Seasonal outlooks of the European Network of Transmission System Operators for Electricity (ENTSO-E) provide observations and foresight for challenges associated with the security of electricity supply for winter and summer. They help Member States and transmission system operators to make informed decisions related to future risks of power shortages.

The importance of these European wide seasonal assessments is heightened in the context of gas supply uncertainties, changing weather patterns and generation outages.

Highlights of ENTSO-E’s Summer Outlook (2023)

ENTSO-E’s Summer Outlook 2023 identified no electricity security of supply concerns for EU consumers. Nevertheless, close monitoring is suggested for Cyprus, Crete, Malta and Ireland.

Adequacy risks flagged for island Member States (and Crete) show the importance of interconnections in ensuring security of supply. With limited interconnections, the islands cannot benefit from the resilience the meshed network of the continental Europe offers, which allows for enhanced sharing of resources.

Source: ACER based on Summer Outlook 2023 - Figure 13: Adequacy risk overview - considering non-market resources

ENTSO-E’s report also points to comfortable gas storage levels by the end of summer and highlights the need to resort to any gas withdrawals with prudence over the summer period.

What does ACER say about ENTSO-E’s Summer Outlook?

• ACER appreciates ENTSO-E’s commitment to adapting its seasonal outlooks to the prevailing circumstances, such as developments in the gas system situation.
• ACER also stresses the importance of considering interconnection capacity when assessing the adequacy of electricity supply.
• ACER highlights, as in its past opinions, that ENTSO-E’s Summer Outlook assessment lacks flow-based modelling to optimise cross-zonal exchanges in line with the current market design.

For the next seasonal assessment (the Winter Outlook), ACER suggests that ENTSO-E addresses the following considerations to support management of security of electricity supply over the coming winter:

• Analyse the consequences of alternative scenarios including sensitivity to factors such as the impact of low precipitation (prolonged droughts) over the year.
• Assess the potential rebound of demand in case energy-saving measures introduced last year (2022) are not in effect and demand side response to prices is less pronounced.

ACER monitors and reports annually on the EU (internal) markets of electricity and natural gas (in our so-called Market Monitoring Reports (MMR)).

In 2023, ACER publishes a series of overviews of gas markets and the progress towards an internal EU gas market. Today’s Key developments publication provides an initial assessment of key developments in European wholesale gas markets over the recent months. The analysis will be further elaborated in our September’s MMR on European gas market trends and price drivers.  

What are the key findings?

Among the main trends identified in 2022 and the first half of 2023:

• The extreme wholesale gas price rises during 2022 can be primarily attributed to the Russian supply shock. However, it was the resilient demand for gas, driven upwards by above-average storage injections, that caused prices to clear at record-high levels;
• Since the end of 2022, the demand-supply balance in the gas market has improved due to a combination of rising liquified natural gas (LNG) imports and a decrease in demand, effectively compensating for the loss in Russian pipeline flows;
• This improved balance has resulted in a reduction in gas prices, which are now approaching pre-crisis levels. However, supply is overall still tight exposing prices to unexpected developments. China’s LNG demand remains an important factor for EU gas prices going forward;
• The significant price spreads between Northwest European (NWE) and South European hubs during the summer of 2022, caused by limited access to NWE, have returned to normal levels, due to increased LNG import capacity;
• Gas trading activity has increased in recent weeks due to more favourable prices and reduced margin requirements.

What are the next steps?

• September: European gas market trends and price drivers (analysing the drivers behind record-high gas prices in spring and summer 2022);
• November: 2023 Synthesis and Recommendations for gas; and
• December: Analysis of LNG market developments.

Access the Key developments in EU gas wholesale markets – 2023 Market Monitoring Report.

Dive into our interactive dashboard and explore the evolution of price and demand supply metrics for the period 2015 to 2023.

Today, ACER has published two reports and a recommendation related to energy infrastructure in the EU:

• Consolidated monitoring report on Projects of Common Interest (PCIs);
• Report on investment evaluation, risk assessment and regulatory incentives for energy network projects; and
• New recommendation for cross-border cost allocation (CBCA).

Why are these ACER publications relevant to Europe’s clean energy goals?

