Changes on the restrictions on the use of capacity remuneration mechanisms in the light of the Clean Energy Package

(1)

Changes on the restrictions on the use of capacity remuneration mechanisms in the light of the Clean Energy Package

University of Eastern Finland Law School

Master’s thesis 17.6.2018

Iida Kuusrainen 234674

Supervisor: Emilia Korkea-Aho

(2)

Abstract

UNIVERSITY OF EASTERN FINLAND Faculty

Faculty of Social Sciences and Business Studies

Department

Law School

Author

Iida Kuusrainen

Title

Changes on the restrictions on the use of capacity remuneration mechanisms in the light of the Clean Energy Package

Major subject

European Law

Work type

Master’s thesis

Time

Summer 2018

Pages

64

Abstract

The EU has set itself in ambitious path of emission reduction to achieve the targets of Paris Climate Agreement. All sectors including energy has to reduce their emissions remarkably to achieve the ambition of 80 % emission reduction by 2050 when compared to the emission levels of 1990. To reduce the emissions, the EU aims to be global leader in renewable energy. The increase of renewable energy to the electricity system is however not without complications. The intermittency of renewables brings the question of security of supply. The security of supply can be ensured through capacity remuneration mechanisms. However, as a state aid measures, the capacity remuneration mechanisms have a distortive impact on the market.

To address the evident need to update the EU internal energy market legislation, the Commission published the new Clean Energy for all Europeans Package, which introduces the largest energy legislative package including recast of the Electricity Market Regulation. For the first time, the Commission proposal incorporated capacity remuneration mechanism rules in a regulation. Previously the state aid measures have had to be approved by the EU State aid Guidelines on energy and environment. The co-legislators, the European Parliament and the Council of the European Union have both formed their positions on the new electricity market proposal and the new legislation is expected to be finalised in the end of 2018, latest by spring 2019.

Safeguarding security of supply is one of the corner stones of EU energy policy and of outmost importance in today’s society as the industry and citizens expect uninterrupted flow of electricity. In order to safeguard the security of supply some Member States introduce capacity remuneration mechanisms. However, as some capacity providers get additional rewards for maintaining the capacity, the capacity remuneration mechanisms affect competition in the internal electricity market. The EU wants to ensure also a competitive and harmonised internal electricity market without any unnecessary market distortions. Therefore this master thesis is aims to study how the current and upcoming EU legislation allows the Member States to design and use capacity remuneration mechanisms.

Key words

European Union law, capacity remuneration mechanisms, market distortions, security of supply, electricity market

(3)

Tiivistelmä

ITÄ-SUOMEN YLIOPISTO Tiedekunta

Yhteiskuntatieteiden ja kauppatieteiden tiedekunta

Yksikkö

Oikeustieteiden laitos

Tekijä

Iida Kuusrainen

Työn nimi

Changes on the restrictions on the use of capacity remuneration mechanisms in the light of the Clean Energy Package

Pääaine

Eurooppaoikeus

Työn laji

Pro gradu

Aika

Kesä 2018

Sivuja

64

Tiivistelmä

EU on asettanut itselleen kunnianhimoset tavoitteet saavuttaakseen Pariisin ilmastosopimuksen päästövähennysvaatimukset. Kaikkien sektoreiden, mukaan lukien energiasektorin, tulee vähentää päästöjä huomattavasti, jotta EU pystyy saavuttamaan 80 % päästövähennyksen vuoteen 2050 mennessä, kun päästötasoja verrataan vuoteen 1990. Vähentääkseen päästöjä, EU:n tavoitteena on olla maailmanlaajuinen johtaja uusiutuvan energian käytössä. Uusituvan energian lisääminen EU:n sähkömarkkinajärjestelmään ei kuitenkaan onnistu täysin ongelmitta. Uusiutuvan energian riippuvuus sääolosuhteista nostaa kysymyksen toimitusvarmuudesta. Toimitusvarmuus voidaan varmistaa kapasiteettimekanismien avulla. Kapasiteettimekanismit ovat valtiotuen alaisia järjestelmiä, joten niillä on markkinoita vääristävä vaikutus.

Vastakseen selkeään EU:n energiasisämarkkinoiden uudistustarpeeseen, komissio julkaisi puhtaan energian lainsäädäntöpaketin, joka on suurin tähänastinen EU:n energialakipaketti sisältäen myös sähkömarkkina-asetuksen uudistukseen. Komissio ehdottaa ensimmäistä kertaa kapasiteettimekanismien säätelyä asetuksen tasolla. Aiemmin valtiontukijärjestelyt olivat EU:n energia- ja ympäristöalaa koskevien suuntaviivojen alla. EU:n lainsäätäjät, Euroopan parlamentti ja EU:n neuvosto, ovat kummatkin muodostaneet oman kantansa uudesta sähkömarkkinaehdotuksesta, ja uuden lainsäädännön odotetaan olevan valmis vuoden 2018 loppuun mennessä, aivan viimeistään vuoden 2019 keväällä.

Toimitusvarmuuden varmistamien on yksi EU: energiapolitiikan kulmakivistä. Se on myös nyky- yhteiskunnassa äärimmäisen tärkeää, sillä sekä teollisuus että kuluttajat olettavat ettei sähköntoimitus katkea. Tämän varmistamiseksi EU-jäsenvaltiot ovat ottaneet kapasiteettimekanismeja käyttöön.

Sähkömarkkinat kuitenkin vääristyvät silloin kun joillekin sähköntuottajille maksetaan vain siitä, että he ylläpitävät tietyn sähköntuotantokapasiteetin. EU haluaa myös varmistaa kilpailukykyiset ja harmonisoidut sisäiset sähkömarkkinat ilman tarpeettomia markkinavääristymiä. Tämä pro gradu- tutkielma tarkastelee kuinka nykyinen ja tuleva EU-lainsäädäntö sallii kapasiteettimekanismien suunnittelun ja käytön.

Avainsanat

Eurooppaoikeus, kapasiteettimekanismit, markkinavääristymät, toimitusvarmuus, sähkömarkkinajärjestelmä

(4)

BIBLIOGRAPHY

Primary Sources

European Union legislation Primary legislation

Consolidated version of the Treaty on the Functioning of the European Union [2012] OJ C326/47.

Consolidated version of the Treaty on European Union [2012] OJ C326/13.

Treaty of Lisbon amending the Treaty on European Union and the Treaty establishing the European Community [2007] OJ C306/1.

Consolidated versions of the Treaty on European Union and of the Treaty establishing the European Community [2002] OJ C325/33.

Secondary legislation

Directive 2003/87/EC of 19 March 2018 amending Directive to enhance cost-effective emission reductions and low-carbon investments, and Decision (EU) 2015/1814 [2018] OJ L76/3.

Regulation (EC) 994/2010 of 20 October 2010 concerning measures to safeguard security of gas supply and repealing Council Directive 2004/67/EC [2010] OJ L295/1.

Directive 2009/73/EC of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC [2009] OJ L211/94.

Regulation (EC) 715/2009 of 13 July 2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No 1775/2005 [2009] OJ L211/36.

