Designation of NEMOs
Articles 4, 5 and 6 of CACM Regulation determine the designation of Nominated Electricity Market Operators (NEMOs). Each Member State needs ensure that at least one NEMOs is designated in each Member State to perform the single day-ahead and single intraday coupling. Each NEMO designated in a territory of one Member State has the right to provide its services in other Member States (i.e. by way of so called “passporting") Exceptionally Member States may refuse the trading services by a NEMO designated in another Member State only in specific, well-defined cases, as stated in Article 4(6) of the CACM Regulation. Moreover, the Member States have the right to revoke the designation of a NEMO, in case the NEMO fails to maintain compliance with the criteria set in Article 6 of the CACM Regulation.
Implementation
The CACM Regulation sets out specific obligations for NEMOs, TSOs, regulatory authorities and the Agency regarding the development and approval of different terms and conditions or methodologies, which are considered as detailed rules for the operation of Internal Electricity Market in the day-ahead and intraday timeframe. Article 9 of CACM Regulation describes the process of adoption of these terms and conditions or methodologies. In accordance with Article 9(6) of CACM Regulation these terms and conditions or methodologies are divided into European, regional and national. They are developed either by TSOs or NEMOs and in specific cases the cooperation of both is required. A proposal from NEMOs or TSOs should typically be consulted upon in accordance with Article 12 of CACM Regulation and submitted to the concerned regulatory authorities and to the Agency in accordance Article 9(9) of CACM Regulation. The proposal should contain a timescale for implementation and the expected impact on the objectives of the CACM Regulation (Article 3).
Regulation (EC) No 713/2009 has been repealed and replaced by the Regulation (EU) 2019/942 of 5 June 2019 and amends some procedures established by either Regulation (EC) 713/2009 or Regulation (EC) 714/2009.
The ‘old’ procedure for adoption of the terms and conditions or methodologies (before 4 July 2019) now applies for only regional and national decision making processes:
The concerned regulatory authorities should take decisions concerning the proposed terms and conditions or methodologies from NEMOs and/or TSOs within six months after the receipt of the proposal. Where the regulatory authorities are not able to approve the proposal, they can request an amendment, which gives the concerned NEMOs or TSOs two months for amending the proposal. Subsequently the regulatory authorities need to approve the amended proposal within two months after receiving the amended proposal. If the regulatory authorities are not able to reach an agreement or upon their joint request, the Agency becomes competent to adopt a decision on the proposal within six months from the referral.
The ‘new’ procedure (after 4 July 2019) now applies for only those terms and condition or methodologies, which are subject to approval by all regulatory authorities, in accordance to Article 9(6) of the CACM Regulation:
The Agency should take decisions concerning the proposed terms and conditions or methodologies from NEMOs and/or TSOs within six months after the receipt of the proposal.
To enable a regular review of the terms and conditions or methodologies, the TSOs or NEMOs responsible for developing these terms and conditions or methodologies may propose amendments to them and submit them for approval to regulatory authorities or the Agency, respectively.
For the designation of NEMOs and reviewing the existing bidding zone configuration, different rules and procedures apply and are described in more detail in pages Designation of NEMOs and Bidding zone review.
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The core elements of CACM Regulation are:
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Optimal definition of bidding zones. Bidding zones are geographic areas within which electricity exchanges are unrestricted, whereas exchanges between bidding zones require cross-zonal capacity - which is limited. Bidding zones should be defined to prevent structural congestions within a bidding zone. In case the existing bidding zone configuration is not efficient, TSOs need to review the structure and propose a more efficient one.
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Calculation of capacities between bidding zones. Capacity calculation should be coordinated among TSOs to become as efficient as possible and transparent for market participants. As a result, TSOs can provide an optimal amount of cross-zonal capacity for allocation in the market.
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Allocation of cross-zonal capacities with market coupling. The most efficient way to allocate cross-zonal capacity is the use of the Union-wide market coupling, which collects all bids and offers from the bidding zones within the European Union and maximises the economic surplus. For this purpose, NEMOs organize the day-ahead coupling as an implicit auction and the intraday coupling as continuous trading supplemented by numerous implicit auctions. The CACM Regulation also addresses the related post-coupling processes.
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Management of residual congestions. Physical congestions, which were not prevented by capacity calculation and allocation, need to be managed by coordinated TSOs' actions -i.e. by using countertrading or re-dispatching.
