CommUnity Post

Clean Energy Package & New Electricity Market Design: Challenges & Opportunities for Spain

Blog Post created by CommUnity Post Partner on 24-May-2018

On April 4th 2018, The CommUnity in Barcelona held the panel discussion event: The Clean Energy Package - Policy for all Europeans at the CCCB cultural centre. The main focus of the discussion with energy specialists was the The Clean Energy Package, an ambitious policy released by the European Commission (EC) in 2016 with the intention of driving the European Union (EU) energy goals. Following the release, the EC aimed to have the information about the new policy disseminated to energy professionals and EU citizens. The CommUnity by InnoEnergy, a hub of thought and inspiration for sustainable energy change agents, was the perfect means by which to have the information shared.


 

Inspired by events on the same topic by the CommUnity in Brussels and Lisbon, and in the same week that the Experts Reports for Energy Transition in Spain was published, the Barcelona CommUnity sought five panelists for a thought-provoking panel discussion on some of the key issues of the wide-ranging package of measures, namely, the new electricity market design. This panel was formed by a wide range of experts including Pep Salas, an independent Energy Consultant and founder of SmartGrid.CAT; Pedro González González, Regulation Director of UNESA (Spanish Electricity Industry Association); Dr. Enric Bartlett, Associate Prof. in Public Law ESADE; Santi Martínez, CEO of Estabanell; and Alejandro de Roca, Operational Director from Magnus Commodities.

 

The event started with a presentation of what the CommUnity by InnoEnergy is and a short introduction to the the Clean Energy Package by Chris Parker, local manager in Barcelona, and followed by a short presentation of Alicia Carrasco, CEO of Olivo Energy, who moderated and led the path throughout the event. The primary targets of the policy were briefly presented: putting energy efficiency first, achieving global leadership in renewable energies, and providing a fair deal for consumers. Some legislation has sparked heated debate regarding their efficacy and achievability and there is a lot of controversy in various aspects of the regulation that the moderator covered through different questions: fuel poverty, smart grids, participation of consumers, distributed energy generation, the new role of transmission system operators (TSOs) and distribution system operators (DSOs), etc. Each issue was discussed from the Spanish perspective, considering the peculiarities of the national energy system and its users.

 

The new energy package aims to put the customer in the centre of the new market design. The panelists agreed it is important to have in mind that the user has no experience being in this role. An important prerequisite is to disseminate information about energy generation and usage to activate and engage the customers. According to Santi Martinez, the mindset of the average customer is not yet ready to adopt such an active role. Spanish consumers hardly understand their energy bills and they are misinformed to the point that many people believe that installing PV cells on their rooftop is forbidden. From this starting point, the adoption of new initiatives in which the customer is an important actor may take longer than in other European countries.

 

LEFT: Alicia Carrasco presenting to the audience as the moderator before the panel discussion; RIGHT: Enric Bartlett (left), Santi Martinez Farrero (centre) and Alejandro de Roca (right) in discussion.

 

The topics of flexibility and the role of the aggregator were brought to the discussion several times, highlighting the importance that the new framework will have in providing all the tools to create regulations and ease their deployment. It is yet to be decided at national level who will take the role of the aggregator. According to Pep Salas, it is crucial to release the option of aggregation of distributed energy resources (DER) in a competitive way, reducing barriers and opening the market to new players, such as independent aggregators and energy communities that manage their own flexibility, to untap the potential of these resources. In response to this new paradigm, traditional market players will have to learn to cooperate with these newcomers and adjust their business models.

 

Regarding competition in the future market, providing fair and transparent rules for all the players involved will be a challenge. For example, solar based energy systems, whose capacity is expected to grow by a factor of 10 in Spain, will heavily contribute to set up a model of centralized and decentralized generation and consumption in which it will be complicated to provide rules for impartial and transparent competition. Furthermore, the wholesale market is expensive, especially in Spain, and panelists mostly agreed that regulation should push competitiveness to lower the prices. In Spain, there are wide margins to improve competition. Specifically, in relation to priority dispatch, Pedro Gonzalez commented that new players, such as small-scale producers, should sell the energy (or other services) in the same conditions as the rest of the players to ensure fair competition.

 

The new European policies offer both opportunities and challenges to reduce Energy Poverty according to Dr. Bartlett. Furthermore, the new design will offer equal conditions for all players to participate in the market and, by means of aggregation, will enable a reduction of  energy procurement costs for consumers. Nevertheless, Bartlett sent a message to the EC to be careful not to leave things like they are right now. In addition, the importance of Fuel Poverty must be dealt from a general country level approach, not just from the electricity sector.

