ACER publishes today its Recommendation on the treatment of electricity losses in the Inter-Transmission System Operator Compensation (ITC) mechanism.

What is the ITC mechanism?

The ITC mechanism compensates Transmission System Operators (TSOs) for the costs incurred on national power systems for hosting cross-border flows of electricity (transits). The ITC fund seeks to cover the costs of the incurred transmission losses and infrastructure’s availability.

What are power losses?

Power losses happen with electricity’s transmission and they can give rise to significant costs. In most EU countries, the procurement of energy to cover transmission losses is in the hands of the TSOs. Reducing losses decreases the operational costs of power grids and increases benefits to the society.

The ACER Recommendation is addressed to the European Network of Transmission System Operators for Electricity (ENTSO-E), TSOs and National Regulatory Authorities (NRAs) after ACER having identified potential shortcomings in its latest yearly monitoring report on the ITC mechanism.

What is the summary of ACER’s recommendations?

• The number of snapshots used for the estimation of the volume of losses due to transits should be increased;
• An ex-post reconciliation of the costs of losses due to transits should be applied in the ITC mechanism, to reflect the costs actually incurred; and
• Where relevant, and at least as an interim measure, liquid forward-market prices should be considered instead of historical prices for determination of the relevant components of the value of losses for the ITC mechanism.

Access the Access the ACER Recommendation on the Treatment of Losses for the Purpose of the ITC Mechanism.

ACER launches today a public consultation on electricity grid operators’ proposals for a harmonised cross-zonal capacity allocation methodology for procuring electricity balancing capacity.

Electricity grid operators must keep the power system stable or in balance. Allocating cross-zonal capacity to balancing capacity enables the power system to be balanced more efficiently.

ACER received the Transmission System Operators’ (TSOs’) and ENTSO-E’s proposals:

• for the harmonised methodology for cross-zonal capacity allocation for the exchange of balancing capacity or sharing of reserves;
• for the Regional Coordination Centres’ (RCCs') task of regional sizing; and
• for the RCCs’ task of facilitating the procurement of electricity balancing capacity.

These three proposals aim at integrating balancing capacity markets with the use of cross-zonal capacities. The goal is to lower the costs of procuring electricity balancing capacity while ensuring security of supply. This can be archieved by reducing the overall balancing capacity needs and by lowering the procurement cost of that balancing capacity which needs to be procured.

What are the next steps?

• ACER will assess these proposals and decide on all three by July 2023.
• To collect the views of stakeholders, ACER is running a public consultation on the proposals from 13 April to 11 May 2023.
• ACER invites interested stakeholders to a workshop on 19 April 2023. 

On 31 March 2023, with its Decision 08/2023, ACER approved for the European Union a proposal from 13 October 2022 by Transmission System Operators (TSOs) to include the Norwegian bidding zone borders into the electricity capacity calculation regions (CCRs).

What are the amendments about?

Norway is part of the internal energy market through the Agreement on the European Economic Area (EEA). In 2021, following the Capacity allocation and congestion management (CACM) Regulation becoming binding for Norway, TSOs proposed the inclusion of the Norwegian bidding zone borders in the Hansa and Nordic CCRs.

Before approving the TSOs’ proposal for the EU, ACER assessed whether the changes would contribute to market integration, non-discrimination, effective competition and the proper functioning of the EU electricity market. The EFTA Surveillance Authority (ESA) is conducting in parallel its assessment to prepare its decision for Norway.

To make an informed decision, ACER also consulted stakeholders across the EEA through a public consultation between 28 October and 25 November 2022.

What are the capacity calculation regions and why are they important?

CCRs define the geographic areas (i.e. by listing bidding zone borders) across Europe in which the task of capacity calculation and other processes are coordinated by the TSOs (i.e. subject to regional methodologies).

There are 8 CCRs in Europe: Nordic, Hansa, Core, Italy North, Greece-Italy (GRIT), South-west Europe (SWE), Baltic and South-east Europe (SEE).

Forming CCRs benefits European consumers, as it:

• allows TSOs to run regional processes related to capacity calculation, re-dispatch and countertrading more effectively;
• facilitates the optimal provision of cross-zonal capacity, which allows more cross-zonal trade while ensuring security of supply; and
• further facilitates welfare increases by integrating Norwegian bidding zone borders in European and regional processes.