Regulation (EC) 714/2009 of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation (EC) No 1228/2003 [2009] OJ L211/15.

Regulation (EC) 713/2009 of 13 July 2009 establishing an Agency for the Cooperation of Energy Regulators [2009] OJ L211/1.

Directive 2009/72/EC of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC [2009] OJ L211/55.

(6)

Directive 2005/89/EC of the European Parliament and of the Council of 18 January 2006 concerning measures to safeguard security of electricity supply and infrastructure in-vestment [2005] OJ L33/22.

Judgements of the European Court of Justice

Case T 540/15, De Capitani v European Parliament [2018] ECLI:EU:T:2018:167.

Case T 59/02 Archer Daniels Midland Co v Commission [2006] ECLI:EU:C:2006:328.

Case 174/02 Streekgewest Westelijk Noord-Brabant v Staatssecretaris van Financië [2005]

ECLI:EU:C:2005:10.

Case 280/00 Altmark Trans GmbH and Regierungspräsidium Magdeburg v Nahverkehrsgesellschaft Altmark GmbH, and Oberbundesanwalt beim Bundesverwaltungsgericht [2003] ECLI:EU:C:2003:415.

Case 308/01 GIL Insurance Ltd and Others v Commissioners of Customs & Excise [2004]

ECLI:EU:C:2004:252.

Case 372/97 Italy v Commission [2004] ECLI:EU:C:2004:234.

Case 364/90 Italy v Commission [1993] ECLI:EU:C:1993:157.

Decisions of the European Commission

On the measure SA.41187 (2015/C) (ex 2015/NN) implemented by Hungary on the health contribution of tobacco industry businesses Commission Decision [2016] OJ C282/43.

European Union documents

Proposal for a Directive of the European Parliament and of the Council on the promotion of the use of energy from renewable sources (recast), COM(2016) 767 final, 30 May 2018.

Krišjānis Kariņš’ Draft report on Amendments to Internal market for electricity (recast), Proposal for a regulation, COM(2016) 0861, 25 September 2017.

European Commission ‘Staff Working Document accompanying the Interim Report of the Sector Inquiry on Capacity Mechanisms' SWD (2016) 119 final, 13 April 2016.

(7)

Draft European Parliament Legislative Resolution on the proposal for a regulation of the European Parliament and of the Council on the Governance of the Energy Union, amending Directive 94/22/EC, Directive 98/70/EC, Directive 2009/31/EC, Regulation (EC) No 663/2009, Regulation (EC) No 715/2009, Directive 2009/73/EC, Council Directive 2009/119/EC, Directive 2010/31/EU, Directive 2012/27/EU, Directive 2013/30/EU and Council Directive (EU) 2015/652 and repealing Regulation (EU) No 525/2013, COM(2016) 759 final, 30 November 2016.

Proposal for a Directive of the European Parliament and of the Council on the promotion of the use of energy from renewable sources (recast), COM(2016) 765 final, 30 November 2016.

Proposal for a Directive of the European Parliament and of the Council amending Directive 2010/31/EU on the energy performance of buildings COM(2016) 765 final, 30 November 2016.

Proposal for a Directive of the European Parliament and of the Council on the promotion of the use of energy from renewable sources (recast), COM(2016) 767 final, 30 November 2016.

Proposal for a Regulation of the European Parliament and of the Council on the internal market for electricity (recast), COM(2016) 861 final, 30 November 2016.

Proposal for a Regulation of the European Parliament and of the Council on risk- preparedness in the electricity sector and repealing Directive 2005/89/EC, COM(2016) 862 final, 30 November 2016.

Proposal for a Regulation of the European Parliament and of the Council establishing a European Union Agency for the Cooperation of Energy Regulators (recast), COM(2016) 863 final, 30 November 2016.

Proposal for a Directive of the European Parliament and of the Council on common rules for the internal market in electricity (recast), COM(2016) 864 final, 30 November 2016.

Proposal for a Regulation of the European Parliament and of the Council on the Governance of the Energy Union, amending Directive 94/22/EC, Directive 98/70/EC, Directive 2009/31/EC, Regulation (EC) No 663/2009, Regulation (EC) No 715/2009, Directive 2009/73/EC, Council Directive 2009/119/EC, Directive 2010/31/EU, Directive 2012/27/EU, Directive 2013/30/EU and Council Directive (EU) 2015/652 and repealing Regulation (EU) No 525/2013, COM(2016) 759 final, 30 November 2016.

Report from the Commission, Final Report of the Sector Inquiry on Capacity Mechanisms, COM(2016) 752 final, 30 November 2016.

(8)

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank, Clean Energy For All Europeans, COM(2016) 860 final, 30 November 2016.

Proposal for a Directive of the European Parliament and of the Council amending Directive 2012/27/EU on energy efficiency, COM(2016) 761 final, 39 November 2016.

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, Accelerating Europe's transition to a low-carbon economy, COM(2016) 500 final, 20 July 2016.

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, A European Strategy for Low-Emission Mobility, COM(2016) 0501 final, 20 July 2016.

Proposal for a Regulation of the European Parliament and of the Council on the inclusion of greenhouse gas emissions and removals from land use, land use change and forestry into the 2030 climate and energy framework and amending Regulation No 525/2013 of the European Parliament and the Council on a mechanism for monitoring and reporting greenhouse gas emissions and other information relevant to climate change, COM(2016) 0479 final, 20 July 2016.

Proposal for a Regulation of the European Parliament and of the Council on binding annual greenhouse gas emission reductions by Member States from 2021 to 2030 for a resilient Energy Union and to meet commitments under the Paris Agreement and amending Regulation No 525/2013 of the European Parliament and the Council on a mechanism for monitoring and reporting greenhouse gas emissions and other information relevant to climate change, COM(2016) 482 final, 20 July 2016.

Outcome of the Council Meeting, 3472nd Meeting, Transport, Telecommunications and Energy, 9736/16, 6 June 2016.

Commission Staff Working Document, Accompanying the document Report from the Commission Interim Report of the Sector Inquiry on Capacity Mechanisms, 13.4.2016, SWD(2016) 119 final, 13 April 2016.

Communication from the Commission to the European Parliament, the Council on The Road from Paris: assessing the implications of the Paris Agreement and accompanying the proposal for a Council decision on the signing, on behalf of the European Union, of the Paris agreement adopted under the United Nations Framework Convention on Climate Change, COM(2016) 110 final, 2 March 2016.

European Parliament resolution Towards a European Energy Union INI(2014) OJ C399/21, 15 December 2015.

(9)

European Parliament resolution Towards a New Energy Market Design INI(2015) 2322, 13 September 2016.

Proposal for a Directive of the European Parliament and of the Council amending Directive 2003/87/EC to enhance cost-effective emission reductions and low carbon investments, COM(2015) 337 final, 15 July 2015.

Outcome of the Council Meeting 3429th Meeting, transport, Telecommunications and Energy, 14632/15, 26 November 2015.

Communication from the Commission, A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy, COM(2014) 80 final, 25 February 2015.

