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The EU Clean Energy Package sets the EU energy efficiency and renewable energy ambitions for the 2030 horizon. It also updates the rules that govern the functioning of the internal electricity market and the transmission and distribution grids. The package, proposed by the European Commission in November 2016, includes 8 legislative proposals on the electricity market and consumers, Energy Efficiency and Energy Efficiency of buildings, Renewables & bioenergy sustainability as well as governance of the Energy Union. The Council agreed on its negotiating position for four legislative proposals of the EU Clean energy package in December 2017. For the different topics selected for this report, we will present the Commission proposals as well as the Council position included in the electricity Directive and Regulation. The positions of the different stakeholders of the EU electricity sector will also be stated at the end of each discussed topic.

This study has been commissioned by ENTSO-E The need for substantial investment in the European electricity transmission grid to meet the ambitions of market integration and decarbonisation is well known. However, the development of these projects has a significant impact on the public at large. As the public becomes increasingly active in expressing its concerns and opposition, stakeholder engagement activities to raise awareness and build trust in infrastructure development are becoming more and more important, as well as challenging. Suboptimal stakeholder engagement by project developers leads to distortion in the network planning and development process. Therefore, it is crucial that project promoters are encouraged to implement innovative and effective stakeholder engagement strategies, and to reflect the outcomes of those activities in the design of the projects. This report re-examines and assesses the possibility of enlarging incentive regulation to improve the performance of project promoters in building public awareness and trust in infrastructure development projects. The study is structured into three blocks: 1) Taking stock of the obstacles to stakeholder engagement activities and current activities organised by project developers. 2) Innovation in the context of the economic regulation of project developers (TSOs). 3) Enlarging incentive regulation to, first, include other regulators and, second, to consider economic incentives for other stakeholders involved in project development.

Work Package 7 (WP7) of the Progress on Meshed HVDC Offshore Transmission Networks’ (PROMOTioN) Horizon 2020 project focuses on various legal, financial and economic aspects of developing an integrated offshore infrastructure. Task 7.2 focuses on the development of an economic framework for the offshore grid in terms of three building blocks namely: planning, investment, and operation. The WP7.2 intermediate report consists of a compilation of five regulatory challenges that have been addressed and are related to two building blocks: Planning and Investment. The third building block (offshore grid operation) will be treated in the final report (April 2019). 1. Offshore grid planning comprises of three topics namely: CBA methods, onshore-offshore coordination, and public participation. 2. Offshore grid investment comprises of four topics. However, in this intermediate report, only the first two: cooperation mechanisms for renewable support, and transmission tariffs are treated. The remaining two topics 1) Investment incentives 2) CBCA methods would be addressed in-depth in the coming months of this project.

The role of DSOs is evolving due to the increasing penetration of intermittent and distributed energy resources in the distribution system. On the one hand, TSOs are accessing flexibility resources connected to the distribution grid. On the other hand, DSOs are actively managing distribution grid congestion, moving away from the conventional fit and forget approach. As a result, the need for DSO-TSO cooperation has become increasingly important. In this study, we first discuss market and grid operation issues related to different system states and the corresponding congestion management approaches. Second, we discuss possible solutions that are inspired by inter-TSO cooperation solutions as well as solutions that are being adopted by DSOs. Our findings show that the issues are rather similar both at transmission and distribution level; however, the need for cooperation and the solutions will depend on where structural congestion will occur and which borders will be managed.

Traditional analysis of distribution grid user’s reaction to tariffs assumes a low price sensitivity and a lack of alternative technologies to grid connection. This is radically changing with two technology breakthroughs: (1) Photovoltaics (PV) enable domestic and commercial consumers to self-produce energy; (2) Batteries allow self-producers to set both their grid energy and capacity parameters. Contributing to the state of the art, the grid cost recovery problem is modelled as a non-cooperative game between consumers. In this game, the availability and costs of new technologies (such as PV and batteries) strategically interact with tariff structures. Four states of the world for user’s access to new technologies are distinguished and three tariff structures are evaluated. The assessed distribution network tariff structures are: energy volumetric charges with net-metering, energy volumetric charges for both injection and withdrawal, and capacity-based charges. Results show that the new distribution world -open by new technology choices for grid users- is highly interactive and threatens grid regulation not understanding it.