What are the next steps?

ESA, responsible for overseeing the application of the EEA rules in Iceland, Liechtenstein and Norway, has been asked by the Norwegian Energy Regulatory Authority for (NVE-RME) to decide on the CCR methodology for Norway.

The amendments of the CCRs decided by ACER for the EU will become applicable provided that ESA and NVE-RME adopt their respective decisions on the CCR methodology.

Access the ACER Decision on the amendment to the determination of capacity calculation regions and its annexes:

• ACER Decision 08/2023 on the amendment to the determination of capacity calculation regions
• Annex I
• Annex Ia
• Annex II
• Annex III

Europe requires significant investment in energy infrastructure that is cost-efficient to successfully achieve the energy transition. Every two years, the European grid operators submit their Ten-Year Network Development Plan (or TYNDP) to ACER. Today, ACER identifies, in its two opinions, improvements and shortcomings of the 2022 draft electricity TYNDP developed by the European Network of Transmission System Operators for Electricity (ENTSO-E):

• ACER Opinion on the methodological aspects of the ENTSO-E TYNDP 2022; and
• ACER Opinion on electricity projects in the draft ENTSO-E TYNDP 2022 and in the National Development Plans (NDPs).

What is the TYNDP?

The main objectives of the TYNDP are to:

• Identify investment gaps (including cross border capacities);
• Contribute to a sufficient and non-discriminatory level of cross-border interconnections, effective competition and efficient functioning of the market;
• Ensure a greater transparency of the European electricity transmission network.

The TYNDP also provides essential and comprehensive information for the selection of projects of common interest (PCIs).

What are ACER’s main findings?

In ACER’s opinion, the draft electricity TYNDP 2022 does not sufficiently contribute to the efficient and secure functioning of the electricity market.

While the 2022 draft electricity TYNDP shows certain improvements…

ACER acknowledges the resource intensiveness and complexity of the TYNDP process and welcomes a number of improvements in the 2022 draft electricity TYNDP, for instance in the:

• Inclusion Guidelines;
• Consultation on the Implementation Guidelines;
• Needs identification; and
• Increased transparency of the cost benefit analysis (CBA) assessment.

…ACER also finds shortcomings

ACER finds that the plan does not sufficiently contribute to the efficient and secure functioning of the electricity market, especially compared to previous TYNDPs, mainly due to five shortcomings:

• Insufficient and untimely consultations on the main methodological elements of the TYNDP package (i.e. the scenarios methodology, the needs methodology and the implementation of the CBA methodology).
• Delays in the draft TYNDP delivery, resulting in outdated data and delays in the PCI selection processes.
• Insufficient scope of the CBA analysis, focusing on the 2030 study year, and mainly on one scenario.  
• The starting grid (used as a starting point for the calculation of infrastructure needs) and the reference grids (used as counterfactual in the TYNDP CBA for the calculation of the project benefits) are not fully in line with the criteria set by ENTSO-E.
• Inconsistent data regarding the transfer capabilities.

In addition, ACER was not able to assess whether the system’s resilience to climate change impacts is addressed in the draft electricity TYNDP 2022.

What does ACER recommend for future electricity TYNDPs?

ACER proposes several recommendations to ENTSO-E to serve European consumers and Europe’s decarbonisation and sector integration ambitions.

For the 2022 final Electricity TYNDP, ACER recommends ENTSO-E to:

• Make all relevant inputs accessible in a clear and straightforward format as part of the 2022 final electricity TYNDP publication.
• Provide transparency on how the investment costs for the needs identification were derived by distinguishing between internal reinforcements and overall project costs.
• Publish for each cross-zonal boundary and each flow direction the transfer capacities of the current grid, starting grid (for the purpose of needs identification) and of the reference grid for 2030 and for 2040.
• Use the 10,000 EUR/MWh Value of Lost Load (VoLL) where no specific data is available.
• Explain how an assessment of resilience, if any, was carried out in the 2022 final electricity TYNDP (potentially including improvements for future TYNDPs).
• Review and eliminate the project-specific inconsistencies reported in ACER Opinion on electricity projects and consider the differences identified by national regulators between the NDPs and the 2022 draft electricity TYNDP.

