II. BACKGROUND AND THE ROLE OF ENERGY COMMUNITIES IN THE EU
2.3. Impact of the increase of renewable energy sources on electricity market operation
2.3.2. The need for more flexibility in the EU electricity market to accommodate
solar (solar thermal and solar photovoltaic) and geothermal energy, ambient energy, tide, wave and other ocean energy, hydropower, biomass, landfill gas, sewage treatment plant gas, and bio-gas.139 Nowadays, renewable energy sources already account for over 25% of electricity
tion in the EU (Figure 2).140 Moreover, the share of electricity produced by renewable energy sources is expected to grow from 25% to more than 50% by 2030.141
Figure 2. Net electricity generation, EU-28, 2017.142
The most significant growth has recently been in generation from solar and wind. As illustrated by Figure 3 below, the quantity of electricity generated from wind turbines has more than tripled in the period between 2005 and 2013. Solar power generation has grown considerably in the same period. So, there is a need to integrate significant amounts of wind and solar generation into Europe’s electricity system.
140 Eurostat: Electricity production, consumption and market overview.
141 European Commission 2019, Electricity market design.
142 Eurostat. Electricity production, consumption and market overview.
Figure 3. Gross electricity generation from renewable sources in the EU-28 by country and share of vari-able generation (solar and wind) in gross electricity consumption.143
Renewable energy sources, such as wind and solar, due to their physical nature, are variable (see Table 1 below), which means that they are dependent on factors like wind and sunshine and are only able to generate certain amounts of energy at certain times.144 In contrast, firm-capacity generation, such as coal, natural gas, nuclear, can be switched on or off on demand.145 Due to uncertain weather conditions, the amount of wind and solar power in the system cannot be pre-dicted with certainty, whereas conventional fuels can be burnt as required to meet demand.146In fact, the generation is subject to daily and seasonal fluctuations.147 Wind energy is one of the most variable and most difficult to forecast.148 Wind and solar also have very low level of flexi-bility.
143 Welsch 2017, p. 154; Eurostat, [http://ec.europa.eu/eurostat/de/data/database].
144 Ibid., p. 3-4.
145 Ibid., p. 3-4.
146 Hester 2003, p. 49-50.
147 Welsch 2017, p. 155.
148 Hester 2003, p. 49.
Table 1. Characteristics of the main energy generation technologies.149
Due to the variability of such RES as wind and solar, as well as their low level of flexibility, in addition to demand-driven fluctuations caused by consumer behavior the growing amount of variable RES leads to generation-driven fluctuations.150 This increases the challenge of keeping the electricity system in constant balance.151 For this reason, a stable supply of electricity re-quires greater market flexibility, allowing it to cope with an increasing share of RES in the EU energy mix, meaning the range of energy sources available.152
One more important characteristic of renewable energy generation is that it is mainly comprised of small-scale local power distributed153 generations. Renewable energy generation is less prone to monopolization than fossil fuels, at least because it depends on public goods such as the air or the wind.154 In terms of the energy networks, electricity generated from renewable sources is increasingly fed into the grid at the distribution level, in particular when produced by individuals,
149 European Parliamentary Research Service 2016, Understanding electricity markets in the EU, p. 4.
150 Welsch 2017, p. 155.
151 Welsch 2017, p. 155.
152 Ibid., p. 157.
153‘Distributed generation’ means generating installations connected to the distribution system. Article 2(32) of IEMD.
154 Buschle – Westphal European Energy Journal 2019, p. 62.
energy communities and other actors emerging in the context of the energy transition.155 Decen-tralization significantly increases the complexity of our energy systems, as it adds new stake-holders, transactional models and production/consumption patterns.156 Hence, decentralization leads to challenges in governing this new system157, such as balancing supply and demand.
To sum up, as European Commission points it out, the physical nature of renewable energy sources – more variable, less predictable and decentralised than traditional generation – requires an adaptation of market and operation rules enabling more flexibility to accommodate an in-creasing share of renewable energy in the electricity grid.158 The increasing share of intermittent renewable production in the energy mix, as well as the decentralization of EU energy system requires the design of the electricity market to be changed so that it would ensure a balance be-tween supply and demand over the long term.159Markets need to be adapted to meet the needs of renewable energies and attract investment in the flexibility sources, like energy storage, that can compensate for variable energy production.160 The climate change and energy targets for 2020, 2030, and 2050 envisage the share of the renewable energy sources in the energy mix to grow further significantly. In order to keep this process going, electricity markets must also provide economic incentives for consumers to become more active and to contribute to keeping the elec-tricity system stable. Getting the elecelec-tricity system ready for the substantial increase of renewa-bles is considered to be one of the EU priorities to foster the energy transition.161 The European Union attempts to address the challenges, related to the increase of RES in the energy mix, by putting the consumer in the center in its Clean Energy Package.162
155 Buschle – Westphal European Energy Journal 2019, p. 62.
156 Buschle – Westphal European Energy Journal 2019, p. 62.
157 Buschle – Westphal European Energy Journal 2019, p. 62.
158 COM(2016) 864 final/2, p. 3.
159 Huhta Oil, Gas & Energy Law Intelligence (OGEL) 2019a, p. 19.
160 Buschle – Westphal European Energy Journal 2019, p. 58.
161 Bruegel 2019, The European Union energy transition: key priorities for the next five years.
162 Buschle – Westphal European Energy Journal 2019, p. 62; Sovacool – Parag Nature Energy 2016, p. 2.
2.4. The role of energy communities, in adapting electricity market to the needs of energy