Lord Mogg,
Distinguished guests,
Ladies and Gentlemen,
I am delighted to be at the ACER Annual Conference. Thank you for the invitation.
Given your indispensable role in today's energy system it is hard to imagine that this is only your fourth annual conference. In the last five years, the Agency has gone from strength to strength:
- You complement and coordinate the work of national regulatory authorities.
- You lead the way when it comes to the creation of the European network rules.
- And you provide exceptional insight into the energy market in each of the reports you produce
Thanks to that proven track record, ACER has gained the trust of all actors in the European energy sector. That is no mean feat.
And it's also why the Energy Union explicitly calls for a review of ACER's framework to strengthen its regulatory oversight.
You strength lies in your expertise and understanding of the sector. And that could not be better reflected than in the theme of this year's conference. Consumers are at the heart of the Energy Union and are the single most important players in the energy system of tomorrow.
Our vision of an Energy Union is one with consumers at its core, where the power system is more flexible, where citizens participate actively in the market and where vulnerable consumers are protected.
To make that happen we need to create the right conditions for investors, open new business opportunities for traditional and new players, and provide security and confidence to consumers.
Today I want to talk about how we make that vision a reality.
- The first way we do that is to look at the way our energy system is designed. We currently have an outdated, inflexible system that does not allow consumers to make the most of a truly internal, competitive market. That is why next week I will be presenting our proposals on a new, modern market design.
- The second element is empowering consumers. We need a step-change in the way consumers interact with the market to allow them to take control of their consumption, their self-production, and their relationship with suppliers. Next week, together with the Communication on market design I will present our New Deal for consumers to tackle those very issues.
- And the third is ensuring that ACER and national regulators have a key role in shaping and implementing those reforms. That is why I would like to present our ideas for ACER's role in the Energy Union.
A new market design for a new energy system
But allow me to start by outlining my vision for a modern energy market.
As you know, the European energy system is undergoing a significant transformation.
We are coming from a world where large-scale, centralised power plants supplied energy to passive consumers. We are now moving to increasingly decentralised supply with active consumers and more market players.
We are also moving to a new world where renewable energy will be the mainstream generation technology. If we are to achieve our target, up to 50% of generation will have to come from renewable sources by 2030.
Much of this generation will be both variable and more decentralised than traditional production. We must make sure that our energy markets, and the way we operate our electricity systems, is ready for the challenges this will bring.
Therefore we must make sure that the overall system becomes more flexible.
Short-term markets, notably integrated EU-wide intraday and cross-border balancing markets, need to be at the core of an efficient electricity market design.
It is also essential that electricity markets send the right price signals for investment in adequate capacity or demand response. For this prices have to be allowed to rise when demand is high or generation scarce.
This should not only help bring about the necessary flexible capacity that can back up variable production from renewable sources. It should also help to bring about demand response as a way to better integrate this production into the system and still maintain a high level of security of supply.
Ultimately, market price signals should also become key drivers for investment in renewable energy production. This will need a strengthened ETS and the proposals we are going to make next week will be an important milestone for that.
Until we get there, we need a more market-oriented and more coordinated approach to support schemes across Member States. Full application of the State aid Guidelines will make an important contribution to gradual market integration of renewable energy.
At the same time, more regional cooperation is needed, including on support schemes, to ensure renewables development becomes more cost-efficient and market distortions are minimised.
Voluntary initiatives between system operators have shown that regional cooperation works. For example, the TSO Security Cooperation initiative of eleven European TSOs is helping to improve the security of the power grids throughout Central Europe and the 170 million European citizens which it supplies. Such initiatives need to be replicated across Europe.
But we still see too many Member States introducing uncoordinated measures to remunerate generation capacities.
This has the potential to distort the internal energy market. That is why we are considering the merits of a European or regional framework for capacity remuneration mechanisms.
This framework would include a common approach to assess the adequacy of the electricity system to meet demand. We need to move from a national to a regional approach. In other words, Member States have to take into account the contribution of the internal market and their neighbours to their own system adequacy.
But the integration of the internal market should not stop at wholesale level. The retail part of the electricity market has to offer consumers the possibility of active participation in the EU's energy transition.
A new deal for consumers
That is why next week we will publish our ideas on how to bring about the New Deal for Europe's energy consumers. The truth is that energy consumers do not always have the appropriate incentives, nor the information they need to monitor their consumption, understand the latest offers and make informed choices to benefit from competition. Given that the average consumer spends ten minutes a year thinking about their energy use, we need to give them that information and make sure that it is simple and comprehensible.
Firstly, we need to provide them with bills that allow them to understand what they are paying and compare this at a glance against other offers in the market. And it should allow people to compare their usage with other consumers.
That is true market competition. And that is why our proposals will aim to provide clarity on what information bills should include. But regardless of how clear the bill is, information for the sake of it is pointless. Consumers need choice, they need to be able to use that information to their benefit.
In some Member States, there is a lack of competition in retail markets, a lack of reward for active participation, and difficulties in switching. Switching between suppliers remains complex and overly-bureaucratic for many people, and can take months. In telecommunication every customer in Europe has the right to switch their provider in one working day; switching your energy provider on the other hand can take up to sixty days in some countries. That needs to change.
The point is that consumers cannot create the competitive pressure to positively affect cost, quality and choice of available energy services – as we have managed in the telecommunication markets. That is something that we will be addressing in our future initiatives.
But active consumers also need the right set of incentives. Consumers who want to profit from the ups and downs of prices in intraday markets should be able to do so.