The application of cost-benefit analysis (CBA) for offshore electricity infrastructure projects with a pan-European impact is discussed. An analytical framework for the evaluation of CBA methodologies is presented. The framework is then applied to assess the CBAs of three offshore infrastructure projects (EWIC, COBRAcable and ISLES). Overall, the CBAs assessed already comply with several dimensions of the analytical framework. However, based on this assessment it is found that scope for improvement in quality exists in three areas namely, in considering project interactions, in dealing with uncertainty and in making the results between CBAs comparable by ensuring full monetisation. Furthermore, the research also confirms the view that a common harmonised CBA methodology is essential for selection of PCIs.

There is a trend in regulatory practice towards exceptional incentives for exceptional investments. Italy and the US have the longest experience with a regulatory framework for strategically important investments that deviates from the default framework. In these countries, the incentives provided to the project promoter are based on a case-by-case assessment of the project. Policy makers and regulatory authorities in countries that are considering setting up such a framework can learn from these experiences. In this paper, we therefore analyze them in detail. We find that the Italian scheme is simpler, which reduces the administration costs. The US scheme is more advanced in the case-by-case assessment of the requested incentives. However, both schemes have evolved, each becoming more sophisticated and complex. Countries that are considering the introduction of exceptional regulatory incentives for exceptional electricity transmission investments should note that this is a process that will require fine-tuning.

Onshore, generators are connected to the transmission grid by TSOs. This regulatory model could simply be extended to offshore (i.e. Germany), but the connection of offshore wind farms to shore is also an opportunity to test alternatives, i.e. the third party model (i.e. the UK) or the generator model (i.e. Sweden). In this paper, we argue that the third party and generator models are indeed better suited to support the evolution towards larger scale offshore wind farms that are increasingly developed farther out to sea, while the TSO model is better suited to support the evolution towards cross-border offshore grid projects. In other words, an important trade-off needs to be made because none of the existing regulatory models can fulfill all the expectations in the current context in Europe. And, the trade-off has to be made at the regional or EU level because the different national regulatory frameworks are incompatible when applied to a cross-border offshore grid project.

Each semester the THINK project publishes two research reports based on topics proposed by the European Commission. Topic 10 QM-31-12-304-EN-C QM-31-12-304-EN-N This report was produced as part of the THINK project. Cost Benefit Analysis (CBA) has proven to be a useful tool to support the economic appraisal of important projects in many sectors. In the energy domain, a single CBA method has been proposed at EU level to evaluate and compare electricity transmission and storage projects from different countries, which is unprecedented anywhere in the world. The objective of this THINK report has been to advise the European Commission (DG Energy) on the development of this method in the context of the Energy Infrastructure Package. We provide recommendations for the scope of the analysis, as well as the calculation of the net benefit. We also discuss how the method can be used to rank projects. We conclude that the method that has been proposed by the European Network of Transmission System Operators for Electricity (ENTSO-E) is an important step in the right direction, but it is still possible to improve. A key recommendation is that the project ranking should be primarily based on the monetized net benefit, and to calculate this net benefit, the CBA should concentrate on a reduced list of effects. The THINK project (2010-2013) is funded by the European Commission under the Seventh Framework Programme, Strategic Energy Technology Plan. (Call FP7-ENERGY-2009-2, Grant Agreement no: 249736). Coordinator: Prof. Jean-Michel Glachant and Dr. Leonardo Meeus, Florence School of Regulation, Robert Schuman Centre for Advanced Studies, European University Institute.