The core elementsSee Also -
Redispatching and countertrading
Coordination of redispatching and countertrading
What is it about?
The methodology describes how TSOs and regional coordination centres of capacity calculation regions manage network congestions at the day-ahead and intraday level. This is done with regionally coordinated application of costly remedial actions, in the so-called ROSC (Regional Operational Security Coordination) process.
This coordination process involves the remedial actions optimisation and coordination in a single day-ahead and multiple intraday operational security assessment rounds (CROSA).
The methodology is closely related with the Regional Operation Security Coordination (ROSC) methodology (Article 76 of the Guideline on Electricity Transmission System Operation).
Legal basis: Article 35 of the CACM Regulation
Responsibility: all Transmission System Operators (TSOs) in each capacity calculation region
Current status: The methodology was approved in all capacity calculation regions.
Implementation: The methodology is currently being implemented in most of the regions and expected to be fully implemented by the end of 2024.
Cost sharing for coordinated redispatching and countertrading
What is it about?
The methodology establishes the rules TSOs need to follow to determine the different categories of flows (loop, internal, phase shifting transformers, allocated flows) which created network congestions for each capacity calculation region and how the respective costs are shared among TSOs.
The process
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Once resolved in the Regional Operation Security Coordination (ROSC) process by engaging the remedial actions, the polluting flows are mapped accordingly.
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The costs of engaging the costly remedial actions are appointed to the specific TSOs which create the polluting flows.
Legal basis: Article 74 of the CACM Regulation
Responsibility: all TSOs in each capacity calculation region
Current status: The methodology was approved in all capacity calculation regions except of Italy North.
Implementation: The methodology is currently being implemented in most of the regions along with the redispatching and countertrading methodology. The implementation in all regions is expected by the end of 2024.
Post-coupling processes
Fallback procedures
Pursuant to Article 44 of the CACM Regulation, each TSO in coordination with all the other TSOs in the capacity calculation region, needs to develop a proposal for fallback procedures and submit it to the concerned regulatory authorities for approval and to the Agency for information.
Action 1: By June 2017, all TSOs from each CCR submitted to the concerned regulatory authorities and the Agency the proposals for fallback procedures. The delay in the submission was caused by the delay in the approval of the MCO plan.
Action 2: By December 2017, the regulatory authorities of the CCRs CHANNEL, HANSA, GRIT and IU approved the respective proposals for fallback procedures.
Action 3: By December 2017, the regulatory authorities of the CCRs BALTIC, CORE, ITALY NORTH, NORDIC, SEE and SWE requested from their TSOs to amend the respective proposals for fallback procedures.
Action 4: By February 2018, the TSOs of the CCRs BALTIC, ITALY NORTH, NORDIC, SEE and SWE submitted to the concerned regulatory authorities and the Agency the respective amended proposals for fallback procedures.
Action 5: By April 2018, the regulatory authorities of the CCRs BALTIC, ITALY NORTH, NORDIC, SEE and SWE approved the respective amended proposals for fallback procedures.
Action 6: In March 2018, the regulatory authorities of the CORE CCR referred the amended proposal for fallback procedures to the Agency for a decision in accordance with the procedure set out in Article 9(12) of the CACM Regulation. The reason for the referral was that they were not able to reach an agreement on the amended proposal.
Action 7: By May 2018, the TSOs of CCR CHANNEL submitted to the concerned regulatory authorities and the Agency a proposal for amendment of the fallback procedures.
Action 8: In September 2018, the Agency adopted a decision on the amended proposal for the Core CCR fallback procedures.
Action 9: By December 2018, the regulatory authorities of CCR CHANNEL approved the proposal for amendments for fallback procedures.
Action 10: In October 2020, the TSOs of the Core, GRIT and SEE CCR submitted to their concerned regulatory authorities the amended proposals for the fallback procedures.
Action 11: In December 2020, the regulatory authorities of GRIT CCR approved the amended proposal for fallback procedures submitted by GRIT TSOs.
Action 12: In December 2020, the regulatory authorities of Core CCR referred the amended proposal for fallback procedures to ACER in accordance with Article 9(11) of the CACM Regulation.
You can find documents related to the above actions here.
You can find the exact dates of the above actions in the implementation table here.
You can find the approved fallback procedures here.
