FSR ANNUAL CONFERENCE, 2011 EDITION “Future Trends in Energy Market Design” Florence, 25th May 2011
The implementation of the Third Legislative Energy Package should provide an adequate regulatory and institutional framework for the completion of the Internal Energy Market. However, there are current developments in the energy sector which may have an impact on the functioning of the energy markets. For example, the increased penetration of energy produced from renewable sources may impact on electricity markets in several ways. On the one hand, if such electricity is promoted through feed-in tariff, it is likely to be offered in the market at a price equal to zero, if at all; this will reduce the quantity of electricity which contribute to fixing the equilibrium market price. On the other hand, the schemes used for promoting electricity produced from renewable energy may be different in different jurisdictions, with some relying on feed-in tariffs, others on quota obligations and green certificates schemes or competitive auctions; these different schemes may impact the functioning of the electricity markets asymmetrically. Finally, the intermittent nature of some of the electricity produced from renewable may increase the variability and uncertainty in the level of demand which traditional generating technology will face, making revenue streams, and therefore the return on investment, riskier. Some commentators have suggested that these developments may grant a rethinking of the electricity market design, with the introduction of an explicit remuneration of generating capacity, through a capacity market or market-tested capacity payments. The 2011 Annual Conference will explore these and other future developments in the energy sector and will assess the extent to which they should result in changes in the design of the Internal Energy Market.
