Remuneration cap on LTTRs unacceptable to the European energy regulator
- Category: Energy market
ACER refuses to approve the TSOs’ proposal proposal for amendment of the harmonised allocation rules for long-term transmission rights and concludes that:
- an introduction of a cap for LTTRs remuneration is not an appropriate solution to address the malfunctioning of shadow auctions (it is suggested to improve communication with the market participants and to train them more for being ready for such events);
- the remuneration of LTTRs should be equal to the market spread to foster the efficiency of the LTTRs themselves;
- the hedging opportunities for market participants should be provided in full scope and should not be limited by a potential application of a cap.
From the perspective of a uniform, cross-zonal European electricity market it seems to be the right decision.
How to start energy trading in the EU
- Category: Energy market
Current EU's energy markets highs and lows may attract investors around the globe. Some may already ponder necessary first steps to start electricity trading in the EU.
Technically, every market actor intending to enter into transactions or place orders to trade in European Union’s wholesale energy markets (including those established or resident outside the EU) need to be registered with the European Register of Market Participants (CEREMP) and get the ACER Code.
Fit for 55 - impact on PPAs
- Category: Energy market
Power Purchase Agreements (PPAs) are a complementary route to the market of renewable power generation - in addition to support schemes or to selling directly on the wholesale electricity market.
Fit for 55 Package will introduce frameworks to facilitate the uptake of PPAs. RED II draft amendment also promotes the use of credit guarantees to reduce these agreements’ financial risks. Such agreements will be strictly evidenced as National Energy and Climate Plans will indicate the volume of renewable power generation supported by renewables power purchase agreements.
Given the estimate that only 14% of industry PPAs’ demand is bankable it seems that RED II draft amendments on credit guarantees could really help to develop this market segment.
My take-home points on MiFIR transaction reporting regarding emission allowances
- Category: Financial Market
The ESMA's recent Report of 15 November 2021 has summarised application of MiFIR transaction reporting regime to emissions markets.
The regulator's views are always valuable, hence I took some brief notes (as below), maybe will be of interest to you.
For more extensive overview of the MiFIR transaction reporting agenda read here.
Capacity distribution tariffs recommended
- Category: Energy market
The most prominent distributions tariff's classification is the distinction between capacity tariffs and volumetric tariffs.
This differentiation is based on whether tariffs are levied on a MW/kW (capacity) or MWh/kWh of consumption (or production).
Although most EU Member States currently charge grid costs through volumetric grid tariffs, European Distribution System Operators (E.DSO) recommend partial switch to the kW-based system.
According to the EU DSOs, shifting from kWh-based towards kW-based network tariffs is reasoned by the fact that the kWh-component of network tariffs rises artificially the value of self-produced (e.g. solar) kWhs, which makes it more attractive to produce your own electricity.
With more self-production, the amount of energy taken from the grid decreases, and besides the decrease of network losses (which is a relatively small effect), the costs of the network do not decrease, since they are mostly fixed, and the network is still needed for periods of low self-production.
These network costs need to be covered with less kWhs, so the kWh-tariff has to increase.
Then it will be even more attractive to invest in solar panels to produce your own kWhs.
In that way the kWh-tariff will spiral upwards as more and more customers adopt self-consumption, or the network cost-recovery will spiral downwards.
DSOs conclude that the kWh-based network tariff component “has a kind of perverse incentive”.
Busy end of the year at Innovation Fund
- Category: Emissions trading
The EU ETS Innovation Fund has recently become fully-fledged operational vehicle to supply projects with money.
On 26 October 2021 the European Commission launched the second call for large-scale projects with a budget of €1.5 billion (the deadline for submission of applications is 3 March 2022 with the results of the evaluation to be determined in the third quarter of 2022).
Just days ago, on 16 November 2021 Innovation Fund distributed over €1 billion between innovative large-scale projects.
This pace is quite impressive given that only on 4 November 2021 the first three grants from Innovation Fund were awarded (totalling EUR 12.7 million, small-scale projects were at issue this turn).
Grants for project development assistance are also at stake (EUR 1.7 million distributed on 4 November 2021 between 10 projects - the European Investment Bank (EIB), which provides the service, helps them advance their maturity through tailored assistance, such as improving their technical documentation and financial models).
In parallel, Fit for 55 package increases the Innovation Fund’s resources and, apart from traditional projects portfolio, brings Carbon Contracts for Difference (CCfDs) to the scene.