Calculation of scheduled exchanges
Pursuant to Articles 43 and 56 of the CACM Regulation, the TSOs which intend to calculate scheduled exchanges resulting from single day ahead coupling and single intraday coupling need to develop a proposal for a methodology for calculation of scheduled exchanges and submit it to all regulatory authorities for approval and to the Agency for information.
Action 1: By December 2016, the TSOs, which intended to calculate scheduled exchanges, submitted to the concerned regulatory authorities and the Agency the proposal for the methodology for calculating scheduled exchanges.
Action 2: In September 2017, all regulatory authorities sent a letter to all TSOs requesting that all TSOs should submit to all regulatory authorities the proposal for the methodology for calculation of scheduled exchanges by December 2017.
Action 3: By March 2018, all TSOs submitted to all regulatory authorities and the Agency the proposal for the methodology for calculation of scheduled exchanges.
Action 4: In September 2018, all regulatory authorities requested from all TSOs to amend the proposal for calculation of scheduled exchanges.
Action 5: By December 2018, all TSOs submitted to all regulatory authorities and to the Agency the amended proposal for the methodology for calculation of scheduled exchanges for the day-ahead and intraday timeframes.
Action 6: In February 2019, the chair of the Energy Regulators’ Forum, on behalf of all regulatory authorities, requested the Agency to grant a one-month extension for the regulatory authorities’ decision making regarding the amended proposal for the methodology for calculation of intraday scheduled exchanges, pursuant to Article 8(1) of Regulation (EC) No 713/2009, and in March 2019 the Agency granted the extension.
Action 7: By June 2019, all regulatory authorities approved the amended proposal for the methodology for calculation of day-ahead and intraday scheduled exchanges.
You can find documents related to the above actions here.
You can find the exact dates of the above actions in the implementation table here.
You can find the approved scheduled exchanges methodology here.
Congestion income distribution
Pursuant to Article 73 of the CACM Regulation, all TSOs need to develop a proposal for a congestion income distribution methodology and submit it to all regulatory authorities for approval and to the Agency for information.
Action 1: By August 2016, all TSOs submitted to all regulatory authorities and the Agency the proposal for congestion income distribution methodology.
Action 2: By February 2017, all regulatory authorities requested from all TSOs to amend the proposal for congestion income distribution methodology.
Action 3: By April 2017, all TSOs submitted to all regulatory authorities and the Agency the amended proposal for congestion income distribution methodology.
Action 4: In June 2017, all regulatory authorities referred the amended proposal for congestion income distribution methodology to the Agency for a decision following the procedure set out in Article 9(12) of the CACM Regulation. The reason for the referral was that they were not able to reach an agreement on the proposal.
Action 5: In December 2017, the Agency adopted a decision on the proposal for the congestion income distribution.
The congestion income distribution methodology should be implemented in each respective capacity calculation region at the date of implementation of the capacity calculation methodology in accordance with Articles 20 and 21 of the CACM Regulation.
You can find documents related to the above actions here.
You can find the exact dates of the above actions in the implementation table here.
You can find the approved proposal for the congestion income distribution methodology here.
The Agency maintains this site to enhance public access to information about the approvals of those terms and conditions or methodologies developed under the network codes/guidelines which require coordination of at least two regulatory authorities. The information on this site is for informational purpose only and does not replace the officially adopted text of the terms and conditions or methodologies in the legally binding documents. The information on this site is based on input from regulatory authorities, transmissions system operators and nominated electricity market operators. The Agency’s goal is to keep the information on this site accurate and timely, subject to the provision of the information to the Agency and subject to confidentiality restrictions. If errors are brought to the Agency’s attention, it will contact the relevant information provider and try to correct the errors. However, the Agency accepts no responsibility or liability whatsoever with regard to the information on this site and, where this information is linked to external sites, to the information on those external sites.
Market Coupling Development
Designation of Nominated Electricity Market Operators
What is it about?
Each Member State needs to ensure that at least one NEMO is designated to perform the single day-ahead and single intraday coupling. Each NEMO designated in the territory of one Member State has the right to provide its services in other Member States ('passporting').
Member States can refuse the trading services by a NEMO designated in another Member State only in exceptional and specific cases (Article 4(6)). The Member States have also the right to revoke the designation of a NEMO, in case it fails to comply with the criteria set in Article 6 of the CACM Regulation.
