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in this video it's my pleasure to talk to you about the european experience with electricity markets and the story starts at the end of the 90s at that time we only had two countries the ones in green there that had some experience with the national electricity market so for all the others the process still had to start even though they didn't have markets most countries were already trading across borders as you can see in the picture on the left about seven percent of our consumption was already being exchanged across borders this was done in big contracts between governments or between the companies mandated by government to take care of the sector now then we introduced markets how did we do that well we went in three big steps we had the first package the second the third package and we also had the clean energy package more recently besides introducing new rules to govern the sector we also created new institutions new entities very important has been the creation of national regulatory authorities and equally important i would say the creation of transmission system operators that became market facilitators for both we first had a process of establishing them at a national level and then creating a kind of european entity we had acer the agency for cooperation of regulators and we had nsoe thanks to the third package for the cooperation of tsos then the clean energy package took that a step further giving more role to acer more role to ensue but also to create the equivalent of nsoe for dsos because the more the energy system is decentralizing the more we also need dsos in the role of market facilitator so brand new is the eu dso entity why are these entities so important well the third package has mandated then to develop more detailed market rules and we really needed to get into the details to also achieve uh the benefits um and there are three um families of of network codes and here i'll zoom in mainly on the market codes i'll give you a flavor of what this capacity allocation and congestion management guideline did and also what the electricity balancing guideline did for us in europe first the cacm guideline it actually addressed this picture because this picture comes from the sector inquiry that was published a few years before we had the third package and it clearly showed why trade at that time was rather inefficient this is data from 2004 between germany and the netherlands on average the netherlands had a higher price so traders in each hour of the day and that you can see on all the dots were typically trading and scheduling um from germany to the netherlands that's why most of the dots are in the upper part of the graph the lower part of the graph is when they were scheduling in the opposite direction but the price differential was not always in the in the same direction as traders would thought because all the observations all the dots you see in quadrant number two that's when the traders were making money by scheduling in the direction of the netherlands but everything in quadrant one which is quite a lot is about 40 percent of the time traders were actually losing money by trading from germany to the netherlands so it turns out that it was very hard to trade in that kind of scheme and that's why we introduced something we refer to as market coupling one of the biggest achievements of the european market project so far and market coupling implies that the trade across borders is actually more facilitated by power exchanges the trading platforms for day ahead and intraday and other um standardized products at the day ahead stage um what they have done is they collect the bids for the auction at each through each national platform and then they merge these order order books together and try to optimize as good as they can for the whole of europe calculating prices for each of the countries and each of the bidding zones now because they received a more important role they have also been subjected of course to a bit more governance there is a certification of power exchanges that leads them to become what we refer to as nemos very special to the european project is that market operation is not a monopoly activity in all countries some countries have chosen for a competitive model and that allows several exchanges to compete within that market and we see also an increase of that competition going on now all of this has already resulted in billions of money being saved and very interesting reference there is the acer market monitoring report that every year gives us an update on what is going on and how much money is being saved and it's good to have a reminder once in a while of how important this actually is so that was for wholesale markets now a bit about balancing markets more recently we have become rather ambitious in how we deal with balancing markets so they are very important because in electricity it's very hard for everyone that manages a portfolio to know exactly how much you can produce or exactly how much your customers will consume so portfolios will in real time turn out to be somewhat unbalanced and the role of the tso is to then solve that on balance not with their own resources but with resources they've procured in balancing markets and they used to do that mainly at the national level but now we also have european platforms where these services can be exchanged and it turns out that also that is very beneficial so the volumes that are exchanged there are maybe lower than in a wholesale market but the you know the impact it has on prices is is really significant um and this is actually one of the reasons that can explain what we call the german paradox or the renewables paradox because a few years back when we were formulating our ambitions to go towards more renewables everybody was afraid that this would really increase balancing costs in europe but we've seen balancing costs going down for instance in germany but also in other countries as a result of improving balancing markets at a national level but also exchanging these services um across borders so that meant that we've already had quite some success in this whole european story uh and as a result we also have a picture that looks a bit like this so most countries now have similar setup similar sequence of electricity markets and we have codes or the clean energy package that is addressing the harmonization of each of these markets but of course the the story is never finished today we are again facing new challenges and i'm sure that these challenges will be translated in new success stories and a new evolution of electricity markets if you want to know a bit more in detail of how these codes have impacted electricity markets we have an open access book that you can have a look at if you want