23.2.2022

ACER decides not to approve ENTSO-E’s first pan-European resource adequacy assessment due to shortcomings

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ACER decides not to approve ENTSO-E’s first pan-European resource adequacy assessment due to shortcomings

What is it about?

In 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 Europe’s security of electricity supply and identify adequacy concerns.

​​​Following the approval by ACER of the ERAA methodology in October 2020, ENTSO-E must 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. A resource adequacy concern means that the expected level of risk is higher than the acceptable risk level, as defined by a Member State’s reliability standard.

In the ACER Decision published today, ACER decided to neither approve nor amend the ERAA 2021.

ERAA 2021 was not approved by ACER

While the ERAA 2021 represents a significant improvement to its predecessor (the Mid-Term Adequacy Forecast 2020), ACER has identified a number of shortcomings in the report, compromising its accuracy and reliability. ACER finds that the ERAA 2021, among other issues,

  • underestimates the level of profits that resources (e.g. generation and demand-side response) could make in the market;

  • underestimates the volume of capacity available for cross-zonal trade; and

  • does not recognise the value of demand-side response sufficiently.

ACER considers that:

  1. these shortcomings undermine the very purpose of the ERAA 2021 in providing an objective basis for identifying the risks to European security of electricity supply as envisaged in the Clean Energy Package; and

  2. the ERAA 2021 overestimates resource adequacy concerns and could lead to incorrect policy decisions with negative implications for the integration of the electricity market and higher costs to consumers.

ERAA 2021 was not amended by ACER

ACER considered amending the ERAA 2021 and concluded that it would not be feasible within the required 3-month decision-making timeframe. An amended ERAA 2021 would have limited value for identifying resource adequacy concerns, essentially for 2025 only, and be based on outdated data. Furthermore, amending the ERAA 2021 would compromise the delivery of a significantly more ambitious ERAA 2022.

The ACER decision provides recommendations for the ERAA 2022, mainly concerning the scenarios, methodology and the assumptions of the assessment (e.g. reflect the EU’s Fit for 55 proposals), and the need for extensive stakeholder engagement. The aim is to help ENTSO-E in preparing the 2022 report to mitigate the risk of similar shortcomings occurring next year and to ensure that the annual ERAAs progressively align with the requirements of the agreed methodology.

Read more on ACER’s Decision No 02/2022.