Congestion income is the revenue that Transmission System Operators (TSOs) collect in the event of congestion when allocating electricity cross-zonal capacity.

How Member States can use the congestion revenue they collect is specified in the EU law. National Regulatory Authorities (NRAs) must report to ACER (the EU Agency) on the use of electricity congestion income. ACER has updated its recommendation to regulators on how to do so.

Why did ACER update its Recommendation?

• Regulation on an emergency intervention to address high energy prices (October 2022) allows Member States to use the surplus congestion income to also finance measures in support of final electricity customers.

• The Methodology for the use of congestion income will for the first time come into full effect for the NRAs reports to be published in early 2023.

• Gained experience in the first two years of the NRA reporting on the amounts and use of congestion income.

Hence, ACER has updated its original (2020) Recommendations to NRAs.

What’s new in ACER’s recommendation?

• Discontinuity of collecting some project specific data that is already available to ACER (e.g. commissioning date, capital expenditure etc.);

• More options provided for the NRAs to prove the cross-border relevance of projects where congestion income is used;

• The possibility to indicate the support for electricity customers as a use of the collected congestion income is now included; and

• Clarification of certain terms and clearer phrasing.

Access the ACER (2022) Recommendation.

As part of its electricity wholesale market monitoring, ACER conducted a study on the prequalification processes for the provision of balancing services. The ACER study:

• Provides an overview of the different electricity balancing prequalification approaches in Europe;
• Identifies some practices that may be considered by grid operators to remove market entry barriers for new and small market participants, including consumers, in providing balancing services.

Transmission System Operators (TSOs) must keep the electricity system constantly in balance. To maintain system frequency, TSOs procure balancing services from Balancing Service Providers (BSPs).

EU rules (the Electricity Balancing Regulation) require TSOs to develop prequalification processes for potential BSPs. This allows potential BSPs (such as generators or consumers) to provide proof that they fulfil the requirements for rendering one or more types of balancing services necessary to guarantee the grid frequency.

How does this ACER study support EU security of energy supply and consumers?

Demand response programmes allow consumers to adjust their consumption at key times to help grid operators to manage peak electric demand and lower system costs. Currently consumers do not participate to a large extent in electricity markets. However, the flexibility that smaller market participants (including demand response, distributed generation and energy storage solutions) could provide is needed more and more for security of supply. ACER strives to remove barriers that hamper these smaller market participants entering and participating in electricity markets.

For example, some consumers are capable of providing balancing services through bi-directional charging of their electric vehicles (EVs). For the integration of electric vehicles into balancing services, a prequalification process is necessary. This process should prove the technical suitability of the assets for providing the different types of balancing products. In the product prequalification processes for providing balancing services, the TSO verifies the compliance of the assets of the BSP with the technical requirements set by the TSO.

What are ACER’s key findings?

Overall, there is considerable scope for grid operators to reduce market entry barriers to new and small market participants, including small-scale demand response, in providing balancing services.

• Electricity balancing prequalification approaches differ significantly across Member States (MSs) and across balancing products.
• Only a few TSOs apply a simplified approach to product prequalification for some balancing products on a general basis.
• Prequalification of groups of units is still not possible in some MSs. Moreover, where it is possible, some TSOs do not allow generation and consumer/demand units to be aggregated in the same group. This may represent an entry barrier for new market participants that aggregate multiple types of units (e.g. EVs, solar PV panels, household consumers, etc.).
• In the first-time prequalification of groups comprising small units (e.g. EVs, solar PV panels, household consumers, etc.), a few TSOs still require each individual unit to prequalify separately. On the contrary, some TSOs make simplifications or exceptions to simplify and speed-up the prequalification of these groups.
• There is considerable room for TSOs to simplify the re-prequalification of groups when they are subject to changes in units such as add-ons and removals. Some TSOs limit the need for this re-prequalification to only significant changes.

The ACER study showcases some practices that could be considered by TSOs to improve and simplify the product prequalification process for new and small market participants, including demand response:

• Setting a product prequalification for groups aggregating any type of technology;
• Setting a threshold for re-prequalification only after significant changes in prequalified units or groups;
• Using type-approval for small units;
• Verifying the compliance of assets to technical requirements during the service delivery rather than before.

Access the ACER Study.

Check out the interactive charts (filter by country or balancing service).