QM-AI-13-104-EN-C QM-AI-13-104-EN-N • European electricity systems are evolving towards a generation mix that is more decentralised, less predictable and less flexible to operate due to the large scale integration of renewables. In this context, additional flexibility is expected to be provided by the demand side. This implies consumers must be shifted from the current ‘passive’ role to providing ‘active’ demand response. • The objective of the 11th THINK report is to assess how to realise this shift towards active consumers, using a consumer-centred approach. We recognise the need for ‘software’, such as contracts, to engage consumers in addition to the enabling ‘hardware’, such as smart meters and appliances. We propose recommendations for consumer empowerment tools, as well as for market design and regulation that would allow the take-off of active demand response. • A prerequisite of consumer engagement is to have an adequate range of contracts that match different consumer categories. The Think report demonstrates that consumers are diversified both in their flexibility potential and their preferences on a set of criteria that affects their willingness of participation in demand response. We propose a consumer profiling tool that not only empowers consumers to make informed and appropriate choices, but also facilitates intermediaries to valorise active demand response. • Our analysis shows that one single market player might not have incentives to offer an adequate range of demand response contracts. Therefore, it is essential to have diversified market players acting as demand response intermediaries. The entry of new market players, such as consumer cooperatives or third parties from non-electricity sectors, needs to be facilitated. • The THINK report further illustrates that the retail market design needs to be adapted to accommodate active demand response. All consumers should be able to make deliberate choices about their electricity supply, and to valorise their flexibility through active demand response. We propose one such market design referred to as ‘real-time market’. • Given the decentralised and local character of demand response, national authorities may be best placed to implement the necessary measures as proposed in the report. The EU’s role should be focused on promoting contract pilot studies, disseminating the results of decentralised pilot projects, providing guidance or framework regarding consumer empowerment and protection, and rethinking the design of retail market. The THINK project (2010-2013) is funded by the European Commission under the Seventh Framework Programme, Strategic Energy Technology Plan. (Call FP7-ENERGY-2009-2, Grant Agreement no: 249736). Coordinator: Prof. Jean-Michel Glachant and Dr. Leonardo Meeus, Florence School of Regulation, Robert Schuman Centre for Advanced Studies, European University Institute

QM-02-13-166-EN-C QM-02-13-166-EN-N Energy regulation and policy currently belong to the most important and developing areas in the European Union. THINK, the Florence School of Regulation’s think tank was running from June 2010 to May 2013. THINK advised the European Commission (DG Energy) on Energy Policy and presented policy options each semester. This booklet gives an overview of the THINK output published in the second half of the project and focuses on 6 topics: How to Refurbish All Buildings by 2050; Electricity Storage: How to Facilitate its Deployment and Operation in the EU; A new EU Energy Technology Policy towards 2050: Which Way to Go?; Cost Benefit Analysis in the Context of the Energy Infrastructure Package ; Shift, Not Drift: Towards Active Demand Response and Beyond; From Distribution Networks to Smart Distribution Systems: Rethinking the Regulation of European Electricity DSOs. The THINK project (2010-2013) was funded by the European Commission under the Seventh Framework Programme, Strategic Energy Technology Plan. (Call FP7-ENERGY-2009-2, Grant Agreement no: 249736). Coordinator: Prof. Jean-Michel Glachant and Dr. Leonardo Meeus, Florence School of Regulation, Robert Schuman Centre for Advanced Studies, European University Institute

