On the way to a pan-European energy market?

Last month, the European Commission proposed a third legislative package for the energy sector. Further integration of the European energy markets is one of the main objectives. An Agency for the Cooperation of National Energy Regulators (ACER), with binding decision powers, would be created to facilitate cross-border energy flows. The second Energy Economics Policy Seminar, jointly organized by TILEC, the Dutch competition authority (NMa), the Netherlands Bureau for Economic Policy Analysis (CPB), and the Dutch Ministry for Economic Affairs in The Hague last month, discussed the remaining
obstacles on the way towards integration. Boaz Moselle (The Brattle Group) argued that the third liberalisation package does not go far enough, as full unbundling of the high-voltage transmission network is not imposed, and the ACER will not have sufficient powers. Mette Bjørndal (Norwegian School of Economics and Business Administration, Bergen) talked about the difficulties of setting up an integrated energy market when the physical aspects of the network are not fully taken into account during the market design phase. She further showed that different congestion mechanisms can create large externalities for other networks and that the incentives of the different network operators are therefore not aligned.