Reaching European market integration by 2014 is a feasible objective


Interview with Christophe Gence-Creux, Head of the Electricity Department, and Steve Gordon, Head of the Gas Department, ACER

What do you regard as the key issues/challenges for 2012 with regards to the EU market?

Christophe Gence-Creux

Gence-Creux: With regard to the electricity market, The Agency for the Cooperation of Energy Regulators (ACER) has identified three main challenges for the upcoming year:

  • Ensure that the key milestones, deadlines and accountabilities defined and agreed in the cross regional roadmaps are well respected. The cross regional roadmaps are the result of the regional initiatives, a flagship initiative of the energy regulators to speed up the integration of Europe’s national energy markets. Supported by the Commission since 2006, the project is now coordinated by ACER
  • Ensure that the Network Codes drafted by ENTSO-E are fully consistent with the ACER Framework Guidelines and that stakeholders are effectively involved in the drafting process
  • Contribute to the elaboration of a more stable and efficient framework for the development of cross border infrastructures, notably through the assessment of the ENTSO-E Ten-Year Network Development Plan and all the preparatory work related to the Energy Infrasructure Package.
Steve Gordon

Gordon: As with any business sector the implications of the credit crunch, the eurozone debt crisis and austerity measures are important and could have an impact on the market, particularly regarding the resources applied in the sector and infrastructure investment. In particular, the ACER sees the progress to 2014 as critical with the target deliverable for the Commission of a single integrated market for gas.

What are the main ingredients to achieve European market integration by 2014?

Gence-Creux: ACER when it comes to electricity sees the following elements as the main ingredients for the completion of a single energy market by 2014:

  • Stronger focus on priority projects deemed to be instrumental in achieving the internal electricity market (namely the implementation of the CACM target models)
  • Full commitment of key stakeholders (NRAs, TSOs and PXs) to devote the necessary resources to reach the deadline, and their continued support and involvement to maintain confidence and keep the strong momentum
  • Close follow-up of progress/delays/obstacles and a faster decision making process to speed up the process.

Although an ambitious one, we think that reaching market integration by 2014 is a feasible objective as far as electricity is concerned. ACER is certainly committed to reaching this target.

Gordon: We must address the concerns regarding security of supply, to ensure a safe and reliable supply of gas into the member states to meet the energy requirements of end consumers. We need to develop cross border trading and ensure that gas can flow between member states as smoothly as it does within a particular country and eliminate barriers to trading and the movement of gas across borders. Any obstacles to the implementation of the second and third package of market reforms need to be removed, and ACER will encourage participation by all stakeholders in the development of market arrangements to facilitate this.

We have the opportunity through the regional initiatives to test working arrangements designed to facilitate the movement of gas across borders and to develop trading and transparency platforms to allow the free flow of gas and access to infrastructure across several jurisdictions. Work conducted at a regional level will be extended to work at a pan-European level. The Network Codes will be developed containing the detailed rules for capacity allocation, balancing, trading and other areas of stakeholder participation.

How important is ACER in this process?

Gence-Creux: ACER has an important role to play in providing a framework within which national regulatory authorities can effectively cooperate. It will continue promoting cooperation between the national regulatory authorities and between regulatory authorities at regional and community level. ACER always takes due account of the outcome of such cooperation when formulating its opinions, recommendations and decisions.

In 2012 and beyond, ACER will be assuming yet greater responsibilities in monitoring the functioning of the internal electricity market, in identifying any obstacles to its completion and fostering the decision making process. The wholesale energy market monitoring tasks ACER will be given under REMIT open yet a new chapter for the Agency.

Gordon: The role of ACER is fundamental in achieving these goals and overcoming the barriers. We have developed, and continue to develop the Framework Guidelines on which the network Codes are based, and provide direction and advice to market participants. We are also required to monitor the market in terms of the implementation of competitive arrangements in the member states. This is essential in securing a competitive and transparent single energy market that benefits EU end consumers.

What do you think will be the single, biggest advantage to a single market for energy in Europe?

Gence-Creux: Reaching a competitive, sustainable, secure and transparent energy market to the benefit of EU end consumers lies at the heart of the Third Energy Package on the basis of which ACER was established.

Gordon: The single biggest advantage will be the delivery of a secure supply of gas to meet energy needs in a way that will deliver choice and value to end consumers. This will be done in a transparent and competitive way utilizing efficiencies in system design and with the operation of liquid trading hubs key to delivering the internal market for gas. This might seem like a number of advantages, but the goal of the single market contains many related aspects which lead to optimal market design and function, and the establishment of the governance regime to ensure the market can deliver will probably be the key to ensuring that this is possible, along with arrangements for monitoring the market.

What surprises you about this industry?

Gence-Creux: Because of its capital intensive nature, it’s no surprise that the electricity industry strongly asks for visibility and as stable as possible regulatory framework. Even if there is still a lot of work to do in order to create such a framework, I strongly believe that the earliest and continued involvement of stakeholders in the market integration process (both in the definition of priorities and objectives, but also in the follow-up of their implementation) is a key factor to create and maintain confidence and to keep the strong momentum. ACER will certainly continue to seek this involvement of stakeholders.

Gordon: I am tempted to say “nothing” after being involved in the market for over 20 years, but while the challenges remain the same, new ones arise with regularity, and while we are seeking to extend market arrangements across all member states, one area of surprise is that not all stakeholders are perceived to be engaging in the process. This may be due to some extent to perception rather than fact, but there are still gaps in the implementation of the Third and even Second Package in certain member states and this is something we need to address by having all the relevant stakeholders in every member state involved in the process.

Christophe Gence-Creux and Steve Gordon will address the Power Trading session at EMART Energy 2011 on November 23, 2011.