On 15 December 2023, the European Network of Transmission System Operators for Electricity (ENTSO-E) submitted the European Resource Adequacy Assessment (ERAA) 2023 to ACER.

What is the European resource adequacy assessment?

Mandated by the 2019 Clean Energy Package, ERAA is ENTSO-E’s annual evaluation of the risks to the EU security of electricity supply for up to 10 years ahead. Following the methodology approved by ACER in October 2020, ENTSO-E must carry out an annual assessment on whether the EU has sufficient electricity resources to meet its future demand.

At national level, Member States set their own electricity reliability standard to indicate the level of security of electricity supply they need. At European level, ERAA verifies whether the results meet the levels set by the Member States.

What are the benefits?

ERAA provides an objective basis for identifying potential risks to the European security of electricity supply, and whether additional national measures, such as capacity mechanisms, are needed.

What are the next steps?

ACER has three months (i.e. until 15 March 2024) to reach a decision on ERAA 2023.  

Read more on ERAA.

On 30 November 2023, Transmission System Operators (TSOs) submitted to ACER their proposal for amending the definition of two European Capacity Calculation Regions (CCR).

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 Europe: Nordic, Hansa, Core, Italy North, Greece-Italy (GRIT), South-West Europe (SWE), Baltic 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 is the proposed amendment about?

The TSOs are proposing to:

• merge the Core and Italy North CCRs to improve coordination and efficiency of capacity calculation and allocation processes in central Europe;
• include the Celtic interconnector (Ireland-France) to this newly merged region to facilitate Ireland’s further integration into the European electricity market.

Next steps

ACER will assess whether the TSOs’ proposals contribute to market integration, non-discrimination, effective competition, and the proper functioning of the EU electricity market.

To take an informed decision, ACER opened a public consultation and is inviting its stakeholders to submit their views by Wednesday, 10 January 2024.

ACER has six months to decide on the TSOs’ proposal. However, ACER is committed to reach a decision in three months, given the impact this might have on the electricity market.

Update of 21 March 2024: The Decision No 04/2024 and its Annexes have been uploaded here. 

On 24 November 2023, ACER received a proposal from all Nominated Electricity Market Operators (NEMOs) for amending the methodology for the price coupling algorithm and the continuous trading matching algorithm.

What is the methodology about?

The methodology sets the regulatory framework for the algorithms used for matching orders and allocating cross-zonal capacities in the European day-ahead and intraday electricity markets. The European day-ahead electricity market is based on an implicit auction, whereas the intraday market currently relies only on continuous trading. However, intraday auctions are expected to be introduced in 2024.

Thanks to a coordinated calculation of prices and flows, which is referred to as market coupling, available cross-zonal capacity is used more efficiently and price differences are reduced.

The current methodology was approved by ACER in July 2018 and amended in January 2020.

Why amend the methodology?

Amending the methodology, in particular the day-ahead coupling algorithm, is needed to enable a co-optimised allocation of cross-zonal capacity for the exchange of balancing capacity or sharing of reserves. Co-optimisation facilitates the integration of the balancing capacity markets and allows for a more efficient use of cross-zonal capacity.

Additionally, NEMOs proposed changes to the monitoring of scalable complex orders (which are a specific type of orders from market participants) and to the timings and delivery of results of intraday auctions.

What are the next steps?

ACER will run a public consultation and host a public workshop to collect views from stakeholders in the decision-making process.

• The public consultation will run from 18 January to 20 February 2024.

• The public workshop is planned for 1 February 2024.

Update as of 13 February: the public consultation's original deadline of 15 February has been extended to 20 February. 

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 consultancy study.

Access the public notice initiating the procedure.

Update as of 24 September: with its Decision 11-2024, ACER adopted the amended methodology.

On 17 November 2023, the European Network of Transmission System Operators for Electricity (ENTSO-E), on behalf of Transmission System Operators (TSOs), submitted to ACER an amendment proposal to the methodology for coordinating operational security analysis (CSAM). Following the receipt of the TSOs’ proposal, ACER has initiated a procedure to decide on these amendments.

What is the methodology about?

CSAM supports the EU’s operational security by outlining the requirements to ensure:

• the electricity transmission system is operated in a coordinated manner;
• effective system operational planning;
• transparency and reliability of information on transmission system operation.

What does the amendment proposal entail?

The proposed amendments relate to the implementation of the observability area (i.e. where TSOs implement real-time monitoring and modelling of their systems to maintain operational security) as recommended in the Incident Classification Expert Panel’s final report on Continental Europe Synchronous Area Separation on 8 January 2021.

