Duška Godina, Slovenia’s Energy Agency: An Energy Market Is a Nexus of Interests
Date: December 4th 2020
Author: Alenka Lena Klopčič
The Electricity Supply Bill, drafted by Slovenia's Ministry of Infrastructure, gives more powers to the energy regulator. What exactly does this entail for the Energy Agency of the Republic of Slovenia as the country’s energy regulator, and can the Agency exercise these powers if the Ministry of Economic Development and Technology follows through on its plan to merge eight independent agencies into two super-agencies? This was the first topic of Energetika.NET’s new video interview with Duška Godina, the Director of Slovenia’s energy regulator (in Slovenian only). Other subjects discussed in the interview include the active role of today’s energy consumers; the revision of the methodology for setting network charges in electricity supply as the regulator’s most challenging project; and the potential of green hydrogen production.
No benefits to the proposed merger of agencies
When asked about the new powers given to the energy regulator, Duška Godina said it was, in fact, with every transposition of new EU directives that the Energy Agency is given new powers and tasks, while Slovenia’s Energy Act (EZ-1) has substantially increased the energy regulator’s independence. Slovenia ranks sixth by OECD’s indicators on energy regulator independence, whereas the Dutch model, on which the Slovenian government has patterned its agency merger bill, is at the very bottom of the OECD ranking.
Independence (of the regulator) has to do not only with the appointment and dismissal of its management, but above all with preventing the conflict of interest of management members and ensuring adequate expert supervision. This, according to Godina, is the main flaw of the bill: it abolishes the expert council as the body that helps the director make most complex decisions, thus reducing the number of decision makers from seven to just one. Maintaining independence and retaining strong expert leadership is key, added Godina, especially as new tasks include approving system operators’ development plans and therefore steering network planning and development in line with the development of a new market model.
The new directive explicitly emphasises the need to strive for cost effective integration of distributed generation sources into the distribution system, as well as new loads that are expected to emerge due to an increasing number of heat pumps and the expected development of e-mobility. Therefore, system operators should consider making investments in smart grids, as this will allow us to avoid costly network expansions, or manage certain loads over longer periods of time, explained Godina, highlighting the urgent need to pursue broader social benefits and have them prevail over the interests of companies that merely pursue higher profits.
According to Godina, the Agency is also acquiring a more significant role in supervising commercial activities, which system operators are not allowed to engage in unless the regulator finds that there is no market interest for the activity in question at a certain time. These are complex processes that involve constant market analyses and monitoring, and this, in turn, requires a high level of expertise and – independence.
“One should not forget that an energy market is a nexus of interests, and negotiating between them is a very difficult task. This makes decision making that is independent of market or any other interests, key to broader social benefits,” emphasised Godina, adding that the quality of work done is undoubtedly related to the regulator’s independence. This is why the Agency strongly opposes the said proposal of the Ministry of Economic Development and Technology, the planned merger of agencies promising to have no positive impacts.
- Energy Agency: Proposed Merger of Slovenian Regulators in Violation of EU Law
- Vlada potrdila predlog o združevanju regulatorjev (available in Slovenian only)
- Slovenski energetski regulator na področju spodbujanja inovacij med vodilnimi v Evropi (available in Slovenian only)
Revision of the network charge setting methodology as the regulator’s most challenging project
Back in summer, in the light of the changing energy system, the Energy Agency announced it was launching a project to revise the methodology for setting network charges in electricity supply. At the time, the Agency said that the “new methodology must address the development aspects and requirements of the implemented European legislative package ‘Clean Energy for All Europeans’, which focuses on distributed generation and an active role of consumers”.
Duška Godina considers this one of the most challenging projects the Agency has ever implemented. Needless to say, the situation in the energy market was entirely different twenty years ago, when the applicable methodology was developed, than it is today. The last stage of the process to award the public contract is currently underway, and the Agency hopes to have the project running by mid or late December. Earlier this year, the Agency has already coordinated its efforts with both system operators – Eles and SODO – as well as distribution companies.
The aim of the project is to develop a new methodology taking full account of all market development aspects and EU requirements arising from the latest legislative package in terms distributed generation sources, storage capacity, the active role of consumers, etc., while making the tariff system one of the key drivers of this development process. According to Godina, the new methodology is expected to be implemented in stages as it might prove impossible to do it all in one go, given the extent and the impact on consumers.
Read also: Preobrazba elektroenergetike zahteva prenovo metodologije obračunavanja omrežnine (available in Slovenian only)
In its Report on the Energy Sector in Slovenia for 2019, the Energy Agency said that the share of demand response in Slovenia could reach some 10% by 2030 (MORE, in Slovenian only). With regard to this projection, Godina says Slovenia is still in a phase where the activity of small-scale consumers is largely limited to supplier switching. With large-scale consumers, the situation is a little more encouraging.
- Slovenija v letu 2019 dosegla 21,85-odstotni delež OVE v bruto končni porabi (available in Slovenian only)
- Share of Demand Response in Slovenia Could Reach 10% by 2030
On the active role of today's energy consumers
According to Godina, small-scale consumers could be included in aggregation; what is key to encouraging them to participate in the market is awareness-raising and tailored rules that provide adequate protection (MORE, in Slovenian only). One should understand that these consumers will mainly participate for financial reasons. In its document ‘Stimulating Flexibility Market: A Concept of Implementing Demand Response Within the New Market Model’, the Agency has drawn attention to the fact that, if the new regulation hiders business models that boost aggregation and the active role of consumers in the EU, final consumers in Slovenia will be unfairly burdened by the unnecessary costs of network use billed via network charges. As a result, Slovenia’s industry would become less competitive globally (MORE, in Slovenian only).
According to Godina, the right conditions should be created to enable successful market entry for new players. In addition to suppliers, these independent aggregators are key to providing demand response. “The flexibility of demand response should be used to its full potential,” said Godina. In the interview, she also briefly discussed the pitfalls of the active role of consumers, and mentioned Luče as the first local energy community in Slovenia.
The video interview with Duška Godina, which also raises the issue of hydrogen and green gases, is available HERE (in Slovenian only).
This article is available also in Slovene.