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ARERA starts consultation on dispatching reform and from BRUSSELS electric market reform awaited

The energy market is going through a period of great evolution and reform at both national and European level.

At national level, on 13 December 2022, the Italian Regulatory Authority for Energy, Networks and Environment (“ARERA”), published a draft of the Electric Dispatching Integrated Text (Testo Integrato del Dispacciamento Elettrico, “TIDE”) on its website so that those interested may put forward proposed changes or opinions.

The consultation period will end on 13 March 2023, after which the Authority will adopt and publish the TIDE in its final version.

Before identifying the most significant aspects of the TIDE, it seems opportune to specify the context into which this document fits: it follows a previous document on which consultation took place, as per Resolution no. 322/2019/R/eel, with which ARERA had set out the interventions aimed at making dispatching fit to guarantee the security of the electric system.

The consultation revealed

(a) the need for a comprehensive reform of the regulation on dispatching, to include, among other things and in line with current European decarbonisation goals, the integration of renewables into the electric system.

(b) the need to have a clearer and more complete framework (i) on the separation between the physical planning of units and the wholesaling of energy, (ii) on the interrelations between the ex ante planning phase of the Dispatching Service Market (Mercato per il Servizio di Dispacciamento, “MSD”) and the Intra-day Market (Mercato Infragiornaliero, “MI”) which operate in parallel, (iii) on the roles and on the relationship between those involved in trading energy and those involved in supplying ancillary services.

In light of the outcome of this previous consultation, ARERA then prepared the draft of the TIDE which was put for further consultation on 13 December 2022.

The aim of the new TIDE draft is to guarantee the security of the electric system efficiently and at the lowest cost possible, given the increasing spread of non-programmable renewable sources and of distributed generation, as well as the gradual reduction in the use of programmable power plants; a trend which, in light also of the decarbonisation goals agreed at European level, is increasing and is quickly changing the nature and physical characteristics of the resources which can provide the ancillary services needed to guarantee the safe operation of the system, making it necessary to remove any barriers that prevent its use.

The TIDE therefore has set itself the goal of rationalising the general regulatory framework for dispatching, so as to group in a single body of law all those disparate provisions which have been adopted in recent years as the European regulatory framework has changed (including the Guidelines introduced by Regulation no. 943 of 5 June 2019). This framework envisages increasingly open and integrated national markets in terms of exchanging both energy and balancing resources.

Instead, at European level, there is the recent news that the European Commission, pending reform of the electric market design which will profoundly revise the rules for the operation of electric markets, will put out a non–paper for consultation, the most important proposals in which include:

  • incentivised plants should rely on Contracts for Difference (“CfD”), to be assigned through auctions, and non-incentivised plants on Power Purchase Agreements (“PPA”) as long-term electric supply agreements. The purpose is to bring the price of electricity produced by inframarginal technologies to their real cost;
  • assessing the possibility of harmonising and making permanent the limit on the profits of the infra-marginal generators, which was introduced with the Regulation of the Council no. 1854 of 6 October 2022 (with which emergency action was taken to address high energy prices);
  • making flexible solutions such as demand response and storage competitive;
  • envisaging various provisions to protect consumers in order to improve the current emergency provisions on regulated prices. This could ensure that during an emergency some consumers have access to a minimum level of electricity at a reasonable price, regardless of the trend in the electricity market.

The Commission will therefore draw up the final text of the proposed reform of the market design, in light of the responses presented following the consultation on the non–paper.

A date has not been set to issue the reform, but indicatively it is presumed that it will be published in spring 2023, as can be inferred from the non-paper published by the European Commission.