The EU Agency for the Cooperation of Energy Regulators (ACER) publishes today its first monitoring report on the use of congestion income in 2021 (‘Report’).

According to Regulation (EU) 2019/943, all income generated as a result of the cross-zonal capacity allocation must be used as a priority for either guaranteeing the actual availability of the allocated capacity, or for maintaining or increasing cross-zonal capacities. Only where these objectives are fulfilled, the revenues can be used as income when determining network tariffs. Potential residual revenues shall be placed on an internal account line until they can be spent for the abovementioned purposes.

In addition, National Regulatory Authorities (NRAs) must publish a report and inform ACER detailing:

• the amount of collected revenues;
• the amount placed on a separate account line;
• the amount used as income when determining network tariffs;
• explain how the collected revenues were used in view of fulfilling priority objectives.

What are the Report’s key findings?

In summary, the Report finds that the total available congestion income (CI) in 2021 was €6.9 billion. Out of these, €4.9 billion were collected during 2021 and €2 billion were already saved in separate accounts before 2021.

In 2021, the available CI (€6.9 billion) was used as follows:

• €3.1 billion (45%): used on priority objectives;
• €3.4 billion (49%): saved on internal accounts;
• €342 million (5%): used for tariff reductions;
• €89 million (1%): spent on taxes.

ACER welcomes the fact that, compared to 2020, the amount of CI used for priority objectives or saved for future priority objectives-related use increased for 7% (from 88% to 95%), and that the share of CI used for tariff reduction compared to the available CI was reduced by 7% (from 12% to 5%). These figures show an increasing use of CI to fulfil the priority objectives. Despite that, ACER concludes that the priority objectives cannot be deemed fulfilled for five countries, namely for BG, ES, GR, HU, and SI.

ACER prepared this report in line with its duties to monitor the internal electricity markets, the implementation of Projects of Common Interests (PCIs), the EU Ten-Year Network Development Plan (TYNDP) and in order to avoid the lack of prioritisation of necessary interconnection projects at a national level.

Access the Report.

The EU Agency for the Cooperation of Energy Regulators (ACER) has revised and approved the all Transmission System Operators’ (TSOs’) proposal to amend the implementation frameworks for the European balancing platforms for the exchange of balancing energy from automatic and manual frequency restoration reserves (aFRR, mFRR) and for the imbalance netting.

In March 2022, all TSOs proposed an entity to perform the capacity management function for all platforms. This entity shall be a different one from those performing other functions of the respective platforms:

The amendment of the implementation framework of the mFRR platform also includes technical aspects, such as clarifications regarding complex bids and mFRR demand.

What are the benefits?

The implementation frameworks for the European balancing platforms provide the rules for the efficient cross-border exchange of balancing energy from frequency restoration reserves with automatic activation (aFRR) and manual activation (mFRR) and for the imbalance netting. This fosters the liquidity of balancing markets, lowers the cost of balancing energy at European level by using the cheapest resources, and contributes to operational security. 

What are the main elements of ACER’s decision?

ACER amended the TSOs’ proposals to further specify the designation of the entities performing the relevant functions of these platforms. In order to ensure the efficient and effective governance, operation and regulatory oversight of these platforms, ACER introduced several changes on:

• transparency and reporting,
• governance and decision making,
• cooperation framework, and
• operational aspects.

In particular, ACER suggested:

• establishment of a joint steering committee for all three platforms,
• requirements on the annual work program, and
• requirements to ensure proper fall-back and backup mechanisms.

The decision is in line with the objectives of the Electricity Balancing Regulation.

What are the next steps?

Following ACER’s decision, and within 6 months, all TSOs will designate CEPS as the entity to perform the capacity management function for the European balancing platforms for the aFRR, mFRR and the imbalance netting. All TSOs will implement the capacity management function of all three platforms by July 2024.

Access the Decisions 14-2022, 15-2022, 16-2022 and their annexes here.

The EU Agency for the Cooperation of Energy Regulators (ACER) has reached a decision on the methodology optimising the inter-TSO settlements related to electricity redispatching and countertrading, in cooperation with all European National Regulatory Authorities (NRAs), ENTSO-E and Transmission System Operators (TSOs).

What is the decision about?

ACER’s decision seeks to ensure the effective and optimal application of inter-TSO cost settlements relevant for all European TSOs. Inter-TSO settlements are an important element of cross-border trading. Optimisation of inter-TSO settlements contributes to reducing costs and improves clarity on the settlement procedure for the benefit of all electricity market stakeholders.

