National regulators call for changes to rules prioritising green energy dispatch

18 May 2017, Week 19 Issue 860

Two organisations representing national electricity regulators across Europe have urged the European Commission to adjust the way renewable power is prioritised on national grids.

The Commission has proposed that existing renewable plants should continue to be given priority dispatch over most fossil fuel-fired generation, but recommends that new utility-sized renewable plants should be exposed to standard third-party access (TPA) rules so that all generation sources compete on a level playing field.

However, the Agency for the Co-operation of Energy Regulators (ACER) and the Council of European Energy Regulators (CEER) are calling for reforms to end grid prioritisation for existing renewable generation.

In a joint statement published on May 11, the ACER and CEER argued this was necessary to ensure fair competition and “the lowest possible cost” for consumers. “The cheapest plants to meet customer demand should be run irrespective of the plant type, minimising consumer electricity bills,” the statement said.

The regulators welcomed Brussels’ intent to prohibit governments from using renewable dispatch to justify limits on cross-border trading markets. The integrity of European cross-border trade came under scrutiny earlier this year after several countries attempted to ban exports as power demand surged amid severe winter conditions.

Removing the renewable dispatch clause should, the regulators argued, ensure that low-cost exports are able to meet electricity demand. They said the Commission must also reconsider its proposed policy for excess renewable energy, which would award renewable producers 90% of the day-ahead market (DAM) rate when their plants’ output is curtailed.

Renewable generation from wind and solar is highly variable by its nature, and regulators sometimes pay green producers to cut output when higher wind speeds, for instance, threaten to overload the grid. In such cases, renewable producers are usually compensated under a framework designed to reflect higher start-up costs in previous years.

The regulators welcomed the Commission’s intention to bring market norms to the compensation payments, but said fixing them at 90% of DAM prices was arbitrary.

Also of note are the Commission’s proposals to continue to allow priority dispatch for enough indigenous primary fuel to satisfy 15% of the feedstock required for electricity generation. The decision, which aims to protect energy security, comes as a boon for the likes of Slovakia, where a single coal mine is currently given preferential supply contracts for the 266-MW Novaky thermal power plant (TPP).

A spokesperson for Slovakia’s Regulatory Office for Network Industries (RONI), Radoslav Igaz, was quoted by on May 15 as saying the ombudsman respected ACER and CEER’s recommendations, as a member of the former organisation. Igaz added that Bratislava reserved the right to oppose the Commission’s final position, however.

Proposals for a new directive governing the dispatch of renewable energy were first published by the Commission on November 30 as part of the Winter Energy Package. The memorandum argued the renewable sector should become market-based to allow greater “certainty” for all electricity investors.

The Commission expects half of EU electricity generation to be sourced from renewable power plants by 2030, and around 27% of all energy consumption. It believes this will help slash greenhouse gas (GHG) emissions across the EU by at least 40% by 2030.

Changing how renewables are dispatched will be crucial as the Commission seeks tighter regulations on capacity payments across the EU. A surge in renewable generation plants owing to falling input costs led to 24,000 MW of the EU’s thermal capacity being partially or entirely mothballed in 2013, according to legal consultancy group Linklaters.

Capacity payments seek to redress the balance by tendering or awarding financial compensation based on a power plant’s installed capacity rather than its actual electricity output. Such payments were also the subject of a memorandum from the Commission in November, which stressed that poorly designed capacity schemes could potentially distort the market and give undue advantages to specific energy sources. The Commission said member states would be expected to accompany new capacity mechanisms with EU-level reforms designed to deal with fluctuations in renewable production.

Joseph Murphy

Edited by

Joseph Murphy


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