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Highlights

Existing renewable plants to keep priority dispatch

Wind, solar, geothermal see rules supporting growth

EC pushes dynamic pricing to boost demand response

Brussels β€” Emission limits in capacity markets and tackling Germany's north-south congestion problems may have dominated the EU's recent power market design debate, but renewables are the big winners in the long term.

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The draft new power market design rules informally agreed by EU negotiators late last year aim to enable the EU to integrate ever-growing shares of renewables as part of its push to cut its emissions and reduce fossil fuel imports. Output from existing renewable plants will still have priority dispatch to the grid, but power transmission system operators will be able to curtail output from new renewable power plants.

European wind energy trade body WindEurope described these agreed curtailment rules as "fair and transparent," and noted they included giving "compensation for lost revenues in countries where redispatch is not market-based."

TSOs will also have to report on all redispatch actions, and follow recommendations from regulators on how to be more efficient in their redispatch, and avoid curtailing renewables.

"This will help give transparency on any 'must-run obligation' agreements with conventional power plants that are crowding out renewables from the grid," WindEurope said.

The solar sector was also delighted with the informal accord, in particular for securing "the uptake of small scale and locally owned solar installations" in the EU, its trade body SolarPower Europe said.

The "ambitious" accord "will pave the way for a new solar boom in Europe," it said.\

The draft EU power market design regulation and related updated electricity directive were the last parts of the EC's November 2016 clean energy package proposals to reach the informal accord stage. The package included updated directives promoting renewables in general, including for heating, as well as energy efficiency, in particular by setting targets for 2030. These directives entered into force, along with a governance regulation on tracking progress to achieving the targets, on December 24.

This legislation will enable "accelerated development" for geothermal energy, European geothermal trade body EGEC said, particularly in renewable heating and cooling.

The governance regulation required the 28 EU countries to submit draft national energy and climate action plans to the European Commission by the end of last year showing how they intend to help achieve the EU 2030 targets.

Tighter EU carbon market set to prompt more power fuel switching in Europe

2019 is set to be the year that coal-to-gas switching in power generation takes off in continental Europe. Carbon prices supported by the new market stability reserve cutting supplies, coupled with potentially lower gas prices, could prompt unprecedented C2G switching volumes.

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So far 21 countries have done so, and the remaining seven -- from Bulgaria, Czech Republic, Cyprus, Greece, Hungary, Luxembourg and Spain -- are expected soon, according to an EC source on Friday.

DYNAMIC PRICING

The agreed updated draft EU electricity directive introduces more rights for end-consumers, including the right to ask for a dynamic price contract from energy companies with more than 200,000 customers, the European Parliament said in late December.

This coupled with the right to have a smart meter -- unless the cost involved outweighs the benefits -- could help boost demand-side response by giving consumers more information about how prices change throughout the day.

The EC is keen to enable demand-side response to make it easier to balance grids coping with the growing shares of intermittent renewables output.

National governments would still retain the right to regulate power prices temporarily, however, despite persistent attempts by the EC to end this.

The agreed draft requires governments to report their progress toward abolishing price regulation to the EC and requires the EC to produce an overall EU progress report on this by 2025.

This report may include a proposal to end regulated prices, the parliament said.

--Siobhan Hall, siobhan.hall@spglobal.com

--Edited by Richard Rubin, newsdesk@spglobal.com