How did ACER contribute?

The proposal for a new methodology was submitted to ACER by ENTSO-E on 1 July 2022, for the 3-months decision-making process.

ACER has carried out assessments and consulted relevant stakeholders to take an informed decision on any needed adjustments related to both the technical part and the financial settlement part of the cost sharing.

On this basis, ACER has amended the initial proposal of the methodology to further improve the clarity and transparency principles of the inter-TSO settlements.

This ACER decision on inter-TSO settlement was reached in cooperation with all energy NRAs, ENTSO-E and the TSOs.

Read more on the ACER’s Decision 13-2022 on the Methodology for the Optimisation of Inter-TSO Settlements related to Redispatching and Countertrading and its Annex here.

ACER launches today a public consultation inviting stakeholders to submit their proposals for amendments to the Network Code on Requirements for Grid Connection of Generators, and the Network Code on Demand Connection.

The aim is to update the network codes to further support the EU power grid embracing emerging developments such as e-mobility, storage and energy communities.

The European Commission invited ACER to initiate the process to amend the existing EU network codes. ACER published a draft Policy Paper in May 2022 and gathered initial feedback from stakeholders during a public workshop and a public consultation in June 2022 (access the responses of the June 2022 public consultation in the Evaluation of Responses Report).

The public consultation runs from 26 September until 21 November 2022.

Policy Paper on the amendments to the grid connection network codes

ACER sets out in its Policy Paper published today potential ways to improve the Network Code on Requirements for Grid Connection of Generators and the Network Code on Demand Connection.

The ACER Policy Paper on Grid Connection Network Codes reflects ACER’s conclusions on possible amendments to the grid connection network codes following input received from stakeholders during the summer 2022.

The Policy Paper addresses potential amendments to the European network codes concerning:

• technical requirements for electrical charging points and electric vehicles (EVs);
• requirements for mixed customer sites (MCSs), active customers and energy communities;
• significant modernisation of system users’ facilities and equipment;
• grids with significant distributed energy resources (DER) and converter-based technologies; and
• generators’ resilience to weather hazards.

Next steps

A public workshop on the amendment to the grid connection network codes will be held on 25 October.

Following this process, ACER plans to submit to the European Commission its proposed amendments to the grid connection network codes by the end of 2023.

Access the Policy Paper.

Access the public consultation.

Access the public workshop.

Europe’s electricity spot markets have an automatic maximum price adjustment mechanism in case of extraordinary high prices. ACER is reviewing the methodologies for automatically increasing the maximum price limit in case of price spikes. As part of its review, ACER seeks stakeholder input via a public consultation and a public workshop (3 October).

With expected high prices on the electricity markets ahead, on 2 September, ACER urged the Nominated Electricity Market Operators (NEMOs) to submit proposals to amend the Capacity Allocation and Congestion Management methodologies related to:

• the Harmonised Maximum and Minimum Clearing Price (HMMCP) methodology for Single Day-Ahead Coupling (SDAC) and,
• the Harmonised Maximum and Minimum Clearing Price (HMMCP) methodology for Single Intraday Coupling (SIDC).

These methodologies define Europe’s single day-ahead and intraday electricity markets maximum and minimum price limits. Following receipt of the NEMOs’ proposals on 15 September, ACER is now conducting its review of the HMMCP methodologies.

Why change the rules?

With expected high prices on the electricity markets ahead, ACER considers this review as a high priority. The aim of the review is to limit the frequency of increases of the maximum clearing price in the spot markets, allowing consumers and market participants to gradually and better adapt to the scarcity situation in the market.

In addition to this urgent review, a full HMMCP SIDC methodology revision is needed to account for the forthcoming implementation of the SIDC auctions as well as for a newly developed automatic mechanism for adapting the maximum and minimum clearing price limits of the SIDC continuous market.

How does ACER contribute?

ACER ensures that the amendments proposed by all NEMOs are in line with the Regulation on the internal market for electricity, the Capacity Allocation and Congestion Management guideline and fulfil the legal obligations. ACER will assess if the proposed amendments are fit-for-purpose considering the exceptional market situation and its possible evolution.

Process

ACER formally has six months (until 15 March 2022) to reach a decision on the NEMOs’ proposals but the Agency aims to conclude its review much faster.

