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Regulatory flaws in the Clean Energy Package, part 1 – The bidding zones: Shaky foundations of complex machinery
(EurActiv, 29 Oct 2018) The ambition behind the Clean Energy Package is to create a liquid, pan-European electricity market. However, the crucial tool – the appropriate representation of the grid in market processes – has been significantly blunted and remains flawed.
The ‘Clean Energy for all Europeans Package’ (‘CEP’), tabled by the Commission on 30 November 2016, impressed stakeholders not only with its volume (over 1,000 pages of legal text), but also with far-reaching changes – a regulatory revolution vis-a-vis the third package.
CEP states ambitious goals and proposes many tools to achieve them, some deeply interfering with current national practices. Together, these tools constitute a complex system of interdependent elements. But during the complex legislative process, each and every element can be amended independently.
In regulatory policy, the choice of tools to achieve goals should take into account external conditions and constraints. Policy tools form interdependent layers: if ‘basic’ tools have design faults, these will pass on and affect higher layers, ultimately even frustrating the goals. If basic tools cannot be improved due to external conditions, the goals might become unachievable and the whole set up should be reconsidered.
Imagine, for example, a children’s class equipped only with graffiti markers; they may be good at drawing graffiti, but not at fine sketching. If a new teacher wants to boast pupils’ sketching skills, they must be equipped with pencils – otherwise the children will end up getting bad marks without any fault of their own. This may happen to the ‘class’ in EU energy trade as well.
The EU electricity market functions in the zonal model, in which trade takes place within and between bidding zones (aggregations of system nodes into zones containing no internal congestion, at least theoretically). The model has been extensively discussed, often in comparison with the nodal market model (where “zones” are equal to electric nodes of the grid). These bidding zones (BZs) cause a heated debate as to whether they appropriately represent the physical grid. Today, most European BZs are simply state territories, and thus reflect political rather than technical considerations . This has at least three important implications.
EurActiv, 29 Oct 2018: Regulatory flaws in the Clean Energy Package, part 1 – The bidding zones: Shaky foundations of complex machinery
