European Commission - New Energy Market Design

The World Nuclear Association responded to questions posed by the European Commission on the form that an energy union might take.

The full document is available as a pdf

The European Commission launched a public consultation in 2015 on developing a strategy for a resilient energy union that provides reliable, efficient and affordable energy and becomes a world-leader in decarbonisation, with half of all electricity coming from renewables by 2030. The existing market concept dated from an era in which large-scale, centralised power plants, largely fuelled by fossil fuels, had the key aim of supplying every home and business in a national state. The Commission believed that “a fully functioning European market should allow electricity to move freely to where it is most needed, wanted and valued, reap maximum benefits from cross-border competition and provide the right signals and incentives to drive the right investments”.

The World Nuclear Association provided answers to specific questions raised by the European Commission – available here. The association pointed out that although deregulated electricity wholesale markets have been helpful in driving efficiencies, experience has shown that prices have not adequately guided investment. A strong common regulatory framework for energy markets that rewards reliability and environmental ‘goods’ is needed in Europe. There is a role, firstly, for capacity mechanisms to permit investment in stand-by generating capacity for short-term load balancing; and, secondly, for market authority/government guarantees to secure investment in baseload capacity through long-term power purchase agreements.

The environmental benefits from low-carbon generating sources (nuclear and renewable) could be credited through an EU-wide arrangement that establishes a cost for emitting greenhouse gases, such as a carbon tax on emissions or carbon fee levied on coal, oil and gas extraction. The World Nuclear Association is neutral as to which mechanism is appropriate but we recommend that the EU takes another look at this question after the Paris Climate Conference in December 2015 and puts any proposals out for further consultation. A proper EU Emission Trading Scheme reform is the first step to allow investments for a low-carbon future.