INTERVIEW: Integrated power markets key to EU climate goals: ACER director

Brussels — Implementing last year's EU clean energy package to integrate large-scale renewables remains key to achieving the bloc's climate goals, according to EU energy regulatory agency ACER director Christian Zinglersen.

EU policy-makers are now looking at technologies like hydrogen to help the bloc cut carbon emissions, but they still expect renewable power and energy efficiency measures to achieve the bulk of the EU's goal to be climate neutral by 2050.

"There is a risk that people think the power markets are already taken care of, when there is still a huge implementation task ahead," Zinglersen said in an interview with S&P Global Platts.

This implementation "will be very significant for the broader decarbonization objectives," he said.

One key regulatory issue is whether the EU's electricity bidding zones -- areas with a single power price -- need to be changed to tackle cross-border congestion and help make more capacity available for trading.

This is also a politically sensitive issue, particularly in Germany, as it affects prices within the zone and power flows between zones.

Another is how to assess Europe's resource adequacy across its power system, including generation, demand-side response and interconnection, in order to see if national capacity mechanisms are justified.

This link with national policies makes resource adequacy also politically sensitive.

ACER will be looking at both of these issues this summer, in close cooperation with national regulators, Zinglersen said.

"Resource adequacy, this interplay between bidding zones, using existing interconnectors, and methodologies to guide what is likely going to be an increase in redispatch and counter-trading in the future -- this is taking up a lot of time for ACER and national regulators across Europe," he said.

ACER has to decide on which, if any, of the EU's power bidding zones need reviewing, as well as the methodology for reviewing them, by October 8, based on a proposal from formal EU power transmission system operators' body Entso-e.

"It's a very short period of time for such a complex issue. It's also a sensitive issue, a very political issue," he said.

Entso-e will have to produce the formal bidding zone review within 12 months of ACER's decision, so likely by October 2021. Any eventual changes to bidding zones have to be agreed by the national governments involved.

This means ACER wants its decision to be as technically sound as possible, so that the final review is considered rigorous and thorough, Zinglersen said.

ACER slammed Entso-e's first bidding zone review, published in 2018, which reached inconclusive results on whether and which zones needed changes.

Resource adequacy

ACER also has to decide on a European resource adequacy methodology by August 5, so that Entso-e can use it to produce a formal adequacy assessment in 2021.

"I expect this to be a continuous evolving framework, not a one-off," Zinglersen said. "It's a key piece of a more integrated shared resources model for Europe."

The idea is to have as comprehensive a methodology as possible, a future-proof methodology, he said.

He wants to see, over time, "a significant alignment between a European-wide resource adequacy assessment and the national resource adequacy assessments."

National capacity mechanisms have become more popular across Europe as rising volumes of intermittent renewable power replacing dispatchable generation capacity have made some governments anxious about long-term system security.

Under the EU's clean energy package legislation, national governments have to show they have taken cross-border resources into account when deciding if they need a national capacity mechanism to safeguard their electricity system.

These resources include demand-side response, which is a new element to traditional generation adequacy assessments.

"If you're omitting that as a factor, then you're not looking into an accurate adequacy assessment nor indeed are you future-proofing it," Zinglersen said.

ACER is very focused on this, but the problem is that assessing current and future demand-side response is "actually quite difficult to do," he said.

Getting resource adequacy assessments correct and achieving integrated markets is key to ensuring consumers are not overpaying for their system security.

The aims is to achieve "the most efficient outcome for the customer today, tomorrow and in a slightly longer perspective," Zinglersen said.

"For that we need to share resources, we need to make markets work," he said.