Towards a consumer-centric energy market design in Europe

Belgium’s transmission system operator Elia Group has called for two market design changes to become consumer-centric.

Consumers are at the centre of the energy transition from a centralised to decentralised system with widespread distributed resources connected to the grid. These energy resources are essential for meeting net zero targets but their efficacy can only be realised if fully integrated as players in the energy market.

In a new paper from Elia Group, the TSO argues that though this vision has been recognised in Europe, it is yet to be realised as important enablers are still missing. For example, smart meter rollout is not compulsory in member states, and clear legal channels for making electricity markets easily accessible to new types of service provider do not exist.

Elia Group suggests that a consumer-centric market design can be achieved with just two changes to the current market design.

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One is the development of a so-called ‘Exchange of Energy Blocks’ hub, through which the exchange of energy would occur on a fifteen-minute basis between consumers and other market parties such as suppliers and service providers.

The second is the introduction of a robust price signal, which would reflect system conditions in real time, and give consumers a reference for their consumption and the value of services offered by third parties.

Together, these would place consumers at the heart by giving them the full freedom to choose services from different providers behind the meter at the appliance level and without having to delegate all the responsibilities to one single party, Elia Group says.

It also would open up competition behind the meter as well as ‘for the meter’.

Chris Peeters, CEO of Elia Group, comments in the paper that the proposed consumer-centric market design addresses the barriers to the active market participation of small flexibility assets.

“Once it has been rolled out, existing and new suppliers will be able to provide their customers with better services, allowing them to reap the benefits of the flexibility embedded in their appliances.”

The paper notes that the changes would affect the roles and responsibilities of Balancing Responsible Parties, suppliers and service providers. The physical balancing obligation which applies for all connection points in the portfolio of a BRP must therefore be eased, since this constraint is incompatible with consumer freedom and unnecessary under a real-time market that involves decentralised financial responsibility.

The precondition for easing this constraint is real-time pricing, which guarantees appropriate incentives to stabilise the system. A settled balancing system, which has reached a target state and has proven to be reliable, is therefore necessary.

Peeters adds that in order to make the consumer-centric market design a reality, Elia Group is collaborating with actors across the value chain and stakeholders from across society as a whole. During 2021, the focus is on addressing any remaining questions. After undergoing a phase of testing, the evolved market design should be ready to be rolled out as early as 2023 or 2024.