We need new solutions like contracts based on spot prices which, already today, help Finnish and Swedish consumers save up to 30% on their energy bills.
Lack of access to new products and services has also hampered consumers' ability to benefit from demand response or self-production.
We are seeing a growing share of consumers producing part of their own energy. We need to encourage this – the more active consumers are, the better it is for a competitive energy market. At the same time we need to set the right incentives that will ensure such self-generation is integrated in the overall system in a cost-effective manner.
But there are still far too many market barriers to new competition in many Member States. Unequal access to information and high entry barriers for new competitors slow down the adoption of new technologies and practices such as smart metering, smart appliance and distributed energy sources.
Yes, advanced smart home appliances are on the market but they are rarely used. That means that millions of European homes rely on outdated analogue metering. Those consumers have no way of knowing their real energy consumption in any one day. We need to make that a thing of the past.
The good news is that Member States have committed to equipping three quarters of European citizens with a smart meter. But we are still far from that because of the market barriers that new technologies still face. We also want to ensure that the smart meters rolled out benefit the customers, and not only suppliers.
That is why our new deal will focus on making things easier and simpler for businesses and consumers. That will be the philosophy of the proposals we present next week. And it is not a coincidence that we are publishing them as one package. It reflects the complementarity of generation and consumption, and of wholesale and retail energy markets.
The bottom line is that our vision for a new electricity market design is actually a vision on how consumers can benefit the most from the energy system.
Our aim is to give consumers the tools they need to be active participants and enable them to control their consumption, lower their bills and benefit from new smart energy technologies.
The role of energy regulators in the Energy Union
But none of that can be achieved without the oversight of ACER and of national regulators.
The role of regulators in our energy system has never been more important.
Without proper regulation we cannot have a functioning internal market. Regulators have worked hard at breaking down barriers to market entry. You have provided much needed transparency to provide consumer confidence.
And of course the invaluable insight you provide on how energy markets actually operate, both at wholesale and retail level, helps us highlight the areas we need to improve on. Much of what we will propose next week on market design and retail market reform is down to your work.
But the role of regulators is evolving. A much greater emphasis is now being placed in bringing national regulatory authorities together. As you know one of the key tenets of the Energy Union is regional co-operation. That means ensuring that decisions taken in one Member State do not adversely impact on a neighbour.
ACER's role in that is more important than ever. Firstly, this role consists in increasing harmonisation of rules and coordination between national NRAs.
Secondly, it consists in ensuring that co-operation also extends to transmission system operators. ACER will be key in making sure that the co-operation between TSOs in different countries works in the same way as it will between NRAs. Your continued work with ENTSO-E and ENTSO-G will therefore take on an added importance.
And finally, our vision for a future retail market must be based on an adequate regulatory framework:
- A framework that ensures the right set of incentives for investors and full protection for consumers.
- A framework where new technologies fully benefit all market players in a non-discriminatory way.
- A framework that allows business cases to emerge for new services such as demand response.
The bottom line is that active participation from consumers in energy markets will require an active role from the regulators.
The role of regulators as guardians of consumers is even more relevant when we think about vulnerable consumers.
To fully protect all consumers, regulators need to build stronger links with consumer associations.
Working together will allow regulators to have first-hand information on how consumers interact with the market. That will allow regulators to remain vigilant and alert to ensure consumers can benefit fully from better offers, new services and technologies.
The regulatory framework should also be designed to ensure consumers have the incentives to become active energy players, for example by adjusting and reducing their consumption as price evolve or helping balancing out renewable energy variability by embracing demand response.
That's particularly important because better demand-response could help us save up to €100 billion a year. That's almost €200 for every European!
And consumers should have the option of participating in the market not just as single consumers but also through intermediaries such as aggregators, collective actions or community schemes.
Take Ecopower, a renewable energy co-operative in a small town in Flanders. It has brought together 47,000 members who together own 100% local renewable energy installations.
Those installations produce enough cheap, green electricity for all 47,000 members. Not to mention that the total value of their shares is now worth over a million euros!
That is the future of Europe's energy market.
But we need strong regulators to ensure that these new actors have fair access to the markets and consumption data and can be monitored in the same way as suppliers.
That example for me is proof that effective regulation is far more than monitoring. It's about enabling innovation.
Regulating a consumer oriented market is not an easy job. And that's why I have committed to looking at how to reinforce ACER's powers and independence. I look forward to embarking on those discussions with you.
Conclusion
Ladies and Gentlemen,
What we will see and hear today is that today's consumer is no longer passive. And that's a good thing, something which I believe the energy sector is embracing rather than fighting.
The proposals we will make next week will help the transition to a new, more flexible energy system which works for consumers and the energy sector alike. Not only will it help make the internal market working for them but it will save Europe 40bn euros a year.
As outlined today there are several obstacles in the way. That is why we need the new retail energy market to be grounded on an adequate regulatory framework with the right set of incentives for businesses and consumers.
ACER's role in that is paramount. But as I have discussed there are also a number of new challenges that regulators will face in this new retail energy market.
ACER will have an important role to play when it comes to making sure that the internal market remains a level playing field and ultimately protects and benefits all consumers across Europe.
So let me assure you of this: the European Commission is determined to reinforce the Regulators' and ACER's role. That also means looking at the resources you have available and making sure that you have the capacity to play your full role in setting up and monitoring the new regulatory framework.
I look forward to hearing your views today and how can we do that together.
Thank you.