Energy Council Conclusions, 14225/14 ENER 430, 9 December 2014.

Communication from the Commission, Guidelines on State aid for environmental protection and energy 2014-2020, COM(2014) OJ C200/1, 28 June 2014.

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, A policy framework for climate and energy in the period from 2020 to 2030, COM(2014) 15 final, 22 January 2014.

Communication from the Commission, Delivering the internal electricity market and making the most of public intervention, COM(2013) 7243 final, 5 November 2013.

Agency for the Cooperation of Energy Regulators, Capacity Remuneration Mechanisms and the Internal Market for Electricity, 30 July 2013.

Commission Decision of 20 December 2011 on the application of Article 106(2) of the Treaty on the Functioning of the European Union to State aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest, C(2011) OJ L7/3, 20 December 2011.

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, Energy 2020 A strategy for competitive, sustainable and secure energy.

COM(2010) 0639 final, 10 November 2010.

International Law

Paris Agreement (adopted 12 December 2015, entered into force 4 November 2016).

United Nations Framework Convention on Climate Change (adopted 4 June 1992, entered into force 23 March 1994) 1771 UNTS 107 (UNFCC).

(10)

Secondary Sources

Books and articles

Mikko Alkio and Olli Hyvärinen, Valtiontuet, (2nd edn Helsinki, Talentum Pro 2016).

Loïc Azoulai, (ed.), The Question of Competence in the European Union (Oxford, Oxford University Press 2014).

Kelyn Bacon, European Union Law of State Aid (3rd edn, Oxford, Oxford Univeristy Press 2017).

Morgan Bazilian and Fabien Roques, ‘Analytical Approaches to Quantify and Value Fuel Mix Diversity’ in Morgan Bazilian and Fabien Roques (eds.), Analytical Methods for Energy Diversity and Security: Portfolio Optimization in the Energy Sector: A Tribute to the work of Dr Shimon Awerbuch (Oxford, Elsevier 2008).

Michal Bobek, ’The Effects of EU law in the national legal systems’ in Catherine Barnard and Steve Peers, (eds.), European Union Law (2nd edn, Oxford, Oxford University Press 2017).

Thomas Börger, Energiepolitik in Europa. Auswirkungen auf den Strommarkt, (Köln GRIN 2006).

Christophe Cassen and Fransesco Gracceva, ‘Energy Security in Low Carbon Pathways’ in Max Gruenig and Patrizia Lomabrdi, (eds.), Low-carbon Energy Security from a European Perspective (London, Elsevir 2016).

Damian Chalmers and Gareth Davies and Giorgio Monti, European Union Law: Cases and Materials (2nd edn. Cambridge, Cambridge University Press 2010).

Monika Claes and Bruno de Witte, ’Competences: codification and contestation’ in Adam Lazowski and Steven Blockmans, (eds.), Research Handbook on EU Institutional Law, (Cheltenham, Edward Elgar Publishing, 2016).

Gerard Conway, EU Law (Oxon, Routledge 2015).

Daniel Crevel-Sander and Charlotte Beaugonin, ‘Case Studies: France’ in Leigh Hancher and Adrien de Houteclocque and Malgorzata Sadowska (eds.), Capacity Mechanisms in the EU Energy Market: Law, Policy, and Economics (Oxford, Oxford University Press 2015).

Gareth Davies, The Competence to Create an Internal Market: Conceptual Poverty and Unbalanced Interests’ in Sacha Garben and Inge Govaere, (eds.), The Division of

(11)

Competences between the EU and the Member States (Portland, Hart Publishing 2017).

Bram Delvaux and Michaël Hunt and Kim Talus (eds.), EU Energy Law and Policy Issues (Antwerpen, Intersentia 2011).

Bert Droste-Franke and others, Balancing Renewable Electricity: Energy Storage, Demand Side Management, and Network Extension from an Interdisciplinary Perspective (Heidelberg, Springer 2012).

Tomasz Dubowsk, Constitutional Law Of The European Union (Bialystock, Temida 2 2011).

Andrew Duff, Saving the European Union: The Logic of the Lisbon Treaty (London, Shoehorn 2009).

Christian Egenhofer and Thomas Legge, Security of Energy Supply: A question for policy or the markets? Report of CEPS working party (Brussels, CEPS 2001).

John Fairhurst, Law of the European Union, (11th edn, Edinburgh, Pearson 2016).

Nigel Foster, Foster on EU Law (6th edn, Oxford, Oxford University Press 2017).

Francisco Enrique González-Díaz, ‘EU Policy on Capacity Mechanisms’ in Leigh Hancher and Adrien de Houteclocque and Malgorzata Sadowska (eds.), Capacity Mechanisms in the EU Energy Market: Law, Policy, and Economics (Oxford, Oxford University Press 2015).

Olga Gore and Satu Viljainen and Kalevi Kylaheiko and Ari Jantunen, ‘Profit Optimization of the Cross-Border Trade Between the Nordic and Russian Electricity Markets’ in Stefan Helber and others (eds.), Research Proceedings 2012: Selected Papers of the International Annual Conference of German Operations Research Society (GOR), Leibniz Universitätt Hannover, Germany September 5-7, 2012 (Heidelberg, Springer International 2014).

Leigh Hancher and Adrien de Houteclocque and Malgorzata Sadowska (eds.), Capacity Mechanisms in the EU Energy Market: Law, Policy, and Economics (Oxford, Oxford University Press 2015).

Matthias Helble, ‘Low Carbon Energy transition in The EU: Lessons from economic, institutional and management approaches’ in: Venkatachalam Anbumozhi and Kaliappa Kalirajan and Fukunari Kimura and Xianbin Yao, (eds.), Investing in Low-Carbon Energy Systems: Implications for Regional Economic Cooperation (Singapore, Springer 2016).

Ari Hirvonen, Mitkä metodit? Opas oiekustieteen metodologiaan, (Helsinki, Yleisen oikeustieteen julkaisuja 17 2011).

(12)

Jesse Jenkins and Valerie Karplus, ‘Carbon pricing under Political Constraints: Insights for Acceleration Clean Energy Transitions’ in Douglas Arent and others (eds.), The Political Economy of Clean Energy Transitions (Oxford, Oxford university Press 2017).

Bengt Johansson, Daniel Jonsson, Ester Veibäck, Eva Mittermaier, Energifattigdom, försörjningstrygghet och offentligt agerande (Stockholm, Totalförsvarets forskningsinstitut (FOI) 2015.

Angus Johnston and Guy Block, EU Energy Law (Oxford, Oxford University Press 2012).

Christopher Jones, (ed.), EU Energy Law: EU Competition Law and Energy Markets, (4th edn, Heverlee, Claeys & Casteels 2016).

Niilo Jääskeläinen, Euroopan Unioni - Oikeudelliset perusteet, (Helsinki, Talentum 2007).

Suzanne Kingston, Greening EU Competition Law and Policy (Cambridge, Cambridge University Press 2012).