For the 2024 electricity TYNDP and beyond, ACER recommends ENTSO-E to, inter alia:

• Restructure the TYNDP development process in order to complete it by December of the TYNDP year (considering also ACER’s opinion).
• Conduct a substantial consultation of the important methodological elements and parameters considered in the various deliverables of the TYNDP early enough in the process to have the capability to consider stakeholders’ comments.
• Calculate the benefits of projects according to all the joint scenarios developed by ENTSOs, and for all relevant time horizons to ensure adequate consideration of uncertainty.
• Base the modelling of the grid on an appropriate starting grid (for the needs exercise) and reference grids (for the CBA assessments) by including only the projects which strictly comply with the rules set in the respective implementation guidelines.
• Calculate the additional transfer capabilities of each project (and not leave this task to the promoters themselves), perform the calculations with more granularity (e.g. calculate at least seasonal NTCs) and improve their transparency.
• Consider the impact of the 70% interconnection capacity availability targets where relevant in the modelling of the power system for the development of the TYNDP.
• Enhance the consistency between the NDPs and the EU TYNDP by implementing the measures recommended in the ACER Opinion on electricity projects.

Access the ACER opinions:

ACER Opinion 03/2023 on the methodological aspects of the ENTSO-E TYNDP 2022.

ACER Opinion 04/2023 on electricity projects in the draft ENTSO-E TYNDP 2022 and in the National Development Plans (NDPs).

On 1 March 2023, ACER received the Transmission System Operators (TSOs) proposal for the amendment of the Harmonised Allocation Rules (HAR) for long-term electricity transmission rights, mainly to allow for their long-term flow-based allocation. ACER launched a public consultation on 29 August 2023 on the amendments to the rules.

Why change the rules?

Cross-zonal capacity is currently allocated in the long-term electricity market with no coordination between different bidding zone borders, causing inefficiencies in some capacity calculation regions. This HAR amendment is needed to introduce the flow-based allocation of long-term transmission rights, enabling cross-zonal coordination. This will make the long-term market more efficient and aligned with the day-ahead market design.

What is the flow-based approach and what are its benefits?

Flow-based allocation of long-term transmission rights is a mechanism that efficiently allocates cross-border transmission capacity in the electricity market. It takes into account the physical reality of the transmission network by calculating the available capacities of physical network elements (so-called Remaining Available Margins) for electricity exchanges between different areas, as well as sensitivity factors (so-called Power Transfer Distribution Factors).

A flow-based mechanism enables cross-zonal coordination in long term electricity markets, leading to better network representation and more accurate price signals for cross-border trade, reducing market distortions and ensuring that the prices reflect the true cost of generating and transmitting electricity.

Amending the rules will allow the implementation of two projects for long-term flow-based capacity calculation and allocation; in the Core and the Nordic capacity calculation regions. The HAR revision is the final step needed for the implementation of these projects, following the approval of the single allocation platform, the congestion income distribution and sharing costs incurred to ensure firmness and remuneration of long-term transmission rights on 22 March 2023.

What are the next steps?

In addition to this proposal, TSOs submitted to ACER their proposal for amending the HAR provisions on collaterals by 1 August 2023.

ACER will decide on both proposals for amending the rules in a single procedure by the end of 2023.  

To make an informed decision, ACER runs a public consultation (from 29 August to 26 September 2023) on the amendments to harmonised allocation rules for long-term electricity transmission rights.

Public notice.

Update of 22 December 2023

On 22 December 2023, with its Decision 18/2023, ACER approved the TSOs' proposal to amend the Harmonised Allocation Rules (HAR) for long-term electricity transmission rights. 

On 31 March 2023, ACER issued an Opinion on the revised statutory documents of the European Network of Transmission System Operators for Electricity (ENTSO-E).

To inform its assessment, ACER consulted, from 3 to 17 February 2023, stakeholder organisations, in particular organisations representing the system users, including customers.

What are the next steps?