To collect the views of the stakeholders, an ACER public consultation on the NEMOs proposed amendments runs from 19 September to 9 October 2022.

ACER also invites interested stakeholders to a public workshop on 3 October 2022.

What to remain vigilant of in the coming months?

Price spikes can occur more frequently if not enough cross-border interconnector capacity is made available for trade and/or demand response is not being brought to the market. In some instances, this may even endanger security of supply.

Therefore, and irrespective of the ongoing review of the mechanism, in the coming months, ACER calls on:

• Transmission System Operators (TSOs) to make sufficient cross-zonal capacity available for cross-border trade.
• Market participants to bring significant demand response to the market.

Access the Public Notice.

Access the Public Consultation page.

Access the Public Workshop page.

The EU Agency for the Cooperation of Energy Regulators (ACER) has reached a decision on how to address the insufficient risk hedging opportunities on the bidding zone borders between Finland and Sweden.

An assessment performed by the National Regulatory Authorities (NRAs) indicated insufficient hedging opportunities in the Finnish bidding zone. To improve such opportunities, NRAs can request their Transmission System Operators (TSOs) either to issue long-term transmission rights (LTTRs) or to ensure the availability of other long-term cross-zonal hedging products that support the functioning of the wholesale electricity markets. As the NRAs could not reach an agreement on this matter, they have referred to ACER for decision.

What is ACER’s recommended solution?

Having assessed the case, ACER considered that issuing LTTRs on the bidding zone borders between Finland and Sweden would come with considerable risks for the existing electricity forward market design in the Nordic region. ACER also noted that there are other less intrusive measures that could be at least as effective in improving hedging opportunities; for example measures to support the existing contracts for difference, called Electricity Price Area Differentials (EPADs).

ACER’s decision requests the Finnish and the Swedish TSOs not to issue LTTRs but instead to ensure the availability of other long-term cross-zonal hedging products. Since EPAD coupling appears to be the most effective solution, ACER recommends the TSOs to submit a proposal for EPAD coupling to their NRAs.

What is EPAD coupling?

EPAD coupling is a solution where long-term cross-zonal capacity from TSOs can be implicitly allocated in an auction of EPADs for the relevant bidding zones. With such implicit allocation, a bid for hedging demand in one bidding zone could be directly matched with a supply bid in another bidding zone if more efficient. This can ensure an optimal use of cross-zonal capacity and provides the need hedging opportunities.

ACER’s decision aims to promote long-term cross-zonal trade by improving the availability of long-term cross-zonal risk hedging opportunities on the bidding zone borders between Finland and Sweden.

Access the Decision 12-2022.

Europe’s single day-ahead electricity market has an automatic maximum price adjustment mechanism in case of high prices. ACER wants to review the methodology for automatically increasing the maximum price limit in case of price spikes.

Under the Harmonised Maximum and Minimum Clearing Price (HMMCP) methodology, if prices in any zone reach 60% of the maximum price, it triggers an increase in the maximum price limit 5 weeks later. Price spike incidents in April in France and more recently in the Baltic area each triggered the need for an automatic increase of the harmonised maximum clearing price for Single Day-Ahead Coupling (SDAC).

Why change the methodology?

With expected high prices on the electricity markets ahead, ACER urges a review of the HMMCP methodology to limit the frequency of increases of the maximum clearing price in the single day-ahead market allowing consumers and market participants to gradually and better adapt to the scarcity situation in the market.

Process to change the methodology

First the Nominated Electricity Market Operators (NEMOs) must propose an amendment to the HMMCP methodology. Then, ACER formally has 6 months to reach a decision but aims at conducting the process in a significantly more rapid manner.

Upcoming public consultation

• ACER urges the NEMOs to propose amendments to the HMMCP Methodology for ACER’s approval.

• In the second half of September (and conditional on the NEMOs’ submission), ACER will run an expeditious public consultation on the NEMOs’ proposals.

What to remain vigilant of in the coming months?

Price spikes can occur more frequently if not enough cross-border interconnector capacity is made available for trade and/or demand response is not being brought to the market. In some instances, this may even endanger security of supply.

Therefore, and irrespective of the ongoing review of the mechanism, in the coming months, ACER calls on:

• Transmission System Operators (TSOs) to make sufficient cross-zonal capacity available for cross-border trade.

• Market participants to bring significant demand response to the market.