It looks at:

• retail market performance, supplier concentration levels and the availability of gas and electricity offers to consumers;
• the price paid by energy consumers for both gas and electricity across the European Union; and
• the impact of high energy prices on household expenditure. 

It issues a set of recommendations:

• to ensure that measures to assist consumers in response to the energy crisis are targeted at those most in need; 
• to ensure that quality comparison tool websites are available to European energy consumers; and
• to ensure that National Regulatory Authorities (NRA) check the compliance of energy consumer bills with the common rules for the internal market for electricity. 

How does this ACER study support EU security of energy supply and consumers?

Demand response programmes allow consumers to adjust their consumption at key times to help grid operators to manage peak electric demand and lower system costs. Currently consumers do not participate to a large extent in electricity markets. However, the flexibility that smaller market participants (including demand response, distributed generation and energy storage solutions) could provide is needed more and more for security of supply. ACER strives to remove barriers that hamper these smaller market participants entering and participating in electricity markets.

For example, some consumers are capable of providing balancing services through bi-directional charging of their electric vehicles (EVs). For the integration of electric vehicles into balancing services, a prequalification process is necessary. This process should prove the technical suitability of the assets for providing the different types of balancing products. In the product prequalification processes for providing balancing services, the TSO verifies the compliance of the assets of the BSP with the technical requirements set by the TSO.

Energy regulators keep the lights on and Europe’s energy markets working

Keeping the lights on and energy markets functioning is the normal job of the energy regulator. At no time is this role more important than during a global health crisis. Keeping the lights on and hospitals equipment running saves lives. Guaranteeing essential services such as gas, heat and power for household appliances and devices such as laptops enables people to work from home. Despite the crisis, the electricity and gas market integration process did not stall. This is good news. It also speaks of the value of having integrated well-functioning energy markets.

Building Europe’s green recovery and the role of market monitoring

In a post-COVID-19 era, achieving a sustainable and resilient recovery will be a priority. In this context, cost-efficient integration of the internal energy market supported by extensive market monitoring becomes more relevant than ever. Market monitoring captures the status of energy markets and identifies remaining barriers to EU market integration. In particular, the integration of power markets and the decarbonisation of gas are critical to meet the ambitious energy and climate policy targets set for Europe. In our view, the Green Deal is an opportunity to integrate sustainability objectives into Europe’s plans to economic recovery.

Key Findings and Recommendations

Europe’s clean energy transition must be built on an efficient and well-integrated IEM. Overall, keeping the focus in market integration is key to ensuring the EU energy union targets are met in a cost-efficient manner.

Electricity and gas market integration continued to progress in 2019

Progress in the functioning of Europe’s electricity wholesale markets is noticeable, though more advances are needed (in particular, finalising day-ahead market coupling). Available instruments must be utilised to increase the efficient use of interconnectors as required by the 70% cross-zonal capacity target and we are pleased to report that we will soon publish a dedicated report on this. Looking ahead, sizable security of supply benefits are expected as Europe shifts towards a better approach to assess resource adequacy.

Build upon the current gas market framework to decarbonise gas

Gas wholesale markets continue to function well based on the implementation of the current market rules. However, with the European Commission’s proposal to reduce emissions further for Europe to be on a responsible path to becoming climate neutral by 2050, as well as the resources earmarked for the EU recovery plan, the currently low uptake of carbon neutral gases will need increased attention. We recommend that any upgrade of the internal gas market rules, targeting an increasingly decarbonised sector, be built on the foundations of the current market framework. This to avoid the transition leading to new national market fragmentations, whilst at the same time retaining the significant benefits for consumers already in place.

Without efficient energy infrastructure investment Europe will not be able to deliver on the ambitious decarbonisation outlook set for Europe’s energy sector. ACER and CEER have recently set out a suite of recommendations to improve infrastructure planning and regulatory oversight in our joint ACER/CEER position paper on the review of the TEN-E Regulation. In the joint ACER/CEER Gas Bridge beyond 2025 Conclusions paper we also address important regulatory issues such as power to gas networks or repurposing existing gas networks for hydrogen.

Electricity prices for household and industrial consumers throughout Europe increased in 2019

Retail gas prices also increased for households but they fell for industrial gas consumers. Our monitoring shows that the state of retail markets is more disparate across the Union than for wholesale markets.

Tackling climate change will involve a profound transformation of our economy and will significantly influence the way we use and interact with energy in our everyday life. For the energy transition to be successful, consumers will need to be informed, supported and nudged throughout this transformation. Our market monitoring underlines the importance of ensuring that consumers have ample choice and that their rights are adequately protected, not least the more vulnerable consumer segments. This requires well-functioning retail markets. We are committed to continue monitoring progress towards the completion of a well-functioning internal energy market and to maintain the stability of the energy system as a whole during and after this time of crisis.

In 2016, different degrees of price convergence were observed across Europe. The average absolute dayahead (DA) price spreads ranged from less than 0.5 euros/MWh on the borders between Portugal and Spain, the Czech Republic and Slovakia, and between Latvia and Lithuania, to 10 euros/MWh or more on all British borders, the borders between Austria and Italy, and between Germany and Poland (see Table i). This confirms the relevance of maximising the amount of tradable cross-zonal capacity, particularly on borders with the highest price spreads.

The Baltic, the Core (Central-West Europe (CWE))1 and the South-West Europe (SWE) regions recorded the highest annual increases in the frequency of intraregional full price convergence in 2016. In these three regions, the DA price differential was, respectively, below 1 euro/MWh in 71%, 39% and 30% of the hours in 2016. The factors explaining these developments include investments in new interconnector lines in the Baltic and SWE regions and the go-live of Flow-Based Market Coupling (FBMC) in the Core (CWE) region.

While FBMC does indeed contribute to increasing price convergence, recent experience in the Core (CWE) region illustrates that FBMC alone is not sufficient to deliver an integrated electricity market. Full price convergence dropped in this region from 48% in the first three quarters of 2016 to 11% in the last quarter, due to high DA prices in France and Belgium. These high DA prices were mainly the result of a significant number of nuclear reactors being offline in these countries, combined with a significant reduction in the level of tradable cross-zonal capacity during the second semester of 2016.