Madrid – OMIE Conference - (15 June 2015) Arthur Henriot & Jean-Michel Glachant Director Florence School of Regulation EUI - Florence

1. Towards a Europeanisation of EU
Capacity Mechanisms?
Madrid – OMIE Conference - (15 June 2015)
Arthur Henriot &
Jean-Michel Glachant
Director Florence School of Regulation
EUI - Florence

2. Nota Bene:
1/ This work has been made at Florence School by Arthur and me
before Arthur joined the French TSO “RTE”
2/ Arthur is not member of the RTE “Market Design” team
3/ RTE is not involved with or engaged by what Arthur did when
working at Florence School under my supervision.

3. The emergence of national capacity mechanisms
3
Different
Needs
Different
Resources
Different
Objectives
Source: ACER

4. The emergence of national capacity mechanisms (2/2)
French
« Capacity market »
Obligation on
suppliers
Decentralised
market
British
« Capacity market »
Target
administratively
set
Centralised
auction

5. The emergence of national capacity mechanisms (2/2)
Probably no harmonized adequacy policy all over Europe

6. Yet autarky is costly
6
• Costs of national self-security are high (≈20% of IEM benefits):
- Uncorrelated demand & RES availability
• Impact not limited to “generation adequacy”
 National mechanisms must be “Europeanized”
Exports to France from neighboring countries on February 8th 2012,19h00

7. How much harmonization needed?
7
No need for a single product
BUT : need to take into account cross-border resources
need to allow cross-border exchanges and remunerate external resources
No need for an identical level of security of supply
BUT : need to measure the efforts made by different countries
need to allocate rights at times of extreme scarcity

8. Assessing & remunerating cross-border resources :
implicit approach
8
• Assessing the overall contribution of cross-
border resources (‘implicit approach’)
− Lack of consistent methodology
− Lack of consistent inputs
 Avoiding oversupply by taking into account cross-border resources contribution,
provided some common methodology and scenarios can be established.
 Failing to remunerate external resources

9. Assessing & remunerating cross-border resources :
explicit approach
9
Cross-border
resource
availability
Interconnection
availability
Flow in the right
direction
Resource operator
best able to
manage this risk ?
Interconnection
operator best able to
manage this risk ?
Who will certify resources availability?
Who can handle delivery risk in the absence of a regional system operator?
How to remunerate: 1/ cross-border resources & 2/Interconnectors?
Who is importing/exporting when markets are coupled?
• Assessing the contribution of a specific
resource (‘explicit approach’)

10. Defining rights over system resources @times of
extreme scarcity (1)
10
How to measure heterogeneous efforts made to insure against scarcity and
allocate energy at times of scarcity (or to set financial compensation)?
Cannot be solved currently by short-term arrangements : low price-caps
/equally shared curtailment
How to build a set of economic incentives compatible with a spirit of solidarity?

11. Defining rights over system resources @times of
extreme scarcity (2)
11
Solidarity will be needed anyway!
“Rarity”, “outside […] regular expectations”
“Extreme impact”
Only “retrospective predictability”

12. 12
A bit more?
Email contact: arthur.henriot@eui.eu
http://fsr.eui.eu

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14. www.florence-school.eu

15. www.florence-school.eu 15
Thank you for your attention
Email contact: jean-michel.glachant@eui.eu
Follow me on Twitter: @JMGlachant already 8 800 tweets
My web site: http://www.florence-school.eu