QM-AI-12-002-EN-C (print)/QM-AI-12-002-EN-N (online) THINK Policy Briefs are abbreviated versions of THINK Reports. The objective of the 5th report of THINK has been to formulate policy recommendations to the European Commission (DG Energy) on offshore grids, and this brief is derived from that report. The development of an offshore grid is able to play a significant role in the accomplishment of the EU energy and climate objectives. The total installed capacity of offshore wind farms is expected to increase from the existing 3 GW to about 40 GW by 2020. The number one priority project in the recently proposed EU infrastructure package is the Northern Seas offshore grid. There are two possible offshore grid developments (Figure 1): there could be a multiplication of standalone lines, which already exists today; or there could also be a transition towards combined solutions, which requires more advanced grid technology than what is currently on the shelf. The first would correspond to an increase of shore to shore investments to exchange energy across borders or to relieve congestion within an onshore grid, and an increase in farm to shore investments to connect offshore wind farms to the existing onshore grid. The second instead would imply mixed investments, combining the connection of offshore wind farms with the creation of interconnection capacity. The potential for EU added value depends on which of these alternative offshore grid developments will prevail. The economic case for combined solutions is still uncertain, but regulation needs to be proactive to avoid compromising this possible offshore grid development. It means that we have to address the fact that the currently mainly national regulatory frames for farm to shore and shore to shore investments are unsound, and the difficulties to design and develop combined solutions are tremendous. We recommend the European Commission to take initiatives to: 1// harmonize into economically sound regulatory frames for offshore transmission investments; 2// harmonize the renewable support schemes for offshore wind farms; 3// facilitate the ex-ante allocation of costs and benefits of offshore transmission investments; 4// speed-up offshore grid technology development; 5// adapt the Community-wide transmission planning to offshore grids, while also allowing regionalized solutions for the implementation of some of these remedies. A least regret EU policy on offshore grids indeed also implies giving a chance to regional initiatives, such as the North Seas Countries’ Offshore Grid Initiative. The THINK project (2010-2013) is funded by the European Commission under the Seventh Framework Programme, Strategic Energy Technology Plan. (Call FP7-ENERGY-2009-2, Grant Agreement no: 249736). Coordinator: Prof. Jean-Michel Glachant and Dr. Leonardo Meeus, Florence School of Regulation, Robert Schuman Centre for Advanced Studies, European University Institute

THINK is a Think Tank advising the European Commission on mid- and long-term energy policy. QM-32-12-022-EN-C (print) QM-32-12-022-EN-N (digital) Energy regulation and policy currently belong to the most important and developing areas in the European Union. THINK, the Florence School of Regulation’s (EUI) think tank advises the European Commission (DG Energy) on Energy Policy and presents policy options each semester. This booklet gives an overview of all the THINK results for the first 18 months of the project focusing on 6 topics: 1. Public Support for the Financing of RD&D Activities in New Clean Energy Technologies 2. Smart Cities Initiative: Fostering a Quick Transition Towards Local Sustainable Energy Systems 3. Transition Towards a Low Carbon Energy System by 2050: What Role for the EU? 4. The Impact of Climate and Energy Policies on the Public Budget of EU Member States 5. Off-Shore Grids: Towards a Least Regret EU Policy 6. EU Involvement in Electricity and Natural Gas Transmission Grid Tarification. The THINK project (2010-2013) is funded by the European Commission under the Seventh Framework Programme, Strategic Energy Technology Plan. (Call FP7-ENERGY-2009-2, Grant Agreement no: 249736). Coordinator: Prof. Jean-Michel Glachant and Dr. Leonardo Meeus, Florence School of Regulation, Robert Schuman Centre for Advanced Studies, European University Institute. Foreword 1 Preface 2 Introduction to the THINK Project 4 The Role of the Expert Hearings in the THINK Report Production Process 6 The Role of the Scientific Council in the THINK Report Production Process 8 THINK Report Policy briefs 11 a. Topic 1: Public Support for the Financing of RD&D Activities in New Clean Energy Technologies 13 b. Topic 2: Smart Cities Initiative: How to Foster a Quick Transition Towards Local Sustainable Energy Systems 21 c. Topic 3: Transition Towards a Low Carbon Energy System by 2050: What Role for the EU? 27 d. Topic 4: The Impact of Climate and Energy Policies on the Public Budget of EU Member States 35 e. Topic 5: Offshore Grids: Towards a Least Regret EU Policy 43 f . Topic 6: EU Involvement In Electricity and Natural Gas Transmission Grid Tarification 53 People 61 Scientific Council 63 Florence-based Research Team 70

What is the European energy strategy for 2050? How different is it from the 2020 energy strategy? What are the technology options? What are the policy options? The European Commission provided a first answer to these questions in its Energy Roadmap 2050. This article gives an appraisal of that answer based on the recommendations we made during the preparation of the roadmap.

