Electricity markets in Europe: Business environment for Smart Grids

This report takes a look on the current state and future development opportunities of electricity markets in the European Union (EU). The business environment established by electricity markets has an essential impact on the potential and development of so called Smart Grid concepts and technologies, currently under extensive research and development in the EU. According to a comparison based on previously published scenarios, electricity demand is expected to increase in the European Union. The projections for 2020 range from 3 530 TWh to 3 795 TWh, being 150-420 TWh higher than the electricity generation in 2008. EU's energy and climate policy commitments imply that the electricity supply structure of EU needs to change completely in the next decades, from the current fossil fuel and nuclear based system to a system based on renewable energy sources and other low-carbon technologies. According to National Renewable Energy Action Plans, the annual RES-E production is expected to reach 1 200 TWh by 2020, more than double the amount generated by RES-E technologies in 2010. Integrating distributed and often non-dispatchable renewable energy resources - especially wind and solar power - in electricity and energy systems is a key driver of the European electricity grid development. The European Union aims towards a single European electricity market. With the help of a well interconnected grid, the cost of renewable energy deployment can be brought down. As a result of expected changes in electricity demand and supply, demand for many technological solutions discussed in a context of Smart Grids, such as demand response, advanced metering and automation, will increase from current. Cost-efficient potential of these technologies as a part of elec-tricity systems remains a key question in further research and development of Smart Grids.