The amendment proposal aims at:

• Aligning the reassessment period for the observability area with the one for the external contingency list (i.e., the list of contingencies to be simulated to test the compliance with the operational security limits). This alignment is important to ensure that the operational security analysis is carried over accurately across all timeframes.
• Including busbar couplers in the contingency lists and in the TSOs’ Individual Grid Models (IGMs). This update ensures that the power flows are kept within the operational security limits after a contingency has occurred.

What are the next steps?

ACER will decide on the TSOs’ proposals to amend the methodology for coordinating operational security analysis by May 2024.

Access the public notice initiating the procedure.

The recent energy crisis showed how shifting and reducing electricity demand plays a crucial role when electricity supply is scarce or at risk. Furthermore, Europe’s ambition to be a carbon neutral continent by 2050 also means that more flexibility in the power system is needed. Electricity flexibility is the ability of energy resources and consumers to change or adjust their consumption or production in response to price signals, or to provide services to system operators. Increased flexibility in the EU power system presents key opportunities for consumers to be part of the clean energy transition. One important solution to achieve electricity flexibility is enhanced demand response.

What is electricity demand response?

Electricity demand response occurs when consumers (or aggregators on their behalf) adjust their consumption or production, in response to price signals.

What’s holding electricity consumers back? In all Member States, many barriers to demand response persist. These impact consumers, new entrants, and small players in electricity markets. Examples of these barriers are:

• the lack of a (or limited) legal framework to allow distributed energy resources (e.g. consumers, small wind generation, roof-top solar) access the electricity markets and provide services to electricity grids operators,
• the unavailability or lack of incentives to provide flexibility,
• restrictive requirements,
• limited competition in the retail market,
• public interventions to fix the retail electricity price.  

ACER reports annually on the barriers to demand response, as part of its Market Monitoring Report series. This year’s report, to be published in mid-December, identifies several key barriers to the participation of distributed energy resources (i.e., demand response, energy storage and distributed generation) in the wholesale electricity markets and system operation services in the EU-27 Member States plus Norway. Furthermore, it presents key findings and specific recommendations per country.

What are ACER’s next steps?

From 15 December 2023 to 26 January 2024, ACER will run a public consultation on the removal of barriers to electricity demand response. The objective is to gather stakeholders' inputs on prioritising strategies for overcoming these barriers.

On 19 January 2024, ACER will also organise a webinar to present its report on monitoring the barriers to electricity demand response and discuss its findings.

Based on the findings of the report and the inputs gathered from stakeholders, ACER will focus its 2024 market monitoring work on the most relevant barriers.

Today, ACER releases its report on the progress of EU electricity wholesale market integration, which is part of the 2023 Market Monitoring Report series.

The report evaluates the functioning of the EU’s internal electricity market in 2022, with a focus on the performance of the forward and balancing markets. The report also assesses whether the electricity markets were contributing to the delivery of clean, affordable, and reliable energy and therefore effectively pushing towards the decarbonisation targets set by the European Green Deal.  

In 2022, electricity markets saw significant price spikes, mainly due to the Russian invasion of Ukraine. In its analysis, the report underscores how market integration is essential to reinforce the electricity wholesale markets’ resilience.

What are the benefits of having an integrated EU electricity wholesale market?

Reinforcing the cross-border interconnector capacity between Member States allows to advance the integration of the European electricity wholesale market. This offers several benefits, such as:

• Consumers can benefit from more competitive (larger) markets.
• Reinforced long-term security of supply (at lower cost) and mutual assistance in case of crises.
• More efficient resource utilisation (balancing of demand and supply at EU level).
• Promotion of renewable energy sources (RES).
• Increased resilience and network stability.
• Encouraged innovation and infrastructure investments.

What are the report's key findings?

The report analyses the status of the electricity wholesale market integration in 2022, taking into account the exceptional circumstances caused by the energy crisis:

• Interconnected electricity markets provided increased resilience against the energy crisis and ensured security of supply.
• Ukrainian power system is synchronised with Continental Europe (since 16 March 2022) under the emergency regime. Cross-border capacity allocation and commercial exchanges contribute to market functioning. While progress was achieved, joint cross border capacity allocation is yet to be implemented.

    Main challenges of market integration

• The main challenge of electricity market integration is long-term markets. It is important to improve liquidity in the European forward markets. Member States’ Transmission System Operators (TSOs) must ensure sufficient capacity is available for cross-zonal trading when needed, especially in the short-term markets, which are now developed (coupled) throughout Europe, and face the challenge of ensuring cross-zonal capacity availability. The next significant step in the market evolution is the development of long-term markets.
• Scarce forward hedges have increased liquidity in the spot market. Hedging is a simple way to manage crisis uncertainty. However, measures like collateral requirements and high bank guarantees forced some market participants to switch from organized forward trading to spot or bilateral trading (potentially increasing volatility).
• On balancing markets, the limited engagement of TSOs and data availability are hindering the success of balancing platforms.
• In 2022, congestion income (i.e. the revenue generated as a result of congestion in electricity transmission systems) increased by more than three times compared to 2021 across Europe, accompanied by a surge in remedial costs (challenging overall price stability). Member States can address congestions without additional operating costs (i.e. grid topology change, phase shifter transformer usage). On the other hand, remedial measures (like re-dispatching, countertrading, or curtailment of allocated capacities) can come at a significant cost – potentially discouraging the deployment of renewable energy sources (RES).