Legal basis: Article 4, 5 and 6 of the CACM Regulation
Current status: Access the list of currently designated NEMOs and where they provide services.
Market Coupling Operation plan
What is it about?
The Market Coupling Operation (MCO) plan sets out how all NEMOs jointly establish and perform the market coupling operator functions which include:
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developing and maintaining the algorithms, systems and procedures for single day-ahead and single intraday coupling;
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processing input data on cross-zonal capacity and allocation constraints provided by coordinated capacity calculators;
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operating the price coupling and continuous trading algorithms; and
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validating and sending single day-ahead and intraday coupling results to NEMOs.
The plan also covers the governance principles for performing the market coupling operator functions.
Legal basis: Article 7(3) of the CACM Regulation
Responsibility: all NEMOs
Current status: The MCO Plan was approved by all regulatory authorities in July 2017.
Implementation: The MCO Plan is implemented once all bidding zone borders in the internal energy market are participating in the single day-ahead coupling and single intraday coupling.
Read more on the latest approved MCO plan.
Documentation on the approval process of this methodology.
Single day-ahead and intraday coupling algorithms
What is it about?
The methodology establishes the requirements for the algorithms used in the day-ahead (price coupling algorithm) and intraday coupling (continuous trading matching algorithm and intraday auction algorithm), along with the criteria to fulfil them. The algorithms need to be scalable, repeatable and aim for maximum economic surplus. The methodology also ensures that any developments enable:
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efficient and timely implementation of the single European electricity market; and
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a close monitoring of the development and operations.
Legal basis: Article 37 of the CACM Regulation
Responsibility: all NEMOs
Current status: The algorithm methodology was approved by ACER in July 2018 and amended in January 2020. Another amendment to include co-optimisation is currently pending ACER’s approval. ACER initially planned to decide on the matter by 24 May 2024, but will now decide by early autumn 2024 to incorporate stakeholders' views on the findings of the related consultancy study.
Implementation: The methodology has been largely implemented. Implementation of certain functionalities is still pending.
Read more on the latest approved algorithm methodology.
Documentation on the approval process of this methodology.
Single day-ahead and intraday coupling products
What is it about?
The terms and conditions list all products that can be used in the day-ahead and intraday coupling and splits them into two categories: mandatory and optional.
Legal basis: Article 40 (day-ahead) and Article 53 (intraday) of the CACM Regulation
Responsibility: all NEMOs
Current status: The terms and conditions were approved by all regulatory authorities in 2018 and their amendment were approved by ACER in January 2020.
Implementation: The terms and conditions are implemented.
Read more on the latest approved products terms and conditions.
Documentation on the approval process of this methodology.
Minimum and maximum prices
What is it about?
The terms and conditions set out the harmonised maximum and minimum clearing prices to be applied in the market coupling. They are subject to the application of an automatic adjustment mechanism. This mechanism ensures that an increment to the original maximum price is added if the clearing prices in the day-ahead or intraday coupling nearly reach its maximum limit.
Legal basis: Article 41 (day-ahead) and Article 54 (intraday) of the CACM Regulation
Responsibility: all NEMOs
Current status: The terms and conditions on minimum and maximum prices were approved by ACER in November 2017.
Implementation: The terms and conditions are implemented.
Read more on the latest approved terms and conditions on minimum and maximum prices.
Documentation on the approval process of this methodology.
Back-up methodology
What is it about?
All NEMOs are responsible for establishing, together with the relevant TSOs, the backup procedures for national or regional market operation in case no results are available from the market coupling operation functions.
The methodology ensures a back-up in operating the MCO functions, in case the responsible NEMO is unable to do so. This methodology takes into account the fallback methodology under the CACM Regulation.
Legal basis: Article 36 of the CACM Regulation
Responsibility: all NEMOs (in cooperation with all TSOs)
Current status: The back-up methodology was approved by all regulatory authorities in March 2019.
Implementation: The methodology is implemented.
Read more on the latest approved back-up methodology.
Documentation on the approval process of this methodology.
Intraday cross-zonal gate opening and closure time
What is it about?
The terms and conditions determine the intraday cross-zonal gate opening (point in time when cross-zonal capacity between bidding zones is released) and closure time (where cross-zonal capacity allocation is no longer permitted).
The intraday cross-zonal gate opening time has been set to 15:00 market time day-ahead.