Corinna Mährlen and Jess Jorhensen, ‘The Role of ensemble forecasting in integrating renewables into power systems: From theory to real-time applications' in Pengwei Du and Ross Baldick and Aidan Tuohy, (eds.), Integration of Large-Scale Renewable Energy into Bulk Power Systems: From Planning to Operation (Cham, Springer 2017).

Kalle Määttä, Oikeustaloustieteellinen näkökulmakotimaiseen lainvalmisteluun, (Helsinki:

Oikeuspoliittisen tutkimuslaitoksen tutkimuksia 242, 2009).

Jacob Öberg, Limits to EU Powers: A Case Study of EU Regulatory Criminal Law (1 edn.

Oxford, Hart Publishing 2017).

Jean-Claude Piris, The Lisbon Treaty: A Legal and Political Analysis (Cambridge, Cambridge University Press 2010).

Conor Quigley, ‘Comments on State Aid, Taxation and Abuse of Law’ in Rita de la Feria and Stefan Vogenauer (eds.), Prohibition of Abuse of Law: A New General Principle of EU Law? (Portland, Hart Publishing 2011).

Primova Radostina, ‘The EU Internal Energy Market and Decarbonization’ in: Claire Dupont and Sebastian Oberthur, (eds.), Decarbonization in the EU: Internal Policies and External Strategies (London, Palgrave Macmillan 2015).

Volker Roeben, Towards a European Energy Union: European Energy Strategy in International Law (Cambridge, Cambridge University Press 2018).

Wolf Sauter, Coherence in EU Competition Law (Oxford, Oxford University Press 2016).

(13)

Stephan W. Schill, ‘The interface between national and international energy law’ in Kim Talus (ed.), Research Handbook on International Energy Law (Cheltenham, Elgar 2014).

Robert Schütze, ’Classifying EU Competences: German constitutional lessons?’ in Sacha Garben and Inge Govaere, (eds.), The Division of Competences between the EU and the Member States (Portland, Hart Publishing 2017).

Ulrich Schwalbem, ‘European State Aid Control –The State Aid action plan’ in Jürgen Basedow and Wolfgang Wurmnest (eds.), Structure and Effects in EU Competition Law: Studies on Exclusionary Conduct and State Aid (The Hague, Kluwer Law International 2011).

René Smits, The European Central Bank, Institutional Aspects (The Hague, Kluwer Law International, 1997).

Bent Sorensen, Energy Intermittency (Boca Raton, CRC Press 2015).

Oana Andreea Stefan, Soft Law in Court: Competition Law, State Aid and the Court of Justice of the European Union (Alphen aan den Rijn, Kluwer Law International, 2013).

Tony Storey and Chris Turner, Unlocking EU Law (4th edn, New York, Routledge 2014).

Stephen Peake ‘What is a Low-Carbon Society?’ in Horace Herring (ed.) Living in a Low- Carbon Society in 2050 (Hampshire, Palgrave Macmillan 2012).

Panagiotis Takis Tridimas, ’Competence after Lisbon: The Elusive Search for Bright Lines’ in Diamond Ashiagbor and Nicola Countouris and Ioannis Lianos, (eds.), The European Union after the Treaty of Lisbon (Cambridge, Cambridge University Press 2012).

Kacper Szulecki and Kirsten Westphal, ‘Taking Security Seriously in EU Energy Governance: Crimean Shock and the Energy Union’ in Kacper Szulecki (ed.), Energy Security in Europe: Divergent Perceptions and Policy Challenges (Cham, Palgrave Macmillan 2018).

Kim Talus, ‘Security of Supply – An Increasingly Political Notion’ in: Bram Delvaux and Michaël Hunt and Kim Talus (eds.), EU Energy Law and Policy Issues (Rixensart, Euroconfidentiel 2008).

Kim Talus, EU Energy Law and Policy – A Critical Account (Oxford, Oxford University Press 2013).

Kim Talus, Introduction to EU Energy Law (Oxford, Oxford University Press 2016).

Weijer VerLoren van Themaat and Berend Reuder (eds.), European Competition Law: A Case Commentary (Cheltenham, Edward Elgar Pubishing 2014).

(14)

Kaarlo Tuori, Oikeusjärjestys ja oikeudelliset käytännöt, (Helsinki, Forum Iuris 2003).

Bert Willems, ‘Generation Mix, Price Caps, and Capacity Payments’ in Leigh Hancher and Adrien de Houteclocque and Malgorzata Sadowska (eds.), Capacity Mechanisms in the EU Energy Market: Law, Policy, and Economics (Oxford, Oxford University Press 2015).

Journal articles

Tom Delreux and Thomas Laloux, ‘Concluding Early Agreements in the EU: A Double Principal‐Agent Analysis of Trilogue Negotiations’ (2018) 56 Journal of Common Market Studies 300,317.

Erik Gawel and Sebastian Strunz, ‘State Aid Dispute on Germany’s Support for Renewables: Is the Commission on the Right Course?’ (2014) 11 Journal for European Environmental & Planning Law, 137,150.

Corey Johnson and Tim Boersma,’The politics of energy security: contrasts between the United States and the European Union’ (2015) 4 Wiley Interdisciplinary Reviews:

Energy and Environment, 171,177.

Mitchell Orenstein and Daniel Kelemen, ‘Trojan horses in EU foreign policy’ (2017) 55 Journal of Common Market Studies 87,102.

Online journals

Sami Andoura and Leigh Hancher and Marc Van der Woude, ‘Towards a European Energy Community: A Policy Proposal’ (2010) 76 Notre Europe

<http://www.europarl.europa.eu/meetdocs/2009_2014/documents/envi/dv/201/2010 06/20100602_envi_study_energy_policy_en.pdf> accessed 12 May 2018.

Manuel Baritaud, ‘Securing Power during the Transition Generation Investment and Operation Issues in Electricity Markets with Low‐Carbon Policies’ (2012) 13 IEA Energy papers <http://www.oecd-ilibrary.org/energy/securing-power-during-the- transition_5k3wb8fmsz6h-en> accessed 4 February 2018.

Deirdre Curtin and Päivi Leino, 'In search of transparency for EU law-making: Trilogues

on the cusp of dawn' (2017) 54(6) CNLR

<http://www.kluwerlawonline.com/files/COLA/COLA_CumIndex53_FINAL.pdf>

accessed 20 May 2018.

Kaisa Huhta, ‘Capacity mechanisms in EU Law: A comment on the free movement of goods’ (2018) Oxford Institute for Energy Studies

<https://www.oxfordenergy.org/wpcms/wp-content/uploads/2018/05/Capacity-

(15)

mechanisms-in-EU-Law-A-comment-on-the-free-movement-of-goods- Comment.pdf> accessed 21 May 2018.

Websites

‘Capacity remuneration mechanisms and the internal market for electricity’ (ACER, July 2013)

<http://www.acer.europa.eu/official_documents/acts_of_the_agency/publication/cr ms%20and%20the%20iem%20report%20130730.pdf> accessed 20 July 2018.

‘Status Review of Renewable Support Schemes in Europe’ (The Council of European Energy Regulators, 11 April 2017) <https://www.ceer.eu/documents/104400/-/- /ce7ac83d-83e8-4c63-4118-f0def993ca01> 21 May 2018.

