ACER to decide on amending the methodology for harmonising cross-zonal electricity balancing capacity allocation

On 31 July 2024, ACER received a proposal from Transmission System Operators (TSOs) to amend the harmonised methodology for cross-zonal capacity allocation for the exchange of balancing capacity or sharing of reserves.

What is the methodology about?

This methodology provides a harmonised approach for effective allocation of cross-zonal capacity for the exchange of balancing capacity or sharing of reserves. Having an optimised allocation of cross-zonal capacity is important to:

• Foster the integration of balancing capacity markets.
• Lower the costs of procuring balancing capacity (hence the costs for tariff payers).
• Ensure the security of electricity supply.

The methodology harmonises the processes (i.e. market-based and co-optimisation) that compare the market value of cross-zonal capacity between balancing capacity and day-ahead electricity markets. These processes then allocate the available cross-zonal capacity to each market in a way that maximises overall welfare.

Why amend the methodology?

The current methodology was approved by ACER in July 2023.

Amending the methodology is necessary to clarify the governance of the market-based process, covering both its implementation and operation. This aims to ensure the process runs efficiently and encourage more TSOs to apply it.

Additionally, TSOs proposed to:

• Establish a process and governance framework to set different maximum limits for exchanging balancing capacity or sharing reserves.
• Amend the provisions to distribute congestion income among TSOs.
• Allow the possibility of delaying the implementation of the harmonised market-based process beyond 31 July 2026.

What are the next steps?

ACER expects to:

• Run a public consultation from 16 September to 14 October 2024 to collect views from stakeholders and inform its decision-making process.
• Reach a decision by 31 January 2025.