Each semester the THINK project publishes two research reports based on topics proposed by the European Commission QM-31-12-492-EN-C (print) QM-31-12-492-EN-N (digital) Topic 7. Final Report June 2012 The THINK project (2010-2013) is funded by the European Commission under the Seventh Framework Programme, Strategic Energy Technology Plan. (Call FP7-ENERGY-2009-2, Grant Agreement no: 249736). Coordinator: Prof. Jean-Michel Glachant and Dr. Leonardo Meeus, Florence School of Regulation, Robert Schuman Centre for Advanced Studies, European University Institute

Electricity markets are increasingly integrated across borders, but transmission and renewable energy policies often remain local and uncoordinated. In this paper, we analyze how cooperative behavior in developing renewable energy technologies across borders and/or cross-border transmission capacity investment can reduce the cost of achieving a renewable energy target. We use a three step equilibrium model with: i) transmission investment, ii) generation investment and iii) electricity market that we apply to an interconnected two zone system. We find that it pays to cooperate if the zones have different renewable energy sources, but the success of a renewable energy cooperation also depends on cooperation in transmission development, which is therefore an important interaction to take into account in renewable energy policy discussions.

Transmission investments are considered key for delivering on energy policy goals. Of particular importance is the interconnection of zonal grids, like the different national European transmission grids or grids in several states in the U.S. Although the interconnection can be favourable from a policy point view, it is uncertain whether all zonal actors are willing to join such initiative and deliver on the required investments. This creates an area of tension between these two levels. In this paper this area of tension is assessed from a planning point of view. Two approaches are modelled and illustrated using a two-zone and three-zone example. A first cooperative model corresponds to a situation in which all zonal planners fully cooperate with the aim of maximizing overall social welfare. In contrast, a second non-cooperative model presents a situation where all zonal planners act according to their own interest and invest in order to maximize their zonal welfare. Both models have a bilevel structure, but are structurally different. Whereas the cooperative model can be seen as an MPEC which can be further simplified towards a QP, the non-cooperative model is an EPEC. Results indicate different investment levels and welfare effects for both approaches and they also underline the importance of compensation mechanisms. ispartof: IAEE International Conference location:Stockholm, Sweden date:19 Jun - 23 Jun 2011 status: published

Each semester the THINK project publishes two research reports based on topics proposed by the European Commission QM-31-11-488-EN-C (print) QM-31-11-488-EN-N (online) The THINK project (2010-2013) is funded by the European Commission under the Seventh Framework Programme, Strategic Energy Technology Plan. (Call FP7-ENERGY-2009-2, Grant Agreement no: 249736). Coordinator: Prof. Jean-Michel Glachant and Dr. Leonardo Meeus, Florence School of Regulation, Robert Schuman Centre for Advanced Studies, European University Institute

QM-AI-11-002-EN-C (print)/QM-AI-11-002-EN-N (online) THINK Policy Briefs are abbreviated versions of THINK Reports. The EU is subscribing to the international trend of local governments becoming more involved in climate change policy-making and higher levels of government encouraging this trend. With the Covenant of Mayors, the EU has already been successful in voluntarily committing city authorities to reduce their CO2 emissions by at least 20% by 2020. The ambition of the Smart Cities Initiative is to speed up the transition towards local sustainable energy systems. A portfolio of smart cities that represents the population of European cities should be selected, consisting of cities with different energy fundamentals, a different political economy, and different institutional capacities. The cities in this portfolio need to be given the institutional flexibility (human and financial resources) to conceive and manage the implementation of concepts of city smartness, i.e. to lead by example (first level of city smartness: city as a public actor), to govern the actions by the private urban actors (second level of city smartness: city as a local policy maker), and to promote an integrated approach (third level of city smartness: city as a coordinator). To have an impact, the initiative needs to establish a strict performance reporting methodology (currently, city pioneer experiences are difficult to compare or replicate because of a lack of reporting, and pioneers that do report, use very different reporting methodologies), which would allow the creation of a good-practice forum or register. An EU level legislative initiative to require all cities to report about their progress or lack of progress is also recommended to further improve the impact of the initiative. The THINK project (2010-2013) is funded by the European Commission under the Seventh Framework Programme, Strategic Energy Technology Plan. (Call FP7-ENERGY-2009-2, Grant Agreement no: 249736). Coordinator: Prof. Jean-Michel Glachant and Dr. Leonardo Meeus, Florence School of Regulation, Robert Schuman Centre for Advanced Studies, European University Institute