‘The presidency of the Council of the EU’ (European Council, 1 March 2018)

<http://www.consilium.europa.eu/en/council-eu/presidency-council-eu/> accessed 28 April 2018.

’Creating a modern electricity market – Council agrees its position’ (European Council, 19 December 2017) <http://www.consilium.europa.eu/en/press/press- releases/2017/12/19/creating-a-modern-electricity-market-council-agrees-its- position/> accessed 21 May 2018.

‘Council adopts internal energy market package’ <http://europa.eu/rapid/press- release_PRES-09-191_en.htm> (European Council, 25 June 2009) accessed 3 February 2018.

’DG Energy and Transport Study, Capacity Mechanisms in Individual Markets within the

IEM’ (European Commission, 28 May 2013)

<http://ec.europa.eu/energy/gas_electricity/consultations/doc/20130207_generation _adequacy_study.pdf> accessed 1 May 2018.

‘10 Commission priorities for 2015-19’, (European Commission)

<https://ec.europa.eu/commission/priorities_en> accessed 14 February 2018..

‘Commissioner Juncker’ (European Commission)

<https://ec.europa.eu/commission/commissioners/2014-2019/president_en>

accessed 14 February 2018.

‘European Commission State Aid Energy and Environmental sector website’ (European Commission) <http://ec.europa.eu/competition/sectors/energy/overview_en.html>

accessed 5 February 2018.

‘Energy production and imports’ (Eurostat, June 2017)

<http://ec.europa.eu/eurostat/statistics-

explained/index.php/Energy_production_and_imports> accessed 21 May 2017.

(16)

’Security of gas supply through solidarity: EP and Council strike a deal’, (European Parliament, 27 April 2017) <http://www.europarl.europa.eu/news/en/press- room/20170426IPR72442/security-of-gas-supply-through-solidarity-ep-and-

council-strike-a-deal> accessed 21 May 2018.

‘Ordinary Legislative Procedure: Interinstitutional negotiations for the adoption of EU legislation’ (European Parliament) <http://www.europarl.europa.eu/ordinary- legislative-procedure/en/interinstitutional-negotiations.html> accessed 28 April 2018.

‘Study of European Parliament’s Industry, Research and Energy Committee, Energy Union: Key Decisions for the Realisation of a Fully Integrated Energy Market’

(European Parliament, April 2018)

<http://www.europarl.europa.eu/RegData/etudes/STUD/2016/578968/IPOL_STU(2 016)578968_EN.pdf> accessed 12 May 2018.

‘Turve pelasti monen kaupungin talven energiahuollon’ (Finnish Bioenergy, 17 April 2018) <http://www.bioenergia.fi/default.asp?item=board;1003&sivuID=29008>

‘State aid to secure electricity supplies’ (European Commission)

<http://ec.europa.eu/competition/sectors/energy/state_aid_to_secure_electricity_su pply_en.html> accessed 12 May 2018.

‘Re-powering Markets: Market design and regulation during the transition to low-carbon power systems- second edition’ (International Energy Agency, 26 March 2016)

<https://www.iea.org/publications/freepublications/publication/REPOWERINGMA RKETS.pdf> accessed 16 May 2018.

‘Continued CEEP input to the ongoing legislative process on Clean Energy Package’

(European Centre of Employers and Enterprises providing Public Services and Services of general interest, 28 July 2017) <https://www.ceep.eu/continued-ceep- input-to-the-ongoing-legislative-process-on-clean-energy-package/> accessed 16 May 2018.

‘Clean Energy for All Europeans’ (European Commission)

<https://ec.europa.eu/energy/en/topics/energy-strategy-and-energy-union/clean- energy-all-europeans> accessed 20 May 2018.

‘Commission proposes new rules for consumer centred clean energy transition’ (European Commission) <https://ec.europa.eu/energy/en/news/commission-proposes-new- rules-consumer-centred-clean-energy-transition> accessed 20 May 2018.

‘Preliminary results from the public consultation on Electricity Market Design’ (European Commission)

<https://ec.europa.eu/energy/sites/ener/files/documents/First%20Results%20of%20 Market%20Design%20Consultation.pdf > accessed 29 April 2018.

(17)

‘Historic climate deal in Paris: EU leads global efforts’ <http://europa.eu/rapid/press- release_IP-15-6308_en.htm> (European Commission, 12 December 2015) accessed 3 February 2018.

‘EPEE EEE Working Group Face-to-face meeting PowerPoint’ (EPEE, 18 April 2018) <

https://www.epeeglobal.org/wp-content/uploads/EPEE-Presentation-EEE-WG- meeting-18-April-2018.pdf> accessed 20 May 2018.

’Clean Energy For All Europeans: regulation vs reality?’ (Politico 19 April 2018)

<https://www.politico.eu/event/clean-energy-for-all-europeans-regulation-vs- reality/> accessed 21 May 2018.

‘Procedure file on Electricity Market Regulation’ (European Parliament)

<http://www.europarl.europa.eu/oeil/popups/ficheprocedure.do?lang=&reference=2 016/0379(COD)> accessed 24 March 2018.

‘Krišjānis KARIŅŠ Profile’ (EPP)

<http://www.eppgroup.eu/mep/Kri%C5%A1j%C4%81nis- KARI%C5%85%C5%A0> accessed 24 March 2018.

‘Creating a true EU electricity market to benefit consumers’ (EPP, 21 February 2018)

<http://www.eppgroup.eu/press-release/Creating-a-true-EU-electricity-market-to- benefit-consumers> accessed 14 March 2018.

‘MEP Karins report on market design’ (Solar Power Europe)

<http://www.solarpowereurope.org/newsletter-archives/july-august-

2017/news/mep-karins-report-on-market-design/> accessed 24 March 2018.

‘MEP Sven Giegold’s open letter to President of the European Parliament, Antonio Tajani, of 30 May 2018’ (MEP Sven Giegold) <https://sven-giegold.de/trilogue- transparency-without-obstacles/> accessed 31 May 2018.

‘Good bye Brussels, hello Brussels!’ (Claude Turmes Energy Blog, 29 May 2018)

<http://energyblog.claudeturmes.lu/news/good-bye-brussels-hello-brussels/>

accessed 3 June 2018.

‘Clean Energy for All Europeans – unlocking Europe's growth potential’ (European Commission, 30 November 2016) <http://europa.eu/rapid/press-release_IP-16- 4009_en.htm> accessed 12 May 2018.

‘European Parliament votes to make European electricity market ready for renewables’

(Wind Europe, 21 February 2018) <https://windeurope.org/newsroom/press- releases/european-parliament-votes-to-make-european-electricity-market-ready-for- renewables/> accessed 24 March 2018.

’Energy Efficiency Working Group material’ (European Partnership for Energy & the Environment) <https://www.epeeglobal.org/wp-content/uploads/EPEE- Presentation-EEE-WG-meeting-18-April-2018.pdf> accessed 26 May 2018.