ACER was mandated by the European Commission to draft a framework guideline on demand response.

Many consumers want to actively participate in energy markets. 'Demand response' essentially means a change in electricity consumption as customers (individually or collectively) respond to some market signal such as a change in electricity prices or some financial incentive to increase/decrease/shift the timing of their electricity consumption. In the context of this framework guideline only active participation of demand response in electricity markets is covered.

ACER’s framework guideline sets out the main principles for the development of a binding EU-wide rules on demand response. The new rules aim at facilitating the participation of more demand response including consumers’ electricity demand, storage and distributed generation (e.g. rooftop solar panels, electric vehicles) in the wholesale electricity markets, as well at facilitating the market based procurement of balancing, congestion management and voltage control services needed by grid operators. The following areas are covered:

• General requirements for market access to be specified at European level to ensure a level playing field for the participation of all the resources in the electricity wholesale markets;
• Principles for ‘prequalification’ aiming at simplifying the process and removing entry barriers for everyone (such as consumers with solar panels or electric vehicles or small storage facilities such as batteries) in different services to system operators. Prequalification processes allow potential providers (such as generators or consumers) to give proof to the grid operators that they fulfil the requirements for rendering one or more types of services (such as balancing, congestion management and voltage control) necessary to guarantee the secure operation of the system;
• Principles for the coordination of market-based procurement of congestion management, voltage control and balancing services with other wholesale markets and between (distribution and transmission) system operators ensuring coherence in interaction across different markets and timeframes; and
• Requirements for market-based procurement of products used for electricity congestion management and voltage control.

ACER thanks stakeholders for their input to the public consultation in summer 2022. See ACER’s Evaluation of the responses received.

ACER submitted the framework guideline to the European Commission on 20 December 2022.

What are the next steps?

Once ACER’s framework guideline is cleared by the European Commission, ENTSO-E and the EU DSO Entity will be asked by the Commission to draft (within 12 months) the proposal for the new binding EU rules. A drafting committee including ACER and some stakeholders, to support them in this work will be established. ACER will consult and review the proposed new EU rules before submitting them to the European Commission.

Access the Framework Guideline on Demand Response.

ACER publishes today its Report on the implementation of the Inter-Transmission System Operator Compensation mechanism (ITC) covering the year 2021.

ACER issues these yearly monitoring reports since 2012, as required by the European Commission Regulation no. 838/2010.

What is the ITC Fund?

The ITC fund 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;
• Making infrastructure available.

What did the 2021 ITC monitoring report find?

• The ITC fund in 2021 amounted to €364.5 million, reaching its highest-ever value for the third year in a row. For 2021, this is explained by an almost 20% rise in the volume of transmission losses due to transits.
• There is a decrease in the value of losses for the vast majority of the ITC Parties (TSOs or groups of TSOs participating in the ITC mechanism) in 2021 compared to 2020.
• The losses values of individual ITC Parties that are rather volatile from year to year plus the changing volumes of losses due to transits significantly affect the net ITC compensation of several ITC Parties. The volatility occurs mainly because:
  • Power exchange prices are most frequently used as a basis to value the losses;
  • ITC Parties determine ex ante the value of losses for the ITC mechanism on a yearly basis.
• In 2021, the ITC Parties contributed 96.6% to the ITC fund, while the contribution of the Perimeter countries (non-participating countries connected to the ITC Parties’ networks) remained around 3%. The reasons for the significant decrease of Perimeter countries’ compared to the 2011-2019 period are:
  • Decrease of the volume of the scheduled flows between the Perimeter countries and the ITC Parties;
  • Decreased Perimeter countries’ fee; and
  • Increased overall amount of the ITC fund.

What are ACER’s next steps?

ACER considers that in light of extreme price volatility and in line with the general tarification principle of cost reflectivity introduced by the Regulation on the internal market for electricity, there may be room for improvements on how, when and/or how often the values of losses are determined for the purpose of the ITC mechanism.

Access the Report.

On 30 November 2022, the European Network of Transmission System Operators for Electricity (ENTSO-E) submitted to the EU Agency for the Cooperation of Energy Regulators (ACER) its proposal for the European Resource Adequacy Assessment (ERAA 2022). The assessment is mandated by the Clean Energy Package legislation and its purpose is to monitor the risks to security of electricity supply and identify adequacy concerns up to 10 years ahead.​​​

Following the approval of the ERAA methodology by ACER in October 2020, ENTSO-E needs to carry out an annual ERAA to assess whether the EU has sufficient electricity resources to meet its future demand.