In the transition towards a decarbonized energy system, we need city authorities to lead by example as public actors, to govern the actions of the private urban actors as local policy makers, and to conceive and manage the implementation of an integrated approach as coordinators, which we introduce in this paper as three levels of city smartness. Local governments however have institutional disincentives to act, and if they do act, they are confronted with urban actors that are reluctant to follow. This paper analyzes how city pioneers in Europe have been able to overcome these disincentives thanks to a combination of local circumstances and interventions by higher levels of government. We categorize the state of the art instruments that have been used by higher levels of government into “tambourines”, “carrots”, and “sticks”, and reflect on how the state of the art could be improved.

Europe is tightening its climate change policy and with that its pollution control legislation, supposedly to lead the way towards a low carbon economy. As the rest of the world is lagging behind in greenhouse gas emission reduction efforts, this causes increasing concern for the European carbon-intensive industry. In order to address concerns of economic competitiveness and emission leakage, the EU is considering the extension of its recently revised European Union Emission Trading Scheme on carbon-intensive goods imported from countries not taking comparable action to reduce their emissions. This article examines the permissibility of such an extension under the law of the World Trade Organization, namely the 1994 General Agreement

This article is based on research carried out in the framework of the EUI RSCAS Florence School of Regulation, Florence. This paper presents and motivates the development of a techno-economic education package, consisting of two simulation games, to simulate both the trading and the generation of electricity in a liberalized market. Six attributes (storytelling; players as problem solvers and explorers; feedback; challenges that fit the student characteristics; competition; appropriate graphics and sounds) are relevant in order for simulation games to achieve their learning potentials. These attributes are identified within both developed simulation games.

The aim of this paper is to identify the main challenges regarding the achievement of a low-carbon energy system in the EU by 2050. We analyze the visions presented by stakeholders and existing strategies of member state to achieve this transition. The five main challenges identified are the following: 1// energy efficiency - to ensure ambitious energy savings; 2// GHG emissions - to go towards a nearly zero-carbon electricity system; 3// renewable energy - to push effective technologies into the market; 4// energy infrastructure - to ensure timely investment in the electricity transmission grid capacity across borders; 5// energy markets - to guarantee timely investment in electricity generation back-up capacity. We also find that member states are already pursuing different strategies in dealing with these challenges. This creates risks for a European energy policy fragmentation. It also opens new opportunities for cooperation among member states so that the European Commission could demonstrate how to produce European added value.

Loyola de Palacio Programme on Energy Policy If Europe is serious about climate change, it has to reduce its overall greenhouse gas emissions by 80% by 2050, thereby effectively going to a (near-) zero carbon energy and thus, electricity system. The European Climate Foundation, Eurelectric, and the International Energy Agency have consequently published a study elaborating on the final goal of this transition. The studies project scenarios of how such a (near-) zero electricity system would look like and provide recommendations on the policies needed to guide the transition. In this paper, we observe that these studies tell a tale with many similarities. In spite of increased energy efficiency, the electricity demand is projected to increase substantially, with up to 50% from today towards 2050, due to shifts from other sectors towards electricity. This demand will be supplied by a minimum of 40% electricity generation by RES, with the remainder being filled up with nuclear and fossils with CCS. The importance of grid reinforcement, expansion, and planning in this context is emphasized in all three studies. While all three studies further recommend relying on the EU ETS for the transition, the European Climate Foundation and the International Energy Agency consider continuing with targets for RES in combination with a more harmonized EU RES support scheme.