The intraday cross-zonal gate closure time has been set to 60 minutes before the start of the relevant intraday market time unit on a bidding zone border.
Legal basis: Article 59 of the CACM Regulation
Responsibility: all TSOs
Current status: The terms and conditions were approved by ACER in April 2018.
Implementation: The terms and conditions are implemented in all capacity calculation regions.
Documentation on the approval process of this methodology.
Intraday capacity pricing
What is it about?
The pricing mechanism for cross-zonal capacity in the intraday timeframe should be based on intraday auctions. These auctions are part of the single intraday coupling and complement continuous trading, where the available cross-zonal capacity is allocated at a zero price on a first come first serve basis.
The methodology ensures cross-zonal capacity is not allocated to the intraday auctions and the continuous trading at the same time.
Legal basis: Article 55 of the CACM Regulation
Responsibility: all TSOs
Current status: The methodology was approved by ACER in January 2019.
Implementation: The methodology is implemented through the amendments of the algorithm methodology, which introduces intraday auctions as the tool for pricing intraday capacity. The algorithm methodology sets out the implementation of the intraday auctions to the beginning of 2023.
Read more on the latest approved methodology for pricing intraday cross-zonal capacity.
Documentation on the approval process of this methodology.
Day-ahead firmness deadline
What is it about?
The day-ahead firmness deadline methodology defines the deadline after which cross-zonal capacity for the day-ahead allocation becomes firm. The day-ahead firmness deadline is set to 60 minutes before the day-ahead market gate closure time.
Legal basis: Article 69 of the CACM Regulation
Responsibility: all TSOs
Current status: The methodology was approved by all regulatory authorities in July 2017.
Implementation: The methodology is implemented.
Read more on the latest approved day-ahead firmness deadline methodology.
Documentation on the approval process of this methodology.
Complementary regional auctions
What is it about?
These provisions allow for the implementation of complementary regional intraday auctions within or between bidding zones in addition to the single intraday coupling solution if they do not have an adverse impact on the single intraday coupling. TSOs and NEMOs need to establish the methodology to be approved by the relevant regulatory authorities. Their application shall be reviewed at least every two years.
Legal basis: Article 63 of the CACM Regulation
Responsibility: relevant NEMOs and TSOs
Current status: The complementary regional intraday auctions were approved for the bidding zone border between Spain and Portugal and Italy North and Italy-Greece biding zone borders.
Implementation: The complementary regional intraday auctions are partially implemented (see above).
Read more on the latest approved methodologies for complementary regional intraday auctions.
Fallback procedures
What is it about?
The fallback procedures ensure efficient, transparent and non-discriminatory capacity allocation in case the single day-ahead coupling process is unable to produce results. Different regions have different fallback solutions in place.
Legal basis: Article 44 of the CACM Regulation
Responsibility: all TSOs in each capacity calculation region
Current status: The fallback procedures were approved in all regions. Some regions also approved amendments.
Implementation: The fallback procedures are implemented in all regions.
Documentation on the approval processes of the fallback methodologies.
Calculation of scheduled exchanges
What is it about?
Scheduled exchanges are electricity transfers scheduled between geographic areas for each market time unit and for a given direction. The scheduled exchanges between bidding zones, scheduling areas and NEMO trading hubs are calculated by using the net positions and clearing prices of bidding zones (as outputs of the day-ahead and intraday algorithms)
Legal basis: Article 43 (day-ahead) and Article 56 (intraday) of the CACM Regulation
Responsibility: all TSOs
Current status: The methodology for the day-ahead timeframe was approved by all regulatory authorities in March 2019. The methodology for the intraday timeframe was approved by all regulatory authorities in June 2019.
Implementation: The scheduled exchange methodologies are implemented.
Read more on the latest approved scheduled exchange methodologies.
Documentation on the approval process of these methodologies.
Congestion income distribution
What is it about?
The congestion income distribution methodology establishes the rules for collecting and distributing the congestion income on the bidding zone borders within capacity calculation regions from the day-ahead market and for distributing it among the TSOs having interconnectors on that border.
Legal basis: Article 73 of the CACM Regulation
Responsibility: all TSOs
Current status: The latest amendments to the methodology were approved by ACER in 2022.
Implementation: The implementation is linked to the implementation of the capacity calculation methodology within their respective capacity calculation region, so different regions have different implementation timelines.
Read more on the latest approved congestion income distribution methodology.
