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The EU power sector needs long-term price signals. CEPS Special Report No. 135/April 2016

Genoese, Fabio and Drabik, Eleanor and Egenhofer, Christian (2016) The EU power sector needs long-term price signals. CEPS Special Report No. 135/April 2016. UNSPECIFIED.

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    By 2030, half of the EU’s electricity demand will be covered by renewables and will need to be accompanied by flexible conventional back-up resources. Due to the high upfront costs inherent to renewables and the progressively lower running times associated with back-up capacity, the cost of capital will have a proportionately greater impact on total costs than today. This report examines how electricity markets can be designed to provide long-term price signals, thereby reducing the cost of capital for these technologies and allowing for a more efficient transition. It finds that current market arrangements are unable to provide long-term price signals. To address this issue, we argue that a system for long-term contracts with a regulated counterparty could be implemented. A centralised system where capacity or energy or a combination of both is contracted, could be introduced for conventional and renewable capacity, based on a regional adequacy assessment and with a competitive bidding system in place to ensure cost-effectiveness. Member states face a number of legislative barriers while implementing these types of systems, however, which could be reduced by merging legislation and setting EU framework rules for the design of these contractual agreements.

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    Item Type: Other
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > energy policy (Including international arena)
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Centre for European Policy Studies (Brussels) > CEPS Special Reports
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 06 May 2016 13:11
    Number of Pages: 16
    Last Modified: 29 Nov 2016 09:33

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