What is the EU Target Model?
Written By: Maya Ardon
Edited by: Vanessa Lu Langley
The EU target model for electricity markets is a basis for the development of a single electricity market across Europe (Keay, 2013). It is part of the EU’s third energy package, which aims to resolve structural problems of the internal energy market and further the EU’s approach to climate change. (European Commission). Essentially, the target model is a blueprint for what the electricity market should look like in a “cross-border market design” as electricity is traded between member countries (ENER, 2017). The target model is based on two main principles:
A “flow-based method” that calculates the capacity of electricity at certain points and allocates the energy as directly as possible to where it’s needed. Ideally, all the electricity markets between member countries are interconnected in one grid allowing for market coupling. (Keay, 2013).
Regional wholesale markets are established on a zonal basis that can account for constraints in the system in different places, since the generation and allocation of electricity is not uniform across European member countries. Thus, this occurs in zonal pricing to reflect these differences.
The integration of electricity markets across Europe is not a uniform process, because different countries function on different stages in regards to energy development. For example, Greece implemented the target model quite recently in 2020.
Third energy package. European Commission – Energy. (n.d.). Retrieved February 15, 2022, from https://energy.ec.europa.eu/topics/markets-and-consumers/market-legislation/third-energy-package_en
Ioannidis, F., Kosmidou, K., Andriosopoulos, K., & Everkiadi, A. (2021). Assessment of the target model implementation in the wholesale electricity market of Greece. Energies, 14(19), 6397. https://doi.org/10.3390/en14196397
COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Commission Regulation (EU) No .../... Establishing a Guideline on Electricity Balancing, (2017) (testimony of ENER & Европейска комисия, Генерална дирекция „Енергетика“). https://eur-lex.europa.eu/legal-content/bg/TXT/?uri=CELEX:52017SC0383
Keay, M. (2013). The EU "Target Model" for electricity markets: fit for purpose? Oxford Energy Comment. Retrieved February 15, 2022 from https://www.oxfordenergy.org/publications/the-eu-target-model-for-electricity-markets-fit-for-purpose/.