Capacity Calculation
Definition of capacity calculation regions
What is it about?
This methodology groups all the bidding zone borders of the EU's internal energy market into the different capacity calculation regions (CCRs). This is relevant for the functioning of the internal energy market, as it simplifies processes by forming such regional sub-groups. The approach needs to consider for which bidding zone borders the need of coordination is the highest (e.g. taking into account the interdependencies) and where it is most efficient to apply cross regional coordination. Different regional methodologies (such as capacity calculation, redispatching and countertrading) will be applied on the various capacity calculation regions.
Legal basis: Article 15(1) of the CACM Regulation
Responsibility: all Transmission System Operators (TSOs)
Current status: The determination of capacity calculation regions was approved by ACER in March 2024.
Implementation: The determination of capacity calculation regions is implemented. A future assessment is foreseen to assess the efficiency of the current CCR determination based on information from newly implemented regional methodologies.
Read more on the latest approved determination of capacity calculation regions.
Documentation on the approval process of this methodology.
Check out ENTSO-E’s interactive map of capacity calculation regions.
Generation and load data provision
What is it about?
The generation and load data provision methodology sets out requirements related to the delivery of the generation and load data needed to establish the common grid model. It specifies what units and which information need to be submitted to their respective TSOs, as well as their deadlines.
Legal basis: Article 16 of the CACM Regulation
Responsibility: all TSOs
Current status: The generation and load data provision methodology was approved by all regulatory authorities in July 2017.
Implementation: The methodology is implemented.
Read more on the latest approved generation and load data provision methodology.
Documentation on the approval process of this methodology.
Common grid model
What is it about?
The common grid model (created by merging all individual grid models of TSOs) provides the best forecast of perspective network states in the relevant market time units used for the day-ahead and intraday capacity calculation.
The methodology defines the rules and procedures for developing and merging the models, including the relevant parameters of network elements, generation and load patterns, net positions of modelled areas and network topology.
Legal basis: Article 17 of the CACM Regulation
Responsibility: all TSOs
Current status: The methodology was approved by all regulatory authorities in May 2017.
Implementation: The implementation deadline foresees the common grid model to become perational and available for the day-ahead and intraday time frames by June 2018. However, implementation is still ongoing.
Documentation on the approval process of this methodology.
Capacity calculation methodology
What is it about?
The day-ahead and intraday capacity calculation methodology describes the rules of each capacity calculation region on how to calculate the amount of capacity available for trading between bidding zones at day-ahead and intraday market time frames. The methodology also complies with the network security standards.
The process
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TSOs define capacity calculation inputs, such as hourly common grid models.
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The inputs are used by regional coordination centres to calculate the available amount of cross-zonal capacities either by using a flow-based or coordinated Net Transmission Capacity (NTC) approach, depending on the respective region.
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The final cross-zonal capacities are then made available to the market coupling were they are allocated, enabling trading among bidding zones.
Legal basis: Article 20 of the CACM Regulation
Responsibility: all TSOs in each capacity calculation region
Current status: The methodology was approved in all regions. Some regions also approved amendments, or they are currently under approval.
Implementation: Different regions have different implementation timelines. Some regions have already implemented the methodology, whereas some other are expected to do so by the end of 2022.
Bidding Zone Review
Bidding Zone Review
Reporting on existing bidding zones and their review
What are the bidding zones and why the need to review them?
A bidding zone is the largest geographical area in which bids and offers from market participants can be matched without the need to attribute cross-zonal capacity. Currently, bidding zones in Europe are mostly defined by national borders.
The Electricity Regulation prescribes that the configuration of bidding zones in the EU should aim at maximising economic efficiency and cross-zonal trading opportunities, while ensuring security of supply. To achieve this, a review of the existing bidding zones needs to be carried out, to identify structural congestions and include an analysis of the different bidding zone configurations. Better defined bidding zone configurations can bring several benefits, including:
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increased opportunities for cross-zonal trade;
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more efficient network investments; and
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cost-efficient integration of new technologies.
How is a bidding zone review launched?
Legal basis: Articles 32-34 of the CACM Regulation, Article 14 of the Electricity Regulation
Involved parties: Transmission System Operators (TSOs), National Regulatory Authorities (NRAs), ACER, Member States (MSs), European Commission (EC)
Current status: A pan-European bidding zone review process is currently ongoing.
