PE 504.466 III-1 CoNE 2/2013 Cost of Non-Europe in the Single Market for Energy ANNEX III

Modern and extended European energy infrastructure, to meet the Union's energy policy objectives of competitiveness, sustainability and security of supply Research paper by Georg Zachmann In this paper we show that market integration in the European Union can reduce the cost of electricity. First, through various case studies, we indicate that competition and integration in the different electricity market segments have led to substantial cost savings. Second, we show that increasing interconnections between countries reduce the cost of producing electricity. This effect is particularly important when countries can re-optimise their power plant park within the joint system and when high shares of renewables require substantial back-up capacities. Furthermore, connecting countries with strongly differing profiles of renewable energy feed-in is exceptionally beneficial. And third, we demonstrate that the value of interconnections have started to increase again. The full benefits of the internal market can only be reaped with an appropriate market design and an appropriate infrastructure. To create a stable investable single energy market, a common vision for a consistent European market design needs to be developed. Research paper on competitivenes