15. May, 2008
Energy sector requires regional cooperation!
No country in Europe can operate in isolation, which is why the EU must closely cooperate with SE Europe. Also in the field of energy. Especially in the field of energy. For this particular reason, the British Embassy in Ljubljana, the Ministry of Economy of the Republic of Slovenia, Borzen, the Slovenian Power Market Operator, and the Centre for European Perspective have set up a plan for an energy training programme for SE Europe. At Jable Castle in the vicinity of Ljubljana, six training modules have already been carried out covering transmission, regulation, power markets, retail, generation and distribution.
Energy Story of SE Europe
It is well known that the use of energy has been growing without control all around Europe in spite of rising prices. New projects are planned and new technologies under development, and a storm of changes is expected for SE European countries, which are slowly, yet persistently, adapting their market rules and structures to EU legislative requirements . The parties to the Energy Community Treaty share the same key priorities regarding the development of the energy sector with the EU. The priorities are security of energy supply, sustainable development, protection of the environment, and energy efficiency. The major difference among the signatory states lies in challenges they face. These differ out of various reasons; not only because of political changes which occurred in SE European countries within the last two decades, but because these changes prevented the countries from investing much in new or the existing capacities. One of the greatest challenges is thus to attract investors who will contribute to further development at the national as well as international level. For this reason, it is necessary to obtain organisational and financial support of the EU, and especially the transposition and implementation of European legislation. Another great challenge is connected with social dimensions. Reforms in the energy sector can be painful, as on one hand investors follow objective, market-based rules, while on the other hand the revenues sometimes do not fulfil there criteria. The third challenge is the time and timeliness of implementation of European legislative acts which will lead to the opening of markets in the field of electricity and gas. In January 2008, the market was opened for non-household users, and a complete opening of the market will take place in January 2015.
Energy Training Programme for the SE Europe
The key objective of the training programme partners – British Embassy Ljubljana, Ministry of Economy, Borzen and Centre for European Perspective – is to facilitate some steps for SE European countries, which EU members have already taken, on the way towards liberalisation of their energy markets. “The training programme combines British experience in the field of liberalisation and Slovenian professional knowledge and awareness of the region,” said Tim Simmons, British Ambassador in Slovenia, at the opening of the training programme. Namely, Slovenia completely opened its energy markets on 1 July 2007, and Great Britain serves as an example of a very open country in this regard.
The module on transmission focused on the improvement of efficiency and quality of services, reliability and safety of operation, cross-border activities and market integration. The module on regulation provided participants with fundamental concepts of regulation in the field of monopolies as well as competitive sectors. The principles of efficient regulation, the elimination of obstacles for regulation, and the special features of regulatory activities in transitional economies were also discussed. At the module on power markets, theoretical grounds for the operation of markets as well as practical experience and views of operators including traders, brokers and market operators were presented. The issue of the price formation process was pointed out as well as the fact that the interaction between different markets – power, transmission capacities, system services and others – must be taken into account when evaluating market results. Special emphasis was put on the issue of market concentration and the abuse of market power. An interesting feature of the retail module was the fact that typical economic and technical contents were complemented with the presentation of fundamental marketing approaches which are being increasingly used in the energy sector as well. Besides the market fundamentals, the last implemented module, generation, was focused on the main problems in this field – price formation process from the viewpoint of producers, efficient portfolio management of electrical power plants, and the need for further investment.
Some highlights from previous modules
“Power exchanges offer security, transparency, a price signal for investors and are at the same time one of the key stakeholders in the processes of regional integration.” Already at the opening of the energy training programme, the Director of Borzen, Damjan Stanek, emphasised that besides security and transparency, power exchanges can be a tool for further regional integration.
At the second module on energy transmission, Cecilia Hellner, Secretary General of the Association of European Transmission System Operators (ETSO), pointed out that transmission system operators play an important role in the electricity market. “Besides the integration of transmission systems, the main activities of ETSO, consisting of 38 members, are activities related to transparency, security of supply, analysis and drawing-up of reports regarding tariffs, as well as electronic data exchange among operators,” said Hellner.
At the same module, Graeme Stelle, a representative of National Grid, the British transmission system operator, pointed out that the key for the operation of power markets is information. Market information releases price signals which enable efficient development of the market. “In this case, the transmission system operators are considered a "natural source" of information for the market,” emphasised Stelle.
The European Commission ordered a study with which it would establish how the price is formed in European power markets and how much it deviates from the ideal competitive price. Brian Kessler from Global Energy Decisions, one of the companies that carried out the study, explained at the third module on the operation of power markets that among other things, the RSI factor, which shows the extent of the influence that certain marker participants have on the price of electricity, was found to be an important indicator. “It became evident that on more concentrated markets with a few or only one key player, the producers have greater chances to create extra profits.”
“Only competition in production and consequently in wholesale can bring the desired result in the form of lower prices for consumers. The European power market should be transparent, predictable, allowing free flow of all goods, including power. The government interference in the processes of price formation can present a big obstacle on the way to efficient competition,” pointed out Tomaž Orešič from the EFT Group at the retail module, who believes that market actors need a predictable environment and a competitive market, open for new investments.
At the same module, Frances Williamson from the British Energy Retail Association emphasised that the most important part of the market is the consumer. Suppliers, regulators, non-governmental organizations, the government and the media are focused on the consumer. “Not a day goes by when the energy sector would not be a part of a journalist report,” she added.
The organisers of the Energy Training Programme for South East Europe hope that also as a result of a stronger regional co-operation there will be more good news to report about.
Text: Alenka Žumbar, Energetika.NET – www.energetika.net