Europe’s Clean Energy Package of legislation set a binding minimum 70% target for electricity interconnector capacity for cross-zonal trading (the “minimum 70% target”). 

Why is this 70% target important?

The lack of sufficient cross-zonal capacity between Member States is one of the main barriers to the integration of electricity markets, and market integration is key to deliver on Europe's energy goals. Larger amounts of cross-zonal capacity made available for trade increase cross-border competition and facilitate more renewables on the grid.

Why is ACER publishing a dedicated 70% target report on the Nordics?

In 2020 and 2021, ACER published two reports monitoring the minimum 70% target in the EU. However, the analysis of the Nordic Alternate Current (AC) borders was not included, due to insufficient data provided by the Nordic TSOs to ACER at that time. Following a decision issued by ACER, the data was subsequently received.

What are ACER’s finding on the minimum 70% target in 2020 in the Nordic region?

The performance of the Nordic countries and the quality of the data they provided for monitoring is diverse.

While Denmark and Finland are meeting the 70% minimum target almost at all time, there is room for improvement for Sweden.

Moreover, ACER underlines that the monitoring would benefit from more accurate data, and invites the Transmission System Operators to accelerate their efforts to improve the quality of data they provide.

ACER calls for more harmonisation in monitoring, reporting and assessing compliance with the minimum 70% target.

In 2020 and 2021, ACER, a number of regulatory authorities and the European Network of Transmission System Operators for Electricity (ENTSO-E) published various reports on the level of fulfilment of the 70% minimum target.

ACER calls for more coordination and harmonisation in these reports. A common and consistent message delivered by all concerned parties is key to facilitate stakeholders’ understanding of the progress towards meeting the minimum 70% target and to ensure that the minimum 70% target is implemented with equally high standards across the EU.

Find out more and access the reports.

The EU Agency for the Cooperation of Energy Regulators (ACER) publishes today an opinion on the third update of the manual of procedures for the European Network System Operator for Electricity (ENTSO-E) transparency platform.

ENTSO-E submitted the request for opinion to ACER on 6 October 2021. The update concerns mostly the data related to the European Platforms for the exchange of electricity balancing services across the EU.

Overall, ACER finds the updated manual of procedures fulfils the requirements for the publication of the balancing data items and meets the objective of the Transparency Regulation, subject to the consideration of various recommendations included in the Opinion.

ENTSO-E transparency platform

The purpose of the transparency platform is to provide a common service to all market participants, such as generators, retailers and traders. By increasing transparency, the platform contributes to prevent insider trading and provides equal level playing field between small and large actors.

Read more on ACER Opinion.

The EU Agency for the Cooperation of Energy Regulators (ACER) publishes today a decision approving the harmonised allocation rules for long-term transmission rights (HAR) proposed by all Transmission System Operators (TSOs) for electricity. These rules should ensure a transparent and non-discriminatory capacity allocation of long-term transmission rights to all market participants.

The HAR entail a uniform set of forward market rules for the whole EU that promotes the development of a liquid and competitive market, while providing market participants with equal opportunities to hedge their risk associated with cross-zonal electricity trading.

What common requirements do they set?

The HAR set out common requirements for participation in auctions, provide details on collaterals, specify the organization of auctions, specify the returns and transfers of long-term transmission rights, determine the rules for remuneration and compensation of long-term transmission rights, determine the fallback procedures, describe the principles of invoicing and payments and other related aspects needed for a proper functioning of forward capacity allocation.

The principles set out by the HAR will be applied together with the regional annexes that are approved by the concerned regulatory authorities. These annexes may introduce regional or bidding zone border specific requirements describing a particular type of long-term transmission rights, their remuneration regime, alternative fallback mechanism and compensation rules defining regional firmness.

Access the decision.

On 16 November 2021, the EU Agency for the Cooperation of Energy Regulators (ACER) received a proposal from the European Network of Transmission System Operators for Electricity (ENTSO-E) for the first pan-European resource adequacy assessment (ERAA 2021). The purpose of the assessment is to monitor the risks to security of electricity supply and identify adequacy concerns.

​​​Following the approval of the ERAA methodology in October 2020, ENTSO-E needs to carry out an annual ERAA to assess whether the EU has sufficient electricity resources to meet its future demand. ERAA describes the expected level of security of supply for a ten-year horizon.

