Regulation of the Energy Sector in the EU
16 Pages Posted: 9 Sep 2015
Date Written: September 8, 2015
The EU regulatory framework for energy, despite its complexity related with the originality of the institutional architecture of the EU and regardless of its remaining regulatory gaps after the third legislative package of 2009, has, conversely, some advantages arising from its dynamic nature and adaptability. As referred at the beginning of this Paper, those advantages may place the EU model in a pivotal position for leading the way internationally towards a true reinvention of energy regulation. A reinvented energy regulatory policy must go beyond the traditional goals of promoting consumer rights and economic efficiency in energy markets. It must involve – in response to a new global environment – at least two more demanding objectives: (1) – To provide appropriate incentives to the modernization of energy infrastructures aiming especially at improving energy efficiency at all levels (generation, transmission/distribution and use), increasing the penetration of renewable sources and facilitating the development of new services. This absolutely requires a new proactive regulatory approach to infrastructure planning and operation. (2) – To actively encourage the use of available funds and financial instruments by energy undertakings in order to accelerate investments necessary to modernise the energy infrastructure through the massive introduction of information and communication technologies, to increase the connectivity of electricity and gas networks or to diversify and decentralise supply sources. This refers ‘inter alia’ to processes widely known as “smartening the energy grids”. The existing grids or networks are aging which will lead to more power outages and a decline in reliability (in Europe the majority of the assets in the energy networks date back to the period from 1960 to 1990 with a peak in the 1970s, this being caused by a structural growth in energy consumption in that period). In this context, new regulatory policies and techniques should play a central role to maintain or enhance the reliability of aging grids through appropriate replacement strategies (which will not involve necessarily major grid expansions but may, to a large extent, by achieved through the smartening of the grids, based on the introduction of communication technology elements that can facilitate and control a significant part of the flexible demand for the fluctuating distributed supply of energy). This, in turn requires investments and medium and long term strategies. One of the key dimensions of a reinvented energy regulation lies in providing regulatory constraints and incentives to those types of investments and strategies.
Keywords: Internal energy market; energy regulation; renewable energy; legal and financial unbundling
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