Speech: An integrated European energy market - more important than ever
European Commission - SPEECH/14/359 29/04/2014
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European Commissioner for Energy
An integrated European energy market - more important than ever
15th Anniversary of the European Federation of Energy Traders (EFET)
Brussels, 29 April 2014
Thank you for inviting me to say some words today, on the 15th Anniversary of the European Federation of Energy Traders (EFET). Perhaps this anniversary is an opportunity for some of you to look back to 1999, when EFET was created. We have gone a long way since then, but of course more work remains to be done. So, I hope you are using today's discussion not only to look back, but also as an opportunity to talk about how we can achieve even more progress on European energy markets in the future.
The cost of energy remains an important issue for both domestic and commercial energy consumers. A competitive and liquid market is the best guarantee to keep prices for consumers in check. During recent years, not least because of the past excesses in financial markets and the financial crisis, citizens and governments have tended to trust markets less and less. That is a pity, because the importance and the benefits of well-regulated and well-functioning markets can hardly be overstated. And, if we analyse in some depth why the excesses in financial markets occurred before the financial crisis, we will find that it was the absence of well-regulated and well-functioning markets.
In view of this lack of trust, our common task to explain the benefits of an integrated energy market is even more important today. Could the benefits be clearer than at this time of the Ukraine crisis, where those countries without liquid markets and diversified supplies are the most vulnerable? Or where the massive deployment of renewables necessarily requires to pool reserves in larger regions?
Functioning markets are still the best tool to allocate resources efficiently in the interest of citizens. We should all continue to champion a competitive and efficient market as a most valuable instrument, but never forget that ultimately it is consumers that need to receive the benefit.
Back in 1999, when EFET was created, European electricity and gas markets were not fully competitive. The First Energy Package existed, but markets were dominated by vertically-integrated companies, market liquidity was low and customers were generally not able to choose their energy supplier.
Ever since then, EFET has been one of the advocates for the creation of common European markets for gas and electricity. EFET's good knowledge of the markets and its relentless efforts to inform us of existing trade barriers has triggered numerous Commission investigations. In many cases this has led to tangible improvements for market - and customers. A few topics in particular come to mind, where EFET's input has supported changes:
Unbundling. Since its inception, EFET has called for a separation of energy transmission and energy trading businesses. This has fed into the Second and Third Energy Packages. We now have an unbundling regime that ensures that network companies do what they can to facilitate market functioning and security of supply.
Cross-border infrastructure. EFET has been an active participant of the Madrid and Florence Fora and contributes actively to the work of ACER and the ENTSOs in this area. This includes the work on European network codes, but also identifying those small changes on the ground that make an impact.
Market design. EFET has for a long time advocated the introduction of entry-exit systems in gas. We now observe increasingly liquid gas hubs in the EU. Also electricity market coupling is being implemented for the day-ahead and intraday timeframes. Most recently, in February, day-ahead market coupling went live throughout the NWE region. These are very concrete steps that were taken and that have a very positive impact on market development.
Trading and transparency rules: EFET's expert knowledge on trading practices has helped to create rules that make energy trade more transparent than years ago.
Looking to the future, more challenges need to be addressed.
To complete the internal market for electricity and gas. We have gone a long way in this area, but the development and implementation of the electricity and gas target models need to continue. Some questions remain unresolved e.g. on how to fit demand response into market arrangements or how to ensure that the market can deliver the flexibility that is needed. And even where we know what the solutions are, these have not yet all been implemented in all Member States.
Bring renewables into the market. Our renewables policy has been successful and we are on track to meet the 2020 targets. The Commission is now working on the next step, the vision for 2030. However, renewables have also created challenges, both of a technical and a commercial nature. It is now time to ensure that those technologies, that can be considered mature, become part of the market.
Ensure security of supply. Together, we have ensured high levels of security of supply in Europe. However, there are those that say that we see insufficient levels of investment in Europe's electricity generation capacity. This issue needs to be examined, and it needs to be ensured that we find solutions that minimise market distortions. I count on your input in shaping these solutions and highlighting risks of market distortions or to security of supply where they arise. Ultimately, any policies we put in place must ensure energy is consumed where it is valued most rather than distorted by other mechanisms.
Infrastructure investment. Over recent years, the EU's infrastructure has been continuously developing and bi-directional flows for gas pipelines is increasingly the norm. We will now need to develop more infrastructure connections from north to south and further diversify sources of supply. In the coming years, to realise the internal market and its potential, Europe will be investing billions in energy infrastructures. Whether it is transmission lines, storage technology or generation capacity: reliable, sufficient and flexible investment is essential to the functioning of the Internal Energy Market. It is central to the realization of all our policy objectives. More secure supplies. More access to clean renewable energy. More affordable energy.
Smart Grids. New technologies are being developed and adopted as we speak. The challenge for us is to create an environment where market arrangements are such that those technologies that best serve the needs of consumers can succeed. This also includes enabling consumers to play a more active part in the management of the system, for example through demand response.
Transparency. Transparency and effective market oversight is important to ensure that citizens regain trust in markets. As we develop and implement a framework for this, we need to ensure that this is consistent, proportionate and does not become a barrier to trade.
All of us who are active in the energy area have a big responsibility for society and our economy as a whole. Responsibility for ensuring the secure, sustainable and affordable supply of energy, responsibility for investments, for consumers, for jobs.
Let me say that, in my view, EFET has taken its responsibility and has made an important contribution to promoting well-regulated and well-functioning energy markets.
I invite EFET to continue contributing to this process also in the future and hope that you will have an enjoyable and stimulating evening tonight.
Thank you very much.