This is set to change, however, with political support for a single electricity market gathering momentum. The European Commission is aiming to complete “an efficient, interconnected and transparent” internal energy market by 2014.
It is an ambitious deadline, given the big obstacles, but the change would benefit consumers and producers.
For consumers, the most obvious advantage of a single electricity market is lower energy bills. Changing the structure of Europe’s generation market, by reducing the concentration in national markets through ownership unbundling and removing barriers to entry for newcomers, would level the playing field and lead to more competitive pricing.
A second key benefit is securing a stable, sustainable energy supply across the EU. Limiting supply and distribution to the national level means shortages cannot be fully mitigated by trading with other member states.
Thirdly, to meet the EU’s energy and climate targets, renewable sources must be integrated into the market on a large scale, which requires a far more flexible and regionally integrated power system.
Paul Wilczek, senior regulatory affairs adviser at the European Wind Energy Association, agrees that the commission is proposing some positive steps with its recent communication on the internal energy market, but believes it should go further.
Regulated energy prices and capacity payments, which distort the market and discourage much-needed investment, are rightly criticised, but other important issues must also be addressed, he adds.
“Ending fossil-fuel and nuclear subsidies, improving market transparency and reducing excessive market concentration is crucial,” says Wilczek. The current market, designed around coal, natural gas and nuclear, lacks the flexibility for the effective incorporation of renewables.
The other thing missing is an adequate grid. Whatever the market design, electricity can move freely around Europe only if it has the means to do so. Ana Aguado, chief executive of Friends of the Supergrid, believes that although significant regulatory progress is achievable by 2014, a single market is a long way off.
For Aguado, the main stumbling block is a lack of infrastructure, because “the necessary investments in transmission networks in Europe have not been made in the last 15 years”.
Political support for infrastructure investment is gaining momentum, however, with agreement in late 2012 on a new EU regulation for streamlining and facilitating permitting and planning procedures for grid projects.
Taken together with the €9.1bn ($11.9bn) proposed for the trans-European Networks for Energy budget, this legislative proposal will bring important developments in offshore and transnational grids, priority electricity corridors, expedited permitting and better co-ordination between states.
Whether the commission can achieve its 2014 target for an internal electricity market is the subject of much scepticism. Certainly, there will be many bumps in the road, and it will be a much longer journey before Europe’s electricity is able to enjoy the same freedom of movement as its people.
Ana Aguado will kick off the Integration in Electricity Systems and Markets track at EWEA 2013 on 5 February, chairing a session entitled “Free movement of electricity: will it really happen by 2014”?