(18)

Victor Almqvist, ‘European elections: MEPs back voting dates for 2019’ (European Parliament, 18 April 2018) <http://www.europarl.europa.eu/news/en/press- room/20180411IPR01519/european-elections-meps-back-voting-dates-for-2019>

Jan Braun, ‘EU Energy Policy Under the Treaty of Lisbon Rules: Between a New Policy and Business as Usual’ (European Policy Institutes Network, 24 February 2011)

<https://ssrn.com/abstract=2001357> accessed 6 May 2018.

Antoine Colombani, Yizhou Ren, ‘State aid: Commission adopts new rules on public support for environmental protection and energy’ (European Commission, 9 April 2014) <http://europa.eu/rapid/press-release_IP-14-400_en.htm> accessed 12 May 2018.

Gregor Erbach, ‘EP Briefing of May 2017 on Capacity mechanisms for electricity’

(European Parliamentary Research Service, May 2017)

<http://www.europarl.europa.eu/RegData/etudes/BRIE/2017/603949/EPRS_BRI(2 017)603949_EN.pdf> accessed 11 February 2018.

Alexander Winterstein and Mina Andreeva, ‘EU budget: Commission proposes a modern budget for a Union that protects, empowers and defends’ (European Commission, 2 May 2018) <http://europa.eu/rapid/press-release_IP-18-3570_en.htm> accessed 12 May 2018.

News articles

‘US insists Russia using energy as ‘political tool’ in Europe’ Euractiv (London, 29 January 2018) <https://www.euractiv.com/section/energy/news/us-insists-russia- using-energy-as-political-tool-in-europe/> accessed 20 May 2018.

Hermine Donceel, ‘EU Commission tends to split up trade deals’ Euranet Plus News Agency (Brussels, 23 April 2018) <http://euranetplus-inside.eu/eu-commission- tends-to-split-up-trade-deals/> accessed 12 May 2018.

Maryant Fernández Pérez, ’Trilogues: the system that undermines EU democracy and transparency’, European Digital Rights (EDRi) (Brussels, 20 Apr 2016)

<https://edri.org/trilogues-the-system-that-undermines-eu-democracy-and- transparency/> accessed 20 May 2018.

Alex Hunt and Brian Wheeler, ‘All you need to know about the UK leaving the EU’ BBC (London, 12 April 2018) <http://www.bbc.com/news/uk-politics-32810887>

accessed 28 April 2018.

Sam Morgan, ‘Energy and environment in 2018: A preview’ Euractiv (London, 8 March 2018) <https://www.euractiv.com/section/energy-environment/news/energy-and- environment-in-2018-a-preview/> accessed 28 April 2018.

(19)

Sam Morgan, ’ MEPs take big step towards energy market reform’ (Euractiv, 21 February 2018) <https://www.euractiv.com/section/electricity/news/meps-take-big-step- towards-energy-market-reform/> accessed 14 March 2018.

Frédéric Simon, ‘Parliament backs ‘net-zero’ carbon emissions by 2050’ Euractiv (Brussels, 18 January 2017) <https://www.euractiv.com/section/climate- environment/news/parliament-backs-net-zero-carbon-emissions-by-2050/>

Peter Teffer, ‘Getting secret EU trilogue documents: a case study’ EUobserver (Brussels, 19 April 2018) <https://euobserver.com/institutional/141625> accessed 20 May 2018.

‘Unity may become New Unity; Kariņš may become prime minister candidate’ Baltic News Network, (21 April 2018) <http://bnn-news.com/unity-may-become-new- unity-karins-may-become-prime-minister-candidate-183628> accessed 3 June 2018.

‘Survey: Support for Kaja Kallas, Jüri Ratas as next prime minister tied, (EER, 21 May 2018) <https://news.err.ee/833079/survey-support-for-kaja-kallas-juri-ratas-as- next-prime-minister-tied> accessed 3 June 2018.

(20)

LIST OF ABBREVIATIONS

ACER Agency for the Cooperation of Energy Regulators CJEU The Court of Justice of the European Union (the Court)

CO2 Carbon Dioxide

CRM Capacity Remuneration Mechanism

ECLI European Case Law Identifier

ENTSO-E European Network of Transmission System Operators

ENVI EP Committee on Environment, Public Health and Food Safety

EP European Parliament

ETS Emission Trading Scheme

EU European Union

GHG Greenhouse Gas Emissions

IEA International Energy Agency

IRENA International Renewable Energy Agency

ITRE EP Committee on Industry, Research and Energy

kWh Kilowatt hour

MEP Member of European Parliament

OJ Official Journal of the European Union

RES Renewable energy sources

TEC Treaty establishing the European Community

TEU Treaty on the European Union

TFEU Treaty on the Functioning of the European Union

(21)

UN United Nations

UNFCCC United Nations Framework Convention on Climate Change

(22)

1 INTRODUCTION

1.1 EU Energy Policy - background of the study

The European electricity market has been developing towards an internal energy market (hereinafter ‘IEM’) for the past 20 years¹. The European Union (hereinafter ‘the EU’) adopted the Third Internal Energy Market package in July 2009² allowing for electricity to be traded in a more efficient manner throughout the EU.³

The European Council set the EU on an ambitious path in 2014 by agreeing to reduce at least 40 % of greenhouse gas emission by 2030 during the Paris Agreement negotiations.

The Paris Agreement⁴ supports the EU’s 2030 climate and energy policy targets and the implementation of these targets is an important follow up to the Paris agreement.⁵ The achievement of 2°C target⁶ entails comprehensive and ambitious changes throughout the EU energy mix.⁷ In order to establish an enabling environment for the low carbon economy transition, the EU has been setting a wide range of interacting policies and

1 K Talus, Introduction to EU Energy Law (Oxford University Press 2016) p. 2-3. Read more on T Börger, Energiepolitik in Europa. Auswirkungen auf den Strommarkt, (Köln GRIN 2006).

2 ‘Council adopts internal energy market package’ <http://europa.eu/rapid/press-release_PRES-09- 191_en.htm> (European Council, 25 June 2009) accessed 3 February 2018. The third energy package included the following legislative proposals: Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC [2009] OJ L211/94; Directive 2009/72/EC of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC [2009] OJ L211/55; Regulation (EC) 715/2009 of 13 July 2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No 1775/2005 [2009] OJ L211/36; Regulation (EC) 714/2009 of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation (EC) No 1228/2003 [2009] OJ L211/15; Regulation (EC) 713/2009 of 13 July 2009 establishing an Agency for the Cooperation of Energy Regulators [2009] OJ L211/1.

3 K Talus, EU Energy Law and Policy – A Critical Account (Oxford University Press, 2013), p. 284-285.

Read more on the third energy package on B Delvaux, M Hunt, K Talus (eds.), EU Energy Law and Policy Issues (Intersentia 2011).

4 United Nations / Framework Convention on Climate Change (2015) Adoption of the Paris Agreement, 21st Conference of the Parties, Paris: United Nations. Paris hosted the 21st session of the Conference of the Parties (COP21) to the United Nations Framework Convention on Climate Change (UNFCCC) from 30 November to 11 December 2015. The Parties to the Convention signed a document called the ‘Paris Agreement’ which entered into force on 4 November 2016.