Member States set their own electricity reliability standard that indicates their necessary level of security of electricity supply.

By comparing these results, ERAA aims to identify potential resource adequacy concerns in the EU and provide an objective basis for assessing the need for additional national measures ensuring security of electricity supply such as the introduction of temporary capacity mechanisms.

What are the next steps?

ACER has 3 months, until 28 February 2023, to reach a decision on ERAA 2022. Given this short timeline, ACER is not going to carry out a public consultation. However, interested third parties may submit observations on ERAA 2022 to ACER-ELE-2022-21(at)acer.europa.eu.

Deadline for submitting observations is 30 December 2022.

Access the related ACER public notice, including instructions for submitting any observations.

The EU Agency for the Cooperation of Energy Regulators (ACER) issued the long-term capacity calculation methodology for the Core capacity calculation region (Core region) with its Decision No 14/2021 of 3 November 2021.

Following the Board of Appeal’s Decision A-001-2022 of 7 July 2022, ACER will revise the methodology and amend its Decision.

What is the methodology about?

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

Long‐term cross border capacity calculation promotes effective long‐term cross‐zonal trade. It allows for long‐term planning and provides hedging opportunities by calculating reliable capacities and making them available to market participants at an early stage.

The long-term capacity calculation methodology for the Core region covers yearly and monthly capacity calculation processes by applying the flow-based approach, which is compatible with the day-ahead capacity calculation methodology applied since June 2022. The Core long-term capacity calculation methodology is planned to be implemented by the end of 2024.

What are the next steps?

In the amendment of the methodology, ACER plans to improve the provisions related to the validation process of calculated capacities by the Core transmission system operators.

ACER expects to reach its decision by 25 January 2023

The EU Agency for the Cooperation of Energy Regulators (ACER) is running a public consultation on the Transmission System Operators’ (TSOs’) proposal to include Norway in the capacity calculation regions (CCRs).

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

CCRs define the geographic areas (i.e. by listing bidding zone borders) across the EU in which the task of capacity calculation and other processes are coordinated by 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).

In 2021, the CACM Regulation has also become binding for Norway. The TSOs’ amendment proposes to add the Norwegian bidding zone borders into the Hansa and Nordic CCRs.

Forming CCRs benefit European consumers, as:

• Dividing Europe into different CCRs allows TSOs to run regional processes related to capacity calculation, re-dispatch & countertrading more effectively;
• Having an efficient determination of CCRs facilitates the optimal provision of cross-zonal capacity, which allows more cross-zonal trade while remaining security of supply; and
• The addition of the Norwegian bidding zone borders further facilitates welfare increases by integrating these bidding zone borders in European and regional processes.

What is the process to amend the current bidding zones?

Any amendments proposed by TSOs to the definition of CCRs are subject to the approval of ACER.

ACER has six months (until 13 April 2023) to decide on the TSOs’ proposal.

Next steps

ACER will assess whether the TSOs’ proposals contribute to market integration, non-discrimination, effective competition and the proper functioning of the EU electricity market.

To collect views of the stakeholders, a public consultation on the TSOs proposed amendments runs from 28 October to 25 November 2022.

Access the Public Consultation.

Access the Public Notice.

The EU Agency for the Cooperation of Energy Regulators (ACER) has decided not to grant the Swedish Transmission System Operator (TSO) a derogation from the requirement to provide minimally 70% of the transmission capacity for cross-zonal trade (‘70% requirement’).

What is the decision about?

The 70% requirement is one of the cornerstones of the internal market for electricity. However, the relevant  Regulation 2019/943 on the internal market for electricity (Regulation) allows a temporary derogation for the TSOs who cannot comply with this requirement. The derogation may be granted under strict conditions and is subject to the agreement between the concerned National Regulatory Authorities (NRAs) or, in case of their disagreement, the decision on granting such a derogation is submitted to ACER.

Background

On 6 October 2021, the Swedish NRA (Energy Markets Inspectorate, Ei) received the request from the Swedish TSO (Svenska kraftnät, Svk) for a derogation from the 70% requirement for multiple electricity interconnections for the year 2022.