The CACM Regulation specifies the parties entitled to trigger a bidding zone review as well as the conditions under which it may be launched. One of the conditions is that ACER may request TSOs to launch a review of the existing bidding zone configuration in case inefficiencies in the current arrangement are detected. The presence of any inefficiencies is to be identified in at least one of the following reports, which are drafted every three years:
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ENTSO-E’s bidding zone technical report, which details the structural and major physical congestions in Europe, along with their location and frequency.
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ACER’s market report, evaluating the impact of the current bidding zone configuration on market efficiency.
If ENTSO-E’s technical report concludes that structural congestions exist in the EU, the relevant Member State (in cooperation with the national TSOs) must decide, within six months, to establish either national or multinational action plans or to review and amend its bidding zone configuration.
Alternatively, the review of bidding zones can be triggered by:
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A proposal from all European TSOs, which needs to detail the methodology and the assumptions that are to be used in the bidding zone review process, as well as the alternative bidding zone configurations.
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A report, approved by the competent regulatory authority, drafted by one or more TSOs in their control areas.
Bidding Zone Review
How has the review of bidding zones worked in practice?
The first bidding zone review
A first bidding zone review was launched in 2018. The process concluded by maintaining the status quo, given the lack of evidence that modifying the bidding zone configuration would be beneficial.
The ongoing pan-EU bidding zone review
On 5 October 2019, all European TSOs submitted a bidding zone proposal to regulatory authorities for approval. This proposal lacked alternative bidding zone configurations for a large part of Europe. By 7 April 2020, TSOs submitted an updated version of the proposal to their respective regulatory authorities, which then referred it to ACER for decision.
ACER issued its first decision on 24 November 2020, adopting the methodology and the assumptions to be used in the bidding zone review process. At the same time, ACER requested TSOs to submit the results of the Locational Marginal Pricing (LMP) simulations to be able to decide on the alternative bidding zone configurations.
On 8 August 2022, ACER published a second decision on the alternative bidding zone configurations to be considered in Continental Europe (Germany, France, Italy and the Netherlands) and in the Nordic area (Sweden).
This decision could not cover the Baltic region, as the LMP results were still missing. As these results have been provided, ACER published a third decision on the alternative bidding zone configurations for the Baltic region on 22 December 2023. In its decision, ACER concluded that no alternative bidding zone configurations need to be investigated for the Baltics.
What are the next steps?
After the adoption of ACER’s decisions on the alternative configurations, TSOs have one year to carry out the bidding zone review and provide a recommendation on whether to keep or amend the bidding zone configuration.
Member States have six months to decide on the TSOs’ recommendation. If Member States fail to reach a unanimous decision, the European Commission (after consulting with ACER) has six months to decide.
Information on the status of the study being carried out by TSOs may be found on ENTSO-E’s website.
Related documents
History
The development of the CACM Regulation started in 2011 when the Agency developed the Framework Guidelines on Capacity Allocation and Congestion Management for electricity. These Framework Guidelines were adopted on 29 July 2011.
Among other elements, the Framework Guidelines included provisions for the forthcoming development of the Network Code on Capacity Allocation and Congestion Management. The core of these requirements was centred around cross-zonal capacity calculation and allocation in the day-ahead and intraday timeframe.
Calculation of capacities between bidding zones should maximise the possibilities to trade between bidding zones taking into account the limitations of existing network infrastructure. Capacity calculation should be efficient, transparent, and strongly coordinated among TSOs. Flow-based capacity calculation should be applied in highly meshed networks, whereas coordinated net transmission capacity (CNTC) calculation may be used in less meshed networks. In the day-ahead timeframe cross-zonal capacity should be allocated via implicit auction (single coupling). For the intraday timeframe cross-zonal capacity should be allocated through implicit continuous allocation (single coupling), which can be complemented with implicit auctions in specific cases.
The Framework Guidelines also define a process to regularly investigate and report on whether existing bidding zones are efficient. In case inefficiencies are identified, the review of bidding zones should be triggered to compare the overall market efficiency of alternative bidding zones configurations against the existing one.
Based on these Framework Guidelines, ENTSO-E was tasked to develop the Network Code on Capacity Allocation and Congestion Management. Subsequently, the draft network code was submitted to the Agency for opinion based on which ENTSO-E revised the network code and resubmitted it to the Agency. Finally, the Agency adopted a recommendation to the European Commission to adopt the Network Code on Capacity Allocation and Congestion Management subject to specific amendments proposed by the Agency. Following this recommendation, the European Commission further revised the network code, which was then finally adopted as a Commission guideline in July 2015 and entered into force in August 2015.
