Capgemini: EC efforts to stabilise energy market lacking

12 November 2014 3 min. read

The 2014 European electricity and gas markets remain disturbed, resulting in negative wholesale prices, closing plants and high prices for consumers, concludes Capgemini in a new report. To stabilise the European energy market, the European Commission has set new regulations and defined new energy targets to be fulfilled by 2030. These efforts, however, are insufficient. According to Capgemini, Big Data needs to be recognised as an important priority and utilities need to become truly digital.

European Energy Markets Observatory
For more than a decade, consulting firm Capgemini has been researching the state of the European energy markets. In its European Energy Markets Observatory (EEMO), the firm tracks the establishment of an open and competitive electricity and gas market in EU-28 (plus Norway and Switzerland) and the achievements made by the EU in reaching its Energy-Climate objectives. Recently, Capgemini together with the Research team at Natixis, CMS Bureau Francis Lefebvre and Vaasa ETT released the 16th edition of the report.

Capgemini - Natixis - CMS Bureau Francis Lefebvre - Vaasa ETT

According to the researchers, the European markets for electricity and gas in 2014 remain, just as in 2013, disturbed. This disturbance translates into negative electricity prices on the wholesale markets, closures of gas-fired plant closures and increased retail prices for residential and industrial customers.

European energy markets remain chaotic

As a result of the fragmented energy market, the European Commission (EC) has tried to adapt to the market condition and defined new objectives and rules. The EC has modified its Energy Climate policy and outlined its climate and energy priorities to be reached by 20130: a 40% reduction in greenhouse gases from the 1990 level, an increase of the proportion of renewable energy in the electricity mix to 27% from the 14.1% in 2012, and an energy efficiency gain of 27% from its 2005 projections. In addition, the EC initiated several reforms such as the lowering of renewable energy funding by linking the subsidies to market conditions, the creation of Market Stability Reserve that to manage the carbon allowances and accepting capacity markets implementation to enhance the security of supply.

Actions and reforms by EC to restore electricity markets

According to Capgemini however, these measures will not be enough to restore a stable market in electricity and ensure security of energy supply for Europe. “By establishing these objectives, the European Commission is responding to current market failures. However, their effects won’t occur for many years. Without rapid and profound changes, negative wholesale electricity prices could still be observed and new gas-fired plant closures could occur. Moreover, prices will keep increasing on the retail markets, and electricity supply could gradually be threatened in many European countries,” comments Colette Lewiner, Global Leader Energy and Utilities as Capgemini.

Future perspectives
The importance of Big Data should be recognised as Big Data will play a significant role across all sectors going forward. Lewiner states that fragile companies should be bold and become Digital Utilities. The EC has already committed to a multi-sectoral R&D program known as ‘Horizon 2020’, an ambitious and well-funded plan according to Lewiner. In the ‘Horizon 2020’, the gathering, analysing and use of all available data are recognized as priorities. In addition to the emphasis on big Data, Lewiner states that investments in electricity infrastructure of $2,200 billion are needed by 2035.