ACER webinar: monitoring the European LNG market developments

Today, ACER and the Council of European Energy Regulators (CEER) publish a paper reviewing the national treatment of anticipatory investments and proposing ways to facilitate the necessary electricity grid enforcement to meet the EU’s climate and energy targets.

Requested by the European Commission as a follow up of the 9th Energy Infrastructure Forum (June 2023), this paper analyses the main barriers to anticipatory investments and provides a set of recommendations to promote national incentive schemes to overcome them.

What are anticipatory investments?

Anticipatory investments reinforce the grid based on anticipated potential future needs, which go beyond confirmed generation and demand needs. On one hand, this will help ensure that the power grids are fit for the rapid uptake of renewable energy sources (RES), avoiding connection delays of RES caused by a slower grid capacity expansion. On the other hand, investing into anticipatory investments carry a risk that they may turn out be underused, at least until there are developments on the generation side.

What are the energy regulators’ key findings?

Reviewing the current national regulatory frameworks for energy infrastructure investment, ACER and CEER find that:

• The focus should be on implementation: several National Regulatory Authorities (NRAs) reported no need for further actions at national level with anticipatory investments but called for the already-foreseen measures to be properly implemented.

• System operators often adopt a forward-looking approach in planning and anticipate future generation and demand (including grid connection requests of renewable energy sources, electric vehicles’ charging infrastructure or other drivers of network expansion).

• The same regulatory treatment is applied to anticipatory investments as for other types of grid investments. Both are subject to the same regulatory incentives and penalties, as well as the same cost-recognition process.

What are the energy regulators’ recommendations?

Consistent with the recommendations in ACER’s Report on investment evaluation, risk assessment and regulatory incentives for energy network projects (June 2023), ACER and CEER  recommend:

• Reinforcing the role of energy regulators (and the tools at their disposal) in assessing energy infrastructure needs and projects; facilitate the NRA’s decision-making process by reducing uncertainties on the development of new network usages (e.g. such instruments include the identification of renewable acceleration areas, improved analysis of the electric recharging uptake in the network plan scenarios).

• Encouraging electricity network users (like generators) to flag their potential connection requests (including their capacity requirements and planned locations) as early as possible.

• Improving coordination and information exchange amongst future network users, network operators and energy regulators as a basis to speed-up the regulatory validation of grid investments. For example, better consultation is needed on the network planning scenarios and the priorities in addressing reinforcement needs.  

• Electricity Transmission System Operators (under oversight by the energy regulator) improving how electricity transmission needs are identified by providing detailed analysis (with higher spatial granularity at European and national level) and transparency of their results.

• Countries having separate regulatory approvals for permit granting and construction to expedite project implementation and minimise “sunk costs” in case the project will not be needed.

• Regulators evaluating the potential welfare loss from a “too early” or “too late” implementation of the projects.

What are the next steps? 

This paper aims to contribute to the discussions (and actions to be taken) on anticipatory investments foreseen in the framework of the European Commission’s Grid Action Plan to accelerate the development of smart electricity grids and support the rollout of renewables.

Access the ACER – CEER paper.

ACER is seeking for applicants to join a new consultative expert group, which will work on Power Purchase Agreements (PPAs).

The main focus of the new expert group will be to advise on the need for standardised PPA contracts within the European energy market, exploring their feasibility, main benefits and drawbacks. Experts will help ACER assess whether standardised PPAs will foster the transparency, efficiency and integration of the European internal energy market, and will build the necessary knowledge to ensure alignment with other European energy policies and objectives.

The expert group will operate from spring to summer 2024, with the possibility of extending into 2025 for further analysis on the development of such contracts.

How to apply?

ACER is seeking for a diverse group of experts with experience in legal, financial, and technical fields related to energy regulation (especially electricity markets).

To apply, please follow the instructions in the Open Letter and make sure you fulfil all the application criteria​.

Application deadline is Friday 19 April 2024.​

In November 2023, Transmission System Operators (TSOs) submitted to ACER their proposal to amend the definition of two European electricity Capacity Calculation Regions (CCR).

On 19 March 2024, with its Decision No 04/2024, ACER has approved the amendments to the Core and Italy North 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 where TSOs coordinate the capacity calculation and other processes (i.e. subject to regional methodologies).