5 Historic climate deal in Paris: EU leads global efforts’ <http://europa.eu/rapid/press-release_IP-15- 6308_en.htm> (European Commission, 12 December 2015) accessed 3 February 2018.

6 According to the Article 2(1)(a) of the Paris Agreement, the aim is to avoid limit global warming below 2°C, meaning that the global average temperature would not rise more than 2°C.

7 C Cassen, F Gracceva, ‘Energy Security in Low Carbon Pathways’ in M Gruenig, P Lomabrdi, (eds.), Low- carbon Energy Security from a European Perspective (Elsevir 2016) p. 186-187; M Baritaud, Securing Power during the Transition Generation Investment and Operation Issues in Electricity Markets with Low‐ Carbon Policies. IEA Energy papers No. 2012/13 OECD Publishing, Paris (2012), p. 34.

(23)

instruments under the Energy Union Strategy⁸, which is also one of the ten priorities⁹ of Juncker Commission.^{10 11} Energy Union aims at providing consumers with “secure, sustainable, competitive and affordable energy”.¹² Sustainable means achieving a basically zero emissions society.¹³ In practice this means that a substantial redesign¹⁴ of the energy system in the EU is needed.¹⁵ The Energy Union has set target milestones for both 2030 and 2050.¹⁶

Before presenting the energy legislation package in 2016, the European Union Commission (hereinafter ‘the Commission’) had already published other proposals¹⁷ to

8 Communication from the Commission, A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy, COM(2014) 80 final, 25 February 2015, p. 4, 19-21.

9 The 10 priorities for 2015-19 of the Juncker Commission are (1) Jobs, growth and investment, (2) Digital single market, (3) Energy union and climate, (4) Internal market, (5) A deeper and fairer economic and monetary union, (6) A balanced and progressive trade policy to harness globalisation, (7) Justice and fundamental rights, (8) Migration, (9) A stronger global actor, and (10) Democratic change. More information on the Commission website ‘10 Commission priorities for 2015-19’ (European Commission)

<https://ec.europa.eu/commission/priorities_en> accessed 14 February 2018.

10 Jean-Claude Juncker was elected the Commission’s President for the term 2014-2019. As the head of the Commissions, he determines the organisation of the Commission, assigns portfolios to members of the Commission and decided on the Commission's policy agenda, defending the general European interest. More information on the Commission website ‘Commissioner Juncker’ (European Commission)

<https://ec.europa.eu/commission/commissioners/2014-2019/president_en> accessed 14 February 2018.

11 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank, Clean Energy For All Europeans, COM(2016) 860 final, 30 November 2016, p. 2.

12 Communication from the Commission, A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy, COM(2014) 80 final, 25 February 2015, p. 1.

13 V Roeben, Towards a European Energy Union: European Energy Strategy in International Law (Cambridge, Cambridge University Press 2018, p. 22.

14 This transformation is done through five interlinked main dimensions: 1) Energy security, solidarity and trust; 2) A fully integrated European energy market; 3) Energy efficiency contributing to moderation of demand; 4) Decarbonising the economy, and 5) Research, Innovation and Competitiveness. Communication from the Commission, A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy, COM(2014) 80 final, 25 February 2015, p. 4.

15 Communication from the Commission, A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy, COM(2014) 80 final, 25 February 2015, p. 1. Read more on energy union: V Roeben, Towards a European Energy Union: European Energy Strategy in International Law (Cambridge, Cambridge University Press 2018.

16 V Roeben, Towards a European Energy Union: European Energy Strategy in International Law (Cambridge, Cambridge University Press 2018), p. 16.

17 In 2015, the Commission presented a proposal to reform the EU Emission Trading System; Proposal for a Directive of the European Parliament and of the Council amending Directive 2003/87/EC to enhance cost- effective emission reductions and low carbon investments, COM(2015) 337 final, 15 July 2015; and in summer 2016, the Commission brought forward four proposals for accelerating the low-carbon transition in the other key sectors of the European economy 1) Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, Accelerating Europe's transition to a low-carbon economy, COM(2016) 500 final, 20 July 2016; 2) Proposal for a Regulation of the European Parliament and of the Council on binding annual greenhouse gas emission reductions by Member States from 2021 to 2030 for a resilient Energy Union and to meet commitments under the Paris Agreement and amending Regulation No 525/2013 of the European Parliament and the Council on a mechanism for monitoring and reporting greenhouse gas emissions and other information relevant to climate change, COM(2016) 482 final, 20 July 2016; 3) Proposal for a Regulation of the

(24)

speed up the low carbon transition¹⁸, including reform of the EU Emission Trading System (hereinafter ‘EU ETS’)¹⁹ to enable the energy sector and energy intensive industries deliver the necessary emission reductions. All the legislative proposals published by the Commission in 2015 and 2016 related to the Energy Union should be a priority for the European Parliament (hereinafter ‘the EP’) and Council of the European Union (hereinafter ‘the Council’).²⁰

The transition to a low carbon energy system requires a substantial change in electricity market legislation. Moving generation from large central power plants towards de- centralised production from renewable energy sources requires an adaptation of the existing electricity trading rules as well as modification of their market roles. The electricity market has to adjust to the new reality and to efficiently integrate all market players including flexible demand, energy service providers and renewables.²¹ The new electricity market design aims to guarantee that markets are able to support the low-carbon transition with minimum expenses.²²

In order to achieve that, the EU has to develop a new framework delivering all the market acquirements, namely, interconnected EU-level electricity market that provides clear signals for new investments and facilitating the further development of renewables. While at the same time the EU is promoting regional cooperation and coordination or energy

European Parliament and of the Council on the inclusion of greenhouse gas emissions and removals from land use, land use change and forestry into the 2030 climate and energy framework and amending Regulation No 525/2013 of the European Parliament and the Council on a mechanism for monitoring and reporting greenhouse gas emissions and other information relevant to climate change, COM(2016) 0479 final, 20 July 2016; 4) Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, A European Strategy for Low-Emission Mobility, COM(2016) 0501 final, 20 July 2016.

18 Low carbon refers commonly to energy forms that do not emit a lot of CO2. However there is no single definition for it. Read more: S Peake ‘What is a Low-Carbon Society?’ in H Herring (ed.) Living in a Low- Carbon Society in 2050 (Hampshire, Palgrave Macmillan 2012), p. 15-16.

19 Directive 2003/87/EC of 19 March 2018 amending Directive to enhance cost-effective emission reductions and low-carbon investments, and Decision (EU) 2015/1814 [2018] OJ L76/3, p. 3–27.

20 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, Accelerating Europe's transition to a low-carbon economy, COM(2016) 500 final, 20 July 2016, p. 8.

21 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank, Clean Energy For All Europeans, COM(2016) 860 final, 30 November 2016, p. 8.