Member States set their own electricity reliability standards based on the value of lost load and the cost of new entry for generation or demand response. The reliability standard indicates the necessary level of security of electricity supply for a given Member State.

By comparing these results, ERAA aims to identify potential resource adequacy concerns in the EU and provide an objective basis for assessing the need for additional national measures ensuring security of electricity supply such as the introduction of temporary capacity mechanisms.

To date, ENTSO-E performed the European Mid-term Adequacy Forecast (MAF) with the same ten-year time horizon. Mandated by the Clean Energy Package legislation and based on ACER-approved methodologies, ERAA replaces the MAF and will be key in improving the monitoring of security of electricity supply in Europe.

In order to inform its assessment, ACER invites interested third parties to submit their observations by 7 December 2021 to ACER-ELE-2021-011(at)acer.europa.eu.

The deadline for ACER to reach a decision on ERAA 2021 is 17 February 2022.​

Access the related ACER public notice. 

The European Green Deal sets ambitious targets that require vast investments into the electricity network. Some estimates claim the sector will need to double the investments rate into new infrastructure to help enable the green transition.

While recognising different hurdles on this path, from financing to public acceptance, the EU Agency for the Cooperation of Energy Regulators (ACER) believes special focus should be given on how to facilitate the most efficient use of the existing grid and technologies. In this context, the regulatory framework has an important role to play in promoting innovative investments and providing the right incentives to increase the efficiency of the electricity transmission network and therefore unlock its full potential.

How can the regulatory framework incentivise smart investments?

ACER has inquired the role of regulation in incentivising smart investments to improve the efficient use of electricity transmission assets in a new position paper, published today.  

In its position paper, ACER:

• Recognises the need to improve incentives for innovative solutions, especially those focusing on network efficiency and bringing immediate benefits to end consumers.

• Acknowledges the traditional regulatory framework favours high cost solutions over less costly ones - therefore affecting the setting Transmission System Operators (TSOs)’ work in and influencing their choices.

• Suggests a paradigm shift promoting a benefit-sharing regime to complement the classical cost-based remuneration scheme of the rate-of-return regulation. This will improve the efficiency in the usage of existing infrastructure and provide the incentives to invest in innovative assets.

• Explores the potential introduction of Key Performance Indicators (KPIs) to measure, in a harmonised way across Europe, the impacts and benefits of TSOs investments, as well as of KPI-based incentives to sustain innovative solutions.

What are the main conclusions?

ACER concludes the introduction of a benefit-based remuneration scheme can potentially represent a strong incentive for regulated entities to improve their efficiency, both when utilising future and existing infrastructure.

What comes next?

Register to ACER infoflash not to miss any updates on this topic!

Read ACER Position Paper to find out more.

The EU Agency for the Cooperation of Energy Regulators (ACER) publishes today its report on  implementation of the Inter-Transmission System Operator Compensation mechanism (ITC) covering the year 2020.

In this latest edition, ACER notes the Inter-Transmission System Operator Compensation Fund amounted to 352.8 million Euros, reaching its highest ever value. The increase is mainly due to a significant increase (29%) of the losses volume due to transits in 2020 compared to 2019.

ACER also observes that after a gradual decrease of the weighted average of transmission losses costs in the period 2012-2017, it started to increase, reaching 51.21 EUR/MWh in 2020 (45% higher than its value in 2017).

In 2020, perimeter countries contributed with 10.8 million Euros to the Fund, reducing their contribution by almost 50% if compared with the previous year. This contribution is also the lowest value since the ITC Fund was established. ACER concludes this is due by the significant decrease in the volume of the scheduled flows between the Perimeter countries and the ITC parties in 2020 as well as the decrease of the Perimeter countries’ fee.

Access the Report. 

Background:

The Inter-Transmission System Operator Compensation (ITC) mechanism was established by the European Network of Transmission System Operators for Electricity (ENTSO-E) to compensate transmission system operators (‘TSOs’) for the costs incurred on national transmission systems due to hosting cross-border flows of electricity (‘transits’).

The ITC Fund is mainly a redistribution of yearly payments among the participating TSOs (‘ITC Parties’) who receive compensation from the ITC Fund based on the transits they carry and contribute to the ITC Fund based on their net import and export flows.