ACER's opinion is addressed to the European Commission. Following ACER’s opinion, the Commission has three months to provide its own opinion to the transmission system operators (TSOs). Subject to a favourable opinion of the Commission, the TSOs must adopt and publish the revised statutory documents.

Access the Opinion.

ACER is organising three hybrid workshops in its premises in Ljubljana and online in April/May 2023 on certain technical requirements related to the electricity grid connection network codes:

• ACER workshop on electromobility, power-to-gas demand units and heat-pumps (17 April 2023);
• ACER workshop on rate of change of frequency and grid forming capabilities (10 May 2023); and
• ACER workshop on electricity storage (11 May 2023).

The objectives of these workshops are:

• To present and discuss potential amendments to two network codes namely the Network Code on Requirements for Grid Connection of Generators and the Network Code on Demand Connection; and
• To clarify the purpose, process and timeline for the amendments of the network codes.

EU stakeholder associations that are interested in presenting their views (up to 10 slots of 8 min each) on the topics tackled in the workshops should contact ACER on ACER-ELE-2022-015(at)acer.europa.eu before the deadline indicated in the event pages. ACER will consider the expressions of interest and will announce the final agendas ahead of the events.

What are the next steps?

These workshops precede a Public Consultation, to be organised later in 2023 on concrete amendment proposals regarding the two network codes.

Europe’s long-term electricity market relies on so-called long-term transmission rights (LTTRs), which allow market participants to hedge their exposure across bidding zones. The allocation of those LTTRs is currently not coordinated across different borders, which leads to inefficiencies in some capacity calculation regions (CCRs).

To enable the implementation of the long-term flow-based allocation in the Core and Nordic CCRs, ACER approved on 22 March 2023 three proposals from Transmission System Operators (TSOs) for amendments to the forward capacity allocation methodologies related to:

• Single allocation platform, including the methodology for sharing costs for its establishment, development and operation (SAP);
• Congestion income distribution (CID); and
• Sharing costs incurred to ensure firmness and remuneration of LTTRs (FRC).

To ensure an informed decision, ACER organised a workshop on 17 November 2022 and ran a public consultation from 26 October to 28 November 2022 to gather stakeholders’ views.

What are the benefits of the new rules?

The newly approved methodologies include requirements for flow-based allocation of LTTRs, aiming to make the long-term market more efficient by allowing competition between the different bidding zone borders of a capacity calculation region and align it with the day-ahead market design. In particular, this revision was needed to enable the implementation of two ongoing projects for long-term flow-based capacity calculation and allocation; in the Core and the Nordic CCRs. To finalise this implementation, the last methodology still needs to be revised: the Harmonised Allocation Rules (HAR).

The Core region comprises 13 countries: Austria, Belgium, Czech Republic, Croatia, France, Germany, Hungary, Luxemburg, the Netherlands, Poland, Romania, Slovakia and Slovenia.

The Nordic region comprises 4 countries: Denmark, Finland, Norway and Sweden.

Access the ACER Decision 05/2023 on SAP and its Annex I, Annex Ia, Annex II.

Access the ACER Decision 06/2023 on CID and its Annex I, Annex Ia, Annex II.

Access the ACER Decision 07/2023 on FRC and its Annex I, Annex Ia, Annex II.

See the ACER Evaluation of Responses to the public consultation. 

ACER’s Position Paper towards greater consistency of cost benefit analysis methodologies, published today, identifies topics where consistency is needed across the Cost Benefit Analysis methodologies (CBA methodologies) currently under development by the European Commission and the European electricity and gas grid operators.

Greater consistency of CBA methodologies will enable a more efficient energy system across Europe by ensuring similar terms of assessment of projects in a technology neutral way.

Why did ACER issue this Position Paper?

The updated TEN-E Regulation (Regulation (EU) 2022/869) introduced the task of the development of separate CBA methodologies for the various energy infrastructure categories and by different entities:  

• The EU network of transmission system operators for electricity (ENTSO-E) for electricity transmission projects (including offshore grids);
• The EU network of transmission system operators for gas (ENTSOG)  for hydrogen projects; and
• The European Commission (EC) for projects of energy storage, electricity smart grids, gas smart grids, electrolysers and CO2 networks and facilities.

