II. BACKGROUND AND THE ROLE OF ENERGY COMMUNITIES IN THE EU
2.1. Development of EU legal regulation in the energy sector
2.1.2. The liberalisation of EU energy markets through the EU Energy Packages
Before the liberalization process of Europe’s energy markets, national energy markets have been traditionally characterized as being dominated by large-scale, vertically integrated and often pub-licly owned monopolies with large centralized nuclear or fossil fuel power plants which are re-sponsible for the production, supply and transport of electricity via transmission and distribution systems.55 Hence, the production, transmission, and distribution of electricity were granted to single companies.56It would be true to say however, that even today the liberalization process is far from being complete in a number of Member States.57
The process known as liberalisation of EU energy markets started with the adoption of the first legislative package in 1990s, which was further followed with the second and the third
50 Recital 3 of IEMR.
51 Huhta 2019b, p. 1, 16-17.
52 Buschle – Westphal European Energy Journal 2019, p. 54.
53 Huhta 2019b, p. 1, 16-17; Cseres European Journal of Risk Regulation (EJRR) 2018, p. 231.
54 Huhta 2019b, p. 1, 16-17; Cseres European Journal of Risk Regulation (EJRR) 2018, p. 231.
55 Leal-Arcas - Wouters 2017, p. 257; Lavrijssen European Energy and Environmental Law Review 2017, p. 174;
Recital 2 of IEMD.
56 Welsch 2017, p. 149.
57Welsch 2017 p. 149; Heldeweg, – Saintier Renewable and Sustainable Energy Reviews 2020, p.2.
tive packages, and was generally aimed to introduce the competitive internal electricity market.58 It was then followed by the fourth Clean Energy for All Europeans Package which is in the focus of this research.
In the 1990s, the various directives constituting the First Energy Package were adopted.59 The First Package aimed at introducing competition. The Package was focused on separating or un-bundling energy monopolies and ensuring the distinction between regulated and non-regulated activities.60 Unbundling means that an undertaking’s network activities are to be kept separate from other activities, such as electricity production and trade, by means of different legislative obligations.61However, it was clear that this First Energy Package was not sufficient to create a functioning energy market.62
The Second Energy Package was adopted in 2003.63 This packageincluded more detailed sector- specific obligations, which were intended to achieve further liberalization of the European ener-gy markets.64 The new legislative acts included provisions on national energy market authorities, regulated third-party access, and unbundling, as well as creating a regulatory framework for cross-border interconnectors. Third-party access refers to a system in which Member States en-sure that third parties have access to transmission and distribution networks.65 The outcome, however, was still not sufficient, and so there was a need for further development of the regulato-ry framework.66
58 Leal-Arcas - Wouters 2017, p. 259-260; Welsch 2017, p. 31.
59 This package included Directive 96/ 92/ EC of the European Parliament and of the Council of 19 December 1996
concerning common rules for the internal market in electricity (OJ L 27, 30.1.1997).
60 Welsch 2017, p. 31.
61 Talus 2016, p. 24.
62 Talus 2016, p. 4.
63 This package included Directive 2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in electricity and repealing Directive 96/92/EC (OJ L 176, 15.7.2003); and Regulation (EC) No 1228/ 2003 of the European Parliament and of the Council of 26 June 2003 on conditions for access to the network for cross- border exchanges in electricity (OJ L 176, 15.7.2003).
64 Talus 2016, p. 4.
65 Talus 2016, p. 19.
66 Ibid., p.4.
The Third Energy Package67 was introduced in 2009. It contained, for example, the rules on ownership unbundling, as well as detailed rules for the role of transmission and distribution sys-tem operators.68 Full ownership unbundling does not allow the network company to engage in any energy-market-related activities other than those related to its networks.69The promotion of renewables was enhanced with Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC70 of the Third Package, which included a priority dispatch for renewables.Priority dispatch means, with regard to the self-dispatch model, the dispatch of power plants on the basis of criteria which are differ-ent from the economic order of bids and, with regard to the cdiffer-entral dispatch model, the dispatch of power plants on the basis of criteria which are different from the economic order of bids and from network constraints, giving priority to the dispatch of particular generation technologies.71 The purpose of priority dispatch is to facilitate the integration of renewable energy into the electricity system, to promote sustainability and security of supply in the EU electricity market.72
Starting from the beginning of the liberalization process, the underlying idea of the EU energy policy was that a competitive internal market in electricity is the best way to ensure the objec-tives of EU energy policy.73 The EU liberalized internal energy market is now built on well-established principles, such as the right of access for third parties to electricity grids, free choice of suppliers for consumers, unbundling rules, the removal of barriers to cross-border trade and on ensuring competition on wholesale and retail markets.74
67 This package included Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009
con-cerning common rules for the internal market in electricity and repealing Directive 2003/ 54/ EC (OJ L 211, 14.8.2009); Regulation (EC) No 714/ 2009 of the European Parliament and of the Council of 13 July 2009 on condi-tions for access to the network for cross-border exchanges in electricity.
68 Welsch 2017, p. 32; Talus 2016, p. 5.
69 Talus 2016, p. 26.
70 OJ L 140, 5.6.2009, p. 16–62
71 Article 2(20) IEMR.
72 The European Wind Energy association (EWEA), position paper on priority dispatch of wind power.
73 As follows from the European Commission Proposal COM(2016) 864 final/2, p. 2: “Both the European Council
and the European Parliament have repeatedly stressed that a well-functioning integrated energy market is the best tool to guarantee affordable energy prices, secure energy supplies and to allow for the integration and development of larger volumes of electricity produced from renewable sources in a cost efficient manner”; Cseres European Journal of Risk Regulation (EJRR) 2018, p. 231;
74COM(2016) 864 final/2, p. 3; European Parliamentary Research Service 2016, p. 6;