Non-participating countries connected to the ITC Parties’ networks (‘Perimeter countries’) pay a transmission system use fee for their scheduled imports from and scheduled exports to the ITC Parties’ networks.

The EU Agency for the Cooperation of Energy Regulators (ACER) today submitted to the European Commission its Preliminary Assessment of Europe’s high energy prices and the current wholesale electricity market design.

The European Commission, in its “toolbox” Communication of 13 October 2021, tasked the Agency with carrying out an assessment of the current wholesale electricity market design by April 2022, and providing a preliminary assessment by mid November 2021.

What’s in ACER’s preliminary assessment?

The ACER Preliminary Assessment complements the analysis already presented in ACER’s Note on the High Energy Prices, published in October.

The Agency’s Preliminary Assessment:

• provides some key factors for the relatively uneven electricity price impacts across Member States, and shows how countries with high gas dependency and low interconnectivity were more exposed to high electricity prices;

• looks at how the move towards more spot pricing of gas in Europe (rather than long-term contracts) has yielded significant benefits over the past decade and how this relates to price volatility issues going forward;

• includes key characteristics of the current electricity market design, adding ACER’s initial perspective on certain price volatility issues, and (in light of the current political debates) on alternative market design approaches including the notion of possibly decoupling electricity market outcomes from gas price dynamics through price caps or technology-dependent average prices;

• adds the latest data and analysis from ACER’s energy market monitoring on related dynamics in the European electricity market; and

• provides an initial outline of ACER’s upcoming April 2022 assessment.

What to expect in the ACER April 2022 assessment?

In its broader assessment due in April 2022, ACER will provide an analysis of:

• the benefits and drawbacks of the current wholesale electricity market design and related matters;

• the issue of sufficient revenue certainty in electricity markets in view of the massive  investment needs up ahead; and

• the options for cushioning or shielding end-consumers from perceived excessive levels of price volatility that impact affordability.

What’s next?

ACER will hold a workshop with stakeholders in the first half of February 2022.

To receive the latest ACER news direct to your inbox, sign up (for free) to ACER’s infoflash news.

Access the Preliminary Assessment of Europe’s high energy prices and the current wholesale electricity market design.

The EU Agency for the Cooperation of Energy Regulators (ACER) has reached a decision on the proposal for the long-term capacity calculation methodology of the Core capacity calculation region (Core LT CCM) in cooperation with the regional regulatory authorities and transmission system operators (TSOs).

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

The calculation methodology promotes effective long‐term cross‐zonal electricity trade by calculating reliable capacities and making them available to market participants at an early stage.

As such, long-term capacity calculation allows for long‐term planning and provides hedging opportunities.

In particular, the methodology will apply:

• in the yearly and monthly time frame

• a flow-based approach, compatible with the Core day-ahead capacity calculation methodology

• multiple grid scenarios for the calculation of flow-based parameters

• flow-based parameters for explicit flow-based long-term auctions

• in 3 years from now: starting from the yearly auctions for 2025 and the monthly auctions for January 2025

How did ACER contribute?

In April 2021, the Core regulatory authorities for energy asked ACER to decide on the methodology.

In the past 6 months, ACER has carried out additional analyses and consulted with relevant stakeholders to take an informed decision.

Following these consultations, the Agency has amended the initial Core TSO proposal to improve the efficiency, transparency and non-discrimination of the long-term capacity calculation process, as well as to ensure its compatibility with day-ahead and intraday markets.

Read more on the ACER’s Decision 14-2021 on Core LT CC methodology and its Annexes.

The EU Agency for the Cooperation of Energy Regulators (ACER) publishes an updated analysis on the implementation of the Grid Connection Network Codes, looking at the:

• Network code on requirements for grid connection of generators,

• Network code on demand connection, and

• Network code on requirements for grid connection of high voltage direct current systems and direct current-connected power park modules.

The latest editions of the Implementation Monitoring Reports concerning the Grid Connection Network Codes were published in December 2020. The analyses showed an overall satisfactory level of implementation, but also highlighted a few compliance issues in various Member States.

Following these publications, ACER requested regulatory authorities to provide an update of their national information (in particular those that were not compliant with the Grid Connection Network Codes).

