Where Markets Meet Security of Supply

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Electricity Security Of Supply:
reliability In A Regional And Pan-european Context

Ensuring security of supply at the lowest cost is a crucial societal objective and lies in the center of TSOs’ mission and daily work.

The transition to a distributed and variable power system creates new challenges for the real-time and long-term balancing of demand and supply, for system operations, and for the overall management of the power system. In parallel, dependency on electricity has increased to the point at which our societies would be paralysed if the power system failed.

Unlike in the gas industry, in which the main threat is disruptions from monopoly suppliers, threats to electricity security are foremost related to real-time power system balancing. Impacts are in many cases not national alone, but regional and European, and thus require coordinated solutions at regional and/or pan-European level.

Ensuring security of supply requires the commitment and smooth cooperation of all actors in a system that is increasingly characterised by the co-existence of large, central and smaller decentralized generation. A new focus on TSO-DSO interactions is particularly needed, as is a fast roll-out of smart solutions on the consumers’ side.

Markets are the most Efficient Solution for Security Of Supply in Electricity.

They have to provide appropriate incentives for participants to contribute actively to balancing and flexibility solutions, to ensure that the system is in balance and to preserve security of supply. However, when markets end, rules are needed to manage scarcity situations at the least cost, safely, and to the benefit of all European customers.1

The Electricity Security of Supply Directive 2005/89/EC is Outdated and Therefore Rightly due for Review.

It ignores a decade of fast changes, was adopted before the Lisbon Treaty, but also before the Third IEM Package. It misses out on the existence of ACER and the ENTSOs, the regional dimension, the shift from generation adequacy to system adequacy, the new flexibility challenges and the increasing share of RES.

With this Policy Paper, ENTSO-E Shares its recommendations to be included in the forthcoming legislation.

This paper proposes how to address security of supply in electricity in a market environment first, but also in a non-market environment where there is no other choice left.

WHAT IS SCARCITY?
Scarcity is the inability to maintain security of supply standards through available resources and using existing market mechanisms and operational procedures, leading to constraints for customer supply or quality of electricity supply.

Scarcity situations may occur because of unexpected peaks of demand or the simultaneous unavailability of several transmission lines or power plants, e. g., due to extreme weather events.

Simultaneous scarcity situations occur when scarcity is present simultaneously in two or more neighboring price/market zones.

The definition of emergency state, in the Emergency & Restoration Network Code, is different and focuses mainly on operational emergency situations and procedures.

  1. See ENTSO-E Vision paper “Markets and Innovation Deliver the Energy Union” and the definition of scarcity below.

Contents

  1. Scarcity Situations and Challenges to Power System Adequacy
  2. How to Prevent and Manage Scarcity Situations
  3. Scarcity Situations and Challenges to Power System Adequacy
  4. Use Market Instruments for the Prevention and Management of Scarcity Situations
  5. ENTSO-E Adequacy Assessment and Forecasting as a Key Element for European Security Of Supply
  6. Risk Identification, Assessment and Preparedness to Prevent Scarcity Situations
  7. Where Markets End
  8. Governance Framework for Security Of Supply