The detailed dates and documents of the above actions are presented below:
Action 1: 29 July 2011: The Agency adopts the Framework Guidelines on Capacity Allocation and Congestion Management for Electricity
Action 2: 27 September 2012: ENTSO-E submits the Network Code on Capacity Allocation and Congestion Management to the Agency
Action 3: 19 December 2012: The Agency adopts the Opinion on the Network Code on Capacity Allocation and Congestion Management
Action 4: 14 March 2013: The Agency adopts the Recommendation on the Network Code on Capacity Allocation and Congestion Management
Capacity allocation and congestion management
Capacity allocation and congestion management
The CACM Regulation
The Capacity Allocation and Congestion Management (CACM Regulation) provides binding rules for the implementation and operation of EU-wide single market coupling in the day-ahead and intraday timeframes.
These rules apply to Transmission System Operators (TSOs), Nominated Electricity Market Operators (NEMOs), regulatory authorities and ACER.
What are its core elements?
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Calculation of capacities between bidding zones: capacity calculation should be coordinated among TSOs to become as efficient as possible and transparent for market participants. As a result, TSOs can provide an optimal amount of cross-zonal capacity for allocation in the market.
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Allocation of cross-zonal capacities with market coupling: the most efficient way to allocate cross-zonal capacity is by using the Union-wide market coupling, which collects all bids and offers from the bidding zones within the European Union and maximises the economic surplus. For this purpose, NEMOs organize the day-ahead coupling as an implicit auction and the intraday coupling as continuous trading supplemented by numerous implicit auctions. The CACM Regulation also addresses the related post-coupling processes.
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Management of residual congestions: physical congestions, which were not prevented by capacity calculation and allocation, need to be managed by coordinated TSOs’ actions - i.e. by using countertrading or re-dispatching.
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Optimal definition of bidding zones: bidding zones are geographic areas within which electricity exchanges are unrestricted, whereas exchanges between bidding zones require cross-zonal capacity - which is limited. Bidding zones should be defined to prevent structural congestions within a bidding zone. In case the existing bidding zone configuration is not efficient, TSOs need to review the structure and propose a more efficient one.
Market rules
Market rules, (or “market codes”) are binding EU rules that couple the national electricity markets and foster their integration into a single European electricity market. The rules promote:
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Market integration
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Allowing the most efficient use of infrastructure and resources available at European level
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Creating hedging and new trading opportunities
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Contributing to the creation of the European internal electricity market
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Ensuring an adequate level of security of supply
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Ensuring long-term operation and network development across the European Union
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Fairness and non-discrimination
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Access to cross-zonal capacity’s access
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Creating a level playing field among the parties involved
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Facilitating the participation of demand response and renewable energy sources
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Transparency and reliability of information
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Competition
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Avoiding market distortions and entry barriers
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Facilitating the formation of cost-reflective market prices.
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The Regulation on the internal market for electricity and the three European Commission regulations on market rules constitute the main legal framework for the European electricity market.
The three regulations are:
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Forward Capacity Allocation (FCA) Regulation 2016/1719, covering the forward timeframe.
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Capacity Allocation and Congestion Management (CACM) Regulation 2015/1222, covering the day-ahead and intraday timeframe.
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Electricity Balancing (EB) Regulation 2017/2195, covering the balancing timeframe.
The regulations envisage the establishment of more detailed rules and procedures, called “terms and conditions or methodologies”, which need to be developed by Transmission System Operators (TSOs) or Nominated Electricity Market Operators (NEMOs) and approved by National Regulatory Authorities (NRAs) or ACER.
Read more on the different market rules for the various electricity market timeframes.
Besides helping to shape the first generation of these common rules, ACER plays a key role in their future amendment to ensure they remain fit for purpose in the clean energy transition.
ACER consults with TSOs, NEMOs and NRAs when terms and conditions or methodologies are developed or approved. Where terms and conditions or methodologies are developed by all European TSOs or NEMOs or if the NRAs cannot agree on them on a regional level, ACER is competent to review and decide on them.
Read more on the approval process of terms conditions and methodologies.