European Projects of Common Interest (PCIs) are key cross-border infrastructure projects that further link the energy systems of EU countries. Such infrastructure projects are a strategic priority for achieving Europe’s ambitious clean energy goals. Delays in such investments can hamper further market integration, security of supply and be a major obstacle to the timely rollout of renewable projects. ACER’s annual PCI monitoring reports address the status of PCIs, their implementation plans, reasons for delays and rescheduling.

The revised TEN-E Regulation also tasked ACER with reviewing investment evaluation, risk assessment and regulatory incentives for energy network projects. The 2023 ACER report examines how national regulatory authorities (NRAs) mitigate risks for project promoters and incentivise investments in innovative, efficient and sustainable energy infrastructure. It also includes a common methodology on the risk assessment of PCIs.

CBCA is about sharing the efficient investment costs of a PCI between the countries which are significantly impacted by the projects. The new ACER recommendation on CBCA defines good practices (for project promoters and for NRAs) for shared cost allocation requests.

What are the key findings?

ACER’s recent review of the progress and regulatory treatment of PCIs shows that:

• The overall cost of PCIs is EUR 81.2 billion in 2023 (10% increase compared to 2022), mainly due to the increased prices of materials, technical equipment and labour;
• Most PCIs are in an advanced stage (i.e. at least in permitting). Promoters expect 90% of electricity projects and 100% of gas projects to be operational by 2030;
• However, approximately 30% of electricity and 20% of gas PCIs experienced delays over the past year (similar to the trend observed in previous years), most frequently due to permit granting;
• Transmission system operators’ (TSOs’) risks are largely mitigated in the Member States by the default mitigation measures of the national regulatory framework; Project promoters show limited interest to apply for the additional project specific regulatory incentives offered by the relevant EU regulations; only a few times in the past decade have they requested additional incentives due to higher risks;
• In contrast, project promoters have submitted investment requests for CBCA for more than 40% of the gas and electricity transmission PCIs, with a total investment value of EUR 16.5 billion. The respective NRAs confirmed the benefits of the projects for both the hosting countries and Europe as a whole, deviating from the default allocation methods (i.e. the territorial principle for onshore projects and 50-50% allocation for offshore projects) only in a few instances.

What does ACER recommend?

To facilitate the evaluation, approval and implementation of high value European projects, ACER recommends NRAs, TSOs and project promoters to:

• Enhance scrutiny of ‘non-progressing’ priority projects by the Regional Groups;
• Improve investment evaluation, including identification of needs (also at regional level), and cost-benefit analysis of projects addressing those needs;
• Pursue consistent approaches in the assessment of project promoter’s risks across Member States;
• If existing regulatory tools fail to address investment gaps, further align the interest of TSOs and energy consumers by systematically applying benefit-based incentives, and by ensuring impartiality towards specific technological solutions;
• Ensure that project promoters submit complete and high-quality investment requests, including for clusters of interdependent projects;
• Seek an efficient, consistent, pragmatic and flexible approach for the treatment of investment requests and subsequent allocation of investment costs between benefiting countries;
• Include, directly in the CBCA decisions, mechanisms on how to treat uncertainties in the investment requests.

Access the:

• Consolidated report on the progress of electricity and gas Projects of Common Interest, its Annex I (electricity) and Annex II (gas);
• Report on investment evaluation, risk assessment and regulatory incentives for energy network projects and its Annex;
• Recommendation on good practices for the treatment of the investment requests, including cross-border cost allocation requests, for projects of common interest.

From 21 July to 15 September 2023, ACER will run a public consultation on its upcoming report on cross-border capacity in EU electricity markets in 2022, to be published on 21 July 2023.

What is the report about?

ACER’s monitoring is crucial for integrated markets, as it contributes to efficient cross-border trade, integration of renewables, ensuring security of supply and reducing price volatility.

The ACER report on cross-border capacity in electricity markets will:

• Address network element usage, barriers, and potential solutions;
• Highlight the importance of maximizing cross-zonal trading for efficiency and decarbonization; and
• Evaluate the progress made towards the Clean Energy Package's target of achieving a minimum of 70% transmission capacity for cross-zonal trade by 2025.

What are the next steps?

After publishing its report on cross-border capacity in electricity markets on 21 July 2023, ACER will:

• Run a public consultation to collect stakeholders’ views on the report (from 21 July to 15 September 2023); and
• Organise a workshop to discuss the report’s conclusions (6 September 2023).

Based on its findings and stakeholders’ input, ACER will issue a formal opinion with recommendations to the European Commission and European Parliament by November 2023.