The analysis published today provides an update based on the replies collected from the national regulatory authorities.

What are the latest findings?

ACER confirms the satisfactory implementation status as indicated in the previous reports. However, the analysis shows that only a few of the identified non-compliances have been addressed.

The report also outlines some key policy recommendations and invites relevant parties to ensure full compliance with the Network Codes. In particular, it emphasises:

• the importance of implementing the connection rules stipulated in the Network Code on requirements for grid connection of high voltage direct current systems, and

• the need for further actions to bring national legal frameworks into full compliance with the harmonized rules of the Grid Connection Network Codes.

Access the report.

The EU Agency for the Cooperation of Energy Regulators (ACER) and the Council of European Energy Regulators (CEER) publish today the new edition of the Electricity Wholesale Markets Volume of the 2020 Market Monitoring Report (MMR).

The MMR presents the main results of monitoring the European internal electricity and gas markets and recommends further actions to foster their integration. It comprises three ​Volumes, analysing respectively: the Electricity Wholesale Market, the Gas Wholesale Market, and the Energy Retail Market and Consumer Protection. 

Historical highs in European energy prices in 2021

This MMR relates to 2020 data. While energy prices decreased in 2020 (in response to the COVID-19 pandemic), wholesale energy prices increased significantly in Q3 2021 (by around 200% since April 2021). Even though various factors have contributed to the high energy prices in Europe, the main driver for the high rise in wholesale electricity prices is the surge in the price of natural gas, caused mainly by a tight global LNG market.  See the separate ACER Note on High Energy Prices (October 2021) for insights on the drivers, the impact, and certain policy considerations (such as how to protect vulnerable consumers).

Barriers to efficient price formation and easy market entry and participation: room for improvement

For the first time, this Volume of the MMR includes an assessment of barriers to price formation, as well as to entry and participation of new and small market players. ACER analysed eleven potential barriers and found they exist, to varying degrees, in most of the European Member States.

Regarding efficient price formation, a number of issues stand out as barriers, including insufficient cross-zonal capacity and liquidity. The report identifies several main barriers affecting new and small players. These include:

• Lack of a legal framework to enable entry and participation in the various market segments.

• Stringent requirements, e.g. related to prequalification or aggregation, hindering participation in balancing markets.

• Insufficient retail competition or incentives for consumers to participate more actively.

The report concludes that significant room for improvement can be found by removing wholesale price restrictions, reviewing requirements related to prequalification and aggregation, and urgently finalising the transposition of the Electricity Directive.

COVID-19 and market integration: progress despite the pandemic

The report underlines the drop in demand (annual decrease of 4.1 % compared to 2019) related to the pandemic in the first half of 2020, which exacerbated the decrease in electricity prices observed in the preceding year.

For the first time, renewable energy sources generated more electricity than fossil fuels.

In this context, Member States’ efforts towards market integration continued; particularly in the integration of the EU intraday markets (continuous intraday volumes increased by nearly 32% in 2020). As a consequence of the day-ahead markets’ integration, the level of efficiency in the use of cross-zonal capacity (87%) scored the highest across all short-term timeframes in 2020.

Interruptibility schemes: suggestion of a market-based approach

Interruptibility schemes refer to national programmes dedicated to demand-side response, organised by transmission system operators (TSOs) for temporary load interruption or reduction. For the first time, the report includes an assessment on interruptibility schemes services, identifying four of them: adequacy, balancing, congestion management and contingency reserves. ACER promotes a market-based approach in their usage to increase their efficiency in fostering security of the European electricity supply.

Our recommendations: market coupling, 70% target, barriers and adequacy

ACER and CEER reiterate their recommendation to:

• Finalise the implementation of the single day-ahead and single intraday market coupling

• Gradually increase the level of cross-zonal capacity (still far from the 70% binding target)

• Removing all types of wholesale price restrictions, reviewing requirements related to prequalification and aggregation and urgently finalise the transposition of the Electricity Directive.

• Establish an appropriate reliability standard, perform sound adequacy assessments at the EU and national level and only adopt capacity mechanisms where resource adequacy issues are forecasted

Would you like to find out more?

Read the MMR Report – Electricity Wholesale Volume.