Power Exchanges (PXs) are key market institutions in open and market-based electricity industries. This paper aims at contributing to the ongoing debate on why and how to regulate Power Exchanges in the EU market integration context. The paper starts by stating that two different types of PXs have to be distinguished, i.e. “Merchant” PXs and the “Cost of Service Regulated” PXs. The paper continues by comparing the typical incentives of these two types of PXs to perform the basic PX tasks in an isolated national market and in a market integration context. The paper concludes by deriving from this analytical frame the most relevant regulatory actions.

Florence School of Regulation Climate change and security of supply policies are driving us towards a decarbonization of the electricity system. It is in this context that smart grids are being discussed. Electricity grids, and hence their regulatory frameworks, have a key role to play in facilitating this transformation of the electricity system. In this paper, we analyze what is expected from grids and what are the regulatory tools that could be used to align the incentives of grid companies and grid users with what is expected from them. We look at three empirical cases to see which regulatory tools have already been applied and find that smart grids need a coherent regulatory framework addressing grid services, grid technology innovation and grid user participation to the ongoing grid innovation. The paper concludes with what appears to be a smart regulation for smart grids.

Awareness among policy makers that electricity grids need to become smarter is growing. To allow policy makers to design policies for improving the smartness of grids, discussion is needed on what makes an electricity grid smart and how that this smartness can be measured. This paper provides a methodology to measure the smartness of the electricity grid. The defined framework consists of six characteristics which a smart grid should meet. Progress in the development of each characteristic is assessed by several key performance indicators. This allows to track the status of smart grid development. ispartof: 2010 7th International Conference on the European Energy Market, EEM 2010 ispartof: International Conference on European Energy Markets location:madrid date:23 Jun - 25 Jun 2010 status: accepted

Florence School of Regulation The Florence School of Regulation (FSR) is a partnership between the RSCAS at the EUI and the Council of the European Energy Regulators (CEER), and it works closely with the European Commission. The Florence School of Regulation is sponsored by leading European energy companies. The objectives of the FSR are to promote informed discussion of key issues; to provide state-of-the-art training for practitioners; and to produce analytical studies in the field of regulation. It is a European forum dedicated to economic regulation. While its primary focus is on energy regulation, particularly in the electricity and gas markets, it is extending its coverage to other areas of regulation. This series of working papers aims at disseminating the work of scholars and practitioners on current regulatory issues. For further information Florence School of Regulation Robert Schuman Centre for Advanced Studies European University Institute Via Boccaccio, 151 I-50133 Firenze Tel.: +39 055 4685 751 Fax: +39055 4685755 E-mail: fsr@eui.eu http://www.eui.eu/RSCAS/ProfessionalDevelopment/FSR/ Cross-border capacities in Europe are currently inefficiently used. Implicit auctioning is about eliminating these cross-border trade inefficiencies by internalizing the arbitrage into the auction procedures of the Power Exchanges that are organizing trade nationally. On the Kontek Cable, implicit auctioning has been implemented without price coordination between the involved Power Exchanges. This implementation, referred to as “volume or dome coupling” as opposed to “price coupling”, has been argued to be institutionally easier to implement. The Kontek Cable experimented with three different implicit auctioning implementations whose performance we analyze empirically in this paper. We find that the third implementation is significantly outperforming the previous two implementations, but in this third implementation stakeholders partly abandoned the volume coupling approach they initially believed to be a viable alternative to price coupling.

Florence School of Regulation The European Commission has recently launched the Smart Cities Initiative to demonstrate and disseminate how to foster a quick transition towards local sustainable energy systems. Within this initiative, the three main challenges faced by pioneering cities, are to reduce or modify the demand for energy services, to improve the uptake of energy efficient technologies and to improve the uptake of renewables in the urban environment. We find that enough resources will need to be provided to a significant number of pioneering cities, and propose that the initiative would allocate these resources through project competition, rewarding innovation, ambition and performance, which have been ingredients of success at Member State level.

