Europe: Unbundling options provided

Market liberalisation levels playing field

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New EU legislation to liberalise the electricity market will yield many benefits for the wind industry, even though it does not include a firm requirement for full unbundling of vertically integrated power companies, according to the European Wind Energy Association (EWEA). Commenting on the ruling, which came into force last month as part of a third EU energy package, Justin Wilkes, head of regulatory affairs, says: "National regulation authorities are now obliged to facilitate the introduction of renewables into the grid."

The industry has long argued that separating the generation activities of energy companies from their wires businesses would allow renewable energy technologies to reach their full potential (Windpower Monthly, May 2008). But under the final legislation, member states can choose one of three types of unbundling and so, if desired, avoid completely separating electricity generation and transmission activities (see table, below). "The legislation on energy market liberalisation was often characterised as a fight about the unbundling of integrated energy companies. But essentially what it was trying to do, and what I am confident it will succeed in doing, is to facilitate new investment and greater efficiency," says Andris Piebalgs, EU energy commissioner, defending the decision. "New investments are more energy-efficient than old, and in many cases new investment is carbon dioxide-free renewable energy." He points out that in 2008 "for the first time, it was the wind energy sector that undertook the most new investment in the EU's energy capacity".

EWEA's Wilkes says the liberalisation directive, in conjunction with the EU renewables package, will help level the playing field but it is not a quick fix to boosting renewables. There will be national challenges ahead in applying the directive. "It is not about what one piece of legislation will do, but what all EU legislation (will do to help grow the wind industry)," he adds.

Chris Boothby, spokesman for EU electricity industry association Eurelectric, says that all three types of unbundling are "meant to be equally efficient in ensuring the independence of transmission system operators, or TSOs, vis-a-vis their other interests". Adopting a full unbundling stance would not necessarily have a greater influence on encouraging the production of electricity from wind power. "There is no evidence that one model is more suited than others to encouraging the deployment of renewable energies and therefore they should be regarded as being neutral with regard to power generation technologies," he says.

The European Commission is now drawing up interpretative notes to help member states implement the whole of the third EU energy package, including unbundling. They should be published this month, says Ferran Tarradellas Espuny, EU energy spokesman, so they will be available "early enough to assist member states and other stakeholders to prepare for the implementation of the energy package by March 2011".

Road map

The commission is also preparing a market integration road map to outline best market design features for an integrated electricity market. It has already established a generic target model for integrating regional electricity markets, which covers forward, day-ahead, intra-day and balancing markets as well as capacity calculation and governance issues. "There is a broad consensus amongst relevant stakeholders on most of the issues, most importantly that compatible day-ahead and intra-day regimes will deliver a significant majority of the benefits of the internal electricity market by providing competitive prices as well as secure supply through efficient utilisation of the power system," says Wilkes.

Meanwhile, the European Energy Regulators - still organised as the European Regulators Group for Electricity and Gas (ERGEG) - has published a paper outlining the next steps in implementing the EU energy package. The paper highlights the need to identify a pilot topic to develop the framework guidelines and network codes required. "Such a pilot topic in electricity would cover grid code harmonisation for wind generation and has been agreed by the newly established European transmission system operators body, ENTSO-E, and ERGEG," says EWEA.

EU electricity market liberalisation Three options for running the
Type Ownership Independent System Independent
unbundling Operator (ISO) Transmission

Description Complete Independence in The "third
seperation legal form, way". Based
of generation organisation and on a
and transmission. decision-making powers. proposal
Transmission ISO assumes technical from several
system must operation of the system member
sold and capacity marketing. states, led
Second-best solution, by Germany
in the opinion of and France.
the commission
Owner An independent Integrated energy company, Group parent
company with under obligation to (integated
no operations cooperate energy
in either power company)
generation or
Control by No control Control over operation, Group parent
utilities investments and maintenance receives 50%
is fully transferred to plus one
the ISO. ISO makes vote
independent decisions on the

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