ACER decides not to approve nor amend ENTSO-E’s European Resource Adequacy Assessment 2022


ACER decides not to approve nor amend ENTSO-E’s European Resource Adequacy Assessment 2022

What is it about?

Mandated by law, the European Resource Adequacy Assessment (ERAA) is ENTSO-E’s annual assessment of the risks to EU security of electricity supply for up to 10 years ahead. ENTSO-E is the European association of Transmission System Operators (TSOs) for electricity.

The ERAA should provide an objective basis for identifying electricity adequacy concerns and assess the need for any additional national measures ensuring security of electricity supply such as the introduction of temporary capacity remuneration mechanisms.

In the ACER Decision published today, ACER decided to neither approve nor amend ENTSO-E’s ERAA 2022.

ERAA 2022 was not approved by ACER

On ERAA 2022, ACER finds several positives:

  • ACER acknowledges ENTSO-E’s substantial efforts to improve ERAA 2022 in the context of an unprecedented energy crisis.
  • ACER points to improvements on some methodological aspects, such as the investment model and demand-side response, and input assumptions.
  • ACER recognises ENTSO-E’s enhanced stakeholder engagement and transparency.

However, ACER also finds room for improvement:

  • ERAA 2022 has certain simplifications or deviations from the methodological framework that compromise the robustness of the assessment.
  • ERAA 2022 underestimates the revenues that capacity resources could make in the energy market, and the volume of cross-zonal capacities.
  • ERAA 2022 should be aligned with the European Union’s Fit-for-55 policy objectives.

Hence, ACER considers that ERAA 2022 does not provide a fully objective basis for identifying the risks to European security of electricity supply. In particular, the underestimation of revenues in the energy market does not adequately capture the opportunities for existing power plants to continue running to meet system needs (instead of retiring) or the incentives to attract new resources in the power system. Similarly, the quantity of cross border electricity trade is underestimated in the ERAA 2022 report. For example, Member States are making electricity supply available to neighbours particularly for security of supply reasons (one example being France becoming a net importer in 2022 per French nuclear production being particularly low). Such underestimations may lead to incorrect policy decisions with possibly negative implications for the integration of the electricity market and/or result in higher costs to consumers.

All in all, against this background ACER has decided it is not in a position to approve ERAA 2022.

ERAA 2022 was not amended by ACER

ACER considered amending ERAA 2022 and concluded that it would not be feasible within the required 3-month decision-making timeframe. An amended ERAA 2022 would be of limited value given that ERAA 2022’s scenarios are becoming increasingly outdated in the current, fast-evolving context.

ACER guidance for ERAA 2023

ACER’s decision provides recommendations intended as guidance for ENTSO-E to ensure a successful implementation of the next edition of ERAA. These concern primarily the use of reliable and transparent input data (in particular scenario assumptions reflecting the EU’s Fit-for-55 objectives) and the effective implementation of the methodological framework (in particular the robust consideration of market revenues and cross-zonal capacities).

The ERAA assessment is the cornerstone of the EU`s long-term adequacy framework, foreseen in the (2019) Clean Energy Package of EU legislation to provide (from 2021) an objective basis to identify electricity adequacy concerns. A robust pan-European security of supply assessment is a much-needed input for Member States, and even more so in the context of the ongoing war in Ukraine and the energy crisis. ACER and the NRAs are committed to continue working together with ENTSO-E and the TSO community to close the remaining implementation gaps for a robust ERAA 2023.

Access the ACER Decision and its Annex.