This paper provides a comparative analysis of the impact of Market designs on generation adequacy. The paper introduces the general issues associated with generation adequacy; discusses generation adequacy in terms of electricity markets; and presents two specific market designs – France and PJM – and their respective practices and experiences with generation adequacy. The basic information is derived from an international survey distributed by the Task Force on Impacts on Infrastructure Investment resulting from Electricity Market Designs (TF C5-7.1) of CIGRE’s Working Group C5-7 on Market Design. ispartof: Cigré Symposium on Operation and Development of Power Systems in the New Context ispartof: Cigré Symposium on Operation and Development of Power Systems in the New Context location:Guilin, China date:28 Oct - 30 Oct 2009 status: published

International audience; Following several regional initiatives on the day-ahead and intra-day stage, integrating real-time balancing markets constitutes a logical next step in the process towards an Internal Electricity Market (IEM) in Europe. So far, realtime balancing market designs significantly differ between European countries and a coordinated approach for cross-border exchange of balancing services is non-existent. This paper aims to illustrate that the current lack of balancing market harmonisation – in combination with an increasingly integrated day-ahead and intra-day trade – can be profitably exploited by traders. More specifically, trading strategies taking advantage of structural design differences in the imbalance settlement of two countries are identified and assessed. The paper analyses detailed data of the Belgian and French power system using statistics in order to verify the profitability of different trading strategies between both countries. Some of the identified trading strategies are found to be significantly profitable; others turn out to be loss-making. On average, France was the most attractive country for traders to be long in 2008; Belgium to be short. Profitable trading strategies can usally be carried out without any expense as cross-border capacities available at the intra-day stage are currently far from being used and no value is attributed to them. However, some profitable trading activities resulting from market design imperfections may induce economic inefficiencies

Since the launch of electricity sector liberalisation in the EU, the creation of the Internal Electricity Market (IEM) has been high on the agenda of the European Commission (EC) and European energy regulators. Considerable effort has been put into integrating national electricity markets, prompting a number of successful regional initiatives. Balancing markets spanning national frontiers are an important step towards completing the IEM. Against this backdrop, the EC (DG TREN) commissioned this study with the purpose of deriving practical recommendations on the optimal design and effective implementation of cross-border balancing or real-time markets. To ensure the compatibility of marketoriented recommendations with the physical reality of interconnected power systems, the study was conducted by an integrated team of engineers and economists from Tractebel Engineering and the Katholieke Universiteit Leuven (K.U. Leuven).

This paper discusses the background and main contributions of my PhD thesis about power exchanges in Europe. Most exchanges were originally only organized trade within national borders. Increasingly, they are also involved in facilitating cross-border trade. The changing context implies new challenges but also renews the discussion on how former challenges have been addressed. ispartof: Revue E Tijdschrift - Tijdschrift voor Elektriciteit en Industriële Elektronica vol:1 issue:125 status: published

The European Commission wants to take the lead in the introduction of renewables to cover final energy demand. Strong benefits are expected from a significant increase in the renewables share with regard to the different pillars in the EU energy policy. A legal framework is build with very ambitious targets. However, supporting mechanisms are needed to trigger investments in renewable technologies. Concerns might arise from the effectiveness and cost efficiency of different mechanisms. A development framework determines 5 optimization steps focusing on both elements of concern. This framework also allows to determine the extent to which the 4 most well-know mechanisms facilitate the optimal performance of the renewable energy supporting policy. In addition, opportunities for redesigning feed-in tariffs and certificates to better align with the optimization steps are presented even as a dynamic policy focusing on the phase of innovation of a renewable technology. ispartof: Infraday location:Berlin Germany date:10 Oct - 11 Oct 2008 status: published

Following initiatives on the day-ahead and intra-day stage, a regional approach towards real-time balancing constitutes a logical next step in the process towards a single Central Western European electricity market. For the moment, balancing market designs still significantly differ between the countries of the region and a coordinated approach for cross-border exchange of balancing services is lacking. Further harmonisation and coordination efforts are consequently required to enable the implementation of a single cross-border balancing market in the region. ispartof: Revue E: revue d'électricité et d'électronique industrielle vol:124 issue:1 pages:19-24 status: published