ACER must provide opinions on the ENTSO-E and ENTSOG CBA methodologies and on the draft lists of PCIs prepared by the EC. The Regulation tasks ACER with promoting consistency in the CBA methodologies developed by the EC with the CBA methodologies elaborated by ENTSO-E and ENTSOG.

To this end, ACER’s Position Paper sets out the topics where consistency should be promoted among all CBA methodologies.

Where is consistency of CBA methodologies needed?

1. Common input data set and assumptions;
2. Selection and use of scenarios and ways to deal with uncertainty;
3. Length of assessment period, residual value of projects, and social discount rate;
4. Definition of reference case networks;
5. Treatment of interdependency with other projects;
6. Project implementation status;
7. Clustering rules;
8. Criteria to assess the plausibility of projects’ commissioning dates;
9. Implementation Guidelines;
10. Definition and handling of capital and operational expenditures;
11. Consideration of the impact of the future extreme weather events on infrastructure resilience;
12. Approach to calculate social and environmental impacts of projects;
13. Methodology to calculate the benefit-to-cost ratio and Net Present Value of projects;
14. Sensitivities;
15. Modelling interlinkages of CBA methodologies;
16. Presentation of CBA results.

Next steps

The ACER Position Paper could serve as a reference document, e.g. during the cooperation with the EC and the ENTSOs during the development phase of their CBA methodologies, as well as when drafting the ACER opinions on the ENTSOs’ CBA methodologies, or when the EC Advisory Board for Climate Change forms their views on the methodologies.

Access the ACER Position Paper.

In response to the energy crisis, every Member State introduced emergency measures to support their citizens and economy, and to mitigate security of energy supply risks.

Today, ACER publishes an inventory of 400+ measures adopted by Member States to cope with the energy crisis. ACER publishes its inventory in the form of an interactive dashboard, providing a high-level analysis of the measures. In a second step, ACER will proceed with an assessment of the measures, focusing on lessons learned and publishing a fuller report in July 2023.

How is ACER’s inventory of energy measures relevant?

ACER’s detailed EU-wide picture of the energy emergency measures adopted across Europe is timely:

• As energy and fiscal policy makers consider next steps now to cope with persistent short term energy challenges;
• With Member States starting to re-evaluate their energy emergency support measures in the context of falling energy prices; and
• Given recent calls (by certain EU bodies) for fiscal policy (in the current high inflation environment) to be targeted, tailored and temporary.

Lessons from measures taken over the past year and a half could help Member States direct any future energy emergency support measures, when and where deemed appropriate, to those who need it most.

What is ACER’s inventory of emergency measures about?

• The inventory collects over 400 measures implemented by Member States from July 2021 until February 2023.
• It relies on information collected by the European Commission, directly from Member States, as well as on publicly available information. National regulators validated and complemented the information.
• ACER clusters the measures related to gas and electricity into categories according to criteria, such as the primary purpose of the measure or the specific group of (targeted) consumers.

What are ACER’s high-level findings to date?

• Every Member State has adopted energy emergency support measures.
• 1/3 of the measures aim at what we have labelled broader security of supply objectives, while 2/3 aim to tackle affordability for end-consumers.
• Almost 1/2 of the measures take the form of direct support to final consumers.
• 1/2 of the measures targeting broader security of supply objectives aim at increasing energy efficiency and renewable generation uptake, thereby also contributing to the Green Deal and Fit-for-55 policy goals.
• Some measures aiming at replacing the use of gas for heating or for producing electricity could, however, hamper the decarbonisation goals; hence, their use should be limited to areas where alternatives to safeguarding security of supply are not readily available.
• 40% of the measures aiming at tackling energy affordability target households (sometimes inter alia with other consumer groups) but less than 1/4 of them target vulnerable consumers.
• 60% of the measures aiming at providing direct support to consumers come in the form of income support (e.g. one-off cash payments), while the rest come in the form of discounts in the energy bills (price support).

What’s next?

ACER plans to publish a fuller analysis of emergency measures in July 2023 to further assist policy makers.

As this ACER inventory might not be complete, ACER welcomes feedback on its inventory (by 16 April 2023), to be sent to 2023_emergency_measures(at)acer.europa.eu.

Access the Emergency Measures inventory.