Role of ACER and National Regulatory Authorities (NRAs)

ACER and the NRAs are exploring developments in the European forward electricity markets, continuing the debate which started in February 2023 (with the publication of ACER Policy Paper on the further development of the EU electricity forward market).

What are ACER’s recommendations?

• Improve cross-border electricity trade to strengthen market integration (and its resilience).
• Advance the progress of forward electricity markets by expanding their development and utilizing Long-Term Transmission Rights (LTTRs) for hedging.
• Reinforce the engagement of TSOs in balancing markets. This could be done by considering slower balancing reserves to manage price fluctuations more effectively.
• Manage re-dispatching expenses and promote the deployment of renewable energy sources, particularly in those regions with high RES-generation potential. This will clearly support the energy transition goals and ensure compliance with the legal requirement to stay below the 5% curtailment limit.

What are the next steps?

On 7 November 2023, ACER will organise a webinar to present its report and discuss with stakeholders. Register here.

Access the Progress of EU electricity wholesale market integration report.

On 24 October 2023, the National Regulatory Authorities (NRAs) of the Core capacity calculation region requested from ACER an extension of three months to agree on the Transmission System Operators’ (TSOs’) second proposed amendment to the Core day-ahead electricity capacity calculation methodology.

The Core region comprises 13 countries: Austria, Belgium, Croatia, Czech Republic, France, Germany, Hungary, Luxembourg, the Netherlands, Poland, Romania, Slovakia and Slovenia.

What is the methodology about?

The day-ahead capacity calculation methodology describes the rules of each Capacity Calculation Region (CCR) on how to calculate the amount of capacity available for trading between bidding zones at day-ahead market time frame.

What are the NRAs asked to decide about?

The TSOs’ proposal suggests an implementation of the Advanced Hybrid Coupling (AHC) aiming at reducing the volume of unscheduled allocated flows on the Critical Network Elements with Contingencies (CNECs) of the Core CCR. These unscheduled flows result from electricity exchanges on the bidding zone borders of adjacent CCRs.

What are the next steps?

ACER intends to act promptly on this request, aiming to reach a decision by mid-December.

Access the Public notice.

EU Member States need to massively ramp up their renewable power capacity in the coming years. This increase in renewables from variable sources, such as wind and solar, will also increase the need for ‘flexibility’ in the EU electricity system. A joint report released today by two EU agencies, EEA and ACER, demonstrates how Member States could exploit collaboration synergies to unlock flexibility and enhance energy security while contributing to long-term climate neutrality. Key levers include better cross-border planning and forecasting, enhanced use of interconnectors as well as financial incentives and reliable information for electricity consumers to adapt demand when needed.

With the EU 2030 renewables target of 42.5% (compared with 22% in 2021), this decade will see an accelerated decarbonisation of EU electricity supply. A joint report by the EU Agency for the Cooperation of Energy Regulators (ACER) and the European Environment Agency (EEA) underlines the need to double the 'flexibility' of Europe’s power system to keep pace with the growth in renewables from variable sources, such as wind and solar.

Flexibility is the power system’s ability to adjust to the fluctuating generation and consumption of energy. Flexibility can be provided in different timeframes, such as days, weeks or seasons and by different technologies. Currently, peak generation gas plants provide much of the flexibility but with the clean energy transition, other types of flexibility resources are needed from both the demand and supply side. Meeting the flexibility challenge facilitates the deployment of renewables and brings benefits to European Member States and consumers.

The report underlines that: 

• Flexibility in the EU power system needs to almost double by 2030 compared to today to keep up with the growth of variable renewable electricity sources.
• Enhanced electricity interconnection is key. More grids should be built across borders and the existing grid capacity used better. Interconnectors facilitate the efficient flow of electricity across borders to where it is most needed. Existing and planned interconnectors facilitate flexibility to be shared across border and in 2030 could prevent the forced curtailment of variable renewable power (to balance the system) by an amount equivalent to the 2022 electricity consumption of Sweden.
• A combination of demand response and energy savings not only reduces energy bills but also provides much needed flexibility, thus facilitating renewables and supporting Europe’s security of energy supply. In 2030, better demand response and energy savings could reduce the need for power supply from sources other than wind and solar by an amount equivalent to the 2022 electricity consumption of Spain.
• Allowing price signals to drive investments and consumer behaviour is key. Consumers also need reliable information to make well-informed choices.
• The ACER-EEA report calls for Member States to better assess and have complementary national and EU-wide assessments of flexibility needs (as currently being discussed by Europe’s co-legislators in the electricity market design reforms).
• To foster common policies across borders, Member States could introduce regional cooperation on flexibility into their National Energy and Climate Plans (NECPs), and include detailed energy data in their greenhouse gas emission projections.

