Workshop on long-term contracting in electricity markets: how to insure investments for supply security and climate policy?
Abstract
Wednesday, 18 December 2013, from 9.00 a.m. to 5.30 p.m. (9h00-17h30)
Université Paris-Dauphine
Room Raymond ARON
2nd Floor
The workshop was held in English.
Presentation
Decarbonizing the European electricity industry while maintaining security of supply, will require significant investment in both clean generation technologies and fossil-fuel peak equipment. But the theory for electricity market liberalization developed in the early 1980s is rooted on marginal cost pricing, a market paradigm which worked well to induce competition between technologies with significant variables costs, such as gas fired plants. It does not help to secure investment in large CAPEX equipment as they are in the whole set of RES-E and low carbon technologies. Long-term contracts and vertical integration are the most convenient way to maintain incentives to invest in all the technology mix by helping risk management and risk sharing.
But conventional wisdom in electricity restructuring requires limitations of long term contracts and vertical integration between generators, retailers and large consumers, for allowing entries and development of effective competition on wholesale and retail markets. Attachment to these principles was particularly reflected in the competition principles of the European Commission and some regulation authorities. Economic theory of industrial organisation which formerly points restrictions of competition by CLTs affords new insights on the limitation of entries in generation. In fact it could appear easier if entrants could be helped by long term forward contracts, which would make market more contestable. Moreover some academic works suggest that antitrust regulators could consider introducing forward contracts as a means to reduce market power exercise on oligopolistic markets. So under some change in competition policy principles, future reforms of European electricity markets will therefore need to explore alternative models of competition allowing investment in the technology mix.
The workshop will deal with this need of long term contracts on which consensus is evolving. Market design issues as well as competition issues will be raised in theoretical way and above all particular in an empirical way by referring to concrete experiences.
PROGRAMME AND SLIDES
9.00 a.m. – 9.30 a.m.: Registration
9.30 a.m. – 9.45 a.m.: Welcome of Participants and presentation of key issues by Jan Horst KEPPLER, Scientific Director of the Chaire European Electricity Markets (CEEM)
Introduction
I. SESSION 1: 9.45 a.m. – 10.45 a.m.
THE DILEMMA OF LONG-TERM ARRANGEMENTS FOR DECARBONISATION POLICIES IN EUROPEAN ELECTRICITY MARKETS
Chairman: Jan Horst KEPPLER, Scientific Director of the CEEM, Université Paris-Dauphine.
Presentation 1: Inge BERNAERTS, Head of Wholesale Markets Unit (DG Energy), “In the line of the forthcoming Communication: How can we provide certainty to investors and stimulate investment in low carbon technologies?”
Présentation
Presentation 2: David NEWBERY, EPRG, Cambridge University, “Contracting with government to invest in low carbon technologies: How to design the Visible Hand?”
Présentation
10.45 a.m. – 11.15 a.m. Coffee Break
II. SESSION 2: 11.15 a.m. – 12.45 a.m.
LONG-TERM ARRANGEMENTS BETWEEN PRODUCERS, SUPPLIERS AND PUBLIC AGENCIES
Chairman: Patrice GEOFFRON, Director of CGEMP, Professor in Economics, Director of Axis 3 CEEM, Université Paris-Dauphine.
Presentation 1: Eric BROUSSEAU, Université Paris-Dauphine, “Between the market and vertical integration: The transactional efficiency of long-term arrangements in liberalized capital intensive industries”.
Présentation
Presentation 2: Dominique FINON, CEEM and CIRED, “From the failure of long-term commercial contracting to public coordination under long-term contracting with a neutral agency”.
Présentation
Presentation 3: Fabien ROQUES, Compass Lexecon and CEEM Associate, “Auctioning of long-term contracts for electricity supply: Different approaches and options”.
Présentation
12.45 a.m. – 2.00 p.m. Lunch
SESSION 2 (Continued): 2.00 p.m. – 3.15 p.m.
Presentation 4: Patricia VAN HORN FLORIN, CEEM-Université Paris-Dauphine, “Lessons from LTCs experience in semi-liberalised markets: the case of Ontario and California”.
Présentation
Presentation 5: Frédéric DE MANEVILLE, Former Director of Vattenfall France, “The competition for access to hydroelectric assets: risks related to specifications in current tendering procedures”.
Presentation 6: Anne LAPIERRE, Partner, Norton Rose, “Tenders for off-shore wind-power: analysis of contractual risks”.
Présentation
3.10 p.m. -3.30 p.m. Coffee Break
III. SESSION 3: 3.30 p.m. – 4.30 p.m.
LONG-TERM CONTRACTS AND COMPETTION ELECTRICITY MARKETS
Chairman: Dominique FINON, CEEM and CIRED.
Presentation 1: Anna CRETI, Université Dauphine, “Recent theoretical developments on long-term contracts and imperfect competition”.
Présentation
Presentation 2: Adrien DE HAUTECLOCQUE, Legal Secretary at the European Court of Justice, “In which situation long term contracts with public or private player could be viewed as a State Aid?”
Présentation
IV. 4.30 p.m. – 5.15 p.m.
ROUNDTABLE ON “PUBLIC POLICIES, LONG-TERM CONTRACTS AND COMPETITION RULES”
Jérôme DUROYON (EON France), Marc BUSSIERAS (Directeur du Pôle Économie, Direction Stratégie et Prospective, EDF), Adrien DE HAUTECLOCQUE (Legal Secretary at the European Court of Justice), Fabien ROQUES (Compass Lexecon and CEEM Associate), and Thomas VEYRENC (Directeur du département Marchés, RTE).
5.15 p.m. CONCLUSION by Dominique FINON (CEEM and CIRED).