 

Both Alejandro de Roca and Pedro González brought up the importance of stable legislation if the EU wants big industrial consumers and investors to step ahead and make any decisions. Big players are reluctant to move first in scenarios where rules can vary in the short term. They are preparing and settling all the actions to take, but they are aware that law in Spain advances slowly and with a high grade of uncertainty.

 

One of the topics that brought the most controversy to the discussion was the cost of the transition and who is responsible for what. In a scenario where a notable capacity of renewables must be deployed in a system with current overcapacity, it is unclear how the deployment should take place. It is mandatory to install new renewable generation to accomplish the EU goals, but there is a huge cost for dismantling the current infrastructure based on fossil fuels. The panelists agreed that the bill of the transitions can be very expensive if not handled properly. Important topics discussed regarding greater renewable energy integration included long-term price signals, capacity mechanism and increased interconnections to mitigate effects of over-capacity. Pep Salas, who has recently participated in the elaboration of the Experts Report for Energy Transition in Spain promoted by the national government, pointed out that these costs must be shared with other final energy users, such as the natural gas, gasoline or diesel consumers. Taxes on CO2 and making the most contaminant technologies pay more were also proposed to lower the cost of the energy transition.  Another idea raised in the discussion was to restructure the current tariffs structure in the new framework.

 

It was mostly agreed that to make these initiatives possible, a strong physical infrastructure at the transmission and distribution level is key. Pedro González summarized the efforts to prepare the network for the future to be focused on Digitalization, Automatization and Communications protocols. In line with the technologies needed to make possible the future market design, panelists also mentioned some of the innovations to be pushed forward. These included data management (e.g. access to smart meter data and its analysis), load shedding technologies, blockchain and smart contracts, aggregation enabling technologies and electrification of other sectors.

 

Another relevant topic that was raised as the event was coming to an end was the implementation of the EU Directives at national level, which is known as the transposition of the directive to each state’s conditions. The individual adoption of common rules has been an ongoing problem in the EU. It is not strange to see, at least in Spain, how it can take too long for the Directives to be transposed from the European framework to the National level and how the result can even widely differ from the original EU proposal.

 

After the panel discussion a Q & A session took place. Some of the topics brought up by the audience further extended the discussion on investment and competition, legal stability, the importance of bringing new business models in the game, short-term markets and interconnection capabilities. Within the audience, Carmen Gimeno, secretary general from GEODE (Association of European Independent Distribution Companies) who is actively taking part in the debates in Brussels regarding these regulations, kindly shared her firsthand insight into the 'trialogue' phase and how all these topics are seen from the European Council, the European Parliament and the European Commission. As Carmen Gimeno pointed out, there are many other controversial topics that must be considered when debating about the new electricity market design at European level, such as bidding zones, regional operations centers at transmission level or regulated prices but these could not be addressed during the event due to time limitations. According to her, the negotiations on these topics will take place starting July 2018, when Austria takes over from Bulgaria in the presidency of the European Council.

 

LEFT: Pedro González answering a question from the audience; RIGHT: Q&A session underway with the audience.

 

There was a lot to discuss and to digest from this three-hour event that raised the importance of acting fast and keeping the debate alive. The design of the new electricity market presents challenges and opportunities, but it is crucial that some of the involved agents take the lead with different projects. Spain can serve as an example in some of the fields that it leads, but should as well take the opportunity to learn from other European countries that are ahead in many of these topics and learn from their experience.

 

The event concluded with a networking session where attendants could enjoy some drinks and food while continuing the discussion.

 

To have better understanding of the topics addressed in the discussion and the questions asked by the audience, the whole session video will be soon uploaded to the CommUnity Platform. In the meantime, please, share and comment!

 

 By: Alvaro Picatoste Ruilope, Chris Parker, and Ignacio Zubieta Ochoa

In Collaboration with The CommUnity Post

 

 

Event Organizers:

Chris Parker

Nicole Nembhard

Sahilaushafnur Rosyadi

Alvaro Picatoste Ruilope

Aleksandra Radwanska

Leon Haupt

Ignacio Zubieta Ochoa 

 

 


CommUnity Post Reviewers: Jacopo Sala, Tara Trafton, and Rafael Martins

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