The ACER-EEA report 'Flexibility solutions to support a decarbonised and secure EU electricity system' is presented by the EU Agencies at today’s (20th October) meeting of Member States’ Energy Director Generals in Madrid, under the Spanish Presidency of the Council of the EU.

What’s next?

Today's joint ACER-EEA report highlights demand response as a key flexibility solution. In December 2023, ACER will publish a report on barriers to demand response that should help Member States unlock its potential.

Read the report.

See the report’s infographic.

On 26 September 2023, ACER initiated a procedure to decide on the Transmission System Operators’ (TSOs) proposal on the alternative bidding zone configurations for the Baltic region. After having received the results of the Locational Marginal Pricing (LMP) analysis carried out by the Baltic TSOs, ACER is now in a position to start this decision-making process.

Why review the bidding zone configurations?

A bidding zone is the largest geographical area within which market participants are able to exchange energy without allocating capacity. Currently, bidding zones in Europe are mostly defined by national borders. However, the existing European electricity target model requires defining bidding zones based on network congestions. Better defined bidding zone configurations, i.e. whose borders are based on long-term, structural congestions, can bring several benefits, including:

• increased opportunities for cross-zonal trade,

• more efficient network investments, and

• cost-efficient integration of new technologies.

To initiate the review process, all involved TSOs need to submit a proposal for:

• the methodology and assumptions that should be used, and

• the alternative configurations of bidding zones that relevant national regulatory authorities (NRAs) should analyse and approve unanimously.

What is the role of ACER?

The bidding zone review process initiated in October 2019; however, the TSOs’ initial proposal lacked alternative bidding zone configurations for a large part of Europe. They were therefore requested by the NRAs to submit an updated version of the proposal, which was then referred to ACER for decision (July 2020).

As a following step, ACER issued two separate decisions:

• In November 2020, ACER approved the bidding zone review methodology and assumptions, and requested TSOs to carry out an LMP analysis.

• In August 2022, following provision of information, ACER decided on the alternative bidding zone configurations to be analysed in the review process for all EU Member States, except for those of the Baltic region. This decision was deferred due to lack of data.

Following the submission of the results of the LMP analysis by the Baltic TSOs, ACER is now able to decide also on the alternative bidding zone configurations for the Baltic region.

What are the next steps?

ACER will adopt this decision by 26 December 2023.

To take an informed decision, ACER will consult with TSOs and NRAs.

Access the public notice.

Today, ACER releases the 2023 report on the security of EU electricity supply.

The report looks into four main areas:

• lessons learnt from the energy crisis;
• implementation status of the EU adequacy framework;
• capacity mechanisms;
• other national measures to address security of supply.

The report provides recommendations on improving Europe’s security of EU electricity supply framework.

What are the report’s key findings?

• Europe’s integrated electricity and gas markets sheltered Member States during the energy crisis from price shocks and enhanced their security of supply.
• The implementation of the adequacy framework is uneven across the EU, potentially leading to unfair cross-border competition.
• Harmonised adequacy assessments are a key tool to assess security of supply risks. It is imperative to bring the European Resource Adequacy Assessment (ERAA) up to standard.
• Total EU costs of capacity mechanisms doubled since 2020 to €5.2 billion in 2022, further increasing by another 40% in 2023.
• Capacity mechanisms largely support fossil-fuels (coal and gas) power plants, potentially undermining the shift to a low-carbon economy.
• Non-domestic EU capacity providers are still unable to compete on an equal footing with domestic resources in capacity mechanism.
• There is scope for improving the design of incentives and penalties in capacity mechanisms to ensure delivery of the service.
• The proliferation of uncoordinated measures to address security of supply, beyond capacity mechanisms,  risk fragmenting the integrated EU electricity market; further streamlining of the European process for approving capacity mechanisms and guidance on the type of measures suitable to cope with exceptional situations is needed.

What are the next steps?

ACER will present the key messages of the security of EU electricity supply report at its webinar on 11 October 2023.

High-level panellists Catharina Sikow-Magny (DG-ENER), Christian Zinglersen (ACER) and Tim Schittekatte (Florence School of Regulation) will discuss the findings of the report and address key questions on the topic.

Register here.

Access the Security of EU electricity supply report.

Dive into ACER's informative infographic.

Explore the monitoring data on security of electricity supply.