Ei decided that Svk should be granted the derogation for the interconnectors between the bidding zones Finland – Sweden 3 (FI-SE3) and Sweden 3 - Denmark 1 (SE3-DK1). However, the Finnish NRA (EV) and the Danish NRA (DUR) opposed granting the derogations to Svk due to various reasons. Among others, EV and DUR highlighted that the Svk’s request for derogation is incomplete and that Svk does not provide sufficient efforts to ensure required level of redispatching and countertrading to support the 70% requirement. The question of derogation was therefore submitted to ACER.

In its decision of 26 October 2022, ACER concluded that the derogation from the 70% requirement should not be granted to Svk.

How did ACER contribute?

ACER has thoroughly assessed Svk’s derogation request against the relevant requirements specified in the Article 16(9) of the Regulation, and analysed the Svk’s application of the 70% requirement in the previous years.

The assessment confirmed that:

• The derogation was not necessary for maintaining operational security;
• The derogation request did not provide the minimum capacity targets,
• The derogation request did not provide the methodology on how to avoid the discrimination between internal and cross-zonal exchanges.

Based on the above, ACER has concluded the derogation should not be granted.

Access the Decision 17-2022.

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, and following the all Transmission System Operators’ (TSOs’) proposals, the EU Agency for the Cooperation of Energy Regulators (ACER) is reviewing three proposals for amendments of forward capacity allocation methodologies related to:

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

As part of its review, ACER seeks stakeholder input via:

• Public Consultation, which runs from 26 October to 23 November 2022;
• Public Workshop on 17 November 2022.

Why change the rules?

Cross-zonal capacity is currently allocated at the long-term electricity market with no coordination between different borders (i.e. using a flow-based allocation approach), which leads to inefficiencies in some CCRs. The proposed amendments include requirements for flow-based allocation of LTTRs, aiming to make the long-term market more efficient and align it with the day-ahead market design.

In particular, this revision is 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.

How does ACER contribute?

ACER will assess the amendments proposed by all TSOs and revise them where necessary in order to ensure their contribution to market integration, non-discrimination, effective competition, proper functioning of the market, and their compliance with the Regulation on the internal market for electricity and the Forward capacity allocation guideline.

What are the next steps?

ACER has six months (until 28 March 2023) to decide on the TSOs’ proposals.

To collect the views of the stakeholders, ACER’s Public Consultation on the TSOs’ proposed amendments runs from 26 October to 23 November 2022.

ACER invites interested stakeholders to register for a Public Workshop, which will take place on 17 November 2022.

Access the Public Notice.

The EU Agency for the Cooperation of Energy Regulators (ACER) publishes today its first stand-alone report on the performance of Member States (MSs) regarding security of electricity supply in 2021 (‘Report’). The Report extends the depth and scope of past reporting on the subject in ACER market monitoring reports.

The Report looks into three main areas:

• The implementation of the methodologies to calculate the value of lost load, the cost of new entry and the reliability standard by MSs;

• The short- and long-term adequacy assessments at European and national level; and

• The measures implemented by MSs to address security of electricity supply concerns.

The report does not cover measures deployed as a response to the current crisis.

What are the Report’s key findings?

• MSs gradually implement the ACER’s harmonised methodology to calculate the value of lost load, the cost of new entry and the reliability standard defining the necessary level of security of electricity supply. However, non-uniform approaches in implementation need further attention.

• The short-term and seasonal adequacy assessment framework is largely in place. Only two incidents were identified in 2021 and were tackled by Transmission System Operators (TSOs) in a coordinated manner to avoid possible supply interruptions.

• While ENTSO-E’s pan-European resource adequacy assessment is under development, MSs assess security of supply at a national level. Out of the 14 national assessments conducted in 2021, 7 revealed adequacy concerns in at least one of the next ten years. 

• Cost of additional capacity mechanisms rises to €5 billion in 2021 (+81% from 2020) and is expected to reach €7 billion in 2023, largely directed to conventional power generation. ACER raises attention on potential lock-in effects stemming from long-term contracts and points to incompatibility of such capacity mechanisms’ outcomes with future climate and energy targets.

What are the next steps?

ACER will intensify efforts to monitor the implementation of the adequacy-related methodologies at European and national level and will continue to report on security of supply measures, including those applied as a response to the current energy crisis.

Access the Report.