The European Commission (EC) EC recently published a new package of legislative proposals for the electricity sector, aiming to promote competition and sustainable development. Among other things, these proposals suggest focusing on regional (rather than national) security of supply. A new Frontier Economics bulletin, ‘European regional adequacy’, published today, considers the EC’s proposals.
The proposals have an economic logic. If “spare” generation can be shared between countries, European customers will pay less for overall levels of capacity. However, there are risks, highlighted by the experience in other countries. The bulletin describes the example, of South Australia, which recently suffered a 52-hour blackout as a result of a combination of factors, including reliance on imports from other states and split responsibilities for managing the electricity system. Frontier’s bulletin outlines the lessons to be learned from this experience for the European market, and that these should be considered while the EC’s legislative proposals are negotiated between Member States.
Frontier Economics regularly advises clients on market design and energy system security issues. Frontier in Australia has been advising on the recent issues in the South Australian market.
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