Currently, there are eight CCRs in the EU: Nordic, Baltic, Hansa, Core, Italy North, Greece-Italy (GRIT), South-West Europe (SWE) and South-East Europe (SEE).

Having an efficient definition of CCRs benefits European consumers and producers:

• It allows TSOs to run regional processes related to capacity calculation, re-dispatch and countertrading more effectively.
• It optimises the provision of cross-zonal capacity, allows for more cross-zonal trade and ensures security of supply.

What has changed?

• The Core CCR will include the Celtic interconnector, an undersea cable between Ireland and France. This will facilitate Ireland’s further integration into the European electricity market.
• The Core and Italy North CCRs will be merged and form a new CCR called Central Europe. Initially, this merger will only apply to the day-ahead capacity calculation process. It will improve the coordination and efficiency of capacity calculation and allocation processes in continental Europe.

How did ACER contribute?

ACER assessed whether the TSOs’ proposal contributes to market integration, non-discrimination, effective competition, and the proper functioning of the EU electricity market.

To make an informed decision, ACER consulted with stakeholders in winter 2023-2024.

Next steps

The Celtic interconnector will become part the Core CCR once it becomes operational (expected in 2026).

The TSOs shall submit the day-ahead flow-based capacity calculation methodology for the newly formed Central Europe CCR by January 2025.

The ACER report on key developments in the electricity wholesale markets presents the main results of monitoring the EU electricity wholesale market in 2023 and recommends further actions to foster its integration. It also presents some data on the Energy Community region.

What 2023 electricity trends did ACER’s monitoring and data insights find?

Electricity from renewable energy sources (RES) reached record heights surpassing and replacing fossil fuels. The facts in this ACER report attests to renewable growth driving the EU’s clean energy transition. Coal-fired and gas-fired power plants usage declined.

• Renewables rose to a record 45% of overall electricity generation. Wind and solar are powering this growth in renewables generation.
• Big renewable capacity additions reduce the need for fossils. Renewables account for more than half of the overall installed capacity for the first time, with wind and solar contributing the most. For conventional power plants, the installed capacity remained stable.
• Electricity demand fell significantly, playing a key role in cutting Europe’s reliance on fossil fuel.
• The fall in gas prices led to lower electricity wholesale prices, but they remain higher and more volatile than before the energy crisis. Imbalance- and intra-day prices followed the trends in the day-ahead market.
• The EU faced record negative wholesale prices due to the speeding up of renewable growth to meet sustainability goals.
• Further interconnectivity and enhanced EU electricity market integration is still needed including tackling barriers to cross-zonal trade and reinforcing the EU network.

Access the report.

Along with ACER’s report on the key developments in the gas wholesale markets, today marks the beginning of ACER’s 2024 Market Monitoring Report (MMR) series.

Today, ACER releases its report on the key developments in the gas wholesale markets.

The report looks back at Europe’s gas markets in 2023, shows the trends so far in 2024 and identifies upcoming challenges.

Along with ACER’s report on key developments in the electricity wholesale markets, today marks the beginning of ACER’s 2024 Market Monitoring Report (MMR) series.

What gas market trends did ACER monitoring find?

• In 2023, gas supply to Europe remained below the range that was the norm pre-Ukraine invasion. Yet with consumption also substantially lower, storage levels stayed at historic highs, leading to wholesale prices decreasing.
• Gas hub price convergence improved but did not reach pre-energy crisis levels. New Liquified Natural Gas (LNG) import terminals and additional gas transportation capacity eased the network congestion that drove price differences to record highs in 2022. On the back of the same drivers, spot LNG and European wholesale prices also aligned in 2023.
• Growth in renewables reduced the need for thermal power, easing gas market tightness and driving the EU’s shift towards clean energy and away from fossil fuels.
• The likely end of the Ukraine gas transit agreement – coming in winter 2024/2025 – coupled with potentially increasing costs of cross-border trade could disrupt regional gas balances, calling for Member State preparedness and European solutions.
• Looking further ahead, uncertainties in future gas consumption, lack of available alternatives to gas storage for seasonal flexibility, and persistent global gas price differentials call for the attention of policy makers and energy regulators. Europe can address these energy challenges by leveraging its strengths, such as enhanced market integration enabling energy to move freely across borders.

Access the report.