energy prices:

• identifies the drivers and the impact on price levels across Europe;
• provides the dominant market outlook of how long it is likely to last;
• looks at certain market behaviours; and
• touches on some important policy considerations (both short term and longer term).

Why are energy prices so high and how long will it last?

While various factors have contributed to the high energy prices in Europe, the main driver is the surge in the price of natural gas, caused mainly by a tight global LNG market. Forward markets expect a significant drop in wholesale prices for gas and electricity in spring 2022. A key variable in the very near term is the upcoming winter and its implications for gas demand.

Policy considerations – short term and longer term

The European Commission’s is preparing  a “toolbox” of measures that national governments could use to respond to price hikes without endangering the functioning of EU wholesale markets. This note by ACER touches on a few select policy considerations related to this response, namely:

• disproportionate effects of high prices on vulnerable consumers and the possibility for Member States to mitigate this in the short term without unduly distorting fundamental market signals;
• the functioning and rationale of the current EU electricity market design vis-à-vis the current high prices;
• certain issues related to gas supply going forward such as possible joint purchasing of strategic gas reserves as well as possible obligations for gas storage; and
• longer term transition trajectories and the link to holistic policy.

Today’s energy price squeeze is a reminder of Europe’s still high-dependency on imported fossil gas and the inherent volatility of global commodity markets. It is also a reminder that a well-designed energy transition pathway going forward will rely on holistic policy that targets demand just as much as supply, focusing on both the short-term and the long-term. As such, Europe’s transition pathway will likely need to be a more “managed transition” in the years ahead with both government and regulatory monitoring playing a significant role.

See also the ACER Director’s presentation on Europe’s energy prices to Finance Ministers at the 4th October Eurogroup meeting.