22 Proposal for a Regulation of the European Parliament and of the Council on the internal market for electricity (recast), COM(2016) 861 final, 30 November 2016, (hereinafter ‘Commission’s Electricity Market Regulation Proposal’) p. 1, 2, 7. Read more: M Helble, ‘Low Carbon Energy transition in The EU: Lessons from economic, institutional and management approaches’ in: V Anbumozhi, K Kalirajan, F Kimura and X Yao, (eds.), Investing in Low-Carbon Energy Systems: Implications for Regional Economic Cooperation (Singapore, Springer 2016).

(25)

policies, and safeguarding suitable governance and regulatory framework as well as the security of electricity supply.²³

However, increasing the uptake of renewables brings the issue of intermittency and security of supply to the table.²⁴ In order to ensure that the intermittent character of renewables does not interrupt the availability of electricity, some deem that safeguarding measures designed to guarantee the security of the electricity supply are needed. Therefore the Member States have designed and implemented capacity remuneration mechanisms (hereinafter ‘CRMs’) to make sure that the flow of electricity is not disrupted.

To explain what CRMs are, it is useful break down the whole term. Capacity signifies the physical ability to produce electricity. Remuneration means compensation for the capacity to generate electricity. Mechanism refers to a certain type of measure that can be taken in case of predicted electricity shortage. Therefore CRMs are measures taken by the Member States to compensate generators that they have a certain capacity to produce electricity when needed.²⁵ CRMs are often introduced to safeguard the security of electricity supply.²⁶ As they have a distortive effect on the market, it is relevant that their design and use is coherently legislated by the EU.²⁷

The Commission published a large package of proposals on EU energy legislation towards the end of 2016. This is the largest legislative package on energy issues to ever have been published in the EU.²⁸ Through this reform the Commission aims to enable the EU to

23 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, Accelerating Europe's transition to a low-carbon economy, COM(2016) 500 final, 20 July 2016, p.8. Read more: C Cassen and F Gracceva, ‘Energy Security in Low Carbon Pathways’ in M Gruenig and P Lomabrdi, (eds.), Low-carbon Energy Security from a European Perspective (London, Elsevir 2016).

24 Read more: C Mährlen and J Jorhensen, ‘The Role of ensemble forecasting in integrating renewables into power systems: From theory to real-time applications' in P Du, R Baldick and A Tuohy, (eds.), Integration of Large-Scale Renewable Energy into Bulk Power Systems: From Planning to Operation (Cham, Springer 2017), especially p. 37-38; B Sorensen, Energy Intermittency (Boca Raton, CRC Press 2015).

25 FE González-Díaz, ‘EU Policy on Capacity Mechanisms’ in L Hancher, A Houteclocque and Malgorzata Sadowska (eds.), Capacity Mechanisms in the EU Energy Market: Law, Policy, and Economics (Oxford, Oxford University Press 2015), p. 7-8.

26 D Crevel-Sander and C Beaugonin, ‘Case Studies: France’ in L Hancher, A de Houteclocque and M Sadowska (eds.), Capacity Mechanisms in the EU Energy Market: Law, Policy, and Economics (Oxford, Oxford University Press 2015), p. 265.

27 B Willems, ‘Generation Mix, Price Caps, and Capacity Payments’ in L Hancher, A de Houteclocque and M Sadowska (eds.), Capacity Mechanisms in the EU Energy Market: Law, Policy, and Economics (Oxford, Oxford University Press 2015), p. 140-154.

28 ‘Continued CEEP input to the ongoing legislative process on Clean Energy Package’ (European Centre of Employers and Enterprises providing Public Services and Services of general interest, 28 July 2017)

(26)

achieve the clean energy transition²⁹ while ensuring the best value for customers. The main goals of the package are to put energy efficiency first, achieve global leadership in renewables and ensure a fair deal for customers.³⁰

This legislative package is called the Clean Energy for All Europeans (hereinafter ‘Clean Energy Package’) and it includes altogether eight legislative proposals³¹, both regulations and directives, as well as several supporting documents.³² The eight proposals form the basis of the Commission’s strategy for implementing the Energy Union, as foreseen in the Energy Union Roadmap³³. During the final months of 2016, the Commission started the revision of the current Electricity Market Regulation³⁴ and Directive³⁵.

<https://www.ceep.eu/continued-ceep-input-to-the-ongoing-legislative-process-on-clean-energy-package/>

29 The challenge with clean energy transition is to have a clever policy design that takes into account the cost of the transition while maximising the efficiency. Read more on the clean energy transition: J Jenkins and V Karplus, ‘Carbon pricing under Political Constraints: Insights for Acceleration Clean Energy Transitions’ in D Arent and others (eds.), The Political Economy of Clean Energy Transitions (Oxford, Oxford university Press 2017).

30 Commission’s Electricity Market Regulation Proposal, p. 1.

31 The eight proposals are 1) Proposal for a Directive of the European Parliament and of the Council amending Directive 2010/31/EU on the energy performance of buildings COM(2016) 765 final, 30 November 2016; 2) Proposal for a Directive of the European Parliament and of the Council on the promotion of the use of energy from renewable sources (recast), COM(2016) 765 final, 30 November 2016; 3) Proposal for a Regulation of the European Parliament and of the Council on the Governance of the Energy Union, amending Directive 94/22/EC, Directive 98/70/EC, Directive 2009/31/EC, Regulation (EC) No 663/2009, Regulation (EC) No 715/2009, Directive 2009/73/EC, Council Directive 2009/119/EC, Directive 2010/31/EU, Directive 2012/27/EU, Directive 2013/30/EU and Council Directive (EU) 2015/652 and repealing Regulation (EU) No 525/2013, COM(2016) 759 final, 30 November 2016; 4) Proposal for a Directive of the European Parliament and of the Council amending Directive 2012/27/EU on energy efficiency, COM(2016) 761 final, 39 November 2016; 5) Proposal for a Regulation of the European Parliament and of the Council on risk-preparedness in the electricity sector and repealing Directive 2005/89/EC, COM(2016) 862 final, 30 November 2016; and 6) Proposal for a Regulation of the European Parliament and of the Council establishing a European Union Agency for the Cooperation of Energy Regulators (recast), COM(2016) 863 final, 30 November 2016. Read more on Commission webpage ‘Clean Energy for All Europeans’ (European Commission) <https://ec.europa.eu/energy/en/topics/energy-strategy- and-energy-union/clean-energy-all-europeans> accessed 20 May 2018.

32 Commission webpage: ‘Commission proposes new rules for consumer centred clean energy transition’

(European Commission) <https://ec.europa.eu/energy/en/news/commission-proposes-new-rules-consumer- centred-clean-energy-transition> accessed 20 May 2018. .

33 Communication from the Commission, A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy, COM(2014) 80 final, 25 February 2015.

34 Regulation (EC) 714/2009 of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation (EC) No 1228/2003 [2009] OJ L211/15, p. 15–35, (hereinafter ‘Electricity Market Regulation 2009’).

35 Directive 2009/72/EC of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC [2009] OJ L211/55, p. 55–93, (hereinafter ‘Electricity Market Directive 2009’).

Changes on the restrictions on the use of capacity remuneration mechanisms in the light of the Clean Energy Package